Algiers — The UAE is investing in spare production capacity, as well as additional crude oil storage, to provide the market with some cushion in the event of a supply shortage, energy minister Suhail al-Mazrouei told S&P Global Platts.
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The Arab country, OPEC's fourth largest producer, aims to achieve a total production capacity of 3.5 million b/d by the end of the year -- some 500,000 b/d above what it currently produces -- but will not tap that full amount unless it sees sufficient customer demand, Mazrouei said in a brief interview.
"As a responsible producer, we have invested in the stability of the market," he said after an OPEC/non-OPEC monitoring committee meeting Sunday in Algiers. "We will not overproduce. We have customers to respond to."
He added that the UAE plans to invest around $109 billion on upstream projects over the next four to five years, in addition to $45 billion in its downstream sector.
"We are not worried about market instability if we have spare capacity," Mazrouei said. "We and other countries also have storage capacity. We are building both to help us respond to any shortage or requirement for crude."
OPEC and 10 allies have agreed to boost production by 1 million b/d from May levels, to offset expected losses from US sanctions on Iran and Venezuela's continued economic crisis.
But only a few members have sufficient spare capacity to produce those barrels. Saudi Arabia holds the bulk of global spare capacity, with energy minister Khalid al-Falih saying it has some 1.5 million b/d in reserve that it can produce if needed.
Once the UAE is able to boost its total capacity to 3.5 million b/d, it would hold the second largest spare capacity.
The UAE pumped 2.97 million b/d in August, up 100,000 b/d from May, according to the latest Platts survey on OPEC production.
Industry sources have told Platts that the country is ramping up output from its offshore Umm Lulu field, which was producing about 30,000 b/d in August and could hit 75,000 b/d soon.
Abu Dhabi National Oil Co., which produces nearly all of the UAE's crude, launched the new light, sweet Umm Lulu grade earlier this year as a blend of crudes from its namesake field and the Satah al-Razboot, or SARB, field, with an expected API density of around 39 degrees.
The first Umm Lulu cargo was lifted in July from Zirku Island in the Gulf. In the longer term, ADNOC has said it wants to reach a combined 215,000 b/d from the Umm Lulu and SARB fields.
Other fields are also being commissioned, sources said.
Besides Umm Lulu, ADNOC also exports the offshore-produced Das Blend, the offshore Upper Zakum crude, and its flagship onshore Murban grade.
"Within ADNOC and within the concessions we have, we can raise production if we have to," Mazrouei said.
--Edited by Geetha Narayanasamy, email@example.com