UAE not threatened by shale revolution, says energy minister

The rise of North American shale hydrocarbons does not threaten the UAE or Opec, Suhail Al Mazrouei says.

VIENNA // The rise of North American shale hydrocarbons does not threaten the UAE or Opec, said the Minister of Energy.

"Of course we can't ignore it, but I doubt it will be a huge impact if there is a demand on the Opec," Suhail Al Mazrouei told The National as Opec began its meeting in Vienna today. "And as the UAE, our target is the East, and I don't think this will hugely impact that. We can take a longer time to debate what is the impact and what is the production, but I don't see any immediate impact."

Shale has been the catchword of the group's biannual meeting, where it decides how much Opec oil is needed to keep the market in balance — usually about 40 per cent of global supply.

But demand for Opec supplies is expected to fall over the next two years even as it adds to pumping capacity. Demand for Opec crude will slip from 30 million bpd last year to 29.2 million bpd in 2015 at the same time as it increases its capacity from 35 to 36.4 million bpd by 2015, according to the International Energy Agency.

The reason for the mismatch is the dramatic rise in North American production — the biggest increase since the dawn of oil exploration in the 1860s — that is expected to meet the bulk of new demand. Jose Maria Botelho de Vasconcelos, the Angolan minister of Petroleum, said Angola looking at finding new customers in Asia to replace American ones.

The Opec capacity increases are expected to come from Iraq and Libya, as well as the UAE which is on a long term plan to expand production 2.8 to 3.5 million bpd by 2017.

The UAE has yet to decide how much of that to retain as spare capacity, said Mr Al Mazrouei,

"This is just to be able to supply the market when needed and having that flexibility," he said. "We are continuing to look at supply and demand, and it will depend on the demand. It's always balancing."

The UAE pipeline from Habshan to Fujairah that bypasses the fraught bottleneck of the Strait of Hormuz, built to accommodate 1.5 million bpd or all of the emirate's current onshore capacity, will be expanded to accommodate 1.8 million as the emirate ramps up its onshore pumping. The pipeline, however, as been hit by 18 months of delays stemming from technical errors and is not yet operating even at current capacity.

"We are increasing the output and potential output," he said. "The full utilisation of any pipeline, it goes gradual with time, it doesn't just switch over."

This month the International Petroleum Investment Company, the Abu Dhabi sovereign wealth fund that built the pipeline with contractor China National Petroleum Corporation, said it expected to receive $4 billion from the government as reimbursement for the project.