US embassy cable - 05ABUDHABI3439

S E C R E T SECTION 01 OF 02 ABU DHABI 003439 
 
SIPDIS 
 
STATE FOR NEA/ARPI AND EB/ESC/IEC/EPC 
ENERGY FOR MOLLY WILLIAMSON AND JOHN BRODMAN 
NSC FOR HUTTO 
 
E.O. 12958: DECL: 08/08/2015 
TAGS: ENRG, EPET, PTER, TC 
SUBJECT: ABU DHABI OIL PRODUCTION AND SECURITY 
 
 
Classified By: Ambassador Michele J. Sison for reasons 1.4 (B) and (D). 
 
1. (S) Summary:  Abu Dhabi Company for Onshore Oil Operations 
(ADCO) GM told Econchief that ADCO is currently producing 1.2 
mb/d and will be able to produce 1.4 mb/d by end 2006.  He 
expressed concern about the impact of a sea borne attack on 
ADCO's main export terminal, which could shut down exports 
for months.  The GM also noted that ADCO had not discovered 
any large fields since 1964 and that future increases in 
production would need to come from smaller fields.  End 
Summary. 
 
INCREASING PRODUCTION CAPACITY 
------------------------------ 
 
2. (C) On August 7, Econchief met with Kent Wells (strictly 
protect), General Manager of the Abu Dhabi Company for 
Onshore Oil Operations (ADCO) to discuss onshore oil 
production capacity and oil infrastructure security.  Wells 
said that he understood the USG's concern over high oil 
prices, adding that ADCO is increasing production capacity as 
quickly as it reasonably can.  ADCO currently produces 1.2 
million barrels per day (mb/d) and will raise production 
capacity 1.3 mb/d by the end of 2005, and to 1.4 mb/d by the 
end of 2006.  Wells said that ADCO would easily reach these 
targets and would be completing one project in September 
2005, another in December 2005, and one more by the end of 
2006.  Wells added that ADCO was developing a plan to reach a 
production capacity of 1.5 and 1.6 mb/d by the end of the 
decade.  He said that he thought this would be the maximum 
ADCO could reasonably expect to produce.  He acknowledged 
that ADCO might eventually be able to produce 1.8 mb/d if 
ADNOC changed its policy of requiring fields to be able to 
produce at the same rate for 25 years.  Wells added that he 
thought ADCO's main export terminal at Jebel Dhana would be 
able to handle exporting 1.5-1.6 mb/d.  To go much beyond 
that, he said, would require substantial investments in 
expanding the terminal.  He said that, from ADCO's point of 
view, these investments wouldn't make much economic sense. 
In an absolute emergency, Wells said that ADCO could increase 
onshore production by 200,000 to 300,000 bpd, without 
flaring.  Of the 1.2 million bpd ADCO produces, it pumps only 
90,000 bpd to Abu Dhabi's refineries and exports the 
remainder as crude. 
 
3. (C) According to Wells, ADCO has experienced the same 
shortages of petroleum engineers and supplies that have 
affected world markets.  Wells said that, over the last few 
months, ADCO has been losing employees to higher salaries in 
other countries, at a time when it should be growing its 
workforce.  Although ADCO has not faced difficulty getting 
oil rigs, he noted that the price of steel has doubled in 
recent years.  Wells said that because suppliers know that 
the UAE is a good long-term customer, they will push prices 
exactly as much as they can without hurting the relationship, 
then back off. 
 
EXPLORATION 
----------- 
 
4. (S) Wells told Econchief that ADCO has not discovered a 
large oil field on the scale of the Bab, Bu Hasa and Asab oil 
fields since 1964.  Wells said he does not expect to find any 
additional large fields, although he would like to discover 
one more.  According to Wells, ADCO,s three large oil fields 
still contain a 100 year supply of oil, and supply 1.1 of the 
1.2 million bpd that ADCO produces.  Its two smaller fields, 
Sahil and Shah, produce about 500,000 bpd each.  Increases in 
production, however, will need to come from smaller fields, 
which are more expensive to exploit. 
 
OIL FIELD SECURITY 
------------------ 
5. (S) In response to Econchief's question about oil field 
security, Wells said that the UAE was well protected against 
"people already in the country," adding that it was very 
difficult to approach the onshore facilities without security 
responding.  He said, however, that the main export terminal 
at Jebel Dhana was much more vulnerable to an attack from 
offshore, for example by a "fishing boat full of explosives." 
 If a terrorist sunk a tanker in the main channel to Jebel 
Dhana, he noted, "we would be out of business for months." 
If the attackers destroyed one of the single point moorings, 
it would close down exports until ADCO could replace it.  On 
the other hand, he said, if someone blew-up an onshore 
pipeline, ADCO could replace it quickly.  Wells reported that 
ADNOC is currently conducting a major study on security 
issues.  In Wells, opinion, the UAEG's interest in U.S. 
security for the oil sector gave U.S. firms considerable 
leverage. 
SISON