23 May 2017

The United Arab Emirates is committed to oil production targets agreed upon in the latest OPEC-led deal to curb output, but it is expanding its oil and gas production capacity, the energy minister said in a conference in Abu Dhabi on Tuesday.

“In the UAE, the good news is that we are expanding our production capacity. Building a cushion of an overcapacity to be produced when needed is something that we should always have as a major producer because we never know when we are going to have a shock again in the market,” said Suhail Mohamed Al Mazrouei, UAE energy minister, speaking at the EIC Connect Oil & Gas event a few hours ahead of traveling to Vienna for the much-anticipated OPEC meeting this week.

OPEC delegates will meet in Vienna this Thursday to consider whether to extend the deal reached between the organisation and 11 non-member countries to cut output in the first half of 2017. The UAE energy minister had earlier announced he supported prolonging oil output cuts for another term.

Al Mazrouei also highlighted the UAE’s plans to increase gas production, despite the challenge posed by the production from sour gas reservoirs, which is more expensive to produce than standard gas.

“Anything that has to do with reducing the cost of producing sour gas, is going to be of interest for us,” he said.

“The IOCs [international oil companies] always complain about the local gas price. The good news is that we will fix it for you. We are working on fixing the local gas price to enable such development (of the gas sector), because we cannot afford only to import LNG [liquefied natural gas] from outside,” he said.

The UAE has witnessed a sharp rise of gas demand over the past six years and is looking at further investments to plug its gas deficit, with the majority of its needs currently met through gas imports from Qatar. Sour gas is mostly used for petrochemical feedstock as well as power plants.

“Petrochemicals is also going to thrive as we move to improve the full value chain. We will see more petrochemical projects and that is going to be an area of focus,” Al Mazrouei said.

The UAE has announced its energy strategy up to 2050, which aims to diversify its energy sources mix and wean its dependence on natural gas, with 44 percent of energy to be met from renewables, 38 percent from gas, 6 percent from nuclear energy and 12 percent from clean fossil.

“Within the energy sector, we have around $192 billion of investments coming till 2050, and the majority of it is going to be in the private sector. The government will enable the private sector and we would like to see more projects that are commercial, non-subsidised, and help the environment as well,” the minister added.

© Zawya 2017