Room for more: Numerous projects on multiple fronts are energising the sector

A string of investments in both conventional and alternative resources is ensuring that Abu Dhabi sits at the very centre of the global energy map. With vast reserves still promising more than 80 years of production at current rates and conditions, the government is nevertheless keen to develop the latest in enhanced oil recovery (EOR) to maximise its onshore and offshore assets. At the same time, it is prioritising a rapid increase in the production of sizeable gas fields to meet a looming supply crunch, while pushing ahead with fledgling solar power and nuclear industries. All this combines to make the emirate a hive of investment opportunities, albeit one in which the competition is increasing.

EXPORT OUTLOOK: Even with the growing buzz around unconventional hydrocarbons and their ability to meet global energy needs, Abu Dhabi can be sure that crude reserves will remain vital to the global economy in the years ahead. In late 2011 the International Energy Agency (IEA) stated that more than 90% of growth in global oil production must come from countries in the Middle East and North Africa. As such, Abu Dhabi’s decision to increase production capacity by around 25% by 2018 is well placed. Although the emirate is looking to diversify its economy away from hydrocarbons, crude exports will provide a steady source of revenue and investment in the coming decades. However, the market has experienced bouts of uncertainty that may extend into the short-term future. Political instability in the region, along with concerns over the possibility of a renewed global economic slowdown, led to volatility in global oil markets in 2011 and early 2012.

In the first half of 2011 Brent crude surged from around $95 per barrel to more than $125, as disruptions in Libyan production and unrest in several Middle Eastern countries raised fears over the security of supplies. But by the end of the year, economic woes – primarily in relation to the eurozone sovereign debt crisis – brought prices back below $110.

Moving into 2012, an increase in the perceived risk of interrupted oil shipments passing via the Strait of Hormuz caused a steep rise in prices to nearly $130. In a coordinated move with Saudi Arabia, the UAE agreed early in the year to ramp up production to make up for lost supplies from other members of the OPEC. This saw oil output from the UAE – of which 95% comes from Abu Dhabi – reach its full capacity of 2.8m barrels per day (bpd) in August 2012, and demand was reported to be strong.

Future trends in global oil demand are unclear, given the rapid growth in Eastern countries as many Western nations grapple with financial woes. Asian buyers have recently begun to purchase the majority of Abu Dhabi’s crude exports, and sustained economic growth on that continent will make it an important destination for the emirate’s oil, especially as Abu Dhabi makes large investments to boost its production capacity. Some economists point to signs of economic fragility in countries like India and China, but others remain broadly convinced that their growth will remain strong.

LONG-TERM: Abu Dhabi’s efforts to remain one of the world’s leading crude oil exporters make sense. According to BP’s “Statistical Review of World Energy 2012”, the UAE’s 97.8bn barrels of proven reserves will keep up supply for another 80 years at current production rates and at an assumed 70% estimated ultimate recovery. This makes the country’s oil sector an attractive proposition to Asian giants looking to shore up their long-term energy security.

Furthermore, a large spike in Abu Dhabi’s production in 2011 and 2012 has kept the UAE at the forefront of an increasingly competitive pack of Middle Eastern oil exporters. BP figures suggest the UAE expanded its production by 14.2% in 2011 – faster than any other country in the region – averaging 3m bpd of crude and liquid condensate. As such, the UAE ranked as the world’s fifth-largest producer, with 3.8% of global production, up from 3.2% in 2010.

UPSTREAM: Despite its secure footing, Abu Dhabi aims to further boost production capacity, from current levels of 2.8m bpd to 3.5m bpd by 2018. Although the UAE’s official production quota from OPEC is today 2.2m bpd, the UAE’s move to ramp up production to full capacity in 2012 to make up for shortfalls from other OPEC members demonstrates the usefulness of having excess capacity, given the unpredictability of contemporary oil markets. Even if the emirate does not immediately begin to pump 3.5m bpd once the capacity is reached, the ability to do so will be a welcome development both for buyers and those investing in Abu Dhabi’s energy industry.

Over the past decade, plans to increase capacity have suffered some delays, but the pace appears to be picking up. While the government’s official target has been to boost capacity to 3.5m bpd by 2018, a December 2011 report by the IEA reported that expansion projects have been “fast-tracked”: it now expects capacity to hit 3.4m bpd by as early as 2017.

ONSHORE: New capacity will gradually become available over the next five years, with gains expected in both offshore and onshore operations. The Abu Dhabi Company for Onshore Oil Operations (ADCO) announced that capacity in its fields would increase by 213,000 bpd in 2012 and, following the allocation of service contracts in that same year, by another 200,000 bpd by 2016. In this way the operator’s total output will grow from 1.4m bpd to 1.8m bpd over the next four years, with upgrades and new fields pushing up capacity. Ongoing expansion will bring an additional 111,000 bpd by 2014 to ADCO’s Bab, and two new fields, Qusahwira and North East Bab, are also expected to come on-line by 2014, adding 250,000 bpd. A smaller addition of 20,000 bpd is due to be made at the Bida Al Qemzan field by the end of 2013. Additionally, four-year expansion projects at Asab should see increased production at the field by 2013, according to Petrofac, which was awarded the engineering, procurement and construction (EPC) contract for the project.

OFFSHORE: The Abu Dhabi Marine Operating Company (ADMA-OPCO) operates the emirate’s main offshore fields. ADMA-OPCO envisages that its total capacity will rise by 14.2% to 700,000 bpd before the end of 2014, and by 60% by 2017, bringing the company’s production to 970,000 bpd.

The first of these boosts is largely thanks to a water injection upgrade project on the Lower Zakum field, ramping up its capacity by almost a third. An extra 20,000 to 25,000 bpd should also be squeezed out of the further development of a reservoir in the Umm Shaif field. The new developments at the Nasr and Umm Al Lulu fields, on which at least $10bn will be spent, will help realise ADMA-OPCO’s 2017 production goal. The initial phase of Umm Al Lulu is to come on-line by 2013, and $4.5bn of the project had been tendered as of 2012 (see analysis).

The emirate’s other major offshore developer, the Zakum Development Company (ZADCO), whose mandate is to develop and operate the Upper Zakum, Satah and Umm Al Dalkh fields, also has ambitious expansion plans. In September 2011 ZADCO awarded a $500m contract to France’s Technip and Abu Dhabi’s National Petroleum Construction Company (NPCC) for work on the Satah Full Field Development, a brownfield project to maximise production and recovery rates. ZADCO is also overseeing the Upper Zakum 750 (UZ 750) project, which seeks to boost production at the Upper Zakum field from 520,000 bpd to 750,000 bpd by 2015.

The project is being awarded in two separate EPC contracts, the first of which, EPC-1, was awarded to a second joint venture by Technip and NPCC for $800m in July 2012. The second contract, EPC-2, valued at approximately $4.2bn and focusing on the onshore efforts of the project, is to be awarded by the year’s end. Central to the Abu Dhabi National Oil Company’s (ADNOC) overall industry expansion, UZ 750 involves the construction of artificial islands that house new drilling platforms and other production infrastructure. The islands are expected to reduce costs of development and increase recovery factors. “In the long term, they will allow for significant increases in production,” Morten Mauritzen, the president of ExxonMobil Abu Dhabi, told OBG. The islands also have environmental benefits for Abu Dhabi’s waters. “Compared to the numerous towers, platforms and pipelines we currently see spread out over the ocean, they will be a much more efficient use of space, and their environmental footprint will therefore be that much smaller,” said Mauritzen, adding that it will be easier to manage and maintain the fields, and that the risk of oil spills will be reduced.

ASIAN ARRIVALS: Western firms have long dominated Abu Dhabi’s oil and gas sector, but recent years have seen growing interest from the oil-hungry economies of the East. The emirate has signed multiple production agreements with Japan in recent years, and in 2012 the government committed to a joint venture that gives South Korea a stake in its crude oil, securing supply of Middle Eastern oil for the Asian nation. As is typical of ADNOC joint venture arrangements, the national company retains a 60% stake, and the remainder is divided between the Korea National Oil Corporation (34%) and its Korea-based partner, GS Energy (6%). Valued at $5bn, the development, which began in 2012, involves the exploration of several blocks that are expected to provide around 43,000 bpd of crude. Chinese oil companies also look set to make Abu Dhabi a part of their rapid expansion drive into the world’s major energy producers. After signing a strategic cooperation agreement with Abu Dhabi in 2012, the China National Petroleum Corporation (CNPC) is studying five possible onshore and two offshore blocks.

The gains of these Asian countries come at a pivotal moment as Abu Dhabi’s petroleum industry is set to see major changes when the decades-old ADCO concessions expire in 2014 (onshore). These developments suggest that in the upcoming retendering phase, when the tenders currently held by major Western companies expire, bids made by Asian players are expected to be favourably received. However, despite the potential reshuffling, there are good reasons why the emirate would want to retain and foster relations with well-established international oil firms currently in its fold.

“The mature oilfields of Abu Dhabi require high levels of technology and thorough knowledge of the reservoirs,” Sultan Al Hajji, the vice-president of institutional development at Total ABK, told OBG. As the emirate looks for new or alternative ways to boost production capacity, the experience and advanced technological capacity of the major players in Abu Dhabi may be crucial (see analysis).

PIPELINE: In 2008 China Petroleum Engineering & Construction (CPEC), a subsidiary of CNPC, won a $3.3bn contract from the International Petroleum Investment Company to construct a 380-km oil pipeline stretching from Habshan in Abu Dhabi to a coastal terminal in Fujairah. The pipeline is designed to carry two-thirds of the emirate’s current peak oil production, roughly 1.5m bpd, with the ability to increase this to 1.8m bpd. Although delayed more than two years, the pipeline partially opened in June 2012 and is now fully operational.

As well as allowing Emirati oil to be transported more quickly and easily, the pipeline is a strategic move, reducing the country’s reliance on the shipping routes passing through the Strait of Hormuz, a volatile geopolitical hotspot. The Habshan-Fujairah pipeline allows the UAE to ship oil directly from the Fujairah export terminal in the Gulf of Oman.

ENGINEERING, PROCUREMENT & CONSTRUCTION: undefined With billions of dollars pouring into oil and gas developments, the engineering, procurement and construction (EPC) industry has surged. The generally high oil prices of 2012 have fuelled demand for EPC work. A peak year was 2009, when more than $30.21bn worth of projects were awarded, followed in 2010 by a still considerable $13bn, according to Middle East Economic Digest (MEED) Projects, a Middle East business intelligence firm. “The oil and gas expansion projects in Abu Dhabi did not slow down as a result of the global financial crisis,” Abdulla Saeed Al Suwaidi, the CEO of National Drilling Company (NDC), part of the ADNOC Group of Companies, told OBG. “This was a good opportunity to invest in tendering for new rigs and enhancing our portfolio; NDC is working closely with operating companies to meet their requirements.” While contract values fell to $2.69bn in 2011, investment is expected to rebound in 2012 to $8bn or more (see analysis). “There are massive projects under way in the hydrocarbons sector, and more and more nationals are looking to enter the workforce for this industry,” Abdulkarim Al Mazmi, the general manager and chief representative of BP UAE, told OBG.

KOREAN COMPETITION: Given the expansion, competition has been stiffening. Asian players are making big entrances in the EPC segment, especially South Korea. According to Contax Partners, an oil and gas consultancy, the aggressive pricing strategy used by Korean firms is paying off: they were awarded $21bn worth of energy projects in the GCC area during 2011, accounting for 23% of all awards made that year. For now, says Contax, they are the most prevalent in the power sector. According to figures from the Korea Institute for International Economic Policy, the UAE provides Korea with 36% of its EPC work – more than any other country.

Given recent production agreements Abu Dhabi has signed with South Korea, Korean EPC firms will be well positioned to win more work. As such, Korean players are reportedly causing medium-sized and even large EPC providers that have traditionally operated in the local sector to rethink their strategies.

The state-owned NPCC has fared well in recent years, with its highest net profits to date ($249m) realised in 2010, up 40% on 2009. But the company is now feeling the pinch of Korean and other Asian competition, its chief executive, Aqeel Abdullah Madhi, stated in a company press release in December 2011. NPCC won significantly fewer projects in 2011 compared to 2010, he told reporters. However, with the $500m it intends to invest in upgrading and expanding its equipment, NPCC should have a better footing in the competitive market.

It is also playing a major role in the development of the offshore Upper Zakum field, having won two significant contracts for the project, both in joint venture with Technip, the first for $500m EPC in September 2011, and the second for $800m in July the following year. Korean firms have yet to develop a particularly competitive offering for offshore upstream work, according to Contax, meaning other companies can still gain an advantage.

Nevertheless, European firms continue to be important players. Italy-based Saipem has found Abu Dhabi to be one of its most important markets in recent years. In mid-2010 it scored approximately $3.5bn of EPC contracts from the Abu Dhabi Gas Development Company for the gas-processing facilities, sulphur-recovery unit and pipelines associated with the Shah Gas development project. More recently, as the leader in a consortium with Italy’s Maire Tecnimont and the UAE’s Dodsal Engineering, Saipem won an $898m contract for the first construction stage of a rail network that will link Ruwais, Shah and Habshan by 2014. Prior to winning two joint venture projects with NPCC, Technip won a $415m contract in 2009 to work on the Asab 3 Project, aimed at boosting the amount of associated gas produced at the Asab, Shah and Sahil.

REFINING: While upstream activities expand, Abu Dhabi is also taking strides to boost its refining capacity. The emirate’s two refineries are managed by the state-owned Abu Dhabi Oil Refining Company (Takreer), and they have a combined current refining capacity of 485,000 bpd.

Ruwais refinery, the larger of Takreer’s two plants, is undergoing $9.6bn worth of expansion projects, which should boost Abu Dhabi’s total current refining capacity to 907,000 bpd by the end of 2013. Four Korean companies are carrying out the work, having been awarded contracts in 2010. The boost will be helpful on a number of fronts. Added capacity will help the emirate address the needs of the local market, where demand for transportation fuels and new industrial developments is growing. This will enable Abu Dhabi to streamline its own petroleum production industry, as well continue integrating it with other sectors of the economy. For example, the petrochemicals complex of Borouge in Ruwais that produces olefins is seeing significant expansion, and is due to receive 1.1m tonnes of propylene feedstock from the Ruwais refinery.

The expansion projects are also instrumental in allowing Abu Dhabi to secure a greater share of an export market that is expected to grow in the coming years. A 2012 report by Global Data on the world’s refining industry found that by 2016 the majority of new demand for petroleum products is expected to come from the Middle East, Africa and the Asia Pacific region. Furthermore, the study shows, buyers of refined products will increasingly look to MENA-based suppliers: while today producers in that region contribute 13% of global petroleum supply, they are projected to provide 17% by 2016.

Currently, the emirate is catering to both the European and Asian markets, with the biggest importers being France, Japan, Korea, the Netherlands and Taiwan, according to the Statistics Centre – Abu Dhabi. Both France and the Netherlands increased their imports of refined products from Abu Dhabi between 2006 and 2010, but given current projections and population growth trends, the bulk could become Asia’s. Korea accounted for 12.3% of the emirate’s refined exports in 2011, up from 11.8% in 2006, while Taiwan’s share jumped from 6.3% to 12.1%. Over the same period, the UK’s total share of Abu Dhabi’s petroleum exports fell from 13.4% to 3.9%.

ELECTRICITY DEMAND GROWTH: As Abu Dhabi is able to optimise the value derived from its oil on international markets, it is also looking to secure sufficient natural gas supplies to meet local demand. Despite holding the world’s seventh-largest proven reserves of natural gas – 6trn cu metres, according to BP’s “Statistical Review of World Energy 2012” – the UAE currently produces only minimal quantities from its reserves. Annual production rates have been edging up over the past five years, from 49bn cu metres in 2006 to 51.7bn cu metres in 2011, but not fast enough to keep pace with domestic demand. In 2007 consumption began to outpace production, and the gap continues to grow. At the end of 2011 consumption had reached 62.9bn cu metres, growing 3.5% in just one year, according to the BP report.

With electricity demand in the emirate set to grow by 7-10% annually through 2020, according to the Abu Dhabi Water and Electricity Company, power plants will have to burn more and more gas, which is the fuel source for 98% of the UAE’s total electricity generation, according to the International Energy Association. Making matters more pressing is that a large proportion of the gas produced in Abu Dhabi is “re-injected”, or pumped back into the ground to boost oil production. According to research published in 2010 by the Dubai Initiative in cooperation with the Harvard Kennedy School of Government, the UAE re-injects around 18bn cu metres of gas every year – 38% of total production.

BOOSTING PRODUCTION: Policymakers have been working to attract new investments in an effort to keep the emirate supplied. Since 93% of the UAE’s natural gas reserves are found in Abu Dhabi, the emirate will likely be the scene for most of the action in the years ahead. To increase local production, the Abu Dhabi Gas Industries (GASCO) spearheaded the $9bn Integrated Gas Development in 2009 to boost the procurement of gas from the Umm Shaif field and its processing at Habshan and Ruwais. The project is scheduled for completion by 2013, and will have a capacity of 900m standard cu feet per day (scfd) and 12,000 tonnes per day (tpd) of natural gas liquids and 5000 tpd of liquid sulphur.

SULPHUR & SOLUTIONS: Various plans are currently being developed to utilise this sulphur production, both within the emirate and as an export product. The Abu Dhabi National Tanker Company ( ADNATCO) is a wholly owned subsidiary of ADNOC and operates nine bulk carriers that transport sulphur and other products. “Shipping sulphur is already an important segment of our business,” Ali Obaid Al Yabhouni, the CEO of ADNATCO & the National Gas Shipping Company, told OBG. ADNATCO & NGSOCO operates a fleet of 30 ships, of which nine are bulk carriers that are dedicated for the transport of sulphur and other products. “As sulphur production from a number of projects increase, we expect this segment to grow.” In 2011 an equally massive joint venture agreement was concluded between ADNOC and Occidental Petroleum to develop the Shah Sour Gas Project. This endeavour will build up sour gas production capacity from the Shah field, aiming to source 500m cu feet of natural gas per day, as well as 50,000 bpd of natural gas liquids and condensate (see analysis).

To address the present and expected shortages in the future, the emirate is looking for a commercially viable substitute for the large amount of natural gas that is re-injected for oil production. One promising option is to use carbon dioxide captured from industrial activities, but carbon capture and storage (CCS) projects, both globally and in Abu Dhabi, have experienced delays in recent years.

Nevertheless, the emirate looks set to see its first large-scale CCS project go to tender. In early 2012 it was announced that negotiations on commercial issues had made sufficient progress to go ahead with plans. Alongside a nitrogen injection project, CCS will put the emirate in the direction of securing future gas needs, while helping the industry maximise the capacity and utility of maturing oilfields.

To this end, the emirate is strongly promoting the development and use of EOR technologies. Projections suggest that this technology will be increasingly valuable for the industry given that, according to the US Geological Survey, only around 13% of the world’s 3trn barrels of heavy oil reserves can be produced with current technology.

RENEWABLES: While Abu Dhabi strives to make the most of its hydrocarbons, it has equally ambitious plans to develop renewable energy. The government aims to draw 7% of the emirate’s total generation capacity from renewable sources by 2020, a target that surpasses those of all neighbouring Gulf countries. At the forefront of this drive is Masdar, a state-owned conglomerate that advances the renewables industry through a multipronged investment, development, commercialisation and research approach. The 7% target will keep up the pressure for large investments in utility-scale projects over the coming years. “The emirate requires all the renewable energy that it can get, but the problem is that it can’t get enough, fast enough,” John Barry, the country chair of Shell Abu Dhabi, told OBG. “Furthermore, renewables bring with them very high capital costs. Until mid-century, we see fossil fuels continuing to play a key role alongside renewable.”

Solar power is at the top of the agenda, and Masdar, a developer and operator of renewable power projects, has announced that the $700m, 100-MW Shams 1 project – a concentrated solar power plant being built with France’s Total and Spain’s Abengoa – will be complete by the end of 2012.

Plans were announced in early 2011 to build a second 100-MW plant, Nour 1, which will use photovoltaic technology to produce energy. According to company officials, Masdar is currently reviewing the proposals received. “Hydrocarbons, renewable and nuclear energy will play a very important part of the emirate’s future energy mix. Current investment in these fields will benefit Abu Dhabi greatly in the medium and long term. The Shams solar power plant is a good example in this direction,” Sultan Al Hajji, the vice-president of institutional development at Total UAE, told OBG.

Wind energy is also on Masdar’s agenda, although given Abu Dhabi’s climate, wind will not make as large of a contribution as solar. The island of Sir Bani Yas is already home to the region’s largest wind turbine, producing 850 KW of power. Masdar is also building its expertise by investing in several wind projects abroad, including one in the UK that is scheduled to be the largest offshore wind farm in the world – the 1-GW London Array offshore wind farm. The first phase of the project will produce 630 MW and will reach completion in early 2013.

RESEARCH: Abu Dhabi has already been making headlines for its research and development (R&D) in energy technology. In 2009 the International Renewable Energy Agency decided to house its headquarters in Abu Dhabi, and this, along with the ongoing work of Masdar both at home and abroad, have put the emirate at centre stage. However, with funding for R&D in clean energy presently falling victim to fiscal austerity in many parts of Europe, renewable energy research efforts are beginning to play an even more important role in Abu Dhabi.

Masdar, which also oversees initiatives for carbon emissions reduction, focuses on the development of CCS technologies, especially in the oil, gas and power sectors. This is complemented by ongoing work at the Masdar Institute for Science and Technology (MI), a research-oriented, graduate-level university focused on alternative energy and sustainability. In May 2012 MI announced a research collaboration with Siemens, a global electronics and electrical engineering firm with expertise in the energy sector. Siemens evaluated the capture of carbon dioxide from gas-fired power plants and its use in EOR. Such research is vital not only for establishing a more sustainable energy mix, but also for reducing the emirate’s greenhouse gas emissions.

MI’s research into clean energy technology is aided by its location in Masdar City, a low carbon technology cluster and special economic zone in Abu Dhabi. The urban space is not only a focal point for research, but also aims to be one of the most sustainable cities in the world, housing nearly 40,000 residents in an ultra-energy-efficient environment.

EFFICIENCY: Alongside efforts to boost energy supply, Abu Dhabi has been working to reduce demand in a country with very high per-capita energy consumption. According to the latest statistics from the World Bank, the UAE’s energy use has been falling, but it still stands much higher than regional and global averages. According to the World Bank, in 2009 energy use per capita in the UAE stood at 8558 kg of oil equivalent, compared to 1678 kg for the Arab world and 1790 kg globally. In addition to the environmental benefits, efficiency improvement initiatives would save the government a significant sum. According to a February 2012 report published by Oliver Wyman, a management consultancy, some $3bn a year could be saved, with the majority of savings (51%) to be found in the residential sector.

To increase the energy efficiency of buildings, in 2010 the municipality of Abu Dhabi City contracted Masdar to launch a pilot programme to study wide-ranging conservation measures on a sample of 70 buildings. “The area selected is a representative sample of a dense urban environment, including residential and commercial properties including offices, schools, mosques and hospitals,” Nicholas Brown, an associate at the corporate sustainability department at Masdar, told OBG. “Initial findings suggest that we could achieve technical savings of 30% through measures such as introducing low-energy lighting and optimising the performance of air conditioning systems.” The first phase of this project will be completed in 2012, after which the municipality of Abu Dhabi City will assess the potential of expanding this conservation initiative to cover a larger area of Abu Dhabi City.

The municipality has also announced that it intends to introduce energy-efficient codes which, among other areas, will cover the maintenance requirements of existing buildings. The proposed codes will satisfy all of the UN’s green building standards for very hot climates, and fall just short of the ideal energy consumption that can be theoretically achieved in the Gulf region. It is believed that the new codes will complement other initiatives such as the Estidama pearl rating system, which was ratified by the Executive Council in 2010 to enhance demand side energy management of the emirate of Abu Dhabi. Under this system, all new communities, buildings and villas must achieve at least one “pearl” of energy compliance. “The pearls are similar to the US’s Leadership in Energy and Environmental Design (LEED) ratings system, however, they are tailored to account for Abu Dhabi’s climate,” said Brown.

Despite these steps, many remain doubtful that energy efficiency can be properly tackled without an overhaul of government subsidies, which supply consumers with electricity, water and certain refined products at a fraction of their market price.

NUCLEAR: The largest contribution to Abu Dhabi’s energy mix in the medium term will come from four scheduled nuclear energy plants, the first of which is to come on-line in 2017, followed by one more every year until 2020. Nuclear energy will provide base-load electricity to power the growth of the UAE while saving 12m tonnes of CO 2 emissions every year. State-backed Korean Electric Power Company ( KEPCO) won the $20bn contract in late 2009 to construct the four 1400-MW reactors. All of the reactors will be located in the Al Gharbia region.

The meltdown at Japan’s Fukushima nuclear plant in March 2011 following an earthquake and its attendant tsunami gave the world’s nuclear industry a pause for thought, and led the UAE’s Federal Authority for Nuclear Regulation (FANR) to prolong its licensing review. In July 2012 the regulator finally gave the green light, making the UAE the first country to embark on a peaceful nuclear programme since 1985. Following the approval of FANR and the Environment Agency – Abu Dhabi, ENEC began construction of Unit 1 and is on track to steadily advance its programme to deliver electricity by mid-2017. In August 2012 ENEC succeeded in arranging the appropriate legal and financial contracts to source Dh11bn ($2.99bn) worth of nuclear fuel from the US, Canada, the UK, France, Australia and Russia.

OUTLOOK: Abu Dhabi’s energy policy is widely regarded as smart and heading in the right direction. Irrespective of future volatility in global oil markets, the government’s push to increase its production capacity is the sensible long-term strategy, sending reassuring signals to industry investors and buyers. Asian entrants will likely increase their market presence, especially as those governments look to secure crude supplies for their fast-growing economies. At the same time, Abu Dhabi’s leadership is unlikely to relinquish the experience built up by international oil firms with decades of activity in the emirate. As for gas resources, the emirate is keen to minimise imports and shortages, through investment in and expansion of its reserves and production. Renewable energy and efficiency measures are making headway, although the sector is held back by subsidies for consumers, and these are unlikely to change in the near future. At the same time, the drive to make Abu Dhabi a research centre for EOR, renewables and clean technology should pay off in the long run, as the world pursues the latest technologies in these fields.

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The Report: Abu Dhabi 2013

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