The Discovery of Oil in the United Arab Emirates

Subject: History
Pages: 9
Words: 2308
Reading time:
9 min
Study level: Bachelor

Introduction

The United Arab Emirates is currently a major power in the Middle East and the world at large. It has not always been like this for the UAE. The independent federal UAE was established in 1971 from a coalition of tribes with homogeneous cultures (Anthony et al., 1975). Most Emirati citizens are Sunni Muslims who mainly follow the Maliki Islamic interpretation. Until its independence, the UAE had been ruled by the British Empire, although the local leaders had a relative voice in local affairs (Anthony et al., 1975). The British played a vital role in the demarcation of the UAE into the current configuration of the seven emirates, namely Abu Dhabi, Dubai, Ajman, Sharjah, Umm al-Quwain, Fujairah, and Ras al-Khaimah. Individual emirates differ from each other in matters of politics, religious intensity, and openness to the West.

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The discovery of oil was a significant inflection point for the economic fortunes of the UAE, cementing its reputation as a beacon of transformation. The country has 98.63 billion barrels of oil, according to “OPEC: United Arab Emirates” (n.d.). Of the seven emirates, Abu Dhabi owns most of the oil with 92 billion barrels, while Dubai and Sharjah have 4 billion and 1.5 barrels, respectively (“OPEC: the United Arab Emirates,” n.d.). Most of the oil is located in the Zakum field, the fourth largest in the region with approximately 66 billion barrels (“OPEC: the United Arab Emirates,” n.d.). The current production rate is around 3 million barrels per day (“OPEC: the United Arab Emirates,” n.d.). In terms of reserves for production, the oil is supposed to last 18 years (“OPEC: the United Arab Emirates,” n.d.). This paper will focus on the question: how significant of an inflection point was the discovery of oil in the UAE? The literature review will focus on the state of the country before ad after the discovery. The methodology will combine both primary and secondary sources. The discussion will be a qualitative verdict on the socio-economic significance of the oil discovery.

Methodology and Literature Review

Before Oil

There was little cohesion in the UAE area prior to the rise of Islam in the 17th century. Many rulers and socio-religious systems would rise and fall (Anthony et al., 1975). However, Islam was able to bring a cultural unity that bolstered the political rule of the Arab caliphates. As the Islamic culture spread eastwards, it fused with Persian and Indian influences producing an identity that still exists today (Anthony et al., 1975). During the Middle Ages, various indigenous political identities would emerge alongside the UAE littoral; the economic fortunes of specific areas depended on the wealth of the ruling families. After the advent of the caliphal system, the UAE states remained free of non-Islamic influence until the Europeans interfered; the Portuguese in the 17th century, then the Dutch, and finally Britain in the 19th and 20th centuries.

From 1820, the sheikhdoms had a treaty with the British to protect them and control foreign affairs. This treaty remained until 1971 when it was replaced by a treaty of friendship (Anthony et al., 1975). The local rulers remained in control of local affairs even during the protectorate era, which preserved the traditional sociopolitical configuration. The British, however, did have a significant effect on law and administration and administering external affairs and on how the sheikhdoms related (Heard-Bey, 1982). Up to this day, the UAE’s fields of international commerce, oil industry and technology, and higher education are heavily reliant on the English language.

The Oil Discovery

In the 1930s, Abu Dhabi was a mere fishing village that owned a port. The local economy flourished with the pearl trade, but cultured pearls from Japan ruined their natural pearl market, and they were struggling. Sheikh Shakhbout bin Sultan al Nahyan desired to find a good source of water and had heard about the drilling work of Major Frank Holmes in Bahrain and thought of implementing the idea in Abu Dhabi (Morton, 2011). He ordered that a survey be conducted immediately and made a request to the Iran Petroleum Company (IPC), who were partners with the Anglo Persian Oil Company. When the Anglo Persian delegation arrived in 1935, Sheikh Shakhbout had changed his mind and was keener on oil survey as he had heard of other states that had made a fortune from oil (Morton, 2011). The survey was conducted the same year but revealed problems since most of Abu Dhabi was covered in sand. Drilling would not begin until 1950 at Ras Sadr and 1950 at Jebel Ali, where both wells were dry.

On top of this setback, there was also a territory dispute with Saudi Arabia in what is now known as the Buraimi Dispute. Because of the conflict, the PDTC drilled the Murban No. 1 well a few kilometers off the seismic crest, but the well was plugged after releasing high-pressure sour gas (Morton, 2011). The Buraimi dispute broke down, and PDTC continued to drill in Abu Dhabi, where two wells, Gezira and Shuweihat, both proved dry. The Abu Dhabi Marine Areas Ltd. (ADMA), jointly owned by BP and Compagnie Française des Pétroles (became Total), drilled the Umm Shaif field and struck oil in 1958 at a depth of 2668m (Morton, 2011). The field was huge at 300 km2 and came to stream in 1962. Meanwhile, PDTC would make an onshore discovery at Murban No. 3, which came to stream in 1964 and was 450 km2 in size.

The PDTC would relinquish most of their Trucial Coast but retained Abu Dhabi and changed its name to Abu Dhabi Petroleum Company (ADPC). They would sign a 50-50 oil-sharing deal with Sheikh Shakhbut in 1965; ADMA followed suit in 1966 (Morton, 2011). Sheikh Shakhbut’s younger brother, Zayed, would succeed him in 1971; he would later become the leader of the newly created federation. In the same year, the Abu Dhabi National Oil Company was formed and would gain a 60% share in ADMA and ADPC (Morton, 2011). The two companies were incorporated as the rAbu Dhabi Company for Onshore Operation and the Abu Dhabi Marine Operating Companies.

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Post Oil Discovery

The UAE is formed shortly after the British left. By 1970, Abu Dhabi was well aware that it was the richest in oil wealth and was anxious to join the federation. They clearly demarcated their borders due to the rising importance of oil income. Abu Dhabi came with a compromise aimed at finding a compromise against opposing views. Sheikh Zayed declared that all oil wealth was for all emirates; other Trucial states were invited to the federation, including Bahrain and Qatar, but the two would refuse to join (Seric & Tong, 2019). By June 1971, the six remaining sheikhdoms had come to an agreement to form a federation (Dubber, 2017). Ras al Khaimah’s ruler Sheikh Saqr would hold out joining, expecting to find oil in the scale of Qatar but would swallow his pride after two months (Dubber, 2017). Sheikh Zayed of Dubai became president of the federation, while Sheikh Maktoum of Dubai became the vice president and prime minister.

One of the greatest motivations for forming the federation was security because the British were leaving. They had feared an attack from the Soviet Union, especially after they had invaded Afghanistan. The region would experience some instability because of the Iran-Iraq War in 1980 and the Israeli-Arab conflict (Dubber, 2017). While Iraq and Iran were busy fighting, the oil-rich Arab countries seized the opportunity to form economic cooperation, the Arabian Gulf Co-operation Council.

In the emirates themselves, each was having its own ambitions and was taking a different path to prosperity. Abu Dhabi is the wealthiest in reserves, took a conservative approach to development because it did not need to diversify. On the other hand, Dubai was aware of its limited resources and had invested the initial revenues into large infrastructural projects such as a new port and a world trade center. These projects would lay down the foundation for the dramatic rise of the city. Sharjah had even fewer reserves and was hounded by political instability; their monetary system would collapse in 1989 and had to be rescued by the Saudis (Dubber, 2017). Meanwhile, the other smaller oilless emirates would get occasional help from Abu Dhabi, such as industrial parks in RAK and an oil port in Fujairah.

The 90s would be the decade when the UAE caught the world’s attention courtesy of strategic projects by Sheikh Mohammed, Sheikh Rashid’s third son. Some of his most vital investments were Emirates Airlines and the Burj al Arab hotel, which established the UAE as a world icon (Al Maktoum, 2019). Other megaprojects would follow suits, such as the world’s largest artificial island, the Palm Jumeirah and the Burj Khalifa, and Dubailand (Al Maktoum, 2019). Dubai’s goal was to become a world center for tourism, transportation, and business. Abu Dhabi would soon also follow suit with its own eye-catching megaprojects such as the Emirates Palace hotel, the Sheikh Zayed Grand Mosque, the Saadiyat Island Complex, and the Etihad Airlines (Dubber, 2017). Abu Dhabi aimed to bolster itself as an alternative to its flashier neighbor, while in the other emirates, descent industrial progress and tourism continue to occur (Seric & Tong, 2019). Dubai would be hit heavily by the 2008 financial crisis and was on the verge of collapse but was bailed out by Abu Dhabi, which was barely affected by the crisis thanks to its vast oil reserves.

Abu Dhabi had managed to unleash itself from Dubai’s shadow with headline events such as the purchasing of the Manchester City soccer team by Sheikh Mansour and the unveiling of the Abu Dhabi Grand Prix (Conn, 2018). The 2008 financial crisis may have hit Dubai heavily, but the reports of its collapse are somehow exaggerated; they are already starting to strategize for the future with optimism (Saif, 2009). Abu Dhabi still continues to showcase itself as a worthy alternative to its flashier neighbor, while in the other emirates, descent industrial progress and tourism continue to occur. The political federation among the 7 emirates continues to be a model of political calm in a region so often plagued with instability and dysfunctionality.

Discussion

The UAE had been a British protectorate for centuries; it is interesting that the British had not practiced the type of colonialism in UAE that they had practiced elsewhere. It would seem there was a level of mutual respect that they had for the Arabs. It is not a surprise that the Arabs would prove capable of managing their own affairs. It is interesting that Abu Dhabi agreed to join the other emirates in the founding of the federation; they would have faired fine by themselves, but they need the protection during precarious times when there is still a rush for territory.

The oil discovery in the UAE has been one of the most remarkable turning points in the history of any country. A little over 50 years ago, the emirates were inhabited by fishermen and villagers, but today, they have established themselves as a center of civilization with one of the most glamourous developments anywhere in the world. It is difficult to imagine that all the luxury hotels, skyscrapers, shopping malls, and amusement parks used to be dry deserts with little to no settlement. The UAE has established itself as a beacon of victory and progress of humankind over nature and other adversities. Despite adverse climate and desert conditions, the country is significantly ahead in developing and improving its quality of life.

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Nothing illustrates the importance of oil in the UAE more than the stark difference between the oil-producing emirates and the oilless ones. As expected, oil wealth is directly proportional to development, as witnessed by the pecking order from Abu Dhabi, Dubai, Sharjah, and others. Once again, human nature is exposed in its essence when the Sheikh of Saqr of Ras al Khaimah delays his entry into the federation, also expecting to make huge oil discoveries like Qatar. One is left to wonder what the fate of the union would have been having Sheikh Saqr been the one in charge of Abu Dhabi.

It is remarkable how different Abu Dhabi’s and Dubai’s approaches to prosperity were. Being the more daring sister, Dubai takes a progressive approach, opening Dubai up to the rest of the world and establishing it as a world icon. On the other hand, Abu Dhabi does not seem fazed by the prospect of their taps ever running dry and is not daring at first, but they have been outshone by a neighbor with lesser resources and cannot stand it; they are forced to play copycat or catch-up. Dubai faces some economic difficulty, and, in the end, it is its conservative neighbor who bails them out. Maybe there is no clear winner between their two approaches as in the end, they both must stand together for the betterment of the United Arab Emirates.

Conclusion

This paper embarked on an effort to investigate the impact of oil discovery in the UAE. The events in the paper have been obtained from both primary and secondary sources. It has been observed that the UAE has a rich history from the rise of Islam in the 17th century to the encounter with the Europeans until their independence from the British, which coincided with the oil discovery. The exit of the British, who were managing protection and foreign affairs, necessitated the formation of a coalition on the apparent basis of strength in numbers. Abu Dhabi has the most oil wealth and, naturally, its leader becomes the president of the union while Dubai’s becomes the vice president. Oil wealth is so vital that even the most important seats in the federation are being shared based on oil wealth. Few countries have had so much natural wealth and utilized it better than the way the UAE has.

References

Al Maktoum, M. R. (2019). My story: 50 memories from 50 years of service.

Anthony, J. D., University of Toronto, & Canadian Institute of International Affairs (Eds.). (1975). The Middle East: Oil, politics, and development. American Enterprise Institute for Public Policy Research.

Conn, D. (2018). Manchester City accounts show Sheikh Mansour has put £1.3bn into club. The Guardian. Web.

Heard-Bey, F. (1982). From trucial states to United Arab Emirates: A society in transition. Longman.

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Dubber, H. (2017). The UAE: From rags to riches | insight guides blog. Web.

Morton, M. Q. (2011). The Abu Dhabi oil discoveries. GEO ExPro. Web.

OPEC: United Arab Emirates. (n.d.). OPEC. Web.

Seric, A., & Tong, Y. S. (2019). Progress and the future of economic diversification in UAE. Industrial Analytics Platform. Web.

Saif, I. (2009). (Rep.). Carnegie Endowment for International Peace. Web.