UAE energy minister warns of "new uncertainties"

25 September 2018
EXCLUSIVE INTERVIEW: Suhail Mohamed Faraj al-Mazrouei talks to MEED about the challenges faced in achieving a reliable, economically viable and environmentally sound energy supply for the UAE

Relaxing into one of the oversized armchairs of the energy ministry’s interview room, Suhail al-Mazrouei expertly clips the microphone onto the lapel of his khandoura.

It cannot be easy being the energy minister of a major oil-exporting nation at a time when the energy industry is in an extreme state of flux. Everyone wants to know your thoughts. And every word you speak is scrutinised for hidden meaning. One misspoken sentence can move markets or trigger a political firestorm.

But none of this appears to faze the UAE minister of energy and industry. He is clearly comfortable giving interviews and he smiles as he exchanges pleasantries while he waits for the video recording equipment to be set up.

Volatile time  

Suhail al-Mazrouei is one of the most prominent figures in world energy at a time of great change for the industry. In the five years since his appointment as UAE energy minister, Al-Mazrouei has had to deal with the impact of extreme volatility in the oil markets, first as oil prices collapsed in 2014 following a supply glut brought on by the expansion of US shale oil production.

Then, since 2016, he has been at the centre of a restructuring of the global oil industry, as Opec and non-Opec producers coordinated oil output in order to rebalance the markets, leading to a year-long surge in oil prices that some fear is now overheating.

New uncertainties

Throughout, there is the growing consensus that global demand for oil is likely to peak at some point in the coming 10-15 years, raising huge issues for oil producers everywhere. And then there is the uncertainty of the disruption caused by the rise of renewable energy and digital technology.

“The challenges for any energy sector in any country is security of supply of the energy source, the reliability of that supply, and the environmental and future environmental impact of each source of energy,” says Al-Mazrouei.

He acknowledges that it is not easy. Delivering the opening remarks of the Opec ministerial summit in Algiers on 23 September, Al-Mazrouei told the gathering they faced “new uncertainties” and that “many of these uncertainties are factors beyond our control”.

[caption id="attachment_318069" align="alignleft" width="780"]Suhail al-Mazrouei, Minister of Energy & Industry, UAE The UAE energy minister talks to the media at the Opec Ministerial Monitoring Committee in Algiers on 23 September[/caption]

Energy strategy

Al-Mazrouei says when he took up his post as UAE minister of energy and industry and sat with his advisers to identify key issues, he did not see these challenges as threats. “We looked at them as an opportunity,” he says.

Those early conversations culminated in January 2017 with the launch of the UAE’s new energy strategy.

Energy Strategy 2050 aims to increase the contribution of clean energy in the UAE’s energy mix from 25 per cent to 50 per cent by 2050, and reduce the carbon footprint of power generation by 70 per cent. It also seeks to increase consumption efficiency by 40 per cent.

The strategy targets an energy mix of 44 per cent of the UAE’s energy coming from renewable sources and 38 per cent from gas, plus 12 per cent from clean coal and 6 per cent from nuclear power.

The national strategy has led to the diversification towards renewable energy, along with efforts to secure more gas resources, adhere to the highest efficiencies when it comes to sources of generation and reduce the losses in transmission of electricity, says Al-Mazrouei. “We needed to change.”

Priority tasks

Al-Mazrouei says it is equally important to improve the efficiency of supply as it is to reduce demand.

“We need to reduce per capita demand by about 40 per cent,” he says. “Part of it is going to be through talking to people, trying to advise them. Part of it is going to be through creating rigorous codes for building. Our buildings of the future are going to be energy efficient, rather than simply relying on occupants to save energy.”

Suhail al-MazroueiWatch the full 'Ten Minutes into the Future of Energy' interview with Suhail al-Mazrouei by clicking here

Another important element of the strategy is the decoupling of electricity generation and water desalination, says Al-Mazrouei.  “When we agreed the water security strategy, we came to the conclusion that we need to adopt 100 per cent reverse osmosis (RO) in the future,” he says. “It's cheaper and more efficient.”

Spending plans

While Al-Mazrouei says there are already some significant initiatives, he acknowledges governments cannot shy away from investing in capacity. “You have to spend, because the growth in demand is there,” he says. “We have never stopped investing in our sectors.

“The difference with the strategy is we have identified how much we need to spend. So we need to invest about AED600bn, or almost $160 billion, in new projects in the electricity, transmission and gas sectors to ensure that energy is available.”

Gas self-sufficiency

The increased focus on renewable and alternative energy sources set out in the energy strategy will have ramifications for the UAE’s reliance on gas.

“Gas is the cleanest form of fossil fuel and we are adopting the highest efficiencies, which means they are also environmentally friendly plants,” he says. “We are adopting a reduction in the contribution of gas from almost 100 per cent to 38 per cent. That is going to help us plan the supply and try to cover it from the additional resources that Adnoc is working on, whether unconventional gas or the newer gas developments of the future.”

It is not clear what the most cost-effective alternatives to gas will be in the future. “There is a race among the different forms of energy to produce the cheapest. And in that race, I cannot predict which one is going to win,” he says. “At the moment, solar is cheaper, but solar is not baseload. So, as an intermittent load, solar is the cheapest by far of any energy form. After solar, the lowest baseload is clean coal.”

“But it depends on the gas. If the gas is indigenous gas, what is the price of that gas? We believe that even gas can compete with clean coal at moderate gas prices,” he says.

“Now we are trying to be as self-sufficient as possible. And I think it is doable. If we reduce consumption by changing to more efficient power plants, we can reduce consumption of gas by around one third. And if we do that – and we adopt a lower target for gas – I think the UAE can be self-sufficient.”

Oil target

Al-Mazrouei expects the UAE to achieve its goal of producing 3.5 million barrels of oil a day by the end of 2019. And he says the country is continuing to invest heavily in both upstream and downstream oil and gas.

“In terms of new investments, we are opening up,” he says. “For example, carrying out exploration with drones. We are working with overseas companies on discovering more resources. We are also looking at the unconventional and trying to learn from what has been achieved in the US so we can deploy it here.

“We have identified about $109bn of new investments over the next four or five years, in addition to the $30-35bn resulting from the downstream forum we held.”

Looking East

A key element of the UAE’s investment plans is identifying strategic partners to work with. Al-Mazrouei says there are many aspects to these kinds of decisions, but acknowledges that the increasing shift of focus towards Asian markets, in particularly China, is significant.

“China is becoming the next future,” he says. “China and India are the largest populated countries in the world. And they are the fastest-growing economies in the world.

“Our leadership is wise to look at building a relationship with these two important countries.”

The challenge in the UAE is ensuring the highest commercial recovery of our reservoirs, says Al-Mazrouei. “It's a competitive business, and we've always been competitive. We did not simply go to a certain country and ask them to develop all of our fields. We've been open and transparent to the market about it, and I think they are adhering to those rules. It's a combination of technical and commercial pressures, but there is strategic value if you are the destination of that crude. If you are the destination of a product produced here, [there is value] in building that relationship with you.”

Watch the full 'Ten Minutes into the Future of Energy' interview with Suhail al-Mazrouei here

The ‘Ten Minutes into the Future of Energy’ initiative is produced by MEED and powered by Mashreq, and aims to explain and highlight the challenges and opportunities facing the energy sector. Click here if you would like to access content produced by the MEED Mashreq Knowledge Partnership.



Suhail al-Mazrouei biography

2018    President of the Opec conference

2013    UAE minister of energy and industry

2007    Deputy CEO and executive vice-president, Mubadala

1997    Director of offshore production and engineering facilities, Adnoc

1996    BA in petroleum engineering, University of Tulsa, US

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