Gas shortfall hits Abu Dhabi's industrial ambitions

13 June 2011

Abu Dhabi’s rapid industrial growth is putting a strain on gas availability. The UAE capital will have to review the pace of its diversification drive

Much like most of its GCC neighbours, Abu Dhabi has manoeuvred itself into a difficult position.

A relentless increase in demand for electricity and desalinated water has left it bereft of an adequate supply of natural gas, the feedstock for power and water generation.

The rising demand has been driven by the emirate’s desire to develop heavy industries that will help diversify the economy away from crude oil exports and create much needed jobs for local nationals.

Abu Dhabi has invested billions of dollars in the development of basic industries, such as the Emirates Aluminium (Emal) smelter in Taweelah or the Abu Dhabi Polymers Company (Borouge) petrochemicals complex in Ruwais. Both are big consumers of natural gas. 

Given an adequate supply of gas, these ventures can be successful and profit-making. But industrialisation undoubtedly adds to the strain on gas supply.

With a finite supply of gas, Abu Dhabi will have to question whether the economic diversification drive is really worth it.

If one of the objectives is to guarantee jobs for locals, industrialisation could become a failed policy, as physically demanding work is not what nationals are normally looking for when considering a career.

The government might be better off investing in people and creating a knowledge-based economy, while skipping the industrialisation phase. After all, Europe’s 19th century miners would have preferred their grandchildren’s office job too.

Unlike Saudi Arabia with its population of 25 million, only about 20 per cent of the roughly 5-8 million UAE residents are nationals, and need jobs.

Abu Dhabi, in particular, could put its enormous oil wealth to use in providing education for its people, which would allow them to secure their livelihoods by providing professional services instead.

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