UAE MAY CUT OIL PRODUCTION LATER THIS YEAR

C O N F I D E N T I A L ABU DHABI 003721 SIPDIS DEPT FOR NEA/RA, NEA/ARP, INR/EC, EB/IEP, EB/CBA USDOE FOR INT'L AFFAIRS - COBURN, ALSO CALIENDO USDOE FOR OFFICE OF THE SECRETARY - RHONDA 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 08/12/08 TAGS: EPET PGOV BEXP ENRG ECON EINV TC SUBJECT: UAE MAY CUT OIL PRODUCTION LATER THIS YEAR ¶1. (U) Classified by Charge d'Affaires, a.i., Richard A. Albright, for reasons 1.5 (B) and (D). ¶2. (C) The Abu Dhabi National Oil Company (ADNOC) acknowledged publicly on August 10 that it will cut oil production in the last quarter of 2003 to undertake major repair work in the Lower Zakum and Umm Shaif offshore oil fields. ADNOC analysts say that production from those two fields could be reduced by as much as 40 percent. ADNOC will try to make up for the shortfall by increasing production of the higher grade Murban crude from other, unspecified fields. A Western oil executive confirmed to Econoff that the scheduled maintenance includes renovations and upgrades that had been delayed earlier this year because of the war in Iraq. ADNOC deferred work that could have affected the production of any one field, and stood ready to ramp up production to offset shortages caused by the loss in Iraqi exports. ¶3. (U) Current production from those two fields is estimated at about 420,000 barrels per day (bpd). The Abu Dhabi Marine Operating Company (ADMA-OPCO) quarterly bulletin states that current production in the Zakum field stands at 220,000 bpd and Umm Shaif produces about 200,000 bpd. Umm Shaif also has become a major gas producer for the UAE since the completion of the Umm Shaif Gas Development Project in 1994. ¶4. (C) Comment: Both the Zakum and Umm Shaif fields play a major role in the UAE's total oil production and oil exports -- Zakum alone has 321 oil and gas wells. Although the Western oil exec said that Japan and India are the two major oil importers of the lower grade Zakum and Umm Shaif crude, the announcement nonetheless will put upward pressure on oil prices worldwide. The news comes during a week when oil prices have spiked to their highest levels since before the onset of hostilities in Iraq. End comment. Albright