x Abu Dhabi, UAESunday 23 July 2017

The start of an epic journey

40 years of the UAE: Oil firms both onshore and offshore were at the heart of the new nation's development.

A boater speeds along the water off the Al Khan neighbourhood in Sharjah with an oil derrick in the background.
A boater speeds along the water off the Al Khan neighbourhood in Sharjah with an oil derrick in the background.

Abu Dhabi // The oil story in what was to become the UAE precedes the formation of the confederation by more than two decades.

In 1950, Petroleum Development (Trucial Coast), a subsidiary of the Iraq Petroleum Company (IPC), began drilling at Ras Sadr, Abu Dhabi.

The well was found to be dry and IPC's shareholders, modern-day BP, ExxonMobil, Shell and Total, were left disappointed.

But exploration continued and, much to the delight of Abu Dhabi's 20,000 citizens, oil was eventually found in 1954 at Bab.

Four years later, the first offshore discovery was made at the Umm Shaif offshore field close to Das Island in 1958.

The Das project used an underwater drilling barge that had to be towed almost 11,000 kilometres from Germany by tugboats.

The discovery of oil transformed Abu Dhabi. In From Rags to Riches, his history of the emirate, Mohammed Al Fahim wrote that in 1959 his father "moved his stock and shop" from Al Ain to Abu Dhabi.

As his family migrated between the two settlements, "the number of people who remained on Abu Dhabi island throughout the year began increasing along with the growing importance of the oil industry".

Several more discoveries were made in the 1960s, including the offshore commercial discoveries Zakum in 1964 and Abu Al Bukhoosh and Umm Al Dalkh in 1969.

Onshore, Bu Hasa, Asab, Shah, Sahil and Al Dabbiya were all discovered by 1969. When production commenced in 1962, a mere 14,200 barrels left the ground every day. The following year, production had risen by more than 200 per cent to 48,200 barrels per day (bpd).

By the time the UAE was founded in 1971, Abu Dhabi had become a major player in the oil industry and the fourth largest producer for the Organisation of the Petroleum Exporting Countries (Opec).

Sheikh Zayed, who became Ruler of Abu Dhabi in 1966, used much of his new oil wealth to foster a sense of unity amongst the disparate emirates.

When the Northern Emirates were asked to enter the union that had been thrashed out by Abu Dhabi and Dubai, Sheikh Zayed's generosity and popularity throughout the nascent nation were crucial in convincing them to join.

Valérie Marcel described Sheikh Zayed's balancing act in her 2006 book, Oil Titans. "He put pressure on the foreign oil companies to increase exploration and production so that his ambitious modernisation programme could be paid for, but he maintained a cooperative attitude towards them that contrasted with the nationalist confrontations elsewhere in the Middle East."

Abu Dhabi joined Opec in 1967. With the creation of the UAE, the emirates spoke with one voice at the organisation.

If output changes were demanded, it was Abu Dhabi that increased or cut production, acting as a swing producer while Dubai production remained steady.

Dubai has contributed steadily to the country's output, first producing oil in 1969. Production peaked in 1991 at 410,000 bpd but has dropped sharply, averaging only 55,000 bpd today, contributing about 2 per cent of the emirates' gross domestic product (GDP).

After the founding of the UAE in 1971, the Abu Dhabi National Oil Company (Adnoc) was created.

It ended up taking a 60 per cent stake in the onshore production arm, Adco, and the offshore arm, Adma-Opco. Adnoc's portfolio continued to grow. Today, 16 subsidiaries are under the umbrella of the national oil company.

Crude oil production in Abu Dhabi increased steadily to an initial peak of two million bpd in 1977. After a decline in global demand, production fell, but has increased most years from 1986.

In 2008, the emirate's crude oil production reached a new peak of 2.6 million bpd as oil prices soared.

Abu Dhabi currently produces about 2.5 million bpd, making use of almost its entire capacity.

The emirate is one of only three Gulf states with spare capacity and made use of it this year to compensate the world market for the outage of Libyan oil.

Abu Dhabi's ambitions exceed current oil production levels. The emirate has long held plans to increase production to 3.5 million bpd and several expansion projects are under way.

Oil has had a big part to play in bringing the nation together and, after 40 years of statehood, a big story is turning epic.

newsdesk@thenational.ae