Hussain Sultan Al Junaidy founded Emirates National Oil Company, ENOC, in 1975, and was group CEO of the company until 2007. He maintains a link with the oil industry through a number of oil-related companies including oil trading companies Neptune Energy Trading and Dominion Petroservices where he is chairman.
In this interview with S&P Global Platts" head of news for EMEA, Andy Critchlow, and Middle East oil pricing editor, Tahani Karrar, Al Junaidy looked back at the history of Dubai's oil sector and ENOC itself. He also shared his outlook for Middle East oil demand post-coronavirus and the continued push towards diversification and self-sufficiency in the United Arab Emirates. Al Junaidy spoke with S&P Global Platts on August 8.
Oil was first discovered in Dubai in 1966, and by 1969 Dubai started to export oil. What was the industry like in those days and how did you get into the oil business?
I"m a chartered civil engineer, I graduated from Glasgow University and trained in the UK. I was headhunted by Caltex, which is now Chevron, and I started working for Caltex in 1966. Caltex trained me well, I think, for the job that they wanted me to do. And the job was to open Caltex in the then Trucial States, starting in Dubai.
In 1969, Caltex were in Bahrain, they had a joint venture with the Bahrain government and jointly owned the Bapco [Bahrain Petroleum Co.] refinery in Bahrain, which was and still is one of the largest in the region. But they had no marketing facility, they had nothing at all south of Bahrain. So they wanted to start a total marketing setup in Dubai and they asked me to help them do it. There was nothing in Dubai at that time, the so-called service stations in Dubai were then one pump, probably maximum two pumps, out in the open, and a small shack behind it, where some poor guy sat with no air conditioning.
When I started building the first service stations, Caltex service stations, they were the most modern you would see anywhere. They compare with the service stations you see today with beautiful two-pump islands and a whole canopy over the pump islands, a convenience store, and also each station had a car wash and a lube oil bay.
Then, after setting up six stations in Dubai, I went to Abu Dhabi in late 1969 to do the same thing as in Dubai. But unfortunately, in 1973 they were nationalized by ADNOC in Abu Dhabi. I was then sent to the United States with Caltex to train at their headquarters in New York and also to study at the University of Pittsburgh, Graduate School of Business, and returning to Dubai as CEO in 1975.
How did the discovery and subsequent export of oil change Dubai and the United Arab Emirates?
Dubai started booming after 1969 as offshore oil started to be exported and revenues started to come in from the new oil production. Money started coming in and the oil price shot up in 1972, and the whole Gulf, particularly Dubai, started to boom. Sheikh Rashid wanted gas because people had now started to live in Dubai and a lot of people wanted gas cylinders. There is no gas in Dubai so they used to load up all these cylinders on dhows, take them to Bahrain or Ras Tanura, fill up there and bring them back to sell in Dubai. This took time and you had delays, and sometimes they would even run dry.
So we went to Bapco and arranged for pressurized gas to be supplied through a new pipeline to their loading jetties.
My team and I quickly built a small bottling plant along the Creek, with only 200 tons at that time, and I bought a small LTG tanker, a second-hand one, but in good condition, from Europe. I got it here quickly and started the first company, called Emirates Gas.
From 1975-1982, we were supplying the entire requirements of LPG, for the whole of what became the UAE, no longer the Trucial states, but also in the Sultanate of Oman. And that was one of our most successful companies ever.
We also formed a joint venture with an Indian company to manufacture LPG cylinders, structural steelwork and storage tanks, and also formed the Dubai Maritime Transport Company to own the LPG tankers.
ENOC is one of the largest independent refiners in the Gulf region today, and a pillar of Dubai"s economy. What made you decide to start a company like ENOC?
In 1980, we started Emirates Bunkering and Bitumen Company, EBBCO, which started selling bitumen for the first time in the UAE and also bunker fuels and diesel. From then onwards, it just went one company after another.
EBBCO was 60% Dubai government and 40% Caltex. We later invested, built and ran service stations. Caltex was at that time in the lube business and also in aviation at the airport, but my companies couldn"t be part of their operations so I said, "Listen, you want to join me, but you won"t let me join you? Then I'm going to go on my own." They said, "Are you serious?" And I said, "Of course I"m serious." And that's how I started. In 1993, I formed the holding company, ENOC, Emirates National Oil Company.
EBBCO changed from Emirates Bunkering and Bitumen company to EPPCO, Emirates Petroleum Products Company. And we started to go into everything humanly possible downstream. We formed Horizon Terminals Limited, now a major company, and our first oil storage was built in Jebel Ali. Later we expanded by bringing in shareholders, who were the first users of the terminal, such as oil traders and oil companies. We said to them, "Instead of leasing apartments why don"t you lease storage tanks?" And that's what they did.
When I decided to call it a day, in about 2007, ENOC had grown to over 32 companies.
Why did you decide to shift ENOC"s focus from downstream, to also include upstream?
We wanted ENOC to become a fully-integrated oil company. We needed to buy an upstream company and by chance we found Dragon Oil, which is listed on the London Stock Exchange but established in Dublin. It had a small oil production in the Eastern part of the Caspian, in Turkmenistan. The technical report said that the P2 reserves of the country had 650 million barrels of oil reserves and 3 Tcf of gas.
After the Soviet Union collapsed, Dragon Oil"s production was only 6,500 b/d, [and] declining. The oil price was $11 a barrel, but it was a calculated risk. By 2005, it was already producing 45,000 b/d and more, and the oil price started going up. The production and market value of Dragon Oil kept rising and the market value reached over GBP3.5 billion.
There has been a gradual decline in Dubai"s oil production over the years. Why is that in your opinion?
Dubai"s oil production started in 1969, and at that time everyone knew that the offshore wells would be depleted soon. Production started at up to 400,000 b/d and then started with the decline. Dubai never relied on the money coming from the oil, it decided a long time ago that it should diversify from oil and go into other things, such as trading, business and tourism.
I think that serves Dubai right because you look at what happened to the oil pricing over the years. I mean, the oil price has been under pressure for some time, for a variety of reasons. Also, the minute shale price came in at $60 a barrel, shale became a big competitor. And of course, think of the other alternatives that came in into the market, whether it is the solar, wind or nuclear – which has started already in the UAE and has already been connected to the grid.
How has coronavirus impacted the oil industry in the Gulf? Do you see a recovery in sight?
When the coronavirus came in, that was a shock because everything closed down. The global economy nearly shut down for a while and there was less demand for not only the gasoline but for everything. People soon realized that the days of oil dependence are soon over and most of the countries in the Gulf are now suffering.
Many countries are now borrowing money. We are lucky in the UAE – Abu Dhabi, which contains 95% or more of the country"s oil and 92% of the gas, has invested its money very wisely.
I think in 20 or 30 years we are really going to see less and less dependence on oil and more on the alternatives of oil – look at gasoline now, we have electric cars everywhere. We"re living in a world where everything is changing fast.
What do you think needs to happen for Fujairah to become an even bigger oil trading and bunkering hub?
Fujairah is a small emirate but it has developed in a big way like all the other emirates. The good thing about the emirates is we always compete with each other. I think Fujairah deserves everything really, and Abu Dhabi has supported Fujairah in a big way.
I'm not sure whether Fujairah will benefit from an even bigger refinery... demand has gone down, for products, for everything. And there are more refineries in Saudi and everywhere, existing refineries are also expanding. Even the condensate refinery in ENOC has upgraded to increase its production to over 200,000 barrels a day.
Which industries do you see Dubai focusing on post-oil and why?
I think what Dubai will probably focus on is developing more industries here locally – even producing food supply here. We are not talking about just vegetables and fruits but also fish and livestock. Dubai is now doing wonderful things in terms of being self-sufficient as far as food supplies. Coronavirus is forcing policymakers to rethink how they trade and how much they rely on other countries for food security. What is needed is to be really self-reliant.
Recently, an announcement was made about gas development in Dubai, on the border of Jebel Ali and Abu Dhabi. What do you think the potential for that is?
That was announced jointly by Abu Dhabi and Dubai, and we expect that the field will be developed jointly. We're waiting to hear more, it's just a matter of time, as it takes time to develop a field.