For a city sometimes unfairly described as “sleepy”, Fujairah is keeping the global energy industry awake these days. The Indian Ocean port has emerged as a crucial hub for the world economy, sustaining the UAE’s energy exports despite the Hormuz crisis.
Last week, Fujairah’s importance was highlighted when Dr Sultan Al Jaber, Minister of Industry and Advanced Technology, and chief executive of Abu Dhabi National Oil Company (Adnoc), attended the UAE Energy Markets Forum in the city. This continued a hectic run of conferences as the global energy industry emerges from a sticky summer and tries to find a way through conflict and disruption.
The biennial WPC Energy Congress takes place in Riyadh this week, its first time in the kingdom and only the second time it has taken place in the Middle East, after Doha in 2011. The event has gone ahead despite the fatal attacks on the Saudi capital’s airport.
Then, at the start of next month, executives take on the final boss, at Adipec, the world’s biggest energy event.
Probably the most popular word in Fujairah last week was “resilience”. The UAE has managed to sustain, and possibly even increase, its oil exports through the conflict, as well as maintaining its essential imports. The Indian Ocean ports of Fujairah, Khor Fakkan and the others have been crucial.
Rather than hasty workarounds, this rapid shift builds on years of preparation. The Habshan-Fujairah oil pipeline, with capacity up to 1.8 million barrels per day, was opened in 2012. Preparation for a second line had begun before the war, with the announcement in May and planned completion next year.
Massive oil storage in caverns hewn out of Fujairah’s rugged brown mountains began construction in 2018. Adnoc Logistics and Services has amassed a large fleet of tankers and other ships, which has proved essential for moving oil. Supertankers are now in desperately short supply – it costs more to hire one, $80 million, than to launch SpaceX, a bargain at $74 million.
Work on the impressive, modern new railway to Fujairah started in early 2020. The Barakah Nuclear Power Plant, an important part of assuring electricity even when gas facilities came under attack, began splitting atoms in August of that year.
Regional preparedness
Beyond the UAE, we could highlight similar regional examples of preparedness, such as the Gulf Co-operation Council electricity grid, Saudi Arabia’s East-West pipeline, and the new port, refinery and oil storage facility at Duqm on Oman’s south-east coast. Like Adnoc, Saudi Arabia – with Bahri – Kuwait and Qatar have their own sizeable tanker fleets.
Physical assets are only one part of resilience. Adnoc has over several years built a strong trading capability. That was profitable in the years of peace. In months of war, it has been even more important by salvaging supply to customers, and seizing attractive commercial opportunities.
These assets were not accumulated with precise foreknowledge of the current conflict. Of course, blockade of Hormuz, or general trouble in the Gulf, has been a known risk since the Tanker War of the 1980s, if not before. In general, though, having a broad set of deployable national assets, whether in one company or several, whether in state or private hands, enables a country to cope with crises of all kinds.
That could be regional political unrest as in 2011, a price crash such as that of 2014, a pandemic such as 2020, or a far-off war as in 2022. We do not know what the next challenge may be: a natural disaster, a big climatic upset, an energy technology breakthrough, an international market meltdown over AI or government debt. But combining physical, institutional and human capabilities with a flexible and proactive mindset is the best way to come through such storms.
Resilience alone, though, is not enough. When the bombers thundered through the sky on February 28, politicians and observers alike thought it would be a short war. It has now ground on for more than seven months, though most direct strikes on Gulf and Iranian territory have stopped.
Other theatres – Yemen, Lebanon, Syria and Iraq – have become entwined. Every regional country, even the non-involved such as Turkey, Egypt and Cyprus, have seen some unwelcome visitor land on their soil, and have suffered disruption to their airspace and trade routes. On Friday, US President Donald Trump announced proudly that Russia’s Vladimir Putin had promised to provide some diesel to ease the growing global fuel crisis, a product of the wars in the Gulf and Ukraine.
Handling future crises
The Gulf energy industry must build on the resilience established so far, establish new options to respond to future crises, and accelerate creating value. Of course, that is not easy to do while the spectre of renewed violence hovers over the region, and while shipping routes are still not functioning freely.
The regional countries were, overall, investing heavily and sensibly in their energy industries before this year. They were solidifying their oil upstream, making the downstream more sophisticated, accessing gas for the domestic economy and for export, generating more value from commercial ingenuity, reducing greenhouse gas emissions, electrifying their economies and seizing on transformational new technology in the AI space.
Those remain excellent aims, even if specific projects have to be reprioritised for the new regional reality. Regional energy companies can do more. Becoming true international players fills a capital gap, builds their capabilities and somewhat reduces their near-total reliance on the Gulf. They can do more in inventing and deploying truly game-changing hard technologies. These often struggle in the rest of the world because of lack of visionary capital, overregulation and difficulty in co-ordinating diverse interests.
Regional energy companies can work together more. Huge gains are possible from networking physical infrastructure – pipelines, ports, electricity grids and data cables. Greater achievements can come from soft integration, such as commercial joint ventures, cross-border investments and technology partnerships.
The energy industry, one of the first truly globalised businesses, needs more than most to reimagine or construct institutions that govern its world by laws and not by the missile. The power to convene the world’s leading energy doers and thinkers, as at Adipec in Abu Dhabi, brings positive influence.
Finally, at recent events elsewhere, the energy business has sometimes given the impression of being relieved the issue of climate change has been dethroned by that of war. That is a mistake. Conflicts will, by some smart application of strength and diplomacy, be resolved. Climate change, bad or worse, will be with us for the rest of the century and beyond. It will reshape everything we do in energy and itself can inflame war.
