The persistent drop in oil prices is prompting more oil-rich OPEC countries to revise the projected revenues in their coming budgets.
Already, Saudi Arabia, the world's largest producer of oil and OPEC's richest member, has acknowledged that the steep fall in oil prices since June will leave the Riyadh government with its first budget deficit since 2011 and the largest in its history.
The Saudi budget, announced on Dec. 25, will include spending during fiscal 2015 of $229.3 billion, higher than in 2014, despite revenues estimated at only $190.7 billion, lower than in the current fiscal year. That would leave a deficit of $38.6 billion.
In fact, according to an analysis by Bloomberg in December 2014, 10 of OPEC's 12 member states – all but Qatar and Kuwait – can no longer rely on oil exports to balance their budgets. And although Saudi Arabia is losing money, Bloomberg says, its treasury has a financial reserve of nearly three-quarters of a trillion dollars.
But even that analysis needs revising. Qatar now is expected to base the budget for its coming fiscal year, beginning April 1, on oil valued at $45 per barrel in 2015, down from its previous estimate of $65, an anonymous source in the Persian Gulf state's energy industry tells Reuters. The source stressed, however, that $45 is a conservative figure chosen to “help keep growth on track.”
As is its custom, Qatar's Finance Ministry would not comment on its spending plans until the budget is formally published. Yet Doha is known for being conservative in its revenue estimates to prevent any deficits and, at times, to enjoy unexpected surpluses.
Not in the coming fiscal year, though. On Jan 14, state-owned Qatar Petroleum said it and Royal Dutch Shell have abandoned a 3-year-old plan to build a $6 billion petrochemical plant at Ras Laffan industrial city in northeastern Qatar simply because they can't afford it.
Iran, meanwhile, is predicating the budget for its coming fiscal year, which begins March 21, on an even lower price for oil, $40 per barrel. Iran is beset not only by the precipitous drop in oil prices but also by sanctions imposed because of suspicions that its nuclear program is not peaceful but aims to develop weapons.
Originally Iran's coming budget had assumed a base price of $72. But on Jan. 15 Iran's state-run Fars News Agency quoted Finance and Economy Minister Ali Tayebnia as saying that estimate had been lowered. It says that would mean some government and industry programs would have to be suspended or even ended altogether.
Iran, along with Venezuela, was one of the more outspoken OPEC members urging the cartel to cut production at its November meeting in Vienna to stop the slide in oil prices, which already had damaged their economies.
Instead, OPEC decided to keep production levels at 30 million barrels per day, later explaining that they wanted to reclaim lost market share by driving oil producers using expensive and “inefficient” extraction methods out of business by making oil production unprofitable for them.
By Andy Tully of Oilprice.com
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