SCENESETTER FOR THE VISIT OF SECRETARY CHU

UNCLAS ABU DHABI 000246 SENSITIVE SIPDIS DEPARTMENT FOR NEA/ARP, EEB/ESC/IEC/ENR (MONOSSON, SECOR),AND OES/EGC (THOMPSON) DOE FOR S1, S2, O???CONNOR AND SANDOLOW AMMAN FOR ESTH HUB (BHALLA) E.O. 12958: N/A TAGS: ENRG EPET SENV KGHG AE SUBJECT: SCENESETTER FOR THE VISIT OF SECRETARY CHU ¶1. (U) Mission UAE looks forward to welcoming the Feb. 23-25 visit of Secretary of Energy Dr. Steven Chu. THE UAE AND THE BILATERAL RELATIONSHIP -------------- ¶2. (SBU) In the past five years, the United Arab Emirates has emerged as one of the economic powerhouses of the region and attained a commensurate level of political influence. The UAE has troops in Afghanistan, is an important political player in Pakistan, and its support is sought by leaders throughout the Middle East, and further afield. Although a tiny country, geographically and demographically, the UAE punches well above its weight class in international circles. A COUNTRY BUILT ON OIL AND GAS -------------- ¶3. (SBU) Most of the UAE's development, particularly in the Emirate of Abu Dhabi, was funded by oil revenues. The hydrocarbon sector was developed years before the UAE was established (1971) and provide its population with a high standard of living. Today, Abu Dhabi - through state-owned Abu Dhabi National Oil Company (ADNOC) produces approximately 2.2 million barrels per day (mbpd) of oil although production capacity exceeds 2.6 mbpd. ADNOC is investing in increased production, largely through the application of advanced recovery technologies. Abu Dhabi's main export destinations are Japan and South Korea. ADNOC expects to offer new concessions in 2014 and 2018, potentially allowing U.S. companies to increase market share here. ¶4. (SBU) Although the UAE exports about 4 billion standard cubic feet a day (scfd),the UAE's gas deposits are largely associated and a significant portion of production is reinjected for enhanced oil recovery. The UAE has one large sour gas field, Shah, which is being developed by ADNOC and ConocoPhillips and could yield over 500 million scfd. Other projects are underway to expand existing gas production, however, much of this is also expected to be used for reinjection. Domestic gas production is insufficient to power the UAE's rapid economic development. In 2001, the UAE (then as the UAE Offsets Group and now as Mubadala) entered into a long term gas deal with neighboring Qatar. Named Dolphin Energy, the project currently imports 2 billion scfd by a pipeline designed to deliver 3.2 billion scfd. ¶5. (SBU) In addition to its oil and gas production, Abu Dhabi-owned companies have also made significant investments in global energy assets. State-owned investment corporation Mubadala purchased Singapore's Pearl Energy and owns assets across the Middle East and North Africa, as well as its Dolphin stake. Government-owned International Petroleum Investment Corporation (IPIC) has made both domestic and international investments in refineries, pipelines, and other production facilities. Abu Dhabi Energy Company ("Taqa") has purchased power facilities as far afield as Jamaica, invested in storage in Europe and owns domestic power assets. ...TURNS TO GREEN ENERGY -------------- ¶6. (SBU) In 2007, Abu Dhabi Emirate began a study of the UAE's long term electricity needs and determined that the UAE would be unable to produce enough gas or develop sufficient renewable capacity to meet growing demand. After dismissing oil and coal as environmentally unfriendly, Abu Dhabi determined that nuclear power would best serve the Emirate's long-term electricity needs. The UAE choose to publically renounce uranium enrichment and reprocessing (ENR). In addition to codifying this policy in the US-UAE 123 Agreement, which took effect in late December, the UAE's October 2009 nuclear law also bans ENR. The law established an independent regulator, the Federal Authority for Nuclear Regulation (FANR),which is headed by a former US NRC official (Bill Travers). In December 2009, Abu Dhabi awarded a USD 20 billion tender for the UAE's first four nuclear power plants to Korea's KEPCO, whose significantly lower price beat competitors GE/Hitachi and AREVA. A delegation of U.S. firms will be visiting Abu Dhabi the week of your visit to explore related subcontracting opportunities. ¶7. (SBU) Concurrently, Abu Dhabi is also investing heavily in renewable energy. The Government set a target to produce 7 percent of total electricity demand from renewable by 2020, an effort led by Masdar, the Abu Dhabi Future Energy Company, which is owned by Mubadala. Masdar (Arabic for "source") has four main divisions: Masdar Power, Masdar Carbon, Masdar Sustainable Cities and Masdar Institute. The first invests in renewable technologies, the second supports the reduction of carbon emissions, the third develops model zero-carbon, zero-waste cities, like Masdar City in Abu Dhabi, and the last promotes research, through a partnership with MIT. The selection of Abu Dhabi to host the new International Renewable Energy Agency (IRENA) in June 2009 is in part demonstrative of Masdar's success. Masdar CEO Dr. Sultan Al Jaber is very enthusiastic about your visit and hopes to finalize discussions about the proposed DOE-Masdar MOU to pave the way for signature in the coming weeks. THE POLICY -------------- ¶8. (SBU) While the UAE has taken a number of steps to promote energy diversification and green technology development and application, it has yet to institutionalize these efforts in policy. Abu Dhabi has drafted a broad energy policy which is expected to be released sometime in the spring. This policy is likely to be a significant shift for an OPEC member, as it is expected to highlight the UAE's commitment to combating climate change. The UAE has not yet associated with the Copenhagen Accord, but is very interested in being part of future negotiations and plans to associate once its comprehensive review is completed. THE AGENDA -------------- ¶9. (SBU) More broadly, the UAE - particularly Abu Dhabi - sees itself as a global energy provider. Officials recognize that the country was blessed with a competitive advantage in hydrocarbons and seek to exploit that position and knowledge as they diversify into clean energy production (both renewables and nuclear). Given the UAE's ambitions and financial strength, we can expect the UAE will remain a dominant player in global energy markets. ¶10. (SBU) U.S. firms are involved in almost all of the UAE's energy initiatives, either as consultants, exporters or innovators. However, we have only scratched the surface of USG collaboration opportunities. The President's Cairo speech highlighted the importance of greater science and technology cooperation with the Muslim world. Your visit presents a unique opportunity to cement real UAE commitments to furthering such collaboration, particularly with Masdar. OLSON