UAE oil production data confounds barrel counters, OPEC+ partners

UAE crude oil production is coming under increasing scrutiny from barrel counters, some of whom are questioning official data released by the key OPEC member.

Two years of S&P Global Commodities at Sea data show that despite OPEC+ agreeing production cuts that have committed the UAE to an output quota of 2.912 million b/d since mid-2023, the Gulf state's shipborne crude exports have been consistently above 3 million b/d, or sometimes significantly higher, averaging 3.60 million b/d from January to October 2024.

The elevated export figures could indicate the UAE is pumping well in excess of its quota, as they only capture barrels shipped to the international market and do not include crude volumes processed in domestic refineries. Its main refinery is Abu Dhabi National Oil Co.'s 837,000 b/d capacity Ruwais complex, while smaller facilities are located in the eastern port of Fujairah.

As a result, some barrel counters estimate that the UAE could be as much as 300,000 to 400,000 b/d above its OPEC+ production cap, though not all agree, casting some confusion in the market.

Any quota busting by the UAE would undermine OPEC+ efforts to shore up unsteady oil prices, with many forecasters predicting an oversupplied market in 2025. Tensions within the alliance over production discipline have already led to warnings from some members that a market share battle could erupt if compliance does not improve, sources close to the matter have told S&P Global Commodity Insights. To date, however, the group's public ire has been solely focused on quota miscreants Iraq, Kazakhstan and Russia.

Abu Dhabi's export figures have prompted many analysts to raise their production estimates for the country over the last year, though the seven independent secondary sources used by the OPEC+ alliance to track member production, including the Platts survey by Commodity Insights, have largely indicated only moderate quota overages.

OPEC's latest Monthly Oil Market Report said the UAE pumped 2.955 million b/d for October, based on an average of the secondary sources -- above its quota by 43,000 b/d.

Some barrel counters, who are not counted as OPEC+ secondary sources, are even higher.

The International Energy Agency pegged UAE output at 3.23 million b/d for October. The IEA bases its estimates on its assessments of exports, refinery runs corroborated by product trade data and observed stock changes, according to Toril Bosoni, head of its oil markets division. Discussions with international oil companies that hold equity stakes in ADNOC upstream assets "also support a higher-than-reported production figure," she told Commodity Insights in an email.

Iman Nasseri, Middle East managing director at consultancy FGE, told Commodity Insights that he calculates the country's production at between 3.1 million to 3.2 million b/d. Investment bank JP Morgan, in a Nov. 22 research note, put UAE crude output for October at 3.525 million b/d.

Other sources, who asked not to be named to protect commercial relationships, have estimated as high as 3.7 million b/d, though those figures may include between 300,000 to 600,000 b/d of condensates and NGLs that are not subject to OPEC+ quotas.

The UAE, for its part, self-reported October crude production of 2.914 million b/d – very close to its quota but down 17,000 b/d from the previous month -- to the OPEC secretariat, which published the figure in the MOMR.

The UAE energy ministry and ADNOC, which produces the vast majority of crude in the country, did not respond to multiple requests for comment, including questions about export volumes and production estimates.

ADNOC and ministry officials have privately disputed higher production and export figures, saying they may be mistakenly including condensate that is blended into crude streams.

Condensate blending

The UAE is among eight OPEC+ countries that have implemented the most aggressive production cuts, including a collective voluntary tranche totaling 2.2 million b/d since May 2023 that the group has been waiting for months to begin unwinding.

In a Nov. 3 announcement that the cuts would be maintained through the end of 2024, the eight countries "reiterated their collective commitment to achieve full conformity with the Declaration of Cooperation," according to a statement by the OPEC secretariat, referring to the formal name of the production accord.

Many barrel counters, including secondary sources, calculate output figures for OPEC+ countries each month by summing up estimates of net exports, refinery runs and stock changes, using ship-tracking programs, market intelligence and other proprietary data.

CAS is not the only ship tracker to report export volumes that could indicate a lack of quota adherence by the UAE, if refinery runs are added. Kpler estimated its crude exports in October at 2.850 million b/d, with a three-month average of 2.865 million b/d.

As well, ADNOC's Ruwais refinery upgrades have clouded estimates of its throughput. The company has spent billions of dollars on the Ruwais West crude flexibility project to enable the facility to process heavier grades, freeing up volumes of its lighter flagship Murban for export. That has involved Ruwais at times importing foreign crudes for processing.

CAS data show an average of 15,000 b/d of crude have been imported into Ruwais to date in 2024, though there have been no inflows since July. Meanwhile, refined product exports out of Ruwais have averaged 521,000 b/d from January through October, according to CAS.

The UAE also is developing strategic crude storage at underground caverns in Fujairah, though ADNOC officials have been extremely tight-lipped about its operational status.

Spare capacity

OPEC+ rules require countries that breach their caps to make extra "compensation cuts" of equal volume in subsequent months. However, so far only Iraq, Kazakhstan and Russia have been compelled to publicly declare their compensation cut commitments, even though the UAE, Gabon and other members have also violated their quotas to varying degrees, according to OPEC+ data.

Sources within the alliance, none of whom wished to be named, said politics and market clout have sometimes dictated which countries have faced scrutiny, though some said they have taken note of the growing discrepancy on UAE production figures. Others said the group relies on secondary source estimates, which have not revealed large-scale UAE quota cheating.

Of all the OPEC+ members, the UAE holds the biggest share of its production offline -- leverage it has wielded in quota negotiations. The capital Abu Dhabi drives the country's energy policy and state-owned ADNOC has recently upped its production capacity to 4.85 million b/d, with plans to reach 5 million b/d by 2027.

ADNOC alone has around 1.9 million b/d in spare production capacity with the 2.912 million b/d quota – meaning it would hold some 40% of its capacity offline, if it fully complied with the country's cap. Smaller oil companies in other emirates, including Dubai Petroleum, add more barrels.

The UAE in 2021 held up an OPEC+ policy meeting for weeks, demanding a higher production baseline from which quotas are determined that it said would more accurately reflect its output capacity -- a point the group eventually acquiesced to.

The country again in June successfully lobbied for a higher quota that would allow it to pump an additional 300,000 b/d, phased in over the first nine months of 2025.

The UAE has long sought to up its daily production as it seeks to further develop its energy sector and become self-sufficient for gas by 2030. Most of the gas produced in the UAE is associated with crude production, which is constrained by the OPEC+ quota.

Pumping more crude would be beneficial for the UAE's expansion plans. Rice University's Baker Institute of Energy Policy has estimated that full use of ADNOC's production capacity could bring in $50 billion-$70 billion annually in additional revenue by 2028.