US embassy cable - 05ABUDHABI1683

C O N F I D E N T I A L SECTION 01 OF 03 ABU DHABI 001683 
 
SIPDIS 
 
E.O. 12958: DECL: 04/16/2015 
TAGS: ECON, ENRG, EPET, TC 
SUBJECT: UAE ENERGY SECTOR: SECURITY, SPARE CAPACITY, AND 
TECHNOLOGY 
 
 
Classified By: (U) Classified by Richard A. Albright, Deputy 
Chief of Mission, reasons 1.4 (b) and (d). 
 
1. (C) Summary:  Although the United Arab Emirates has taken 
many steps to improve oil and gas facility security, a number 
of vulnerabilities for both off and onshore facilities still 
exist.  The UAE needs to improve information sharing and 
interagency coordination to further enhance security.  ADNOC 
officials detailed a number of their security measures to 
protect their oil and gas facilities, including exclusion 
zones, alarmed fences, and subsurface valves. The UAE plans 
to increase its production capacity to 3 million bpd by 2006, 
and this goal should be easily obtainable at its current rate 
of investment in new projects.  End Summary. 
 
2.  (C) An interagency team of energy analysts visited the 
UAE from April 2-4.  They met with ADNOC Deputy CEO Abdullah 
Nasser Al-Suweidi, and several other ADNOC officials.  They 
also met with three foreign oil company executives: 
Occidental Middle East Development Co. Vice President David 
Scott, ExxonMobil Al-Khalij Inc. President Frank Kemnetz, and 
BP Middle East and Pakistan President Michael Daly. 
 
Oil and Gas Facility Security 
------------------------------ 
 
3.  (C) Since 2001, the UAEG has invested heavily into 
improving oil and gas facility security.  However, 
vulnerabilities remain including problems with interagency 
coordination and a lack of transparency in information 
sharing.  BP Middle East and Pakistan President Michael Daly 
pointed out that the UAEG does not take a strategic approach 
to oil and gas field protection; instead of trying to 
determine vulnerable chokepoints in the oil and gas networks, 
it instead attempts to cover all the bases with security. 
ExxonMobil Al-Khalij President Frank Kemnetz noted that the 
UAEG needs to think of security like it thinks of safety on 
the oil and gas fields ) as an essential element that must 
permeate all planning and actions. 
 
4.  (C) The Abu Dhabi National Oil Company (ADNOC) controls 
the oil and gas facilities of the Emirate of Abu Dhabi (more 
than 90 percent of the oil and gas reserves in the UAE).  The 
onshore (ADCO) or offshore (ADMA-OPCO) national operating 
companies operate the fields.  Foreign oil companies own oil 
concessions and are minority shareholders in the operating 
companies.  The Ministry of Interior, the UAE Coast Guard and 
Navy, and the State Security Directorate (intelligence) are 
all concerned with security.  One of the key complaints of 
foreign oil companies is that the UAEG government is hesitant 
to share threat information, particularly information that is 
politically-sensitive.  The government frequently lacks 
transparency, and foreign oil companies complain that they 
know little about government measures taken to protect oil 
and gas facilities.  Occidental Middle East Development Co. 
Vice President David Scott noted that the UAEG does make an 
attempt to pass information, but the filtering and manner of 
transmission sometime make it difficult for company 
executives to interpret.  The UAEG does invest in risk 
analysis (most often through outside consultants); but again, 
does not share the reports or action items of such analysis 
with foreign oil companies operating locally. 
 
5.  (C) Despite these perceived vulnerabilities, all foreign 
oil company executives did note that they feel secure in the 
UAE.  Even after the bombing in Doha, Qatar by an employee of 
Qatar,s oil company, oil company executives felt that there 
was lots of invisible, but present, security in the UAE. 
 
Onshore Oil and Gas Security 
----------------------------- 
 
6.  (C) UAE oil production is divided 50-50 between onshore 
and offshore facilities.  Private sector interlocutors 
generally regard the onshore facilities as more secure, 
although difficult to protect due to their vast size (some of 
the fields are 45 km by 30 km).  ADNOC has considered fencing 
the oil and gas fields, but fencing would be more likely to 
attract undesired attention to the fields.  Instead, the UAE 
has mostly relied on fencing certain areas and facilities 
within fields.  These fences are supplied with cameras, and 
the newer fencing systems are alarmed.  Additionally, the UAE 
uses subsurface safety valves to prevent fire and oil spills. 
 These valves can also isolate a problem area on the field, 
minimizing security vulnerabilities.  ADNOC Deputy CEO 
Abdullah Nasser Al-Suweidi noted that the onshore oil fields 
are all independent facilities, minimizing security and 
safety risks (i.e. an attack at once facility would not 
impact other facilities).  The one major chokepoint is the 
Jebel Dana export terminal, which is the primary UAE export 
terminal and holding facility for onshore oil.  There are 
three loading facilities at Jebel Dhana, and multiple tanks. 
At any given time, only 20 to 40 percent of the tanks are 
utilized so there is spare capacity.  These tanks are 
isolated within the facility by distance in attempt to limit 
their vulnerability to fire or explosion. 
 
Offshore Oil and Gas Security 
------------------------------- 
 
7.  (C) Many foreign oil companies regard the offshore oil 
installations as the UAE,s greatest vulnerability, since 
there are large numbers of offshore facilities that are 
difficult to protect.  The UAE maintains strict exclusion 
zones around these facilities, but there is considerable 
shipping traffic near the zones which increases the risks to 
the facilities.  The UAE Coast Guard and Navy patrol the 
zones, and conduct 24 hour continuous operations.  The UAEG 
accompanies all LNG tankers (all of which are double-hulled) 
in UAE territory.  The export facilities are primarily 
located on Das Island (two tanks), although there are 
facilities on other islands.  Although ADNOC can make up for 
lost production for a limited time using onshore production 
(i.e. when a plant is not operating due to repairs), Abu 
Dhabi cannot shift offshore production from field to field. 
All offshore gas fields, and the majority of offshore oil 
fields, use subsurface valves to prevent fire and spills. 
 
Spare Capacity 
--------------- 
 
8.  (C) According to ADNOC and foreign company executives, 
the UAE is serious about investing and producing more oil to 
raise its oil production capacity to 3 million barrels per 
day (bpd) by the first quarter of 2006.  The UAE currently 
can produce 2.5 million bpd at sustainable production, and 
2.7 at peak production.  By early 2006, the UAE will easily 
be able to produce 2.7 million bpd sustainable, and 2.9 
million bpd peak.  According to BP President Michael Daly, 
these projects are starting to be completed now.  By counting 
gas condensates (approximately 220,000 bpd are produced in 
the UAE), ADNOC reports that they could reach a production 
capacity of 3 million bpd by the end of this summer.  Foreign 
oil companies all agreed with ADNOC,s CEO who made a number 
of media comments this week that the UAE would be producing 3 
million bpd at peak capacity by 2006.  In an emergency, the 
UAE could also increase its capacity by an additional 200,000 
bpd by flaring gas at the fields (the UAE follows a strict 
no-flare policy).  (Note: All but about 160,000 bpd of the 
UAE,s oil production capacity is in the Emirate of Abu 
Dhabi). 
 
9.  (C) Foreign oil companies report that the UAE is already 
evaluating plans for the next tranche of expansion and 
development.  The UAE will start investing this year to bring 
an additional production of 200,000 bpd onshore and 100,000 
bpd offshore online by 2008 or 2009. In addition, the UAE is 
increasing its production of condensates (which are not 
limited by OPEC quotas). 
 
 
Technology 
----------- 
 
10.  (C) Technology transfer remains a primary priority for 
the UAE, particularly in tendering contracts to foreign oil 
companies.  Although the oil market is seeing an increase in 
Asian consumption and Asian companies eager to obtain 
concessions (particularly from China and India), ADNOC views 
these firms as unable to compete technically with the major 
international oil companies.  In particular, a number of the 
offshore facilities in the UAE require greater technical 
expertise than these firms possess. (Note:  Abu Dhabi,s 
Supreme Petroleum Council cited Exxon Mobile,s technically 
superior bid as the primary reason it has chosen to negotiate 
only with Exxon Mobile at this point for the 28% tender in 
the offshore Upper Zakkum field). 
 
11.  (C) Emiratization (creating jobs for Emirati nationals) 
and aging oil industry executives present additional 
technical difficulties for the UAE oil industry.  Many newly 
hired Emiratis, although highly educated, are entering the 
sector without the depth of experience needed to replace 
aging oil industry executives.  In response, many of the 
foreign oil companies with a large presence here are making 
more of an effort to train the Emiratis by sending them 
abroad to observe techniques and gain experience at other oil 
fields. 
 
Comment 
------- 
 
12.  (C) The UAE is investing time and resources into 
producing more spare capacity, while ensuring that its 
current and new fields remain secure from terrorist attacks. 
Although the UAE government could take more actions to share 
information and vulnerabilities with the foreign oil 
companies operating here, it does expend the considerable 
government and military resources necessary to provide 
exclusion zones and protection for their facilities. 
SISON