(C) ABU DHABI OVERPRODUCING QUOTA BY 200,000 B/PD,

C O N F I D E N T I A L ABU DHABI 001086

SIPDIS

DEPT FOR NEA/RA, NEA/ARP, INR/EC, EB/IEP, EB/CBA
USDOE FOR INT'L AFFAIRS -- COBURN, ALSO CALIENDO
USDOC FOR 4520/ITA/IEP/ONE
USDOC FOR 4530/ITA/MAC/ONE/DGUGLIELMI
4500/ITA/MAC/DAS/WILLIAMSON
3131/CS/OIO/ANESA

E.O. 12958: DECL 03/05/13
TAGS: EPET PGOV BEXP ENRG ECON TC
SUBJECT: (C) ABU DHABI OVERPRODUCING QUOTA BY 200,000 B/PD,
BUT STILL HAS EXCESS CAPACITY OF 400-450K B/PD


1. (U) Classified by DCM Richard A. Albright for reasons
1.5 (B) and (D).


2. (C) A western oil executive in an excellent
position to know told Econchief March 5 that he
believes that the Abu Dhabi National Oil Company
(ADNOC) is overproducing the UAE's 2.14 million
barrel per day (bpd) OPEC quota by as much as ten
percent, i.e., around 200,000 bpd. This
statement tracks with an earlier private
admission to Econchief by the number two official
at ADNOC that Abu Dhabi's senior oil policy
organization, the Supreme Petroleum Council
(SPC),had issued instructions at the turn of the
year for ADNOC to ramp up output to take
advantage of high prices -- a move driven both by
an ongoing budget crunch resulting from low
returns on the government's portfolio
investments, as well as concern that oil prices
might drop considerably in a post-Iraq
contingency environment.


3. (C) Our western oil source said that at
current rates of production (i.e., ten percent
over quota or around 2.3 million bpd) Abu Dhabi
could probably increase sustainable output by as
much as 450,000 bpd. It would not take much time
to reach that level of output, but it would
require direction from the senior-most leadership
-- the SPC, or better yet, President Zayid
himself -- because to reach such a level ADNOC
would need to relax environmental guidelines and
a number of other internal rules limiting output
per field and per well, scheduling of
maintenance, etc. The most significant hurdle to
be overcome would be to temporarily lift the ban
on flaring of gas because while ADNOC can produce
the oil without difficulty, the local gas
processing company, GASCO, will not have the
capacity to absorb the additional associated gas
that would result from a ramp up in crude
production.


4. (C) COMMENT: We believe our source is in a
position to know Abu Dhabi's current spare
capacity and would find his number of 450k
barrels per day generally credible, if a bit on
the conservative side.

WAHBA