Energy & Mining

Going Steady


The $25 billion Barakah nuclear power plant project in Abu Dhabi will see the first of its four 1,400 MW reactors brought into operation in 2017. The final reactor is expected to be delivered to ENEC in 2020 by its Korean partners.

The energy sector in Abu Dhabi is undergoing a process of profound change. Whether through the rationalization of the activities of the Abu Dhabi National Oil Company (ADNOC), or through the ongoing construction of the UAE’s first nuclear energy facilities by the Emirates Nuclear Energy Corporation (ENEC), the Emirate is taking its energy future seriously. ADNOC and its many subsidiaries are now at a crossroads, with a new leadership at the helm steering the energy giant through a new wave of concession awards, establishing the future of the company for up to the next 40 years on its established fields.


The UAE sits on approximately 97.8 billion barrels of proven crude oil reserves and a further 6.1 trillion cubic meters of natural gas, according to Organization of the Petroleum Exporting Countries (OPEC) estimates from 2016. Of those reserves, Abu Dhabi is considered to account for around 95% of both reserve categories, including both onshore and offshore resources. Over 2015, the UAE as a whole produced some 2.99 million barrels per day (bpd), up 7% on the 2.79 million bpd seen for 2014.

Despite the increase in production, the UAE saw a sharp drop in petroleum export revenues over 2015, in line with other oil-exporting countries. OPEC calculations put the plunge at some 46% in year-on-year terms, from $97.17 billion in 2014 to $52.37 billion for 2015. According to the Statistics Center Abu Dhabi (SCAD), 49.2% of Abu Dhabi’s GDP at constant 2007 prices was generated by the oil industry in 4Q15, little changed over the course of the year. Early figures from 1Q16 indicated that this level had fallen back to 48.3% of GDP, though much of this was on the back of strong 8%-plus growth seen in the non-oil segments of the economy.

When one speaks of oil and gas in Abu Dhabi, the first name to come up is that of ADNOC. The behemoth company is actively involved in a dizzying array of downstream and upstream activities, befitting its title as the lead vehicle for Abu Dhabi’s energy resource sector, with crude oil seamlessly being pumped, refined, distributed, and sold to end users all through companies under the ADNOC rubric.

While the crude oil market is still struggling to break back over the $50/barrel level, Abu Dhabi has retained its plan to boost crude oil production from some 3 million bpd to 3.5 million bpd by end-2017, with a long-term target of 7 million bpd. According to the Baker Hughes International Rotary Rig Count, rig numbers have increased from 38 at the start of 2015 and reached 48 by mid-2016, providing support for the ongoing increased production target. However, despite this increase, OPEC reported that numbers of wells drilled fell in 2015 to 219, down on the 292 noted in 2014 and off the five-year average of 271.6 wells. Conversely, the UAE as a whole reported some 1,792 producing wells at end-2015, up 57 on the 2014 total, reaching a record high.

In terms of downstream capacity, ADNOC subsidiary Takreer has two main refining units active in the Emirate. The older of the two, opened in 1976, is based at Umm Al Nar, and has a capacity of 85,000 barrels per stream day (bpsd). The far larger Ruwais facility, which first entered service in 1981, has seen its capacity increase from 415,000 bpsd and is set to hit 900,000 bpsd following the completion of a $10 billion upgrade program, with OPEC reporting some 817,000 bpsd being achieved at end-2015. As part of the upgrade program, the Ruwais facility is set to produce up to 600,000 tons of high-quality base oils, mainly used in the automotive sector. Some 500,000 tons of this production should be of the higher-value Grade III type, with the balance being of the lower Grade II base oil, according to Takreer. As a result of the sharp increase in refining capacity, Abu Dhabi has now gone well beyond being able to provide for its domestic needs, and is now looking to export more value-added, refined products.

While Abu Dhabi has put away a substantial amount of its financial reserves from the good times, the Emirate’s government has used the revenue shortfall as an opportunity to improve the efficiency and competitiveness of many sectors of the economy, with the energy sector at the top of the list. In February 2016, HE Dr. Sultan Ahmed Al Jaber, UAE Minister of State, was appointed as the chief executive of ADNOC, and his appointment has seen a concerted efficiency program come to the fore. Major changes in the leadership of ADNOC’s main subsidiaries were announced in May 2016, as a more “commercially oriented” culture is being promoted to its 55,000 workforce. Dr. Al Jaber announced at the time of the announcement of the new leadership that its members, “will play a fundamental role in executing on our strategic imperatives of creating a more profitable upstream business and a more valuable downstream business, ensuring more gas supply, and developing world-class talent.”

Also on the reform front was news of the $135 billion merger of Mubadala Development Company and the International Petroleum Investment Company (IPIC). Mubadala has a broad range of investment interests in Abu Dhabi’s upstream energy sector, with companies such as Dolphin Energy, Masdar, and Tabreed falling under its areas of responsibilities. IPIC has a more energy-focused set of investments in external markets with a more downstream focus, such as Spanish refinery CEPSA, of which it became a sole shareholder in 2011.


Although Abu Dhabi has extensive natural gas reserves, it is only in recent times that these reserves were able to be used. The sour nature of Abu Dhabi’s gas fields, with some containing up to 24% Hydrogen Sulphide (H2S), long made bringing the fields into production problematic. As a result, the UAE remains a significant buyer of natural gas from Qatar, which is transported via a pipeline connecting Ras Laffan in Qatar with Taweelah in Abu Dhabi. The operator of the project, Dolphin Energy, is 51% owned by Abu Dhabi’s Mubadala. Dolphin Energy transports some 2 billion standard cubic feet (bscf) per day of natural gas from Qatar and injects it into the UAE-Oman natural gas network.

However, Abu Dhabi has long sought to end its reliance on imports for natural gas, and has invested some $10 billion to achieve this end. The Al Hosn sour gas project, a joint venture between ADNOC (60%) and Occidental (40%), is beginning to not only see the gas refined and made consumer friendly, but also is successfully stripping the gas of its sulfur and selling it to other end users. Initiated in January 2015, the Al Hosn facility is now processing some 1 bscf per day, with around half of that being fed into the UAE’s gas network. Additionally, another 10,000 tons of sulfur are dried daily, according to the CEO of Al Hosn Gas, Saif Amed Alghfeli.


The low oil price has presented the government with an opportunity to reform the subsidies applied to the energy sector in the UAE. As in many oil producing states, the government had hitherto kept prices at the pump disconnected from the global oil price. With global oil prices remaining under pressure, and revenues declining, the government has taken steps to review energy subsidies and steadily sunset them. As of August 2015, the price for petrol and diesel is announced on a monthly basis, though the algorithm used to calculate how the price is calculated is kept confidential. In line with global crude prices, the price for diesel, for example, actually fell from AED2.05 ($0.56) per liter in August 2015 to AED1.37 ($0.37) by February 2016, though since then it has steadily risen to AED1.85 ($0.50) by July 2016. The price is significantly above that seen in fellow oil producing states such as Saudi Arabia ($0.20/l) and Qatar ($0.38/l) that still offer more generous subsidies, according to, though it remains below the global “average” of some $0.86/l as of July 2016. While such reforms to pump prices are likely to pay returns over the long term, the government is also revising subsidies it has given to electricity and water generators, and these are likely to see utility prices creep up and be more reflective of market conditions.


By the end of 2014, Abu Dhabi had an installed capacity of 12,571 MW, while some 58.35 million MWh were produced by all companies involved in the electricity sector, up 12.3% over the year. In terms of consumption, 52.84 million MWh were utilized within Abu Dhabi itself, with the rest sent off to different Emirates where required. With a fast growing population, and with electricity also the basis for the mass desalination of water needed for it, Abu Dhabi always has to act ahead of the curve to ensure supply outstrips demand. As part of this effort, in 2017 the first of four 1,400 MW nuclear reactors is set to be turned on, hopefully guaranteeing the energy independence of the Emirate for many years to come. The Barakah Nuclear Power Plant, a deal dating back to 2009 between ENEC and Korea Electric Power Corporation (KEPCO), will see four APR-1400 reactors brought into operation over the 2017 to 2020 period, significantly guaranteeing the energy security of Abu Dhabi and the UAE as a whole. The project has been estimated to cost anywhere between $25 billion to $30 billion, though the operational assistance KEPCO is expected to provide going forward should see that figure go northwards.

On the renewables front, the old relationship between traditional electricity generators and the desalination sector is being revised, with ADWEA and ADWEC involved in issuing a contract tender in April 2016 for the construction of the 350 MW solar power plant at Sweihan devoted to reverse osmosis desalination processes. Bidding proposals on the project are set to be received in mid-September 2016, with comparable bids recently coming in as low as $0.0299/kWh, showing the high level of competition now seen in the local photovoltaic solar energy market.