Features

Fujairah: The Crucial Emirate


A newly built road leading to Hilal City, a residential and business development

Photograph by Kate Peters/INSTITUTE

A newly built road leading to Hilal City, a residential and business development

The office of Sheikh Mohammed bin Hamad bin Mohammed al-Sharqi, crown prince of Fujairah, sparkles with sculpture and medallions. Mounted on one wall is a large painting of the Fujairah shoreline, the only level portion of this rocky, mountainous, tiny kingdom in the United Arab Emirates. The crown prince sits on a crimson sofa in a white dishdasha as he is served tea from a silver platter. His manner measured, Sheikh Mohammed discusses the transformation of the land he will someday rule.

In this part of the world, he says, “We are still tribal.” Accordingly, Sheikh Mohammed, 26, is married to the daughter of Sheikh Mohammed bin Rashid al-Maktoum, Prime Minister of the U.A.E., ruler of Dubai and executor of an $80 billion family fortune. Such alliances have always carried more weight in the desert than elsewhere. The marriage reinforces Fujairah’s newfound strategic value. To the sheikh, of course, Fujairah has always held special importance. “We talk about it now, but it has always been this way,” says Sheikh Mohammed. “You don’t appreciate it until something goes wrong.”

A lot can go wrong in the Middle East. Right now the chief source of instability is Iran. With its economy in jeopardy and the drumbeats of war growing stronger, Iran has threatened to blockade the Strait of Hormuz, perhaps the most critical shipping passage in the world. Seventeen million barrels of crude per day, roughly 35 percent of the global seaborne oil trade, pass through the 21-mile-wide strait. It is the only exit route out of the Gulf for much of the world’s energy supply.

Fujairah has the potential to change that. Founded in 1971, the United Arab Emirates is a federation of kingdoms, a boomerang-shaped nation on the eastern border of Saudi Arabia. One tip of the boomerang forms the southern boundary of the Persian Gulf. Fujairah is the only emirate on the other side of the Strait of Hormuz, which gives it access to the Gulf of Oman and the Indian Ocean beyond. Its location is transforming this emirate, which has long subsisted on handouts from Abu Dhabi and Dubai, into a bulwark of Gulf security and a global energy hub.

The Dolphin Energy pipeline, completed in 2007, is the first multinational gas grid in the Gulf, and links Fujairah to the biggest gas field in the world, Qatar’s North Field. The government of Abu Dhabi, which possesses 9 percent of global oil reserves, is completing a $3.3 billion crude pipeline, opening later this year, that will carry 1.5 million barrels a day to the port in Fujairah, according to U.A.E. Minister for Energy Mohammad bin Dha’en Al Hameli. The oil will be pumped to an 8 million barrel facility, allowing Abu Dhabi to export half of its crude via tankers departing from Fujairah. In 2014, Abu Dhabi will build a liquid natural gas (LNG) pipeline, terminating at a new gasification facility at the Fujairah port. In all, these networks will allow ships to load and offload in Fujairah, avoiding a risky sail through the Strait of Hormuz. Other Gulf countries are negotiating for access to these networks.

Fujairah, with its mountains, has long been known as a place of untouched natural beauty, a seaside location of camels, valleys, and punishing heat. There is no oil here, and that has meant little international development. Sixty-five miles east of Dubai and 130 miles northeast of Abu Dhabi, Fujairah is a stark contrast from those two places of garish growth. But that appears set to change, too. The emirate is increasingly populated by men schooled in the U.S., dressed in spotless dishdasha, making deals over coffee in the cafes, a country newly alert. Whether it will be another Gulf capital of lightning development and architectural adventure or preserve its rough and remote character is a question that Fujairah’s rulers and residents are struggling to resolve.

Fujairah is made almost entirely of rock, upon which little grows. Its limestone, pulverized into aggregate, supplies building projects around the region, such as Dubai’s Palm Islands. Just 20 percent of the territory of Fujairah is land on which anything can be built, and the flat coast, recently cleared of long-standing and lower-class private housing, is beginning to fill with heavyweight industrial development. A new steel factory will turn out one million tons annually. A storage terminal will hold 275,000 metric tons of grain. The International Petroleum Investment Co., the Abu Dhabi government-owned firm behind the new crude pipeline, is building a refinery at a cost of several billion dollars, which it says will process 200,000 barrels of oil per day.

Already, Fujairah is the world’s second-largest supplier of bunkering services, fueling ships at sea on a scale lower than only Singapore, with 24 million metric tons of fuel sold in 2010. Oil companies such as Azerbaijan’s Socar and Vopak, from the Netherlands, are expanding their existing storage capacity, adding huge tanks along the coast. BP (BP) has returned to oil trading in the region after a 10-year hiatus, chartering a 22,000-ton barge, the largest in Fujairah, for bunkering services. By 2015, local officials estimate, Fujairah’s fuel storage capacity will triple, with 360 units holding more than 13 million cubic meters of oil and oil products, three-fourths of the amount that currently passes through the Strait of Hormuz in a single day. “Fujairah is developing from a regional hub into a global logistics hub,” says Cees de Greve, general manager of Vopak’s Fujairah operation.

Ibrahim al-Ansari, the general manager of the Emirati portion of the Dolphin Energy gas pipeline, remembers riding camels in Fujairah in the days before asphalt roads snaked over the mountains to reach the Gulf of Oman. The pipeline now crosses those same mountains. “The whole area has started to move,” he says from his office in Abu Dhabi, the emirate that drives the U.A.E.’s economy. It is Abu Dhabi that makes policy, and it understands the necessity of Fujairah.

“The government is encouraging different businesses and industry to go there,” al-Ansari says. “The oil pipeline and the LNG pipeline have really started a whole economic cycle.” Fujairah is considering plans to develop an offshore island to attract more tankers. Discussions are under way to relocate the Fujairah airport onto a spur of reclaimed land, freeing additional coastal frontage. Three international-class shopping malls have recently opened, and several luxury hotels are being built to accommodate visitors, who will travel along a new $1.7 billion highway from Dubai that has halved driving time to 45 minutes. Recently, Fujairah hired Ramboll, a Danish engineering and environmental consulting firm, to aid in upgrading infrastructure. “The usable land is limited,” says Adrian Palmer, Ramboll’s Middle East executive director. “They realized, ‘We can’t let this go on, on an ad hoc basis. We need to plan this.’ ”

Modernity has arrived late to Fujairah. The emirate still doesn’t have a full complement of street names and house numbers. Fujairah’s main tourist attraction is Al Bidya Mosque, the oldest in the U.A.E., a mud hut built in the 15th century. Amid the darkness within the small structure, a slight imam nods and welcomes visitors. Silence overwhelms, so far from the hum of development.

Doing business requires patience. It is hot, and people move slowly under the sun. The workday ends at 2 p.m. However, Fujairah is also centrally controlled, and the ruling family need only be impressed for a proposal to take off. Sheikh Hamad bin Mohammed al-Sharqi has ruled Fujairah since 1974. Now 64, he receives supplicants at a weekly open house, where he resolves disputes great and minor, his manner as placid as the gulf waters beyond the palace walls.

Judging by available accounts, Sheikh Hamad is a wise sovereign who is fond of making his own decisions, rather than passing off matters to interminable royal committees. Several years ago, managers of Fujairah’s desalinization plant were perplexed by a naturally occurring phenomenon: A dye released by local sea vegetation was turning seawater red. The factory couldn’t very well pump colored drinking water to Abu Dhabi, which buys its water. Sheikh Hamad ordered engineers to dig a well in the beach, drawing water from beneath the soil, instead of through the expensive pipe that jutted from the plant into the sea. It was a resolution in step with Fujairah’s Bedouin heritage, when locals relied on extracting clean water from the ground.

Such personal engagement will not likely survive large-scale development, but for now, a sense of humility prevails. “We’re very realistic here, and there’s not much salesmanship,” says Sharief Habib al-Awadhi, director general of the Fujairah Free Zone. “If the Super Bowl is played in a small city to enhance the city’s life, this city shouldn’t start thinking that it’s the best.”

Roughly 130,000 people live in Fujairah today. Local officials expect an additional 100,000 foreign workers, from management to menial labor, to arrive in the next five years. Sultan al-Shara, a local entrepreneur, sits in the lobby cafe at Fujairah’s Al Diar Siji Hotel, sipping a Turkish coffee. Al-Shara was educated at Indiana University and San Diego State University, and he discusses the many projects he is currently pursuing: a wind farm, sewage treatment, film and TV production.

Al-Shara says several dozen European companies have contacted him about initiating business in Fujairah, where outside companies must join with a local majority partner. “They are calling me all the time, boss,” al-Shara says.

The U.A.E. may be the most liberal country in the Gulf, but in Fujairah the locals are only beginning to cope with the fresh arrivals. At one of the spotless new shopping malls, the call to prayer emits from the PA system, past the Western couple buying a Frosty at the Wendy’s (WEN) in the food court. Two blonde women have arrived from the nearby tennis club. One is wearing a skirt with a slit up the side. It is not long before four security guards descend on her, shrouding her from view, demanding that she cover herself. It is impossible to know what the other women in the mall may think, as they pass by with their faces covered.

The rising tensions in the region mean Fujairah will also receive visitors of a different variety. Ranged around the swimming pool bar at the Rotana Resort at Al Aqah Beach in northern Fujairah is the crew of the HMS Triumph, a Royal Navy Trafalgar-class nuclear submarine. In March of last year, these submariners fired Tomahawk cruise missiles on Colonel Qaddafi’s presidential compound. For now, they enjoy the sun and cocktails after months at sea.

On a recent afternoon, two U.S. diplomats visit the office of Mohammed Saif al-Afkham, the head of the Fujairah municipality. The envoys speak passable Arabic and eagerly stress Washington’s fondness for Fujairah. Al-Afkham receives them warmly, as he understands their way. He was educated at the University of Arkansas, during Bill Clinton’s governorship. “I shook his hand once,” al-Afkham says. “A very nice man.” Al-Afkham serves at the pleasure of Sheik Hamad, the largest stakeholder in the business of Fujairah. The transactions that take place in al-Afkham’s office are often of the old-fashioned mayoral variety. One man wants to exchange his home for one closer to his family’s. Another wants to dispute a fine.

A large satellite photo of Fujairah hangs on one wall of al-Afkham’s office. Viewed at this scale, Fujairah is striking in that mountains almost entirely overcrowd it. “I was in Little Rock,” al-Afkham says. “Now I live on a big rock.” He also served at length on a U.A.E. Navy frigate, and well understands the importance of the Strait of Hormuz.

Al-Afkham shakes hands with the American diplomats, seeing them to the door with hospitable flourish. Once they have gone, he turns back to the map on the wall, where pending developments are marked. Circumstance has brought prosperity to Fujairah, and al-Afkham knows what it means to be a little lucky. “It’s good it’s happening on my time,” he says, with a playful wink. “Because I get to take the credit.”

 

Forrest is a Bloomberg Businessweek contributor.

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