Oil and gas
BMI has reported that since the oil prices have decreased, the UAE’s economic diversification efforts have become all the more important to the country’s long term economic health. So much so, that future success within the UAE oil and gas sector is to be inextricably linked to these economic diversification efforts. BMI has also said that the most consequential economic success that the country has experienced over the last five years, has been recreating the conditions of a stable investment climate, which the immediate after effects of the global financial crisis negatively impacted. Now, according to BMI, the UAE needs to balance investment and growth in the non-hydrocarbon sectors while also maintaining and upgrading its domestic production capacity.
Last year the UAE moved closer to its target of hitting 3.6 million bpd of oil production by 2019. Yet, recent economic studies have argued that investments and focus on the non-hydrocarbon sector is critical to the short term growth of the region as a whole, particularly as global supply of hydrocarbons, due to unconventional production is due to increase.
When it comes to production, BMI expect crude oil, NGL and other liquids production for this year to average 3.29 million bpd, increasing to 3.35 billion bpd next year. With continued instability in Iraq and a markedly worsening political and security situation in Libya, BMI has said that the UAE, along with other OPEC members, will be expected to fill the gap. The UAE is anticipated to focus on adjusting the deficit in gasoline and diesel products while also boosting production of LPG among other products. For gas, production is expected to increase from 2014 levels of 60.15 billion m3 go 69.56 billion m3 this year. BMI has said however that gas production increases in the UAE will be offset by measured consumption increases from 2014 levels of 84.89 billion m3 to 89.32 billion m3 this year. Towards the end of this decade however, BMI expects consumption growth to slow as new power supplies, renewables and nuclear come online and reduce the pressure on gas.
BMI has said that while the UAE is driving up petrochemicals capacities, producers are facing external market challenges as well as the prospect of rising naphtha feedstock prices. In the short term, BMI has said that the export market is challenging. UAE producers are expected to feel the squeeze of moderating economic activity in Europe and Asia and the continuing growth in capacity in emerging markets. China and India will however remain key markets for UAE petrochemicals with their manufacturing industries playing a major role in exports. Yet, BMI has warned that consumption has slowed in both markets at the same time as domestic capacities are rising.
Edited from report briefs by Claira Lloyd