As a key country in the United States’ continued efforts to counter the ever-growing influence of China and Russia in the Middle East, through their primary proxy Iran, the United Arab Emirates are focused on increasing their crude oil production to more than 5 million barrels per day (b / d) by 2030 at the latest, from the current 4 million b / d, and become self-sufficient as soon as possible in gas. Both of these targets received a boost last week, starting with the announcement that the main company responsible for increasing UAE oil production – the Abu Dhabi National Oil Company (ADNOC) – has Awarded AED 3.47 billion ($ 946 million) engineering, procurement and construction (EPC) contract to develop its offshore Umm Shaif field. Despite considerable lobbying from Beijing for the contract to be awarded to several Chinese companies, it was the National Petroleum Construction Company (NPCC) of the United Arab Emirates that obtained the mandate to carry out the work necessary to maintain the production capacity of Umm Shaif’s 275,000 bpd crude oil, then increase that output. The political and economic importance of this award is enormous, given not only the central role that the UAE’s oil and gas sectors are called to play in the new United States strategy for the Middle East, centered on its recent “relationship normalization” agreements but also with the fury surrounding the recent discovery by the United States that China may be building a secret military installation in the UAE port of Khalifa. According to various reportsThe United Arab Emirates told the US team that visited the country to present proof of the installation that they were unaware the Chinese were using the site for this purpose, but immediately decided to suspend work at the port. This gradual and quiet increase in the influence exerted on financial aid in the first place is the basic strategy at play in China’s multigenerational power outlet project “One Belt, One Road”, as it has. been analyzed in depth in my new book on world oil markets. Securing key strategic swathes of land or sea instead of debts owed or investments made has seen China gradually but insistently expand its influence into a series of specific regional hotspots vital to the broader military land and sea plans of China. Beijing. These include, in recent months and years, most of the major Iranian airports and naval ports under the 25 year contract with China, The Port of Hambantota in Sri Lanka (overlooking major South Asian shipping lanes and allowing China to establish a dual-use commercial and military facility for naval assets, as well as ‘dual-use’ assets in Iran), and The port of Doraleh in Djibouti (which was also turned into a dual-use base for the Chinese Navy about four years ago). As pointed out recently in my book, and in several articles for OilPrice.com, China is doing exactly the same for Oman, given its extremely strategic geographical position.
Related: Shell’s Gas Trade Explodes As Oil Trade Slows Without the US intervention on the Khalifa port project, China might have expected at least a significant portion of the Umm Shaif EPC award to go to some of its companies. Like OilPrice.com exclusively reported in August 2020, that month – shortly before the signing of the agreement to normalize relations between the UAE and Israel – saw ADNOC announce the transfer of ownership rights to its offshore concessions of Lower Zakum and Umm Shaif and Nasr from the holding company of the China National Petroleum Corporation (CNPC) to a Subsidiary of the China National Offshore Oil Corporation (CNOOC), CNOOC Limited. To do so, CNOOC acquired a 40% stake in CNPC’s majority subsidiary, PetroChina Investment Overseas (Middle East) Ltd (PetroChina) through its holding company, CNOOC Hong Kong Holding Limited (CNOOC HK). Significantly, aside from China’s wider and relentless expansion in the Middle East, the deal marked the first time that a dedicated Chinese offshore oil and gas company has joined an ADNOC concession. These points did not go unnoticed by CNOOC Chairman Wang Dongjin, who said, “CNOOC will leverage our vast expertise in the offshore sector and be dedicated to creating value in these concessions for our mutual benefit.
Significantly also for what has just happened in the development of the port of Khalifa, the transfer of rights of 2020 exclusively highlighted by OilPrice.com followed the signing of a global framework agreement between ADNOC and CNOOC on the 22nd. July 2019 – as also exclusively reported by OilPrice.com – to “explore new opportunities for collaboration” in the upstream, midstream and downstream petroleum sectors as well as in liquefied natural gas (LNG). Described at the time by ADNOC Managing Director Ahmed Al Jaber as “far-reaching”, the deal was such a significant step forward by China in the oil and gas interests of one of the states’ few vocal allies. United in the Middle East – the United Arab Emirates – that the signing ceremony of the agreement was attended in person by Chinese President Xi Jinping.
Given the direct U.S. intervention in China’s activities in the Khalifa port, the UAE not only ultimately awarded the $ 946 million oil EPC contract to its own company – and what l ‘can be described as “neutral” – but have done the same for the AED 5.36. EPC contract (US $ 1.46 billion) for the Dalma gas development project. As part of the Ghasha concession – the largest offshore sour gas development in the world – the development of the Dalma field will now have no significant Chinese presence, the only non-Emirati participating companies being the Spanish Técnicas Reunidas (working jointly with the WATER and Target Engineering). Not only is the Dalma Gas Development Project critical to making the UAE gas self-sufficient – similarly, Umm Shaif’s Oil Development Program is a critical part of the UAE’s drive to produce 5 million bpd, but they are also cornerstones of ADNOC’s In-Country Value (ICV) program – itself a cornerstone of “Operation 300 billion”, and the UAE Circular Economy Policy 2021-2031. According to a statement released last week by the UAE’s central bank, the country’s total real GDP is expected to grow 4.2 percent in 2022, with real non-hydrocarbon GDP expected to grow 3.9 percent during the period.
Related: Gas Prices In Europe Fall As US LNG Fleet Arrives
The UAE’s apparent decision to stay on the safe side of the United States appears well founded in the reality of economic growth patterns this year, with India set to significantly outpace the economic growth of regional rival China, according to various forecasts. . The Chinese economy, as OilPrice.com points out early December, is only expected to grow around 5% this year, with SEB forecasting 5.2%, TS Lombard 4.7% and Nomura 4.3%, among others, while India’s economy is expected to grow by at least 8% . India has been described by the United States as the world’s great supply of oil to replace China as the final destination for all the oil its Middle Eastern allies want to sell, with a report released in the first quarter of 2021 from the International Energy Agency showing that the country will account for the largest share of energy demand growth at 25 percent over the next two decades. the report added that India’s energy consumption is expected to nearly double as the country’s GDP reaches around $ 8.6 trillion by 2040 under its current national policy scenario. This is supported by a GDP growth rate that will add the equivalent of another Japan to the global economy by 2040, according to the IEA.
That said, the China-Russia axis clearly has no intention of allowing this comfortable deal to unfold unhindered, with the Kremlin’s surprising announcement in December of 28 Russia-India investment agreements signed. during the very recent visit of President Vladimir Putin himself to the Indian Prime Minister. Minister, Narendra Modi, as thoroughly analyzed by OilPrice.com. These covered a wide range of topics, including not just oil, gas and petrochemicals, steel and shipbuilding. Even though these deals are from the United States’ point of view that Russia is capable of exploiting them in military opportunities in India, things got worse as the meetings between Putin and Modi continued. As it stands, a joint statement from Russia and India said: “[We have] reiterated their intention to strengthen defense cooperation, including in the joint development of military equipment production. Specifically, according to other official statements from one or both parties, India will produce at least 600,000 Kalashnikov assault rifles – the weapon of choice for terrorists and militias across the Middle East and beyond. – and, even more worrying for the United States, the Indian Minister of Foreign Affairs. , Harsh Vardhan Shringla, said a 2018 contract for the S-400 air defense missile systems was being implemented.
By Simon Watkins for Oil Octobers
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