Contrary to urban myth, Dubai was never an oil-rich emirate

By late afternoon on Christmas Day just passed, I and a party of family and friends were in expansive mood after lunch at the Jumeirah Beach Hotel.

Looking out over the magnificent Gulf shoreline encompassing the Burj Al Arab, Marsa Dubai hotel and the Madinat, I offered: “Isn’t it incredible to think all this was once a gigantic oilfield.”

Encouraged by wows of appreciation of my deep historical wisdom, I continued: “Yes, we’re sitting on the site of old oil storage facilities, and Pierchic was where it all came ashore,” pointing to the swanky restaurant on the end of a pier jutting out from the Al Qasr hotel.

“Not many people know that,” I think I concluded. I had half-remembered all this from…  somewhere, maybe a confabulation of several bits of miscellaneous fact.

Later – with a bit of help from historians of Dubai Christopher Davidson and Frauke Heard-Bey – I attempted to deconstruct this particular urban myth soberly.

What I discovered was not only that my “fact” was wrong, but that Dubai’s oil past has acquired a curious afterlife: a folklore of restaurants that were once oil jetties and hotels that sit atop buried tank farms.

But the reality is more interesting than the legend.

As we all know, Dubai did indeed once have oil. Commercial quantities were discovered 60km offshore in 1966 at the Fateh field, with first exports in 1969.

Output rose rapidly and peaked in the early 1970s at roughly 400,000 barrels a day — tiny beside Abu Dhabi or Saudi Arabia.

What made Dubai unusual was not the scale of production, but how it was structured. From the outset, the emirate’s oil industry was almost entirely offshore.

Rather than piping crude to large onshore tank farms, Dubai pioneered offshore storage and export using undersea tanks — khazzans — connected to platforms. Oil was loaded directly onto tankers at sea, midway between Iran and the UAE.

That single detail explains why so many Dubai oil myths fail the basic test. Standing on Dubai’s shoreline in the 1970s, the most important oil assets were far beyond the horizon, not along the beach.

Chic mystique

Take Pierchic. The legend holds that it was a loading terminal for the Chicago & Illinois Petroleum Company – “chic” from “Chicago”.

There is no credible documentary evidence for this, and the location makes little sense for oil exports in an era when Dubai was loading crude from offshore facilities. The pier is not a relic but was built in the 1990s.

Or the Jumeirah Beach Hotel story — that it was built on top of old oil storage tanks. This is closer to the truth but still exaggerated.

Parts of the Jumeirah-Umm Suqeim coastline had light industrial, municipal and utility uses before Dubai’s tourism push. But there is no evidence of a major crude storage facility of the sort implied by the legend.

Dubai’s onshore oil footprint was limited, and concentrated. The most important petroleum zone emerged at Jebel Ali, first as a logistics and supply base for the offshore fields and later as the centre of refining and storage.

The Jebel Ali refinery, built in the 1990s, marked Dubai’s shift from upstream production to downstream and trading activity. Jebel Ali, not Jumeirah, was the petroleum corridor.

Oil’s economic importance faded quickly. Production declined steadily from the late 1970s. By the 1980s, oil’s share of GDP was shrinking; by the 1990s it was marginal.

Today it contributes a mere fraction of 1 percent. Dubai did not so much run out of oil as outgrow it.

That was no accident. Davidson notes that Dubai’s reserves were “modest and short-lived”, compelling diversification far earlier than its neighbours.

Heard-Bey makes a complementary point: founding father Sheikh Rashid Al Maktoum treated oil revenues as a means to an end, not an end in themselves.

The early windfall went into dredging the Creek, roads, power and desalination — and above all Jebel Ali Port, which opened in 1979 and transformed the emirate.

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Dubai also borrowed aggressively against future oil income, amplifying the impact of relatively modest reserves. Oil was treated as venture capital: spend it, leverage it, turn it into infrastructure, then move on.

Which is why I have a small personal rule when reading outside commentary about this city. When an otherwise reputable Western journalist lazily refers to Dubai as “the oil-rich emirate”, I stop reading.

It is not local pride or pedantry. It is a tripwire. If you think oil explains Dubai, you don’t know Dubai.

Dubai’s wealth today is the product of ports, trade, services, logistics, tourism, aviation, real estate and finance — and a political economy forged in the knowledge that the oil cheque would not last. Dubai became an oil hub, not a petrostate.

On Christmas Day, I was guilty of repeating the easy myth because it sounded plausible and made a good line over lunch. The truth is more revealing about how this place really works.

Frank Kane is Editor-at-Large of AGBI and an award-winning business journalist. He acts as a consultant to the Ministry of Energy of Saudi Arabia