Viewing cable 05ABUDHABI3884
Title: MEETING WITH UAE ENERGY MINISTER

IdentifierCreatedReleasedClassificationOrigin
05ABUDHABI38842005-09-12 13:06:00 2011-08-30 01:44:00 CONFIDENTIAL Embassy Abu Dhabi
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Diana T Fritz  08/28/2006 03:58:54 PM  From  DB/Inbox:  Search Results

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C O N F I D E N T I A L        ABU DHABI 03884

SIPDIS
CXABU:
    ACTION: ECON
    INFO:   FCS P/M AMB DCM POL

DISSEMINATION: ECON
CHARGE: PROG

APPROVED: AMB:MSISON
DRAFTED: ECON:OJOHN
CLEARED: DCM: MQUINN, CGD: JDAVIS

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OO RUEHC RUEHHH RUEHDE RHEBAAA RHEHNSC
DE RUEHAD #3884/01 2551306
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O 121306Z SEP 05
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1533
INFO RUEHHH/OPEC COLLECTIVE
RUEHDE/AMCONSUL DUBAI 5396
RHEBAAA/DEPT OF ENERGY WASHDC
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C O N F I D E N T I A L SECTION 01 OF 03 ABU DHABI 003884 
 
SIPDIS 
 
ENERGY FOR SENIOR ADVISOR TO THE SECRETARY MOLLY WILLIAMSON 
NSC FOR CHASE HUTTO 
 
E.O. 12958: DECL: 02/08/2014 
TAGS: ECON EPET ENRG ETRD ELAB IR MU TC
SUBJECT: MEETING WITH UAE ENERGY MINISTER 
 
REF: A. ABU DHABI 3799 
 
     ¶B. ABU DHABI 3767 
     ¶C. STATE 163206 
     ¶D. STATE 156227 
 
Classified By: CLASSIFIED BY AMBASSADOR MICHELE J. SISON 
FOR REASONS 1.4 (B) AND (D). 
 
¶1. (C) Summary: On September 11, Ambassador met with UAE 
Energy Minister Al-Hamili to thank him for UAE and OPEC 
support after Hurricane Katrina (including a $100 million UAE 
donation to relief efforts) and brief him on U.S. and 
international efforts to respond to the crisis.  Al-Hamili 
said that he thought OPEC wanted to be helpful and might 
announce a production increase during its September 19 
meeting.  Oil producers needed to expand capacity to keep up 
with projected demand increases and oil companies needed to 
invest more in refineries, he emphasized.  Ambassador also 
noted the impact that high oil prices were having on 
developing countries and urged that the UAEG take this into 
consideration as it looked at its assistance levels. 
Ambassador stressed USG opposition to investments in Iran's 
oil and gas sector and our concern about the Crescent/Dana 
project.  The Minister said that he shared our concerns about 
depending on Iran as a source of natural gas, but noted that 
the UAE needs energy.  Ambassador asked about the impact of 
the August 31 increase in UAE gasoline prices.  Al-Hamili 
admitted that there had been a strong domestic reaction. 
Al-Hamili also said that the International Energy Agency 
would be debuting its 2005 Middle East North Africa Energy 
Outlook in the UAE on November 20.  End Summary. 
 
Responding to Energy Supply Disruptions 
--------------------------------------- 
 
¶2. (SBU) Ambassador and Econchief met with UAE Energy 
Minister Mohammed bin Dha'en Al-Hamili on September 11 to 
thank him for the UAE's support after Hurricane Katrina, 
including the $100 million cash relief donation and for 
OPEC's efforts to make incremental oil available to the 
market.  Noting that this day was also the anniversary of the 
terrible attacks of September 11, Ambassador also stressed 
UAEG - USG cooperation in the fight against terrorism. 
Al-Hamili said that he had been watching the television 
coverage of the effects of Hurricane Katrina and was 
"sickened" by the destruction and suffering.  He also noted 
the changes in the world post September 11.  He said that 
Emiratis pre-September 11 had got used to quick and easy 
travel to and through the U.S.  Now, the additional necessary 
security measures delayed everyone and made transiting 
airports more difficult.  Al-Hamili added that all travelers 
were more nervous about the potential for terrorism. 
 
¶3. (SBU) Ambassador briefed Al-Hamili on the impact of the 
hurricane on U.S. oil and gas production and refining and on 
the IEA's coordinated response.  She discussed the USG's 
efforts to further increase long-term energy security and 
passed the Minister a copy of a White House Fact Sheet on the 
national energy plan, signed into law August 8. 
 
OPEC 
---- 
 
¶4. (C) Al-Hamili said that OPEC wanted to help deal with the 
supply disruption, adding that he thought OPEC would probably 
agree to increase production at its upcoming meeting.  There 
had been discussions in the media by OPEC members of 
increases ranging from 500,000 barrels per day to one million 
barrels per day.  Al-Hamili said that he hoped that reports 
of production increases would calm the market, but that he 
feared the move would be "cosmetic."  OPEC, he noted, keeps 
raising production and supply and the market is well supplied 
with crude.  The current problem was with refined product. 
In addition, oil producers needed to increase capacity to 
keep up with growing demand, particularly in China and India. 
 This would "take time," however. 
 
¶5. (C) Al-Hamili also said that the major oil companies could 
be doing more to alleviate the gasoline crisis.  He said that 
"everyone wants to invest upstream (in drilling), since that 
is where the money is." The major oil companies, he noted, 
needed to take some of their cash and invest in refining 
capacity as well. 
 
¶6. (SBU) The Ambassador noted that high gas prices were 
hurting the developing world and urged that the UAEG consider 
this factor when making decisions on its aid programs (the 
UAE is a key nontraditional donor to Palestine, Jordan, 
Pakistan, and several African countries).  Ambassador, 
referring to upcoming discussions on development at the UNGA 
Summit, noted U.S.-UAE shared goals in ensuring that 
assistance is effective.  Al-Hamili said that he understood 
the impact of high oil prices on developing countries, but 
stressed that many countries, including some that could ill 
afford it, subsidized the price of gasoline.  He argued that 
these subsidies distorted the market and cost countries 
valuable revenue.  He agreed with Ambassador that good 
governance and transparency were key to development. 
 
Iranian Gas and ILSA 
-------------------- 
 
¶7. (C) Ambassador, drawing on ref d talking points, 
underscored USG opposition to investment in Iran's petroleum 
sector.  She specifically noted our concern about Crescent 
Petroleum,s plans to develop the infrastructure to bring in 
gas from Iran and asked the Minister to consider the 
consequences of such a step.  The fact that governmental 
authority within the UAE would permit -- and even sanction 
Sharjah Emirate participation -- was troubling.  The Minister 
acknowledged USG concerns about Iranian policy 
(proliferation, support for terrorism and human rights), 
adding that he shared concerns about depending on Iran as a 
source of gas.  He said that he worried that Iran would 
disavow or cancel any oil or gas deal that it made with its 
neighbors, if its policies changed.  Security of supply was 
not assured.  The problem was, he said, that Iran has massive 
gas reserves (the second largest in the world). 
 
¶8. (C) The problem was, he explained, that the UAE needs gas, 
and Iran has massive supplies of gas. The issue was 
complicated by the fact that individual emirates, not the 
federal government control their own hydrocarbon resources. 
He acknowledged that the Federal Electricity and Water 
Administration has a contract with Crescent to purchase gas 
during the winter months.  The contract, he noted, is for gas 
from Crescent and does not specify Iranian gas.  The 
Ambassador countered that the infrastructure investment and 
the amount of gas concerned, strongly suggests that Iran,s 
Salman Reserve is the source of the gas. 
 
¶9. (C) Al-Hamili explained that he did not have the details 
about the Crescent Petroleum/Dana Gas arrangement, or any 
infrastructure investments on the Iranian side of the border. 
 He noted, however, that "you know" that Sharjah's gas 
supplies are decreasing and that a company would need to be 
"stupid" to invest the kind of money into infrastructure on 
the UAE side, without an assured supply of gas.  Ambassador 
urged the UAE Federal Government to delve further into the 
Crescent/Dana issue, and added that she would be raising the 
issue directly with the ruler of Sharjah. (Sharjah Emirate, a 
partner in Sharjah gas, will be a shareholder in Dana.) 
 
Investment and Liberalization 
----------------------------- 
 
¶10. (SBU) Ambassador passed Al-Hamili a copy of the G-8 
leaders' statement on global economy and oil.  She noted that 
the G-8 encouraged oil-producing countries to take all steps 
to foster a favorable investment climate, something that the 
UAE has been doing.  In the context of liberalization, 
Ambassador also asked about the reaction to the UAE's August 
31 decision to raise gasoline prices between 28 and 31 
percent to $1.83 per gallon for high octane gas and diesel 
prices by 22%. 
 
¶11. (C) Al Hamili noted that the recent increases still did 
not cover the distribution companies' losses.  Unlike some of 
the UAE's neighbors, he explained, the UAE did not have 
separate domestic and foreign prices.  Distributors had to 
pay market rates for gasoline and diesel.  He added, however, 
that the public response to the price increase was highly 
negative and that he didn't think the government could raise 
prices again.   Al-Hamili said that the day after the price 
increase, the Omani Minister of Economy had visited the UAE. 
The Omani complained that the UAE should have coordinated its 
decision with Oman, since the day after the decision, UAE 
cars had flooded the town of Buraimi (across the border from 
the UAE town of Al Ain) to buy cheaper gas and emptied the 
stocks in two hours. 
 
IEA to Launch MENA Energy Outlook 
--------------------------------- 
 
¶12. (SBU) The Minister told Ambassador that the IEA would be 
launching its Middle East and North Africa 2005 Energy 
Outlook in the UAE on November 20 and that the head of the 
IEA had promised to come. 
SISON