UAE oil reserves to fall nearly 6bn barrels by 2016: report

The UAE proven oil and gas reserve will fall over the next few years due to increased production, said a recent report.

Business Monitor International's (BMI) United Arab Emirates Oil and Gas Report projected that proven oil reserves will decline by 5.8 billion barrels from 96.8 billion barrels in 2011 to just over 91 billion barrels by 2016.

BMI also sees oil production rising to over 3.2 million barrels per day by 2016 and nearly 3.5 mbpd by 2021, supported by re-development of mature fields, the deployment of enhanced oil recovery (EOR) and investment from international oil companies and national oil companies.

Crude oil price gained last week closing at $107.87. Bank of America Merrill Lynch (BofA-ML) said in a recent report that Brent will steadily continue rising over the next three quarters. Earlier last month, BofA-ML revised Q1 2012 Brent and WTI crude oil price forecast to $108/bbl and $100/bbl from $100/bbl and $92/bbl, respectively, to reflect the much stronger oil price environment.

“But demand is decelerating sharply and our supply models indicate a ramp up in volumes heading into Q2 2012, so we leave our projections for the rest of the year unchanged. Against our fundamental views, we acknowledge the Fed’s commitment to hold rates near zero until the end of 2014 and that more QE could lend support to Brent oil prices,”

BofA-ML analyst Sabine Schels said in the report.

BofA-ML analyst projected that Brent will slide to $104/bbl in second quarter 2012 but will recover in the next quarter to $112/bbl. It will increase further to $116/bbl in the fourth quarter of this year.

Global oil consumption has been decelerating sharply over the past few months, at a time when prices have held up extremely well. In fact, world oil demand in the last quarter of 2011 did not expand at all, led by declines in Europe and North America. Why aren’t oil prices coming down? First, inventories have failed to build despite steep demand declines, as supply remains very scarce. Second, high liquidity has likely helped prevent a drop in oil prices. 

Gas price

BMI also forecast that UAE’s gas reserves are falling from six trillion cubic metres (tcm) in 2011 to around 5.8 tcm by 2016.

Gas production will receive a big mid-decade boost from the start-up of the Shah sour gas project. By 2016, BMI sees output of around 66bcm, rising to 74bcm by 2021.

The UAE will continue to export modest volumes of liquefied natural gas (LNG) while importing pipeline gas via Dolphin from Qatar. BMI has not factored a volume rise for either flow into its forecasts.