S E C R E T SECTION 01 OF 02 ABU DHABI 001292

SIPDIS

NOFORN

DEPT FOR NEA/RA, NEA/ARP, INR/EC, EB/IEP,
EB/CBA, S/CT
AMEMBASSY TUNIS -- HOLD FSI FOR OLIVER JOHN
USDOE FOR INT'L AFFAIRS -- COBURN, ALSO
CALIENDO

E.O. 12958: DECL 03/17/13
TAGS: KPRP PINR ENRG EINV EPET ETRD
ECON, TC
SUBJECT: (C) ABU DHABI'S OIL PRODUCTION CAPACITY (C-
TN3-00243)

REF A: STATE 63047 REF B: ABU DHABI 1289


1. (U) Classified by Ambassador Marcelle M. Wahba,
for reasons 1.5 (B) and (D).


2. (S/NF) Summary and comment: In separate meetings
with Abu Dhabi National Oil Company (ADNOC) CEO Yousef
bin Omeir and Deputy CEO Abdulla Nasser Al-Suweidi on
March 17, Econchief was provided an unprecedented look
at ADNOC's production and surge capabilities. ADNOC
can produce up to 2.5 million barrels per day (mmb/d)
on a sustainable basis and has significant short-term
surge capacity -- close to 2.8 mmb/d. We are not
aware that the ADNOC leadership has ever provided such
detailed information to the USG before (and indeed,
securing this cooperation required political-level
engagement -- see ref B). That they were so
forthcoming likely reflects a willingness to assist in
stabilizing the oil market should that prove necessary
in the weeks to come. End summary and comment.

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Current Capacity About 2.5 MMB/D
--------------


3. (S/NF) ADNOC CEO Yousef bin Omeir admitted that
ADNOC is producing at about 2.2 mmb/d, could ramp up
sustainable production to 2.4 mmb/d almost
instantaneously, and to 2.5 mmb/d in "a matter of
days," if necessary. According to ADNOC Deputy CEO
Al-Suweidi, ADNOC has the capability to shift
production from field to field easily. ADCO (Abu
Dhabi's onshore production company), for example, had
ramped up production to 1.35 mmb/d for a couple of
days last week to help compensate for the total shut-
down of offshore operations due to dangerously high
winds.


4. Al-Suweidi systematically described production

levels in each of Abu Dhabi's main fields and said
that ADNOC could sustain 2.5 mmb/d indefinitely under
current reservoir management policies. ADMA-OPCO
currently is producing about 500,000 barrels per day
and is close to peak production. The Upper Zakum
field, operated by ZADCO, is producing about 570,000
barrels per day and could produce 600,000 barrels per
day with 15 million cubic feet per day of gas flared.
ADCO peak sustainable production is about 1.4 mmb/d,
with the Bu Hasa field accounting for any significant
production increase. He noted that, while ADNOC
usually limits the flaring of gas, it might relax
those restrictions during a crisis, as it had done
during the 1991 Gulf War, when more than 50 million
cubic feet per day was flared.

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Surge Capacity Is Significant
--------------


5. (S/NF) ADNOC's leadership is not keen to produce
above 2.5 mmb/d out of a concern for potentially
damaging Abu Dhabi's fields and because environmental
considerations militate against the flaring of gas.
(Note: ADNOC has a "Zero Flaring" policy, but since
GASCO, the local gas processing company, does not have
the capacity to manage the additional associated gas,
higher oil output would require the flaring of the
excess gas. End note.) The ExxonMobil Country
Manager here (please protect) previously confirmed to
Econchief that ADNOC could surge to at least 2.6
mmb/d, if needed. Al-Suweidi said, however, that
ADNOC's short-term surge capability at the well-head
could be as much as 20 percent more than peak
production, suggesting a surge capacity closer to 2.8-
3.0 mmb/d.


6. (S/NF) Al-Suweidi acknowledged that while ADNOC
could hypothetically reach 3.0 mmb/d at the well-head,
being able to actually move, process, and export that
amount would require significant investment to
increase the capacity of the surface facilities (i.e.
the collection and processing facilities). He said
that ADNOC's shareholders were not keen to invest in
additional spare capacity at this time, but it is
technically feasible nonetheless.

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Other Factors Affecting Output
--------------


7. (S/NF) There are only a few other factors that
could hinder ADNOC from ramping up production
instantaneously in a crisis. The weather sometimes
prohibits full production from the offshore
facilities, as was demonstrated last week. To take
advantage of current high oil prices, ADNOC has
deferred scheduled maintenance in the near-term that
could affect the production of any one field.
Although we don't know to what degree higher insurance
premiums on tankers could affect ADNOC's ability to
put additional production on the market, Al-Suweidi
confirmed that ADNOC sells its oil FOB (free on board
-- customers provide their own tankers) and the
availability of tankers is outside of ADNOC's control.
Finally, ADNOC would have to receive specific
instructions from the Supreme Petroleum Council (SPC)
to increase production significantly above current
levels. Al-Suweidi undertook to inform us of any
change in the current situation that would affect the
UAE's production capabilities.

Wahba