The government will continue to pursue reforms that lead to diversification away from oil and gas and that promote non-oil exports. However the immediate focus will be on increasing the number of jobs for Omanis in both the public and the private sector and, it is hoped, providing Omani students with the relevant qualifications that make them employable in the job market. The new eighth five-year development plan (2011-15) allocates more than OR1.5bn (US$3.9bn) to the development of non-oil exports and infrastructure development. However, the government will also invest in increasing Oman's crude oil production. Oman's main oil company, Petroleum Development Oman, announced a marginal increase of 1,000 barrels/day (b/d) in crude oil production in 2010, but gas production rose by 9% to 446,000 barrels oil equivalent per day. The use of enhanced oil recovery (EOR) techniques produced results in 2010, with oil production increasing by 6.4% year on year to an average of 865,000 b/d, but most of this seems to have came from the Mukhaizna oilfield, which is operated by a joint venture between Occidental Petroleum of the US and Liwa Energy of the UAE. A shortage of gas may cause some projects to be delayed. Plans to expand gas production are under way with a total of OR412m (US$1bn) set aside. Tourism will play a key role in diversifying revenue. Endeavours to increase the role of the private sector in large-scale projects will continue. Oman is financially well positioned to withstand a fall in oil prices and has based its 2011 budget on a price of US$58/barrel, well below our forecast of US$90/b for Brent Blend in 2011 (which is subject to change as events unfold).

The government will intensify its "Omanisation" policy (the replacement of expatriate workers with local staff) in light of the protests. It will focus on educating and training Omanis to develop local professional and technical expertise. The authorities recently increased the minimum wage for Omanis employed in the private sector by 43%, and we expect other such measures to be implemented, although they will have a limited impact on stemming the protests, if they are not accompanied by political reform. The private sector will come under pressure to meet targets to increase the number of jobs for Omani citizens, while cracking down on illegal workers in the country. Despite changes to the Labour Law, however, supply-side problems are likely to continue to slow progress on Omanisation.