Diana T Fritz 12/19/2006 04:48:34 PM From DB/Inbox: Search Results
C O N F I D E N T I A L ABU DHABI 04400
INFO: DCM POL FCS AMB P/M
OO RUEHC RUEHHH RUEHDE RUCPDOC RHEBAAA RUEHSD
DE RUEHAD #4400/01 3401304
ZNY CCCCC ZZH
O 051304Z DEC 04 ZDK
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7070
INFO RUEHHH/OPEC COLLECTIVE PRIORITY
RUEHDE/AMCONSUL DUBAI PRIORITY 4566
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 004400
C O R R E C T E D COPY (CHANGED SUBJECT)
DEPT FOR NEA/RA, NEA/ARP, INR/EC, EB/IEP, EB/CBA
USDOE FOR INT'L AFFAIRS - COBURN
USDOC FOR 1000/OC/
USDOC FOR 4520/ITA/IEP/ONE
E.O. 12958: DECL: 12/05/2014
SUBJECT: NEW UAE OIL MINISTER CONFIRMS MODERATE STANCE
(U) Classified by Ambassador Michele Sison for reasons 1.4
(B) and (D).
1. (C) Summary: New UAE Energy Minister Al-Hamili told
Ambassador on December 5 that the UAE was committed to
meeting market needs. He also underlined the UAE's interest
in market stability and moderate prices that support global
growth. The Minister stressed that OPEC was doing all it
could to stabilize the market. The UAE is producing at (or
near) its maximum sustainable capacity of 2.6 mb/d.
Al-Hamili said that the sudden drop in prices had made "some"
OPEC members nervous, but that prices were still high enough
that members couldn't (or shouldn't) complain. Although
Al-Hamili declined to predict the outcome of the upcoming
December 10 OPEC meeting, he made it clear that the UAE would
endeavor to play a positive role at the meeting. End Summary.
2. (C) Ambassador paid a courtesy call on Mohammed bin Dha'en
Al-Hamili, the new UAE Minister of Energy, on December 5.
Ambassador used the opportunity to note USG appreciation for
actions taken by producers recently to meet rising oil
demand. She noted that, in spite of the past week's decline
in crude prices, prices remained volatile and high, and were
of concern to global economic growth. The winter heating
season was not the time to signal an impending drop in
supply. Minister Al-Hamili quickly replied that he
understood the need for market stability and reiterated the
UAE's desire to meet consumer country needs. He stressed
that the UAE and other large producers such as Saudi Arabia,
Kuwait and Iraq take a longer-term view than some other OPEC
members. The Emiratis understand, he said, that they benefit
more from moderate prices. The UAE did not want to impede
global growth, or encourage investment in higher cost
alternatives, he emphasized.
3. (C) Al-Hamili said that he would be attending an OAPEC
meeting immediately after the OPEC meeting, and would also be
meeting informally with other Arab producers in advance of
the OPEC meeting to "compare notes" and production figures.
He admitted that OPEC members tended to "play their cards
close to their chest," making it difficult to predict the
outcome in advance. He noted that both the Iranians and the
Venezuelans had made hawkish statements on production,
responding to the recent sharp drop in oil prices, but stated
that prices were still high enough that OPEC members "didn't
have a reason to complain."
4. (C) Al-Hamili explained that, unlike some other oil
ministers, he was not likely to make any public
pronouncements before the meeting. The Ambassador noted that
Al-Hamili had already made some positive statements about the
need for continuity after his November 21 swearing-in.
Al-Hamili explained that he believed that markets needed to
hear reassurances that "cabinet shuffles would not lead to
policy changes." In response to Ambassador's mention of
concerns that the OPEC meeting results might produce
"surprises" that would add to volatility, Al-Hamili stressed
that OPEC needed to play a "responsible role" in stabilizing
the market and in providing the market with enough crude to
5. (C) Al-Hamili stated that prices needed "to adjust" and
that the recent drop in prices was expected. He said what
had surprised everyone, however, was the speed of the fall.
This, and the traditional decline in demand during the second
quarter, was making some OPEC members nervous. He also noted
that OPEC members (excluding Iraq) were only overproducing
quota by about one million barrels per day mb/d. OPEC
production, including Iraq, was about 30 mb/d.
6. (C) Al-Hamili underscored that OPEC was doing all it could
to stabilize the market to the extent of appearing to
"micromanage" it. Al-Hamili said that OPEC producers,
including the UAE, were producing at or near maximum
capacity. He said that the UAE could produce more, but only
by flaring associated gas -- which is prohibited in the UAE
-- and risking damaging the reservoirs. (Note: The UAE's
maximum sustainable production capacity is 2.6 mb/d.)
Al-Hamili opined that market speculation (rather than
supply/demand fundamentals) provided much of the pressure
behind current high prices. He noted that paper transactions
(i.e., oil futures) were about 5 times greater than the
actual physical flow of oil. He said that world demand was
about 82 mb/d (of which U.S. demand was 9 mb/d for gasoline
alone) and the paper transfers were 400 mb/d. He assessed
the price drop as being due to oil speculators exiting the
market, but added that speculators could easily re-enter the
market driving up the price.
7. (SBU) Ambassador also raised the problems an American
company (Caltex) was having with gasoline price controls in
the UAE. Caltex is a joint venture partner in a chain of gas
stations in Dubai and the northern emirates of the UAE. The
price it can charge at the pump is set below the wholesale
cost of gasoline. Minister Al-Hamili said that he was very
much aware of the problem, and that all three UAE
distribution companies were taking huge losses. He said that
his ministry was interested in helping the distribution
companies, but that the final decision rested with the full
cabinet. He explained that the UAEG was worried that raising
gasoline prices would pass through to higher inflation and
hurt consumers, whereas the companies logically needed a
market rate to make money. He said that the ministry was
looking at solutions and suggested that the oil companies
again provide some coordinated proposals to the ministry.
8. (C) Bio Note: Minister Al-Hamili comes from the Abu Dhabi
National Oil Company (ADNOC) and was also previously the
UAE's governor at OPEC from 1994-2002. He is a Harvard
Business School Graduate and a certified accountant. During
the meeting, he noted that he was still readjusting moving to
the ministry and the different rhythms of a public sector
job. He stated that although ADNOC, as Abu Dhabi's national
oil company, was not really a private company, it tried to
operate like one and he was used to getting to his desk at
7:00 am. It was also clear that he hopes to bring some of
the private sector's work ethic to the Ministry. End Bio Note.
9. (C) Comment: This was a very encouraging meeting.
Al-Hamili stated that the UAE is interested in moderate
prices that will not damage global growth and is committed to
market stability. Based on our past experience with the
ministry, we believe that these views reflect the UAEG's
position and will be reflected in the UAE's position in
Cairo. We would predict that the UAE would continue its role
as one of the moderates.
10. (C) Comment Cont. Because the UAE's individual emirates
own their oil resources, not the UAEG, the federal Minister
of Energy has little influence on plans to expand production.
Those are controlled by the Emirates of Abu Dhabi, which has
over 90% of the country's proven oil reserves. We will
pursue with ADNOC CEO Yousef Omair bin Yousef in the near
future. End Comment.
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