Abu Dhabi - Part 1 - Executive Summary.

The UAE emirate of Abu Dhabi has been one of the most attractive places in the world for foreign investors. Alert to any new opening or additional incentives offered in the neighbouring countries, the local government will always try to be competitive, if not the very best. Local and foreign investors will always be happy operating in this emirate.

Abu Dhabi has become a major source of high quality crude oil, of liquefied natural gas (LNG), liquefied petroleum gas (LPG) and other gas liquids (NGLs), and condensates. It will become a more important exporter of these sources of energy and industrial feedstocks in the next decade.

The United Arab Emirates celebrated its 27th anniversary on Dec. 2, 1998, as the only successful union experienced by the Arab World in modern history. The 19th summit of the Gulf Co-operation Council (GCC) was held in Abu Dhabi on Dec. 7-9, 1998. That was a few days after Saudi Arabia, by far the biggest oil exporter in the world but the worst hit by the collapse of oil prices, denied a rumour that it wanted to borrow $5 bn from Abu Dhabi to cover its $15 bn budget deficit.

By far the largest and wealthiest among the seven UAE emirates, Abu Dhabi prides itself on being the leader of this union. Abu Dhabi's ruler, Shaikh Zayed Bin Sultan Al Nahyan, celebrated his 27th anniversary as president of the UAE on Dec. 2 as well. At the age of 81 and getting close to 82, Shaikh Zayed is the oldest ruler in the GCC and has proved to be among the wisest leaders in the Arab World.

The whole of the UAE is 84,000 sq km, and Abu Dhabi is 77,700 sq km. Total population in the UAE is about 2.62 million (compared to 2.39m in early 1997), with Abu Dhabi accounting for a little over one million. Excluding the expatriates, Abu Dhabi's GDP per capita is the highest in the world.

The GDP of the whole UAE including the much poorer emirates was $48.02 bn in 1997, compared to $39.1 bn by end-1995. It rose more than 6% by end-1996 in view of high oil prices in that year. Abu Dhabi's GDP by end-1996 was about $27 bn, as this emirate gained the most from high oil prices.

All the sectors in Abu Dhabi are being expanded to cope with a steady economic growth expected in the next decade and a further improvement in social conditions. The main features of expansion in the sectors of energy and industry are:

- At end-1998, the emirate of Abu Dhabi reached the capacity to produce more than 2.5 million b/d of crude oil, compared to 2.37 million b/d at end-1996 and 1.83 million b/d in 1990/91. The capacity could be expanded to over 3 million b/d by 2001.

In the state-owned Abu Dhabi National Oil Co. (ADNOC), upstream experts say this capacity will be sustainable for several years, rather than for 12 months. Under OPEC's June 1998 agreement, the UAE's share of oil production is 2.157 million b/d (a previous quota from January 1998 was 2.366m b/d), but only Abu Dhabi sticks to OPEC decisions. Abu Dhabi's oil output averages 1.88 million b/d, excluding condensates. About 337,000 b/d of oil and condensates are produced by Dubai and Sharjah.

The geology and hydrocarbon reserves of Abu Dhabi, compared to its size, are the envy of all the countries in the world (see Gas Market Trends).

Abu Dhabi's proven recoverable oil reserves have been officially estimated at 92 billion barrels, and there are more than 200 billion barrels of oil in place in the emirate yet to be appraised for future development. Its proven recoverable reserves of natural gas are officially estimated at 190 TCF (5.7 TCM), with more to be found and proven in the future. To compare, proven recoverable oil reserves in the whole of the UAE are less than 98 billion barrels, and proven reserves of natural gas are almost 205 TCF.

Six major fields in Abu Dhabi, three onshore and three offshore, account for the bulk of the emirate's oil and gas production and their oil is of high quality. Most of Abu Dhabi's oil and gas fields are being expanded. Unlike its bigger GCC neighbours and other OPEC members, Abu Dhabi has foreign partners sharing its burden in funding capacity expansions. They provide the best technology in the industry (see Part 2).

- The sector of natural gas is expanding rapidly. By mid-1996, Abu Dhabi's gas production capacity reached more than 4,000 million cubic feet (MCF) per day, compared to a little over 2,000 MCF per day in 1994 and about 1,800 MCF/day in 1992. A big increase is expected from three gas development and gathering projects awarded in 1998.

By 2001, the gas production capacity will reach more than 6,000 MCF/day. Of this, 500 MCF/day would be exported to Dubai by pipeline and the volume will rise to 800 MCF/day a few years later. But Abu Dhabi now is expected to import gas from Qatar, as local demand is projected to rise rapidly in the coming year in view of big power and industrial expansions (See Part 3).

- The capacity to produce condensates has increased from 40,000 b/d in early 1994 to 171,000 b/d. By 2001 the condensate production capacity will reach more than 300,000 b/d. Condensates, NGLs and LPGs are excluded from the OPEC quota system. ADNOC has had difficulty in marketing its condensates, partly because of the liquids' quality and partly because of differences with potential clients over pricing. But most of the condensates will be refined locally later this year.

- The capacity to produce LNG on Das island has more than doubled. From 2.6 million tons a year, the nominal capacity in late 1994 reached about 4.9 million t/y with the addition of a third train. But the actual production of LNG in the past four years has averaged about 5.3 million tons per annum. The Das complex also produces LPG.

With Tokyo Electric (Tepco) buying 3.6 million tons per annum of the LNG under a 25-year contract and taking a major part of the LPG output, the surplus of both LNG and LPG is being sold on spot basis.

The Das joint venture, ADGAS, is owned 70% by ADNOC. The rest of the ADGAS shares are held by BP (10%), the Mitsui group (15%) and Total (5%). ADNOC's share was increased from 51% in June 1997. The change had been agreed by the partners when ADGAS decided to add a third liquefaction train. The foreign partners' participation in ADGAS was in July 1997 renewed until 2019 (see Part 3).

- The capacity of Abu Dhabi to produce LPG from onshore and offshore associated gas and from the LNG complex on Das island has risen to more than 4.75 million tons per year, from 3.93 million t/y in 1994. A further increase will be expected by 2000.

The onshore gas processing JV, Abu Dhabi Gas Industries Company (GASCO), is expanding its capacity to produce 6 million t/y of ethane, LPG and NGLs. In addition, GASCO at Ruwais has the capacity to produce up to 2.12 million t/y of pentane-plus, which is expected to expand as well.

- ADNOC's oil refining sector is being expanded from 205,000 b/d to 485,000 b/d. The Umm Al Nar refinery has a capacity of 85,000 b/d. The 120,000 b/d refinery at Ruwais is to have two condensate units which will boost its capacity to 400,000 b/d in the coming years. The two Ruwais units will cost about $800m.