Help Current News

The latest United Arab Emirates (UAE) Oil & Gas Report from BMI forecasts that the country will account for 4.62% of Middle Eastern (ME) regional oil demand by 2014, while providing 10.73% of supply.

Regional oil use of 7.47mn b/d in 2001 rose to an estimated 10.64mn b/d in 2009. It should average 10.98mn b/d in 2010 and then rise to around 11.95mn b/d by 2014. Regional oil production was 22.83mn b/d in 2001, and in 2009 averaged an estimated 24.66mn b/d. It is set to rise to 27.18mn b/d by 2014.

Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average of 15.36mn b/d. This total had eased to an estimated 14.02mn b/d in 2009 and is forecast to reach 15.23mn b/d by 2014. Iraq has the greatest production growth potential, followed by Qatar.

In terms of natural gas, the region consumed an estimated 367.6bcm in 2009, with demand of 492.5bcm targeted for 2014, representing 28.7% growth. Estimated production of 429.9bcm in 2009 should reach 657.8bcm in 2014 (+39.8%), which implies net exports rising to 165.0bcm by the end of the period.

The UAE in 2009 consumed an estimated 15.78% of the region’s gas, with its market share forecast at 16.04% by 2014. It contributed an estimated 12.87% to 2009 regional gas production and, by 2014, will account for 13.01% of supply.

We are sticking with our forecast that the OPEC basket of crudes will average US$83.00/bbl in 2010. Wide variations in crude differentials so far in 2010 make forecasting tricky for Brent, West Texas Intermediate (WTI) and Urals, but we believe the three benchmarks will average around US$85.11, US$88.22 and US$83.62/bbl respectively, with Dubai coming in at US$83.14.

By 2011, there should be further growth in oil consumption and more room for OPEC to regain market share and reduce surplus capacity through higher production quotas. We are assuming a further increase in the OPEC basket price to an average of US$85.00/bbl. For 2012 and beyond, we continue to use a central case forecast of US$90.00/bbl for the OPEC basket.

For 2010, the BMI assumption for premium unleaded gasoline is an average global price of US$96.83/bbl. The year-on-year (y-o-y) rise in 2010 gasoline prices is put at 38%. Gasoil in 2010 is expected to average US$92.45/bbl, with the full-year outturn representing a 37% increase from the 2009 level. For jet fuel in 2010, the annual level is forecast to be US$95.58/bbl.

This compares with US$70.66/bbl in 2009. The 2010 average naphtha price is put by BMI at US$82.46/bbl, up 39% from the previous year’s level.

UAE real GDP is assumed by BMI to have fallen by 3.4% in 2009, followed by forecast 2.1% growth in 2010. We are assuming average annual growth of 3.4% in 2010-2014. We expect oil demand to rise from an estimated 472,000b/d in 2009 to 552,000b/d in 2014, lagging our underlying economic assumptions.

State-owned Abu Dhabi National Oil Company (ADNOC) is the biggest national oil company, working in partnership with major international oil companies (IOCs) to deliver an estimated 2.65mn b/d of oil and liquids production in 2009, rising to 2.92mn b/d by the end of the forecast period – subject to OPEC quota policy.

Gas production should reach at least 85bcm by 2014, up from an estimated 53bcm in 2009. Consumption is expected to rise from an estimated 58bcm to 79bcm by the end of the forecast period, allowing net exports of around 6bcm.

Between 2010 and 2019, we are forecasting an increase in UAE oil production of 31.3%, with volumes rising steadily to 3.50mn b/d by the end of the 10-year forecast period. Oil consumption between 2010 and 2019 is set to increase by 36.3%, with growth slowing to an assumed 3.0% per annum towards the end of the period and the country using 656,000b/d by 2019.

Gas production is expected to rise from an estimated 53bcm to 120bcm by the end of the period. With 2010-2019 demand growth of 72.9%, this provides net gas export potential rising to 16bcm over the period. Details of BMI’s 10-year forecasts can be found in the appendix to this report.

The UAE takes first place, above even Qatar, in BMI’s composite Business Environment (BE) Ratings table, which combines upstream and downstream scores.

The Emirates still take second place, behind Qatar, in BMI’s updated upstream Business Environment Ratings, thanks largely to its significant oil and gas resource base and investor-friendly climate. The UAE now stands just two points behind Qatar and four ahead of Iraq, so should be secure over the medium term.

UAE’s score reflects the country’s gas reserves, high RPR, plus non-state competition, established licensing framework and generally encouraging country risk factors. The UAE is well up the league table in BMI’s downstream Business Environment Ratings, with several high scores and further progress up the rankings possible over the longer term.

It is ranked second behind only Israel, thanks largely to high scores for oil and gas demand, refining capacity expansion and nominal GDP. The two-point gap to Israel can be bridged easily during the next few quarters.