Executive Summary

December 2007
UAE Oil & Gas Report;Q1 2008, p5
Industry Profile
The latest United Arab Emirates (UAE) Oil & Gas Report from BMI forecasts that the country will account for 3.93% of MEA regional oil demand by 2011, while providing 7.99% of supply. MEA regional oil use of 8.70mn b/d in 2001 rose to 10.94mn b/d in 2006. It should average 11.19mn b/d in 2007 and then rise to around 12.44mn b/d by 2011. Regional oil production was 30.39mn b/d in 2001, and in 2006 averaged 35.69mn b/d. It is set to rise to 40.04mn b/d by 2011. In terms of natural gas, the region in 2006 consumed 384bcm, with demand of 555bcm targeted for 2011, representing 44.7% growth. Production of 509bcm in 2006 should reach 869bcm in 2011 (+71%), which implies net exports rising from 126bcm in 2006 to 314bcm by the end of the period. The UAE in 2006 consumed 10.87% of the region's gas, with its market share forecast at 10.83% by 2011. It contributed 9.31% to 2006 regional gas production and, by 2011, will account for 8.63% of supply. Global oil demand growth is now expected to be 1.9% in 2007, down from our June forecast, but with Asia Pacific and the CEE regions dominating. While oil demand growth assumptions remain robust, there are early signs that future revisions will be on the downside as factors such as the credit crunch kick in. The overall demand outlook for the period to 2011 remains healthy, but subject to review if the macroeconomic outlook deteriorates. Our projections for 2007 as a whole are revised upwards from the last quarterly report. We are now assuming an OPEC basket price average of US$64 per barrel, compared with the US$59 estimate provided by our last quarterly report. Based on recent price differentials, this implies Brent at US$67.81, WTI averaging US$66.18/bbl, and Urals at US$64.43/bbl. The UAE's real GDP growth is now forecast by BMI at 7.1% for 2007, following 9.0% in 2006. We are assuming 5.8% growth in 2008, 5.6% in 2009, followed by 4.5% in 2010/11. We expect oil demand to rise from 408,000b/d in 2006 to 489,000b/d in 2011, representing 4.0% annual growth, lagging appreciably our underlying economic assumptions. State-owned ADNOC is the biggest national oil company, working in partnership with major international oil companies (IOCs) to deliver 2.97mn b/d of 2006 oil and liquids production, rising to 3.20mn b/d by the end of the forecast period -- subject to OPEC quota policy. Gas production should reach at least 75bcm by 2011, up from 47.4bcm in 2006. Consumption is expected to rise from 42bcm to 60bcm by the end of the forecast period, allowing exports of 15bcm. In the BMI Business Environment Ranking matrix, the UAE this quarter receives an unchanged composite score of 43, but this was enough to promote it to first place out of 16 countries included in the MEA region. The overall business environment is very attractive in a regional context, thanks largely to low levels of perceived political and economic risk, plus the country's abundant oil and gas resources, and widespread participation by foreign companies. The UAE's reserves-to-production ratio (RPR) is one of the region's highest. The state is also one of the most open and Westernised Middle Eastern countries in terms of its hydrocarbons sector.


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