United Arab Emirates Oil & Gas Report Q3 2012 - New Market Report

Fast Market Research recommends "United Arab Emirates Oil & Gas Report Q3 2012" from Business Monitor International, now available

by Bill Thompson

(WireNews+Co) - Boston, MA - 18 October 2012

BMI View: Despite persistent risks surrounding Iran and the threat to the Straits of Hormuz (shared with the UAE), the UAE is facing a strong overall outlook for its oil and gas sector on the back of sustained investment in both domestic production and increased import availability. Enhanced oil recovery schemes and investment from both IOCs and NOCs underscore our bullish outlook for the UAE's oil sector.

We highlight the following trends and developments in the UAE's oil and gas sector:

- BMI sees proven oil reserves declining from 96.7bn barrels (bbl) in 2011 to just over 91bn bbl by 2016, with gas reserves also falling from 6trn cubic metres (tcm) to around 5.8tcm over the same period.
- We see oil production rising to over 3.2mn barrels per day (b/d) by 2016 and nearly 3.5mn b/d by 2021, supported by re-development of mature fields, the deployment of enhanced oil recovery (EOR) and investment from IOCs and NOCs.
- Gas production will get a big mid-decade boost from the start-up of the Shah sour gas project. By 2016, we see output of around 66bn cubic metres (bcm), rising to 74bcm by 2021.
- The country is committed to long-term LNG supply agreements with several countries (primarily Japan), and simultaneously imports gas via pipeline from Qatar. Abu Dhabi's Mubadala Development Company is planning a new LNG terminal in Fujairah, outside the Persian Gulf, which will have 12bcm of import capacity on its opening in 2014.
- A major ongoing sour gas project should help boost domestic production of gas, as consumption doubles in the period 2010-2020. The US$10bn Shah sour gas project will add 9,8bcm of gas capacity when it comes onstream in 2015.
- Liberalisation of fuel prices is unlikely in the short term, owing to the government largesse following political unrest across the Middle East and North Africa (MENA) region in 2011. Fuels distribution in the UAE will therefore remain a loss-making proposition.

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The UAE will remain vulnerable to fluctuations in the price of oil, though its medium-term crude output levels should remain at the current rates for a sustainable period. One unknown is the impact of rising gas consumption: the expansion in both sour gas processing capacity and increased LNG import capabilities could lead to a significant rise in gas demand.

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