DUBAI: Just days before a high-stakes Opec meeting to support an oil market ravaged by coronavirus, the United Arab Emirates’ (UAE) state oil company told the world it planned to spend US$122 billion to boost production capacity.
That set the stage for a standoff at a meeting of the cartel this week. A compromise was struck but ambitious plans to maximise energy wealth may keep stirring tension - in particular with its largest neighbour Saudi Arabia, report agencies.The UAE’s reinvigorated pursuit of petrodollars plays into a wider shift in the dynamic between Abu Dhabi Crown Prince Sheikh Mohammed Bin Zayed and Saudi Arabia’s Crown Prince Mohammed bin Salman over who in the region holds sway on the international stage.
For years, the two countries moved in lockstep on both oil and foreign policy, yet they have diverged in recent months on both. They split over the war in Yemen, then the UAE asserted itself with its landmark deal with Israel in September. They also have their differences over efforts to ostracise Qatar, with a US brokered deal to end the rift including only Saudi Arabia.
It’s in that context that the UAE went as far as to signal last month it might consider a future outside Opec. And while the deal reached on Thursday allowed for a show of unity, it will come up again for review in January, meaning the drama could be replayed in 2021 as the cartel charts a path out of the pandemic.
“The UAE is increasingly willing to act in its own direct national interests, and where that doesn’t align with Saudi Arabia it’s confident and willing to go it alone,” said Neil Quilliam, associate fellow in the Middle East and North Africa programme at the Chatham House think tank.
The UAE is Opec’s third-largest oil producer and holds about 6 per cent of global crude reserves. At the heart of the UAE’s tensions with the Organization of Petroleum Exporting Countries (OPEC) are state-run producer Abu Dhabi National Oil Co’s (Adnoc) plans for growth.
Four years ago, Sheikh Mohammed picked Sultan Al Jaber to run the company. Mr Al Jaber, who has experience in both the corporate and government worlds and is also a minister, has since embarked on a radical overhaul, striking new foreign partnerships and bringing global infrastructure investors to the country for the first time.The price war in March allowed the market to get a glimpse of Adnoc’s ambition, when the company said it would crank up production to four million barrels a day, surprising even the International Energy Agency, which didn’t know it had that capacity.
That was a sudden jump of more than one million barrels from the month before. Its long-term goal is to boost capacity to five million and establish its Murban crude as a regional benchmark. For that it needs liquidity, which is being crimped by the Opec accords.