Country Listing

United Arab Emirates Table of Contents

United Arab Emirates

Oil and Natural Gas

Abu Dhabi became a member of the Organization of the Petroleum Exporting Countries (OPEC) in 1966. When the amirates federated in 1971, membership was transferred to the UAE. Although Abu Dhabi officials represented the other amirs, the officials exercised no power over the amirs because each maintained control of his amirate's underground wealth. Each ruler oversaw arrangements for concessions, exploration, and oil field development in his own territory and published limited information about such arrangements. Thus, the federal Ministry of Petroleum and Mineral Resources has limited power to set policy and engage in overall planning. In 1988 a presidential decree abolished the Department of Petroleum and dissolved the board of directors of the Abu Dhabi National Oil Company (ADNOC). The functions of these bodies (administration and supervision of the country's petroleum affairs) were taken over by the newly formed Supreme Petroleum Council, whose eleven members were led by Shaykh Khalifa ibn Zayid Al Nuhayyan.

Discoveries in the 1980s and 1990s greatly increased the UAE's oil and gas reserves. By 1992 the four oil-producing amirates had total estimated proven crude oil reserves of 98 billion barrels and natural gas reserves of 5.2 trillion cubic meters, with the majority of both reserves lying within Abu Dhabi.

Based on the relative size of their reserves and on their long-term development plans, Abu Dhabi and the other oilproducing amirates have pursued differing policies. Abu Dhabi, with massive reserves, has on the whole based its production and economic development plans on long-term benefits, occasionally sacrificing production and price to meet this end. The other amirates, less well endowed with oil and gas, have sought to exploit their meager resources to produce short-term gains.

In the early 1980s, Abu Dhabi adhered to OPEC production ceilings while Dubayy routinely exceeded them. After 1987, however, both Abu Dhabi and Dubayy habitually produced above OPEC levels. In early 1987, for example, when Abu Dhabi's OPEC quota was set at 682,000 barrels per day (bpd--see Glossary) and Dubayy's at 220,000 bpd, Abu Dhabi produced 1,058,000 bpd (64 percent above quota) and Dubayy produced 365,000 bpd (60 percent above quota) (see table 27, Appendix). As a result, OPEC established a committee to promote greater adherence to quotas by chronic overproducers such as the UAE. For its part, the federation argued that its quotas were too small in relation to its large reserves and to the quotas of other producers.

The UAE's quota was raised several times by OPEC, and it was at almost 1.1 million bpd in March 1990. Not recognizing the OPEC figure, UAE production at the time was 2.1 million bpd. By July 1990, oil prices had fallen to US$14 per barrel, and the UAE agreed to a compromise proposal that raised its OPEC quota to 1.5 million bpd. Meanwhile, among Iraq's public accusations was that both Kuwait and the UAE had deprived Iraq of much-needed revenues by driving down world oil prices through production above their OPEC quotas.

After Iraq invaded Kuwait in August 1990, OPEC suspended quotas to allow member states to compensate for the lost production of Kuwait and Iraq. Producing an average of 2.1 million bpd, the UAE earned US$15.0 billion in oil revenues in 1990. In the following year, producing an average of about 2.4 million bpd, the federation earned US$14 billion. In March 1992, OPEC raised the UAE's quota to slightly more than 2.2 million bpd, which the UAE appeared to be observing. In March 1991, the UAE announced that it would expand its oil production capacity to 4 million bpd by the mid-1990s as part of a multibillion dollar development program.

Data as of January 1993