Al Dhafra's economy benefits from increased investment and diversification

Abu Dhabi’s government is pumping billions of dollars of investment into the region of Al Dhafra as it seeks to expand key hydrocarbons infrastructure, and create an integrated and diversified local economy. Located south-west of Abu Dhabi City, Al Dhafra encompasses around 60% of the total landmass of the emirate. Mostly desert, the region has historically been very sparsely populated, although government investment and job-creation initiatives are encouraging both locals and expats to move to its main settlements, which include Madinat Zayed – the regional administrative capital – Liwa and Ruwais. The region’s growing economy, built around major infrastructure projects, hydrocarbons, real estate, agriculture and tourism, is rapidly integrating with the wider emirate, setting the scene for an influx of foreign direct investment (FDI).

Natural Resource Wealth

Despite the barrenness of its landscape, characterised by temperature extremes and minimal rainfall, Al Dhafra’s dry desert sands sit on top of immense potential wealth. The region contains around 90% of Abu Dhabi’s total oil reserves, and Al Dhafra’s three main offshore gas fields – Ghasha, Hail and Dalma – which hold trillions of cu feet of recoverable gas, are set to underpin the Abu Dhabi government’s production target of 1bn standard cu feet per day (scfd) by 2030.

Aside from hydrocarbons, Al Dhafra also has, despite its dry climate, a relatively large agriculture sector, which in 2017 accounted for 27.7% of Abu Dhabi’s plant holdings and 16.8% of its total livestock, according to the Statistics Centre - Abu Dhabi (SCAD).

Growing Population

Government investment and a diversifying local economy have driven a significant rise in Al Dhafra’s population in recent years. At the end of 2016 Al Dhafra’s population was recorded at 334,000, a marginal increase from 325,800 the previous year, but still more than triple the 108,600 inhabitants recorded in 2005. Foreigners comprise roughly 90% of the population in Al Dhafra, and demand for both skilled and non-skilled foreign labour has increased over the past decade.

Government Investment

Under the framework of Plan Al Dhafra 2030, the Abu Dhabi government is putting the region on a track towards economic diversification and long-term sustainable growth. Master plans tailored for each of Al Dhafra’s subregions include major investments in the traditional hydrocarbons and power-generation sectors, but also transport, tourism and real estate. Mega-projects in the area include the $10bn Shah Gas Development, opened in 2016 near Liwa in the south-east of the Al Dhafra Region, and the $3.8bn Barakah Nuclear Power Plant, which saw the completion of its first reactor in early 2018, with the other three reactors scheduled for completion around the end of 2019. In addition, in January 2018 road and transport infrastructure investments worth over $1.4bn were completed, further integrating the region with the rest of the emirate.

In January 2018 the government also announced completion of a $540m desalinated water reservoir in Liwa. The development holds 26bn litres of drinking water and is the largest of its kind in the world. In September 2018 the state-owned Abu Dhabi National Oil Company (ADNOC) announced it was investing $45bn in a 6.9-sq-km urban development plan for Ruwais City, which is located in its industrial complex to the west of the emirate. The project aims to become the largest integrated refining and petrochemicals destination in the world, which the company estimates will eventually generate 1% of the UAE’s GDP by 2025.

Oil & Gas Focus

Al Dhafra accounts for around 40% of Abu Dhabi’s GDP, and most of its economic output relates to oil and gas. ADNOC manages the emirate’s hydrocarbons reserves, and as such plays a major role in steering Al Dhafra’s oil and gas growth. In November 2018 the company announced it wanted to raise its crude production from 2018’s year-end target of 3.5m barrels per day (bpd) to 4m bpd by 2020 and 5m bpd by 2030. With the Ruwais industrial development in the pipeline, ADNOC has also has set a target of tripling annual capacity at its petrochemicals plants from 4.5m to 14.4m tonnes by 2025.

Although oil is the mainstay of the regional economy, ADNOC’s gas expansion plans in Al Dhafra are potentially more significant, as it will likely see the UAE end its long-standing gas import partnership with Qatar and become a net gas exporter. Following completion of the Shah Gas Development project, ADNOC is looking to exploit the region’s enormous offshore sour gas potential, having recently discovered an additional 15trn cu feet of gas in the Ghasha, Hail and Dalma fields. Guided by its Gas Master Plan, ADNOC has increased gas production by 15% per annum in recent years and is well on its way to achieving its target of 1bn scfd by 2030.

As ADNOC is in the process of releasing several large projects, the activity is creating knock-on benefits in other areas of the economy. The ripple effect from the industry’s resumed spending can be felt across sectors such as financial services, since funding and insurance is needed at every stage of works.


Added capacity to Abu Dhabi’s electricity grid is priming the region for expanded hydrocarbons and petrochemical production, as well anticipated population growth. Energy expansion in Al Dhafra includes a gas-fired plant and a solar investment, as well as the aforementioned Barakah Nuclear Energy Plant (see Utilities chapter). The Middle East’s first nuclear power development is expected to deliver up to a quarter of the UAE’s power, with its projected 5600 MW of capacity. The region is also playing an important role in helping the UAE meet its target of 44% renewable energy by 2050. Opened in 2013, the Shams 1 concentrated solar power plant near Madinat Zayed has an installed capacity of 100 MW, making it one of the largest renewable projects in the Middle East. The plant was developed and is run by the Shams Power Company, a joint venture between Masdar (60%), France’s Total (20%) and Abengoa Solar of Spain (20%) on a 25-year build-own-operate deal.

Diversified Economy

Although hydrocarbons and power generation make up the bulk of investment by the government of Abu Dhabi, the growing real estate, construction, tourism and agriculture sectors are also being prioritised. The number of building permits issued in Al Dhafra grew from a modest 601 in 2014 to consecutive years of ranging from 5000 to nearly 7000, with 5650 permits approved in 2017. The biggest jump was in the number of residential permits issued, which rose from 406 in 2014 to 3624 in 2017. In terms of large-scale housing construction projects, ADNOC is investing in homes for 50,000 people as part of its expansion plans in Ruwais City.

In the tourism sector, the first half of 2018 saw the region’s 11 hotels with a total of 1207 rooms – up from 939 rooms in 2014 – receive 72,225 guests, marking a 9.4% year-on-year increase. The Abu Dhabi government is hoping to leverage Al Dhafra’s agricultural heritage to boost tourism by supporting events and activities such as the Liwa Date festival, which attracts 70,000 people annually, and by placing a growing focus on the region’s cultural heritage. “Plans are under way to showcase the history of Liwa and its tribes through several historical sites undergoing archaeological excavations,” Sheikh Hamdan bin Zayed Al Nahyan, the Ruler’s Representative in Al Dhafra, told OBG. “A new ‘trail’ initiative will be launched, which will incorporate castles, fortresses, modern urban heritage buildings and palm trees that tell the history of the ancient city of Liwa.”

The Al Dhafra Region is also home to much of Abu Dhabi’s coastline, including Delma Island and Sir Bani Yas Island, which is becoming a popular stopping point for cruises. Sir Bani Yas Cruise Beach is the region’s only dedicated cruise stopover beach, where ships park offshore and send passengers to explore the island in smaller boats (see Tourism chapter).

Foreign Investment

According to SCAD, total FDI in Al Dhafra increased by 11.3% to reach Dh652m ($177.5m) in 2016, the last year for which a regional figure was available. Most FDI in the region is focused on electricity, gas and water, process industries and waste management operations. Several foreign companies won major contracts in Al Dhafra in 2018. In March South Korea’s Samsung Engineering was awarded two contracts worth a total of $3.5bn to increase efficiency and production capacity at the Ruwais oil refinery, and in November 2018 Italian energy company Eni secured a 25% stake in the Ghasha offshore gas concession.

Although the hydrocarbons and power-generation sectors will continue to drive Al Dhafra’s economy and attract the bulk of FDI, government-led investments in associated projects are creating a pool of public-private partnership opportunities. Segments such as real estate, hospitality, construction and infrastructure development will continue to drive demand for FDI as the region expands its presence in the emirate.


You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Abu Dhabi 2019

Economy chapter from The Report: Abu Dhabi 2019

Cover of The Report: Abu Dhabi 2019

The Report

This article is from the Economy chapter of The Report: Abu Dhabi 2019. Explore other chapters from this report.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart