UAE should continue oil and gas investment

The oil and gas sector has been the backbone of the global economy for many decades and will continue to maintain its significance in the 21st century and beyond. It remains a vital component in the economic prosperity of GCC countries in particular. Accounting for nearly 40 per cent of global oil reserves and 24 per cent of gas wealth, the region has generated robust revenue from the sector, enabling it to undertake ambitious and sustainable development strategies. In fact, the earnings were utilised to develop the region’s infrastructure, interests in R&D and alternative energies, with the long-term objective to reduce its dependence on oil and gas revenues which is crucial to achieve uniform growth.

Since the latter half of 2014, the oil and gas industry has experienced a price reduction of roughly 27 per cent a barrel. The prices of crude oil have fallen to around $55 a barrel from about $95 in July 2014 due to a number of reasons such as growing production from non-Opec such as the US and declining global oil consumption due to slowing economic growth . While the global oil and gas industry enters a challenging 2015, the GCC continues to flourish because of the strength of their diverse economy which is set for a healthy 4.5 per cent growth. Despite a decline in oil prices, GCC countries will post current account surpluses and barring Bahrain, all will record a budget surplus.

Saudi Arabia, Qatar and the UAE continue to forge ahead with investment in energy and infrastructure projects, followed by Kuwait and Bahrain. While looking to diversify its economy, Qatar is aiming to increase the capacity of its gas production to cater to local as well as foreign demand. Saudi Arabia, on the other hand, is bolstering its offshore activities with projects such as the Jubail Industrial City and the Al Wasit gas programme. As for the UAE, it plans to increase its oil production capacity to 3.5 million barrels per day by 2017 from the current three million. Most of its oil and gas projects remain committed and under construction as the country ranks third in the GCC with $28.36 billion of as-yet un-awarded oil and gas projects.

According to Meed Projects, key oil and gas projects to be awarded in the UAE in 2015 include the $600 million Zadco-Umm Al Dalkh full-field development in the upstream sector; the $350 million Emirates LNG-Fujairah new liquefied natural gas regasification facility in the storage sector; the $200 million Adgas-IGD expansion and the $100 million Emirates Gas-conversion of waste to CNG in the downstream sector; and the $50 million Dolphin Energy Northern Emirates pipeline in the transmission sector.

Rather than passively wait for the current slump in the oil prices to reverse and head north, the UAE has been wise to consider this as an opportunity to devise new and innovative strategies and promote investment into diversified yet sustainable energy and non-energy projects that will ensure more economic growth, however modest, for the country and the region. That said, the UAE’s oil and gas sector is extremely well-developed and resilient against price fluctuations in the long run and there is no immediate need to change the sector’s development plans[…].