United Arab Emirates, one of the wealthiest Gulf states, is pushing ahead with large new energy projects, betting an oil price recovery will start as early as next year as demand begins to absorb the global glut.
“These are times of some hesitancy, times of pain for some … But pain is not new … We will pass it stronger,” energy minister Suhail Al Mazrouei told the UAE’s biggest annual oil show in Abu Dhabi.
“That (oil price drop) didn’t change the vision of the UAE … We are not cancelling projects,” he added.
Oil prices crashed after Saudi Arabia and Gulf allies the UAE, Kuwait and Qatar enforced a decision by the Organisation of Petroleum Exporting Countries (OPEC) to fight for market share with rival producers, abandoning a decade-old policy of cutting output to prop up prices.
Prices have more than halved over the past 18 months, and OPEC itself sees the current oil glut persisting well into next year, prompting even the wealthiest OPEC members, like Saudi Arabia, to revise some field development plans.
Low prices have also slowed some non-oil projects in the UAE, including the opening of a huge new Louvre museum, while others such as the Abu Dhabi film festival have been canceled.
But officials insist that projects in key sectors such as energy, defence and infrastructure continue as planned.
On the energy side, the country is pushing ahead with a plan to raise its oil production capacity to 3.5 million barrels per day from the current 3 million within the next two to three years, the head of the national company ADNOC Abdullah Nasser al-Suwaidi said. The UAE is currently producing 2.9 million bpd.
Some $35 billion worth of investments will flow into offshore exploration after decades of investments into onshore, he said.
The UAE is hoping the lion’s share of its energy needs will be covered with rising gas production by 2021, while around a third of energy needs will be met with nuclear and solar projects, said Al Mazrouei.
He added the UAE, as part of OPEC, could not afford losing market share by cutting back on supply, suggesting continued support for the OPEC strategy to fight for market share through higher output and lower prices.
“I’m not regretting this decision. We like that decision,” he said while declining to predict the outcome of the OPEC meeting in December.
As the markets have began to rebalance, global oil prices will start an upward correction in 2016, Al Mazrouei said. “I wouldn’t call it a crisis. I would call it a cycle … I’m optimistic. Next year will be a year of correction”.
“IRRESPONSIBLE, MAN-MADE CRISIS”
Not everyone is so confident.
The bets on an price recovery might be too optimistic and the low price environment might govern the markets for many more years, Mohammed Al-Rumhy, Oman’s oil minister and a regular critic of OPEC’s policies, told the same conference.
“This is a man-made crisis and it is highly irresponsible,” said Al-Rumhy.
Oman, the biggest Middle Eastern oil producer that is not a member of OPEC, has long argued that OPEC has lost many more billions of dollars by not cutting production than if it had cut output and supported the prices.
Low oil prices are also deterring oil majors from investing into new projects, including in the Middle East: “Try to convince Total to invest, try to convince Schlumberger to research”.