Capital investment in oil field development projects in the UAE

Abstract

The purpose of this thesis is to analyze the way in which the United Arab Emirates (UAE) is progressing plans to increase oil production levels to meet future external demand. The thesis reviews UAE economic growth, social development, and the factors that influence the development decision making. This will enable the reader to understand that the timely economic development of oil reserves in the UAE is a critical undertaking as the country's socio-economic development continues to make demands that only the income from oil can provide. The management of expectations of all levels of society is one of the biggest challenges currently facing the UAE. As oil reserves deplete at a time of high oil prices, new strategies are required to deal with ever increasing demands by a rapidly expanding local population. The discovery of oil in the UAE led to great changes in the economic and social structure of the country. The change was from a simple economy depending on fishing and a seasonal pearl industry as the principal source of national wealth, to a rapidly expanding and developing society. The revenues from oil exports have helped the UAE to become one of the world's wealthiest per capita nations. The UAE holds 9.3% of the world’s proven oil reserves, the third highest after Saudi Arabia and Iraq. To maintain growth and development, the UAE has to continuously develop its oil fields and create new infrastructure facilities. Currently, the UAE's sustainable production capacity is 2.5 million barrels per day (MMbd), and it is in the process of investing massively to expand output capacity to around 4.0 MMbd (a 60% increase) by 2010. Additionally, existing production facilities are ageing and there is a need to build new facilities in order to maintain current production levels. This thesis analyzes the issues surrounding the entire process of development of onshore oil field reserves within the UAE. In order to provide a balanced view it investigates the range of factors which influence onshore oil field development decision making, for example, world energy demand and supply, UAE socio-economic structure and trends These are used to define the capital investment decision making process which is applied to a typical (but hypothetical) onshore oil field development. Three scenarios have been developed to examine the influences of volatility in crude oil prices, investment cost and reservoir decline. Economic development principles, assumptions, methodologies and practices are utilized to present a clear picture of the planning process for investment in a new onshore oil field. A wide range of source material is used covering all facets of the socio-economic and wider energy focused environment facing the UAE.