As one of the world’s leading oil and gas companies, ADNOC plays a major role in the ongoing growth of the economy of the Emirate of Abu Dhabi. Between 2000 and 2004, ADNOC continued to support Abu Dhabi’s key contribution to the importance of the United Arab Emirates (UAE) in the regional and global energy markets. Through its oil and gas reserves – among the largest in the world – the UAE has long been a major contributor to the development of the Gulf Cooperation Council (GCC) region as one of the world’s most dynamic developing markets.
The combined Gross Domestic Product (GDP) of the six GCC member countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – grew during 2003 by about 5 percent to $ 350,000 million. This placed the GCC in 16th place in the world economic league, above Belgium, Sweden and Switzerland. On GDP per capita, the GCC also ranks highly, with some member countries enjoying income levels similar to those in North America and Europe.
The UAE has a GDP per capita of $ 22,000 and boasts one of the most vibrant economies in the GCC. According to International Monetary Fund (IMF) figures, nominal GDP of the UAE grew by 2.5 percent in 2002, and real GDP by 1.5 percent. This positive trend is likely to be sustained, with analysts forecasting real GDP growth of 4.5 percent in 2003, with nominal GDP growth likely to reach double digits.
The GCC accounts for nearly 45 per cent of global proven oil reserves and 20 percent of world gas. It currently produces almost 15 million barrels per day (b/d), which is close to 20 percent of the world total. Most of this is sold into a market that is forecast to grow by at least 1 million b/d for the foreseeable future.
The UAE’s proven oil reserves now stand at around 98 billion barrels, representing just under 10 percent of total world oil reserves. This places UAE as the fourth largest OPEC producer, after Saudi Arabia, Iran and Venezuela. Abu Dhabi’s proven oil reserves have doubled in last decade and now account for 94 percent of the UAE’s total oil reserves. This is the result of significantly increasing the rate of recovery, continuing to identify new finds, especially offshore, and discovering new oil-rich structures in existing fields.
ADNOC’s oil production capacity has risen to over 2 million barrels per day, ranking it among the top 10 oil producers in the world. This has been achieved through major investments in a number of recent and ongoing development projects.
These include a $ 300 million project to increase capacity of the onshore Bu Hasa field from 100,000 to 480,000 b/d, a natural gas re-injection project for the onshore Bab field, and a $ 480 million project to increase capacity of the Ruwais refinery from 145,000 to 500,000 b/d. These form part of the overall goal of raising UAE’s production capacity to 3 million b/d by 2006.
The GCC accounts for around 20 percent of world gas. Global demand is rising by just under 4 percent a year and forecast to reach 12,200 million cubic feet per day (cf/d) by 2025. The GCC’s share of world gas consumption, the most dynamic part of the global energy market, is also growing rapidly, fuelled by rising domestic and industrial demand. Capitalising on its gas feedstock cost advantage, the GCC will account for most future capacity additions in world olefins. A similar trend is developing in fertilisers.
The UAE’s natural gas reserves are 212 trillion cubic feet (tcf), the fifth largest in the world after Russia, Iran, Qatar and Saudi Arabia. The largest reserves, amounting to 196 tcf, are located in Abu Dhabi, where the non-associated Khuff natural gas reservoirs beneath Umm Shaif and Abu Al Bukhush oil fields, rank among the world’s largest.
Increased domestic consumption of electricity and growing demand from the petrochemical industry have provided incentives for the UAE to increase its use of natural gas. Consumption has doubled in Abu Dhabi over last decade, and is projected to reach 4 billion cubic feet by 2005. The development of natural gas fields also results in increased production and export of condensates, which are not subject to OPEC quotas. Gas exports provide a more stable source of revenue than oil, since quantity is fixed for a contracted period, and prices are less changeable.
ADNOC continues to play a major role in capitalising on the UAE’s vast gas reserves. Between 2003 and 2007, an estimated $ 1,000 million per year is planned to be invested in new gas infrastructure, with the lead being taken by ADNOC subsidiaries – GASCO, ADMA-OPCO, ADCO and ZADCO.
These include the third phase of the onshore gas development (OGD-III), the second phase of the Asab gas development (AGD-II), expansion of the gas complex at Habshan, and the Umm Shaif gas re-injection project. In 2001, ADNOC commenced supply of natural gas to Dubai via the Maqta-Dubai pipeline, delivering 200 million cf/d of natural gas. Pipeline throughput is expected to reach 900 million cf/d by 2003, with the completion of additional compressor stations. Prior to this pipeline, Dubai’s natural gas supply came entirely from Sharjah.
Another key intra-regional initiative is the Dolphin Project, which aims to develop links between the national gas infrastructures of Qatar, UAE and Oman. A Statement of Principles was signed in 1999 between UAE Offsets Group (UOG) and Qatar General Petroleum Corporation (QGPC), followed by the signing of a sales agreement in 2002, with natural gas supplies expected to start in 2005. In 1999, ADNOC and UOG issued a joint declaration dividing up natural gas distribution between them. Natural gas from the Dolphin project will be the exclusive supply for natural gas-fired power plants, except in the Western Region of Abu Dhabi, and will also supply natural gas for ADNOC contracts with Dubai.
The GCC is the rising star of the global petrochemicals industry. Abundant supplies of oil and gas, coupled with low feedstock and production costs, give the region a major advantage over other major global producers. Based on projects planned and underway, the GCC’s ethylene capacity will jump to over 15 percent of global capacity by 2010. A decade later, it is forecast that the Gulf will overtake the US – currently the biggest petrochemical producer with a market share of 25 percent – and have the world’s largest concentration of petrochemical capacity.
In Abu Dhabi, ADNOC’s fast-growing petrochemicals activities include the production of ammonia and urea by Fertil since 1983, as well as the production of polyethylene by Borouge, which commenced in 2001. These are helping to diversify the Emirate’s economic base, creating more employment for UAE nationals, and supporting the Government’s privatisation policies by promoting downstream industry linkages.
UAE-Japan Economic Ties
The year 2002 marked the 30th anniversary of economic ties between the UAE and Japan. In 1972, Japan Oil Development Company Ltd. (JODCO), as a partner in ADMA, was the first Japanese oil company to participate in the development of Abu Dhabi’s offshore fields. Today, the UAE supplies more than 1 million b/d to Japan, surpassing Saudi Arabia as the number one crude exporter to Japan. The UAE now supplies Japan with 25 per cent of its total crude oil import needs.
ADNOC and JODCO have developed a mutually beneficial working relationship over the last 30 years. Benefits include the utilisation of state-of-the-art subsurface technology to enhance oil recovery, the implementation of international health and safety standards, and the introduction of environmental programmes such as the project to preserve Abu Dhabi’s mangrove plantations.