US embassy cable - 04ABUDHABI790

C O N F I D E N T I A L SECTION 01 OF 03 ABU DHABI 000790 
 
SIPDIS 
 
NOFORN 
 
DEPT FOR NEA/RA, NEA/ARP, INR/EC, EB/IEP, EB/CBA 
USDOE FOR INT'L AFFAIRS - COBURN, ALSO CALIENDO 
USDOE FOR OFFICE OF THE SECRETARY - RHONDA HUDOME 
USDOC FOR 1000/OC/ 
USDOC FOR 4520/ITA/IEP/ONE 
USDOC FOR 4530/ITA/MAC/ONE/DGUGLIELMI 
4500/ITA/MAC/DAS/WILLIAMSON 
3131/CS/OIO/ANESA 
 
E.O. 12958: DECL 03/21/2009 
TAGS: EPET, PGOV, BEXP, ENRG, ECON, EINV, TC 
SUBJECT:  FORMER UAE OIL MINISTER SHARES "SECRET" DOCUMENT 
ON ABU DHABI OIL PRODUCTION 
 
1.  (U) Classified by Ambassador Marcelle M. Wahba, for 
reasons 1.5 (B) and (D). 
 
2. (C/NF) Special Adviser to the President and the UAE's 
first Oil Minister Man'a Al-Otaiba recently passed the 
Ambassador a document on Abu Dhabi oil production marked 
"secret," and dated February 16, 2003.  Al-Otaiba told the 
Ambassador that he intended to present the document to UAE 
Armed Forces Chief of Staff Shaykh Mohammed bin Zayed; the 
document communicates his vision for the future of Abu 
Dhabi's oil sector -- outlining current production capacity 
and suggesting ways to increase oil production during the 
next 10 years to maximize revenue. 
 
3. (C) The Al-Otaiba family is closely allied with the Bani 
Yas tribal confederation (which includes the Al-Nahyan). 
Man'a Al-Otaiba was one of only three university graduates 
from Abu Dhabi at the time of the federation (he went to 
Baghdad University).  He subsequently was selected to be 
the UAE's first Petroleum Minister.  He led the oil 
ministry from its inception until the late 1980s, and 
currently is one of 12 members on the Abu Dhabi Supreme 
Petroleum Council -- the organization that oversees all of 
the emirate's oil production and the Abu Dhabi National Oil 
Company (ADNOC), and determines Abu Dhabi's position on 
OPEC issues.  He seems to have fallen out of favor with 
most of the leading shaykhs and has a generally unfavorable 
reputation around town.  UAE Deputy Prime Minister Shaykh 
Hamdan bin Zayed has told the Ambassador that Al-Otaiba 
often makes bold initiatives without first consulting with 
the relevant players. 
 
4.  (C) We offer below an unofficial translation of the 
"secret" document, but caution that Al-Otaiba intends to 
influence the reader as much as inform.  We believe that 
Al-Otaiba seeks to disparage current ADNOC CEO Yousef bin 
Omeir Yousef and cast doubt on Yousef's management of Abu 
Dhabi's oil sector, and at the same time burnish his own 
credentials among the senior shaykhs.  Nevertheless, his 
views are interesting given his significant experience in 
the UAE oil sector. 
 
5.  (C/NF) Begin text of document: 
 
It is my pleasure to submit to Your Highness some important 
points on various economic, political and social issues. 
 
I shall begin with a report on the oil sector, in which I 
highlight some important features of the petroleum industry 
and Abu Dhabi's current production capacity.  I also 
discuss the possibility of increasing oil production so as 
to optimize our petroleum wealth and boost our oil revenue 
to its maximum limit without negatively affecting our 
petroleum fields. 
 
The main points are as follows: 
 
First: The current oil production capacity of our offshore 
and onshore fields is 2.3 million barrels per day with 
about 60 billion cubic meters of gas.  It is noteworthy 
that most of the gas associated with our offshore and 
onshore oil production is liquefied and sold through the 
ADGAS plant (which produces gas from the offshore fields) 
and the GASCO plant (which produces gas from the onshore 
fields). 
 
With the permission of Your Highness, I believe that it is 
possible to raise our oil production capacity in the 
medium-term to an average of 5 million barrels per day, and 
sustain this for at least 20 years.  We have huge oil 
reserves -- the third largest in the world after Saudi 
Arabia and Iraq -- and we represent more than 11 percent of 
the world's total oil reserves. 
 
Second: In order to increase the production capacity in Abu 
Dhabi to 5 million barrels per day, we should take the 
following into consideration: 
 
1 - The plan should lead to a gradual increase in oil 
production capacity as per the following table, which shows 
the investment and the period required to achieve 5 million 
barrels per day. 
Production Capacity          Total Investment   By Year 
(In millions barrel a day)    (In $ billions) 
 
       3                           1             2006 
 
      3.5                          2             2008 
 
       4                           3             2010 
 
       5                           4             2014 
 
 
2 - The goal of the plan should be to maintain a production 
capacity of about 5 million barrels per day for 20 years 
(2014-2034). 
 
3 - The plan should focus on developing the Upper Zakum 
field, which ZADCO currently manages, since the oil 
reserves of the Upper Zakum field represent more than 28 
percent of Abu Dhabi's known oil reserves. 
 
The following table shows Abu Dhabi's current known oil 
reserves distributed by field: 
 
Name          Total Reserves      Total Extractable 
              (Million barrels     Reserves 
               and condensate)    (Million Barrels) 
 
Onshore Fields 
 
Murban               103,083            51,541.5 
 
Offshore Areas       50,873             25,436.5 
(Lower Zakum, Umm Shaif) 
 
Upper Zakum          60,000             30,000 
 
Other Offshore        6,955.4           3,477.7 
 
Total Offshore       117,828.4          58,310.4 
 
Total production     220,911.4         110,455.7 
of Abu Dhabi Emirate 
 
4 - It is necessary to seek assistance from companies with 
significant experience and technical experience in oilfield 
development.  Such technology is available in the 
international market. 
 
5 - The plan should take advantage of cutting-edge, 
proprietary technology in order to maximize oil extraction 
above 50 percent. 
 
6 - The plan should allow for the exploration and 
development of areas that have not been surveyed 
adequately.  In light of the constant development of new 
technologies in oilfield exploration, it also is necessary 
to reconsider exploration of areas previously deemed to be 
without commercially viable deposits. 
 
7 - The plan also should focus on expanding production 
capacity for offshore and onshore gas plants or building 
new gas plants to receive the additional gas accompanying 
the increased oil production (an increase from 2.3 million 
barrels to 5 million barrels per day).  Abu Dhabi has the 
third largest gas reserves in the world after the former 
USSR and Iran.  Maximizing our gas production will multiply 
our revenue consequently. 
 
8 - Given the increase in oil production, condensates also 
will increase -- perhaps to 500,000 barrels a day. 
Condensates have about the same value as light crude. 
 
The following table shows the gas reserves in Abu Dhabi 
Emirate and other emirates: 
 
(In trillions of cubic feet) 
 
Emirate   Associated     Non-Associated      Total 
Abu Dhabi 
 
ADCO        78.44          85.68          164.12 
 
ADMA-OPCO   47.02          65.55          112.57 
 
Other       19.64          10.27           29.91 
 
Total       145.1         161.5           306.6 
Abu Dhabi 
 
Total        10.0          10.0           20.0 
Dubai 
 
Total         2.0          20.0           22.0 
Sharjah 
 
Others        2.0           4.0           6.0 
 
Total UAE    159.1         195.5          354.6 
 
Third: The developments in the oil market indicate an 
expected drop in the oil supply during the next few years, 
and a subsequent increase in oil prices.  Abu Dhabi, 
therefore, should be prepared to take advantage of this 
situation: 
 
1 - Abu Dhabi should make every attempt to fulfill the 
market's demand for oil, as we cannot "sleep on huge oil 
reserves" while the world is "dying of thirst for oil." 
 
2 - Abu Dhabi should take advantage of the upward pressure 
on prices during the coming period to maximize revenues. 
 
3 - The following table shows approximate expected annual 
revenue for Abu Dhabi Emirate during the 2006-2014 
timeframe if the above-mentioned plan is implemented: 
 
Year   Production  Est. Oil Price  Est. Oil Revenue 
       (MB/Day)   ($/Barrel)    ($ Million/Day) 
 
2006     3          30            32,850.00 
 
2008     3.5        35            44,712.50 
 
2010     4          38            55,480.00 
 
2014     5          40            73,000.00 
 
In addition, Abu Dhabi receives revenue from oil and gas 
condensate, the sale of refined products and petrochemicals 
-- the total value of these exports could reach $7 billion 
by 2014. 
 
This forecast does not take into consideration any 
unforeseen circumstances; these figures therefore should be 
revised on an annual basis. 
 
I believe this study is just the start of what we could do 
with our petroleum industry in a new world that is full of 
changes. 
 
Best regards, 
Dr. Man'a Saeed Al Otaiba, 
Special Advisor to His Highness the President 
 
End of text. 
 
Wahba