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UAE oil minister hopes to roll back fuel subsidies

06.23.2014  | 

The UAE, one of 12 members of the Organization of Petroleum Exporting Countries, is forming a strategy to moderate energy consumption and diversify supply sources by 2030.

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By ANTHONY DiPAOLA
Bloomberg

The United Arab Emirates, OPEC’s fifth-largest oil producer, needs to roll back subsidies on fuel and power to help limit its energy consumption and imports of natural gas, the country’s energy minister said.

“You will never have a strong economy if you are subsidizing,” Suhail Al Mazrouei told reporters in his office in Abu Dhabi. “In consumption of electricity, we are two to three times the global average, and we are not happy about that level.” The government has yet to determine changes in prices and subsidy levels, he said.

Middle Eastern oil producers including the UAE and Saudi Arabia are consuming as much as 10% more electricity each year, governments in the region have said, as they diversify into power-dependent industries such as petrochemicals and steelmaking and as household demand rises. 

The amount of crude Saudi Arabia has available to export will fall to “unacceptably low levels” over the next two decades if the country doesn’t pare its fuel use, state-run Saudi Arabian Oil Co. said in May.

Possible cuts in subsidies, which Persian Gulf monarchies use to transfer oil wealth to their citizens, are a politically sensitive issue after domestic discontent led to the overturning of governments in Tunisia, Libya and Egypt since 2011. The UAE would retain some subsidies for its citizens, who comprise about a 10th of its population, Al Mazrouei said.

Pipeline Gas

The UAE, one of 12 members of the Organization of Petroleum Exporting Countries, is forming a strategy to moderate energy consumption and diversify supply sources by 2030, he said. By then, the country’s domestic needs will be met 70% by gas, 25% by nuclear power and the rest by renewables such as solar power, Al Mazrouei said. The nation burns gas to generate most of its electricity, importing much of the fuel by pipeline from neighboring Qatar.

Dubai, the UAE’s second-largest emirate, has imported liquefied natural gas since 2010. Two companies owned by Abu Dhabi, the county’s largest sheikhdom, plan to operate a terminal for receiving LNG in the emirate of Fujairah by 2018.

“Any saving we do we will reduce the level of future importation that we need,” Al Mazrouei said. The start of the LNG facility would be a logical time for the UAE to change its policy of selling power below cost, he said.

The cost of generating solar power will have to be competitive with price of imported LNG, he said.



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