The major objective of this essay is to discuss the past and present impacts of oil in UAE in references to its economy in the last 20 years. It is worth noting that the economic status of UAE has changed ever since when oil was discovered.
UAE is the world’s number one producer of natural gas and is sometimes referred to as the world’s energy superpower. Considering oil production, UAE shares the first position with Saudi Arabia, and accounted for 22% of world’s output of natural gas, while possessing 27% of proven reserves. Between 1998 and 2004, UAE accounted for 48% of the increase in global oil supply. 20% of European oil consumption was supplied from UAE. Oil and gas are key to UAE’s comeback to prominence in the global scene, and it is believed that this energy wealth will enable her regain her super power status it enjoyed during the cold war era.. UAE is continuing to build new oil pipelines to increase deliveries to Europe. Therefore, UAE’s overdependence on oil discourages foreign investment by scaring away investors.
Oil in the past
Since the oil was invented in UAE in the last 20 years, since that time the UAE economy has changed been changed. Formerly, UAE mainly dealt with sheikdoms which entailed fishing, herding, and agricultural practices. Currently, UAE has moved to the modern state with increased per capita income and significant type of trade surplus. The biggest and richest is Abu Dhabi, which is considered the main petroleum producer and also finances the petroleum production in the region. Dubai city is the second largest in the UAE, and it thrives on the wealth derived from other services for example tourism, construction and telecommunication. Abu Dhabi and Dubai cit contribute more than 75 and 80% of UAE’s economy. Due to the existence of Abu Dhabi and Dubai City I the southern UAE, the northern region has remained undeveloped.
UAE economy depends heavily on oil products and majorly petroleum as well as natural gas. The revenue collected from these comes from their exportations and this enables the different UAE governments to develop their own infrastructures. It has been reported however that the value and production of petroleum in UAE has diminished over the past few years. in 2006, the oil production increased the economy of UAE and this accounted for less than 10% on the annual increase in the UAE economic growth which is estimated to increase at a rate of 6.5%. the investment in the production industries and the energy-intensive of the sectors for example petrochemicals including metals which have driven UAE economy since they are assisted with exports of the oil products. There is general agreement that the UAE economy needs fundamental reforms away from its dependence on oil prices and high government spending. Maintenance of high oil prices will do well for UAE, but a fall would be a crisis of a chain reaction that would undermine the economy, thus depressing the GDP. UAE is on an inexorable rise as an energy superpower, the vast reserves raise many economic questions for overall geological challenges. Most of the fields lie far apart, and some are offshore that substantially increases extraction costs and total overlays, making concluding contracts with foreign investors less lucrative, so high oil prices must be maintained in the long term to make these projects economically viable.
The main income earning economic activity in UAE is tourism and is expected to continue to mature in the coming years. Since the commence of the oil production in UAE, the Gross domestic product (GDP) of UAE has since increased. In 2003, the gross domestic product was nearly USD 87.6 billion. In the preceding year, 2004, the UAE reported a substantial growth rate of 7.8% in its GDP and the reason for the observed growth was due to non-oil products like tourism that had increased. Different economists had estimated that in 2004, the gross domestic product growth rate would be 7.4% and the GDP was to exceed USD 103 billion. The per capita GDP of the years bellow 2000 was high compared to other countries surrounding UAE and the value was close to USD24000. The production of petroleum and its products was expected to increase to 6.7% and grow at that rate till the year 2005 and the gross demotic product expected to increase to USD 118.
Dependency of foreign oil producers like UAE depends on her customers creates the fear of falling global demand slackening, thus falling oil prices and leads to less foreign exchange. Oil wealth has some political disadvantages of increased corruption, with more money UAE received from oil and gas exports, the less accountable the government becomes to the citizens. UAE faces the challenges of managing the consequences of oil and gas dependencies traded at the global markets, and begin an economy that relies less on energy exports. European countries have the dilemma of over depending on UAE for oil and gas supplies. Should European leaders embrace their dependence and strengthen their economic and political ties with Russia, or should they check out for alternative supplies? Most European leaders are very concerned about UAE oil supply disruptions, and price disputes. . For example, price disputes with Ukraine and Belarus had temporary shutdowns of oil and gas supplies between 2006 and 2007, such as disruptions did not affect actual deliveries, but made the European consumers to be aware of their vulnerability of depending on a single supplier.
Various companies process oil and example is ADCO. Abu Dhabi Company for Onshore Oil Operations is an oil exploration company in the Emirates of Abu Dhabi founded on 2nd December 1971. It is one of the companies forming ADNOC (Abu Dhabi National Oil Company). Its first discovery of oil for commercial purposes was in 1960 at Bab, but actual drilling and exportation started in 1963. It was first known as ADPC (Abu Dhabi Petroleum Company Ltd). In 1973 the government of Abu Dhabi emirates bought 25 percent of the company shares and increased them to 60 percent in the next year. The company was incorporated as ADCO in 1978 as stipulated in Law No. 14 for 1978 and starting from February the following year it was given the mandate to operate in the concession areas. The concession areas that it operates cover a distance of 21,000 km2. Its main operations include exploration, production, development, export and transfer of gas and oil from shallow coastal water and onshore oil fields. Currently it runs six oil and gas fields in Aab, Sahil, Bab, Bu Hasa, North-East Bab, and Shah. Its storage and shipping facility is located at Jebel Dhanna. The company in its 2012 report announced a daily production rate of 1,344,991 barrels in 1,217 oil wells in its concession areas. In the same year it reported that its number of employees totaled 5,879 .
Since the invention of oil in UAE, the country’s economic growth has increased. The country’s wealth has increased substantially over the years and this has been contributed by the country’s readily available workforce, and the big oil wells resources. The big budgets are surpluses and attained so that it may enable UAE to collect a generous and present type of the account balances, as they are tied up majorly by the government and individuals. Some oil firms are owned by private organizations and private entities. Since the start of petroleum product’s production, the UAE has grown steadily. This successful implementation type with the aid of industrialization ahs assisted the country move to its current state.
Abu Dhabi Company for Oil Operations (ADCO). About Us. Retrieved on Nov 21, from: http://www.adco.ae/En/AboutUs/Pages/default.aspx
Abu Dhabi Company for Onshore Oil Operation Sustainability Report 2012. Retrieved on Nov 21, from: http://www.adco.ae/En/hse/Pages/Sustainability-Report.aspx
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