Category Archives: Energy

This Is the Story of Dubai’s Economy

This Is the Story of Dubai’s Economy

For some places in the world, the discovery of a valuable natural resource has the power to change everything. For the city of Dubai, once just a dry expanse of desert with a small settlement, its entire economy and cultural scene has been affected by one precious commodity—oil. Looking at the city, which is packed with luxury hotels, shopping malls, and architecturally impressive skyscrapers, it’s hard to imagine how it could have ever been less than opulent. But Dubai wasn’t always the global city it is today, and this is all due to the veins of “black gold” running beneath the ground.

These days, the emirate and city of Dubai are considered symbols of development and a sign that humans can prosper despite challenging circumstances. Even with its unforgiving temperatures and arid climate, Dubai managed to use the discovery of oil to build a strong economy and a high standard of living. In 2016, the city welcomed 14.9 million tourists who came to enjoy Dubai’s luxury shopping and dining, as well as its daring modern architecture.

History of Oil in Dubai

DesertDubai’s past can be clearly divided into two eras: before and after the discovery of oil. Before the resource was tapped, the people who lived in the area bred camels and goats, while working the land to grow dates and other crops. They used the mouth of Dubai Creek to fish and cultivate pearls. Although its resources were meager, the city’s location and port made it an ideal trading partner with Europe. Since 1900, Dubai has had the busiest port on the Persian Gulf. By the 1930s, Dubai’s population had reached 20,000, with a considerable number of expatriates. By the 1950s, the creek had begun to silt, and the city dredged it several times in the ensuing decades to ensure it could accommodate large ships. The development of Dubai Creek—along with the creation of other ports in the city—solidified Dubai’s position as a major trading hub.

When oil was discovered in 1966, just 60 miles from the coastline, the emirate of Dubai quickly went to work harvesting an even more valuable commodity. By 1969, 180,000 barrels of oil were exported abroad. The next few decades saw the discovery of more marine oil deposits, which bumped production up to about 410,000 barrels per day by 1991, the zenith of the emirate’s oil economy. Infrastructure developed at a frenzied pace, and schools, hospitals, roads, and skyscrapers began popping up everywhere. Dubai International Airport was significantly improved and was able to accommodate the largest jumbo jets for intercontinental travel. With its tourist-friendly attitude, high quality development, and minimal taxes, the city quickly became a business and tourism hub for a region stretching from Egypt to the Indian subcontinent.

Beyond Oil

By 1980, the annual oil income had dropped to an all-time low, forcing the city and the emirate to dream up some new ways to stay relevant on a global scale. They began their reinvention by promoting tourism and establishing the Emirates airline in 1985. The Dubai government founded the Emirates National Oil Company (ENOC) in 1993 and opened the first refinery at a cost of AED 1.5 billion or approximately $273 million. It was able to produce 120,000 barrels a day on average. In 2007, the Dubai Petroleum Company assumed control of all oil and gas projects in the emirate.

That same year, the Dubai Mercantile Exchange (DME) was launched to establish a commodity exchange in the city and set a crude oil pricing benchmark known as the Oman Crude Oil Futures Contract. This effort has brought about a fair and transparent pricing system and has allowed parties to better assess risk and benefits. This level of standardization has helped to establish reliable prices and has become the premier international energy futures and commodities exchange in the Middle East.

Today, Dubai’s oil fields continue to produce, even though the emirate’s high demand for fuel now outpaces its production. As a result, Dubai has become increasingly dependent on imports to make up the difference, bringing in gas by pipeline from Qatar. Oil production in Dubai is now estimated at 70,000 barrels per day, and its reserves will likely be exhausted within 20 years. Oil accounts for less than 5% of Dubai’s economy.

Fortunately, the emirate has been making a sustained effort to diversify its economy since the 1980s and 1990s by supporting the tourism, construction, real estate, and financial services industries. Dubai also boasts several industry-specific free zones with tax incentives for businesses; foreign companies have established major regional headquarters in these areas. For example, in Dubai Internet City, companies including Facebook, Google, Microsoft, Samsung, and IBM have offices. In addition, Dubai has been selected to host the World Expo in 2020 and has chosen the theme “Connecting Minds, Creating the Future” for the international event. This will be the first World Expo hosted in the Middle East and North Africa (MENA) region.

Everything You Need to Know about Data Centers

Everything You Need to Know about Data Centers

A data center is a building or group of buildings that contains networked computers that store and process data. Operations with extensive technology—like telecommunications companies, for example—require extensive hardware that must be housed where it is all connected and protected. This facility is a data center. Components of a Data Center Data centers aren’t simply… Continue Reading

What You Need to Know about Communications Satellites

What You Need to Know about Communications Satellites

Communications satellites orbiting around the Earth are designed to receive telephone, radio, and television signals. A station on Earth sends signals to a satellite, which then retransmits the signals to a receiver on the ground. Communication satellites can provide telecommunication across long distances and to remote locations, such as ships in the ocean. Before the… Continue Reading

A Look at the Remarkable Growth of Egypt’s Energy Infrastructure

A Look at the Remarkable Growth of Egypt’s Energy Infrastructure

Several years ago, Egypt experienced a terrible energy crisis. In 2013, for example, the country only produced 24,000 megawatts of electricity—much less than the 29,000 megawatts it needed. In 2014, the demand for power dwarfed supply by more than 15 percent, leading to nationwide blackouts lasting multiple hours several times a day. Not only did… Continue Reading

What You Need to Know about the World’s Largest Oil Fields

What You Need to Know about the World’s Largest Oil Fields

Countries in the Middle East accounted for more than a quarter of the world’s oil production in 2014. The world’s biggest offshore oil field is operated by Saudi Arabia’s national oil and gas company, and the world’s second-largest is located in the United Arab Emirates (UAE). Here is what you need to know about the… Continue Reading

What You Need to Know about Wind Power in the Middle East

What You Need to Know about Wind Power in the Middle East

The Middle East and North Africa (MENA) region is pursuing a variety of renewable energy resources beyond solar. In 2015, almost 953 megawatts (MW) of wind energy was added to the region’s capacity. Wind power has shown steady growth in MENA; the cumulative wind power capacity for the region is 3,489 MW. Currently, a handful… Continue Reading