Abu Dhabi announced a huge oil discovery on Sunday, which increased the UAE’s reserves by around 25 percent. Alongside the discovery, the capital of the UAE also pledged a massive investment into its state-owned Abu Dhabi National Oil Company (ADNOC). But what does this mean for the country and its place in the wider world?
How will the new discovery impact the local economy?
The $122 billion boost into ADNOC is “great news” for the local economy, says Richard Upshall, who has worked in the UAE's oil and gas industry for more than 20 years and has founded various companies including Dubai-headquartered OES Asset Integrity Management.
“It’s equivalent to a quantitative easing move in the UK, so it’s a huge boost to the economy,” he said.
The collapse of world oil prices earlier this year due to the coronavirus, he said, had an effect on the country’s whole oil and gas industry – including service companies and supply chains.
ADNOC’s $122 billion investment will boost “local jobs, national jobs, expats, and foreign companies,” Richard said.
“Malls will be busier, shops will be busier. It will have further-reaching effects into the economy, especially after COVID,” he added.
How significant is the new discovery?
Abu Dhabi’s newly-discovered 24 billion barrels worth of oil bring the UAE’s total estimated reserves to around 121.8 billion, according to OPEC’s 2019 Annual Statistical Bulletin.
According to the 2019 bulletin, this would mean that the latest discovery sees the UAE overtaking Kuwait as having the world’s 5th largest oil reserves.
For the last three years, ADNOC has been pumping around three million barrels of oil per day. The latest discovery accelerates its plan to increase production to a record five million barrels per day.
In comparison, the entire 13-member Organization of the Petroleum Exporting Countries (OPEC), of which the UAE is a member, pumped a total on 24.59 million barrels per day on average in October.
How important is oil to the UAE economy?
Oil and gas directly contributes to around 30 percent of the UAE’s gross domestic product (GDP), according to OPEC.
Abu Dhabi holds the vast majority of the country’s oil reserves, with 116.2 billion barrels, according to the UAE Embassy in Washington DC.
Dubai, Sharjah and Ras Al Khaimah all have smaller reserves, estimated at 4 billion, 1.5 billion and 500 million respectively.
Dubai’s economy is more diverse – with only one percent of GDP coming from oil production, according to Bloomberg.