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Ruler of UAE dies, with prince who led Abu Dhabi's energy transformation set to take over

Highlights

Crown Prince MBZ expected to maintain continuity in oil policy

UAE pumped 3.01 mil b/d in April: Platts OPEC+ survey

ADNOC investing to boost production capacity to 5 mil b/d

UAE President and Abu Dhabi ruler Sheikh Khalifa bin Zayed al Nahyan has died, officials announced May 13, likely putting OPEC's third-largest crude oil producer in the hands of the crown prince behind its aggressive energy strategy.

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Abu Dhabi Crown Prince Mohamed bin Zayed will become ruler of the emirate, which controls most of the country's crude production, and based on precedent is likely to be named the next UAE president by the Federal Supreme Council, which includes rulers of all seven emirates in the federation.

Known by his initials MBZ, the crown prince has been the de facto ruler of Abu Dhabi since 2014, when Sheikh Khalifa, his half-brother, suffered a stroke that kept him away from the public eye.

MBZ is chairman of the board of directors of Abu Dhabi National Oil Co., the state-owned energy company that pumps most of the oil in the UAE.

Ben Cahill, a senior fellow at the Center for Strategic and International Studies, called MBZ "the architect of today's oil policy," which he runs closely with ADNOC CEO Sultan al-Jaber.

"Their policy is to develop resources faster, embrace more partners, reduce carbon emissions, and move into lower-emission fuels," he said. "There has also been a clear effort to break down old walls and push all UAE energy companies and state funds in the same direction."

In December 2020, MBZ was appointed by Sheikh Khalifa to be the vice-chairman of the newly formed Supreme Council for Financial and Economic Affairs of Abu Dhabi to oversee all economic matters in the emirate, including the energy sector. The new body merged with Abu Dhabi's Supreme Petroleum Council, which previously oversaw energy affairs in the emirate.

The UAE is a core member of OPEC and, together with Saudi Arabia, holds the vast majority of the bloc's spare production capacity, giving it much clout in an oil market tightened by Russia's invasion of Ukraine.

That spare capacity is the product of ADNOC's upstream investment campaign, which will ultimately see the emirate capable of pumping 5 million b/d of crude oil by 2030, from a capacity of about 4 million b/d now.

The UAE pumped 3.01 million b/d in April, according to the latest Platts OPEC+ survey from S&P Global Commodity Insights, in line with its quota under the group's current supply accord.

Building foreign allies

Born in March 1961 and the third son of Sheikh Zayed, the UAE's founding father, MBZ has expanded the country's economic and political might over the years. He led the forging of the country's 2020 peace agreement with Israel, as the UAE became the first Gulf nation to strike such an accord with the Jewish state, which officials have said could lead to more energy cooperation.

In January 2021, the UAE joined Saudi Arabia, Bahrain, and Egypt in ending an economic blockade on neighboring LNG powerhouse Qatar that started in 2017.

He also visited Turkey in November, mending ties with the NATO member and striking a number of investment deals.

MBZ's foreign policy of detente comes amid a retreat of US involvement in the Middle East, which is prompting Arab rulers to look elsewhere for political and economic support.

But OPEC's crude production management alliance with Russia, which began in 2017, has become thorny, as western powers have imposed harsh sanctions on Moscow for its invasion of Ukraine and criticized the UAE and Saudi Arabia for not tapping more of their spare capacity to offset declines in Russian output.

OPEC members have so far stood by Russia, one of the world's top three crude producers, unwilling to jeopardize a relationship that has now extended beyond oil to include security and trade.

"Russia is an important member, and leaving the politics aside, that volume is needed today unless someone is willing to create 10 million b/d," UAE energy minister Suhail al-Mazrouei said in March. "We don't see that someone can substitute Russia."

The current OPEC+ supply pact runs through late 2022 when historic production cuts implemented at the start of the pandemic are scheduled to be phased out, and ministers have yet to say what will happen after that.

The UAE, having spent significant sums to boost its output capacity, is likely to be eager to be freed from its OPEC+ quota.

"All eyes should be on the end of the OPEC+ agreement when we expect the UAE to look for ways to increase output," said Alice Gower, director of geopolitics and security with consultancy Azure Strategy.

Transforming ADNOC

Meanwhile in the UAE, MBZ has been a driving force of economic reform, opening the country up further to foreign investors and selling state assets in order to ramp up developments in the energy and other vital industries.

He has championed the rise of Jaber, who besides being ADNOC CEO also serves as minister of industry and advanced technology.

Since his appointment as CEO in 2016, Jaber has publicly listed several ADNOC units and sold key assets to foreign investors—a move later mimicked by Saudi Aramco.

But the biggest transformation yet was ADNOC's launch in March 2021 of the Murban crude futures contracts on ICE Futures Abu Dhabi, a move that aimed to cement the company's central role in the Middle East's trading business.

While the jury is still out about the success of IFAD and the futures contract, the move indicates ADNOC's and MBZ's grand ambition for the energy company.

Under MBZ, the UAE also announced its net-zero carbon pledge for 2050 and is set to host the COP28 UN climate talks in 2023 as it seeks to have its voice heard on the energy transition debate.

"The UAE wants to increase its market share, which means raising production faster and reducing emissions intensity so it remains an advantaged oil producer," Cahill said. "The net-zero target and ADNOC's investment plans all reflect this goal. That's the MBZ and Sultan al-Jaber agenda."