Dubai: The UAE’s hydrocarbon reserves are very large, both in absolute and per capita terms. According to the 2013 BP Statistical Review of World Energy, the UAE’s proven oil and gas reserves approximated 138 billion barrels of oil equivalent in 2012, which would last about 88 years at the current rate of production, slightly lower than Kuwait and Qatar. Per capita, the UAE had the fourth highest level of oil and gas reserves globally, at about 15,000 barrels of oil equivalent.

Credit rating agency Moody’s expect Brent benchmark oil prices remaining firm at an average of about $109/barrel (Dh400) in 2013 to $105/barrel in 2015.Even if the oil prices were to fall due to a supply glut, it would be limited by the unconventional oil producers’ high breakeven oil price, which is approximately $60-$70 per barrel for the US shale oil fields.

The UAE’s fiscal breakeven oil price is coming down, a unique feature among GCC countries. Because of extraordinary fiscal support programmes in 2009-2011, the UAE’s fiscal breakeven oil price rose sharply.

“Overall, we estimate that the emirate of Abu Dhabi had fiscal surpluses averaging 17.7 per cent of its GDP over the past decade. These have led to the accumulation of considerable financial assets in the Abu Dhabi sovereign-wealth fund, ADIA [Abu Dhabi Investment Authority], which the Institute of International Finance (IIF) estimates at $397 billion as of 2012. As a result, even if the oil price were to fall below the fiscal breakeven level of around $70-$80/barrel, the government would be able to finance fiscal deficits for many years,” said Thomas J. Byrne Senior Vice President — Manager at Moody’s.

Government related entities

Moody’s estimates that the UAE’s government and private debt are within the manageable limits despite high debt obligations of government related entities.

The emirate of Abu Dhabi has a very low debt of around 3 per cent of its GDP. However, debt worth another 35 per cent of GDP was issued by Abu Dhabi government related entities (GREs). The debt of Abu Dhabi’s GREs now exceeds that of Dubai’s GREs in value. However, even considering the wider public sector, Abu Dhabi’s net financial asset position remains largely positive.

Dubai’s direct government obligations are about 30 per cent of the emirate’s GDP, while the emirate’s consolidated debt obligations (government + GREs) is estimated at 143 per cent of its GDP in April 2013.