UAE ENERGY MINISTER ON OPEC AND OIL PRODUCTION

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 001922

SIPDIS

SIPDIS

DEPARTMENT FOR NEA/ARP, EEB/ESC/IEC/EPC
NSC FOR HUTTO
ENERGY FOR SENIOR POLICY ADVISOR WILLIAMSON

E.O. 12958: DECL: 11/26/2017
TAGS: EPET ENRG ECON AE
SUBJECT: UAE ENERGY MINISTER ON OPEC AND OIL PRODUCTION

REF: A. ABU DHABI 539


B. 06 ABU DHABI 4325

ABU DHABI 00001922 001.2 OF 002


Classified By: Ambassador Michele J. Sison for reasons 1.4 (b & d).


1. (C) Summary: Ambassador, accompanied by Econchief, met
with UAE Energy Minister Mohammed bin Dha'en Al-Hamili on
November 25. Al-Hamili argued that OPEC was not setting
prices and that there was a USD 15-20 per barrel "political"
premium on oil prices. He stated that price volatility
complicated investment decisions, but that the UAE would be
continuing its investments. In regard to the shut down of
some of Abu Dhabi's offshore production for required
maintenance, he stated that contractually, Abu Dhabi National
Oil Company (ADNOC) met its commitments to its customers
either by providing more oil in advance of the maintenance or
-- if necessary -- afterwards. According to an Abu Dhabi
Marine Operating Company (ADMA/OPCO) engineer, the Abu Dhabi
Gas Liquefaction Ltd. (ADGAS) had shut down one of its LNG
trains on Das Island for maintenance. ADMA/OPCO had used
this shut down to de-bottleneck its own facilities, raising
sustainable production capacity from 550,000 barrels per day
to between 600,000 and 625,000 barrels per day (if new wells
are drilled). End Summary.

OPEC and Oil Prices
--------------


2. (SBU) Ambassador and Al-Hamili discussed the Riyadh OPEC
summit and the scheduled December 5 OPEC extraordinary
meeting in Abu Dhabi. Al-Hamili said he was extremely busy
in his last month as OPEC president. He said he would be
heading to Singapore on November 26 for a conference,
returning on November 29th, leaving for a meeting in Doha on
the 30th, then returning to host the OPEC meeting on December
4th and 5th. He noted that he was glad to be turning the
reigns of the presidency over to Algeria. In response to
Ambassador's question about the OPEC commitment to renewable
energy, Al-Hamili stated that investment was good, but there
was "a long way to go" before renewables replaced fossil
fuels as a major power source. (Note: During the Riyadh
OPEC summit, UAE President Sheikh Khalifa bin Zayed Al-Nahyan
reiterated the UAE's commitment to supplying oil to the
international markets and his commitment to developing clean,
safe, and cheap alternative sources of energy. President
Khalifa also pledged USD 150 million for scientific research
in the fields of energy, environment, and climate change.
End Note.)


3. (C) With regard to the current high prices, Al-Hamili
reiterated his contention that the fundamentals were largely
in balance, noting that refineries were not producing at full
capacity and global stocks were "comfortable." With regard
to prices, he stated OPEC does not set prices, adding he had
heard that there was a "geopolitical" premium of USD 15-20
per barrel. What concerned him, he added, was price
volatility. It made it difficult to make investment plans.
Since volatility in crude prices contributed to volatility in
petroleum product prices, it was difficult for investors to
know whether to move forward on investments in refineries,
for example. He added that the UAE did not make its
investment decisions on the basis of USD 100 per barrel of
oil, but -- in any case -- was continuing to invest.

ADNOC Maintenance and Production Cuts
--------------


4. (SBU) Ambassador and Al-Hamili briefly discussed scheduled
maintenance, which had reportedly shut down around 600,000
barrels per day of production for between two and three weeks
in November in Abu Dhabi's offshore fields. Al-Hamili stated
that he did not have all of the details on the maintenance
program, adding that it was sometimes easier to shut down
production to perform maintenance rather than to try and
perform maintenance while the system was operating. In any
case, Al-Hamili asserted, scheduled maintenance was
calculated into contractual arrangements with customers. If
ADNOC promised X barrels per day to its customers over a
year, it would make up the shortage resulting from scheduled
maintenance by providing extra oil either before or after the
maintenance, preferably before. The market panic did not
reflect any overall shortage in supply. (Note: Al-Hamili's
remarks track with those of Exxon Al-Khaleej President Frank
Kemnetz, who had earlier told Econchief that ADNOC would
average out supplies to make sure that it met its
commitments. End Comment.

ABU DHABI 00001922 002.2 OF 002




5. (C) An ADMA/OPCO engineer told Econchief that the shut
down was due to required ADGAS maintenance on its Das Island
LNG plant. (Note: ADGAS processes the associated gas from Abu
Dhabi's offshore oil production. End Note.) ADGAS had to
shut down one of its three LNG trains, which affected
production for both ADMA/OPCO and Zadco (ADMA/OPCO's
sustainable capacity was about 550,000 barrels per day, he
noted.) ADMA/OPCO used the opportunity to de-bottleneck its
facilities raising its sustainable capacity to around 600,000
to 625,000 barrels per day. He cautioned, however, that
bringing this additional capacity on board would require
additional well drilling. The long-term goal would be to
increase production capacity to around one million barrels
per day (700,000 from existing fields and 300,000 from new
fields). ADNOC Deputy CEO Abdulla Nasser Al-Suwaidi told
Econchief in November 2006, that ADNOC's goal was to increase
production capacity for ADMA/OPCO to one million barrels per
day by around 2014 (ref b).
SISON