The Worm Turns

Why is 1974 picked out as a key date for me in this story? It was picked because it's one of two years when oil industry events had a global impact. And of course, in addition to impacting global economies, it greatly influenced the career path of people working in the industry.

Before 1974 ADPC owned its concession 100% and paid royalties to the ruler, Sheikh Zayed. I say that because the UAE was only established in January 1972 and was really struggling to establish and hire for the normal roles of government. As the posted price of oil was controlled by the oil majors — Shell, BP, Exxon, Mobil — and they posted $3 per barrel, the host countries weren't doing too well. The other benefit for ADPC was that there was no Abu Dhabi government oversight of operations. It seems to me that this translated into a laissez-faire approach to running the business, so we mostly took it easy and had plenty of time for water sports, tennis, bridge, dinner parties and drinking!

The pre-'74 period was also marked by the scarcity of both expats and Arabs in the country. Expats probably numbered fewer than 100, and local Arabs were only really noticeable during festivals — the Eids — when the Bedouin came in from the desert in all their regalia and performed traditional dances involving waving very large swords. As the country slowly became more organised, palace construction for the sheikhs took off and more roads were built. In fact around about this time there was still no road connecting Abu Dhabi with Dubai. A nice initiative was the organising of camel races: a sort of makeshift oval, jockeys who seemed about 12 years old, and the sheikhs attending in the midst of the spectators. On a number of occasions we were even able to shake hands with the ruler, Sheikh Zayed, and congratulate him on the country's progress.

But everything changed in 1974. The proximate cause was the Yom Kippur War in October 1973, which led to an Arab oil embargo. This in turn led to petrol shortages in a number of countries, not least the US where Colm and Catriona and Liz and I were driving across the country to the west coast and back to Chicago where Dermot was. The saddest part was the Las Vegas Strip, where the illuminations were turned off to save power. During the scramble that ensued, Gaddafi recognised that he could charge more for Libya's oil. So he did, and it worked. When the Shah of Iran saw that, he doubled the price again — and that stuck. Oil that six months earlier had been selling for $3 a barrel was now commanding $12. This windfall gave rise to all sorts of excesses as the small economies of the Persian Gulf tried to absorb the "manna from heaven". I can recall seeing Bedouin with vast rolls of $100 bills pulled out from their dishdashas buying all the biggest, most expensive audio electronics. There wasn't much else really, but that was quickly remedied between Ferrari and Rolex importers and, of course, trips to Harrods in London.

For the oil industry there were other major changes afoot. The producing countries moved at varying speeds to take over partial ownership (Abu Dhabi) or full ownership (Saudi Arabia). In Abu Dhabi the ask was for 60% and this was ultimately granted. This ownership was placed in a new national oil company called ADNOC. As the major shareholder they were setting out to control the activities of ADPC, advised by Algerians who had a great antipathy to the western majors and who were very savvy. The first initiative of this new regime was to force the abandonment of the ADPC structure. Until now company personnel were employees of the Iraq Petroleum Company. Now they would need to be employed directly by the shareholders. So Shell, BP and the rest came out and interviewed everybody to decide who they would offer jobs to. Most people, being British, got either one or two offers from Shell and/or BP. I was the only person to get offers from all five shareholders! Of course, I rejoined Mobil. A sort of funny thing did happen though: BP were so keen to hire me that they said "we know you would like to be in the US, so we will locate you in San Francisco if you join us". No known oil in San Francisco, so it was a tempting offer — though a little strange.

By this stage I was a Senior Reservoir Engineer and as such had to defend the plans we had for exploiting the Abu Dhabi oil fields at Technical Committee meetings. This had been purely technical until now. But it became something more under the pressure of ADNOC. We called it "political reservoir management" because the actions seemed to be designed for more than technical reasons — such as requiring the use of more drilling rigs which just happened to be owned by their Iraqi friends. Anyway, the good old laissez-faire days were over and there was now a tension underlying all oil-field operations. The old hands started thinking about seeking transfers out of Abu Dhabi, and with the newly rich environment all sorts of people poured in. The good old days were gone.