UAE PRODUCTION IN THE WAKE OF THE JUNE OPEC QUOTA

C O N F I D E N T I A L ABU DHABI 001942 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 06/06/2009 TAGS: EPET ENRG ECON TC SUBJECT: UAE PRODUCTION IN THE WAKE OF THE JUNE OPEC QUOTA INCREASE (U) Classified by Ambassador Marcelle M. Wahba, for reasons 1.5 (B) and (D). ¶1. (C) Ambassador, accompanied by EconChief paid her farewell call to ADNOC CEO Yousef Omair bin Yousef and Deputy CEO Abdullah Nasser Al-Suwaidi on June 6, 2004. The Ambassador thanked Yousef for the UAE and OPEC's welcome action and asked about the UAE's announcement that it would produce an extra 400,000 barrels per day. Yousef acknowledged that some of the announcement reflected extra oil that the UAE had already been producing. He said that the UAE's new production would be about 2.5 million barrels per day. (note: The UAE's quota before the increase was 2.05 mbd. After the Beirut meeting, its quota increased to 2.22 mbd. Dubai production does not/not count as part of the UAE's OPEC quota.) He added that the UAE's normal production, counting Dubai, was about 2.2 million barrels per day. Yousef further said that the UAE produced about 250,000 barrels per day of condensate, which were not covered by the OPEC quota. ¶2. (C) The Ambassador asked for Yousef's opinion about the impact of OPEC's decision on oil prices. Yousef stated that he thought speculation and political concerns were playing a role in the current high oil prices. He noted that total world consumption of oil was about 80 million barrels per day, but that the volume of traded oil was 180 million barrels per day. He also explained that oil demand was indeed increasing, and cited China as an example of a country that was increasing its energy use at a tremendous rate. ¶3. (C) For its part, ADNOC was looking at expanding its production capacity, increasing its oil production capacity by 20 to 30 percent over the next three to seven years and doubling onshore LPG output. Yousef also said that ADNOC would be looking to expand dramatically its petrochemical production over the next few years. In response to the Ambassador's question about reports that the northern emirates were interested in gas deals with Iran and whether that would affect ADNOC, Yousef stated that it would not. ADNOC did not have a gas contract with Sharja. It was supplying gas to Dubai and was increasing its deliveries to meet demand. Wahba