UAE OIL OFFICIAL'S VIEWS ON IRAQ AND THE OIL

C O N F I D E N T I A L ABU DHABI 001088 SIPDIS DEPT FOR NEA/RA, NEA/ARP, INR/EC, EB/IEP, EB/CBA USDOE FOR INT'L AFFAIRS OBURN, ALSO CALIENDO USDOE FOR OFFICE OF THE SECRETARY HONDA HUDOME USDOC FOR 1000/OC/ 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 03/05/08 TAGS: EPET PGOV BEXP ENRG ECON EINV TC SUBJECT: UAE OIL OFFICIAL'S VIEWS ON IRAQ AND THE OIL MARKET ¶1. (U) Classified by DCM Richard Albright, for reasons 1.5 (B) and (D). ¶2. (C) The Abu Dhabi National Oil Company's (ADNOC) Deputy CEO, Abdullah Bin Nasser Al-Suwaidi does not believe that the oil market would collapse following a military conflict with Iraq and removal of Saddam Hussein from power. In a March 3 meeting with Econchief and Econoff, Al-Suwaidi posited that oil prices would likely soften a bit -- to the $18-20 range -- if Iraq produced at full capacity, but would not drop significantly beyond that. (Note: Others in the UAE government, including senior officials at the mammoth Abu Dhabi Investment Authority, which makes the Emirates overseas portfolio investments, have privately expressed a concern that a drastic drop in oil prices is inevitable, down to possibly $8 a barrel.) Al-Suwaidi elaborated that prices are artificially high right now, and that he recently signed contracts for the next two months fixing the UAE's signature 'Murban' crude at $34 per barrel. ¶3. (C) Al-Suwaidi does not believe that Iraq's oil production will increase substantially in the short term, and -- although cheap to produce -- Iraqi oil fields will require billions of dollars in investment and several years to realize their full potential. He intimated that the Kirkuk and Basra fields, in particular, are in poor condition, having been producing for decades. He also suggested that Iraq's claimed reserves may be overstated; in any case, he doubted that there are any large, undiscovered deposits of oil in Iraq. Wahba