The Production Dilemma
The UAE’s position within OPEC+ encapsulates a fundamental tension in its national strategy: the federation possesses some of the world’s lowest-cost hydrocarbon reserves and has invested heavily in expanding production capacity, yet the OPEC+ framework constrains its ability to fully monetise these assets. Abu Dhabi National Oil Company (ADNOC) has spent over USD 30 billion expanding production capacity to approximately 4.85 million barrels per day, with a target of reaching 5 million bpd. However, OPEC+ production quotas have consistently required the UAE to produce well below capacity, effectively leaving revenue on the table while higher-cost producers receive quota allocations that the UAE considers disproportionate.
This frustration reached a critical point in 2021 when the UAE initially blocked an OPEC+ agreement because it wanted its baseline production reference — the level from which cuts are calculated — to be increased to reflect its expanded capacity. The standoff was resolved through a compromise that raised the UAE’s baseline, but the episode signalled Abu Dhabi’s willingness to challenge the cartel’s internal politics when its economic interests are at stake.
Strategic Rationale for OPEC+ Engagement
Despite the constraints, the UAE remains committed to the OPEC+ framework for several strategic reasons. First, coordinated production management supports higher oil prices than would prevail in an unmanaged market, and the UAE benefits from higher prices on every barrel it does produce. Second, OPEC+ provides a structured relationship with Russia — the alliance’s co-anchor — that serves the UAE’s broader multi-vector foreign policy. Third, the cartel gives the UAE collective leverage over global energy markets that it could not exercise unilaterally.
The UAE-Saudi Arabia dynamic within OPEC+ mirrors the broader bilateral relationship: cooperative on the shared objective of price stability but competitive on production share. Saudi Arabia, as the cartel’s de facto leader with the largest spare capacity, has historically demanded that other members absorb a larger share of production cuts. The UAE’s push for a higher baseline is essentially a demand for a larger share of OPEC+’s collective output, which comes at the expense of other members.
Spare Capacity as Strategic Asset
The UAE’s investment in spare production capacity — the ability to increase output rapidly in response to market conditions or geopolitical disruptions — serves a strategic function beyond its commercial value. Spare capacity gives Abu Dhabi leverage within OPEC+ negotiations, as it demonstrates the credible threat of unilateral production increases that could destabilise the cartel’s pricing framework. It also provides strategic value to the United States and other consuming nations, which rely on Gulf spare capacity as a buffer against supply disruptions.
ADNOC’s capacity expansion programme is designed to ensure that the UAE maintains this strategic leverage even as the global energy transition progresses. Abu Dhabi’s calculation is that in a world of declining oil demand, the last barrels produced should be the lowest-cost barrels — and the UAE’s production economics ensure that its reserves will remain competitive longer than those of higher-cost producers in West Africa, Latin America, and even parts of North America.
Revenue Management and Diversification
The UAE’s OPEC+ strategy is inseparable from its broader fiscal and diversification planning. Hydrocarbon revenues remain the primary funding source for the federation’s economic transformation programmes, sovereign wealth fund capitalisation, and infrastructure investments. The management of oil revenue through production policy, hedging strategies, and fiscal reserves is a critical determinant of the pace and scale of diversification that the UAE can sustain.
Abu Dhabi’s approach is to maximise the present value of its hydrocarbon wealth by balancing current revenue extraction against the long-term decline trajectory of oil demand. This optimisation problem — how fast to produce, at what price to sell, and how much to reinvest in non-oil sectors — is the central economic challenge facing all Gulf hydrocarbon producers, and the UAE’s strategy within OPEC+ is a key instrument for managing it.
Risk Assessment
The primary risk to the UAE’s OPEC+ strategy is a breakdown in cartel discipline. If major producers — whether Saudi Arabia, Russia, or non-OPEC competitors like the United States — pursue production strategies that undermine price stability, the UAE’s revenue assumptions would be challenged. A secondary risk is the pace of the energy transition: if demand for oil declines faster than projected, the value of the UAE’s unexploited reserves would diminish, and the opportunity cost of production restraint would increase.
A longer-term risk is the political sustainability of the OPEC+ framework itself. The alliance between OPEC members and Russia has been tested by geopolitical events, and the expansion of non-OPEC production — particularly from the United States, Brazil, and Guyana — has reduced the cartel’s market share and its ability to set prices through production management.
Strategic Outlook
The UAE will continue to pursue higher production baselines within OPEC+ while supporting the framework’s broader price management objectives. Abu Dhabi’s long-term strategy is to position itself as the last major producer standing — maintaining low-cost, high-capacity reserves that will generate revenue decades after higher-cost producers have been forced out of the market by the energy transition. The OPEC+ framework is a tool for managing this transition, not an end in itself, and the UAE’s engagement with it will be calibrated to maximise the long-term value of its hydrocarbon endowment.