Executive Summary
Current Market Trends
Recent Market Trends
Competitive Landscape
Best Prospects for U.S. Exporters
Market Entry Strategies
Technical Barriers & Tariffs
Procurement & Tenders
Trade Finance
Industry Sub-Sectors
Upcoming Trade Events
Local Industry Resources
U.S. Commercial Service Information
Tab Options
Executive Summary
Current Market Trends
Recent Market Trends
Competitive Landscape
Best Prospects for U.S. Exporters
Market Entry Strategies
Technical Barriers & Tariffs
Procurement & Tenders
Trade Finance
Industry Sub-Sectors
Upcoming Trade Events
Local Industry Resources
U.S. Commercial Service Information
Executive Summary
The United Arab Emirates (UAE) is estimated to hold the seventh-largest proven oil and natural gas reserves globally, equivalent to 97.8 billion barrels per year. As a member of the Organization of Petroleum Exporting Countries (OPEC) and the Gas Exporting Forum (GECF), the country produces an average of 4 million barrels of petroleum and liquids per day, retaining 100 billion barrels of reserve crude.
Approximately 30 percent of the country’s GDP is directly based on its oil and gas output, contributing to almost 13 percent of the value of its total exports.
One of the UAE’s most recent pursuits was towards the utilization of unconventional gas resources. This form of energy manifests in coal steam gas (CGS) or coal bed methane that is almost equivalent to conventional methane gas but is extracted from a different geological rock. As of November 2020, the UAE became the world’s newest producer of unconventional gas, validating the global expectation that the Arabian Peninsula will have a high potential for the commercial production of this new form of energy. Moreover, in June of 2020, the UAE made one of the world’s largest natural gas discoveries since 2005 and could be anticipated to amplify its already-strong natural gas market; the Jebel Ali reservoir is located between the two emirates and has 80 trillion cubic feet of gas resources. The country is seeking to become self-sufficient in gas supply by 2030, a step that would allow it to break its reliance on imports from Qatar.
Three of Abu Dhabi’s largest government-backed companies, Mubadala Investment Company, Abu Dhabi National Oil Company (ADNOC), and ADQ, in addition to the Ministry of Energy and Infrastructure (MoEI) have formed an alliance for Hydrogen in early 2021 to produce blue and green hydrogen by using both natural gas and renewable energy to market it overseas as well as in the United Arab Emirates.
While the UAE’s oil production was set to rise considerably in 2021, the production delays due to the COVID-19 pandemic will cause output to remain subdued far below previous expectations. The natural gas industry, has not yet been severely impacted, but risks a decline as COVID-19 continues to disrupt domestic and international demand. Nevertheless, the expansion projects ADNOC and the Emirati government are undertaking should help boost oil production in the next five years.
Current Market Trends
Although the global average for oil recovery stands at 35 percent, ADNOC is looking to increase production. ADNOC is seeking to raise its crude oil production capacity to 5 million bpd by 2030, so there is an immediate increased need to expand its infrastructure and jumpstart government programs that will facilitate movement of increased product. According to a 2019 UAE State of Energy Report, Abu Dhabi holds 94 percent of the roughly 100 billion barrels; Dubai holds approximately 4 percent; Sharjah holds 1.5 percent; and Ras Al Khaimah holds 0.5 percent.
The UAE oil and gas market is expected to register a CAGR of greater than 7.5 percent. Factors such as massive investment in upstream and government policies are likely to drive the UAE oil and gas market during the forecast period. Moreover, in 2018, the country launched a mega-project worth USD 45 billion, to increase its refining capacities. The project is expected to increase the refining capacity of the country by 65 percent, up to 1.5 million barrels per day by 2025. This investment in the upstream, midstream, and downstream sectors is expected to drive the UAE oil and gas market during the forecast period. However, the UAE government is expected to shift investments from the oil and gas sector and increase the investments in alternative energy for domestic power consumption, which is likely to hinder the growth of the market during the forecast period.
The UAE, an OPEC member, and a major oil exporter, is looking to gas and other sources of energy to diversify and guarantee security of supply. The burgeoning Middle Eastern business and tourism hub is building nuclear, solar and coal-fired power plants, while ADNOC has invited international companies to help tap previously inaccessible gas deposits.
This expanded production provides opportunities for U.S. firms across a wide range of technologies, equipment, machinery, and services. The UAE has served as a base for international oil companies, and has always encouraged foreign investment into its oil and gas exploration and production sectors. U.S. oil and gas companies are strategically positioned as preferred suppliers and contractors for the UAE, though they should expect tough competition from Asian, European, and local firms.
Recent Market Trends
With proven oil reserves of 97.8 billion barrels estimated in 2018, the UAE has a vast reserve that is expected to drive the downstream market in the forecast market.
The refining throughput capacity of the UAE has shown significant growth with 643 thousand barrels per day in 2014 and 1044 thousand barrels per day in 2018. With this, the refining market is expected to grow considerably. With ADNOC’s announcement in 2018 to invest USD 45 billion in the refining market in the upcoming five years, a robust growth can be expected in the UAE refining sector. In February 2019, projects worth USD 8 million for the engineering and design for a refinery with a capacity of 600,000 barrels per day was allocated to the Wood Group. With such projects, refining capacity can witness growth in the forecast period.
With vast natural gas and oil reserves and large refining capacity, the UAE is expected to show significant growth in the coming period. The oil and gas downstream market is expected to grow considerably with upcoming deals and contracts of the government and increasing interest of international companies. Considerable growth can be witnessed in the forecast period.
In November of 2020, ADNOC and its French partner TOTAL energy company announced their first unconventional gas delivery from the Ruwais Diyab Unconventional Gas Concession, 200 kilometers outside Abu Dhabi.
Competitive Landscape
The UAE oil and gas market is moderately fragmented due to many companies operating in the industry. Key players in this market include Abu Dhabi National Oil Company (ADNOC), Exxon Mobil Corporation, Schlumberger Limited, Al Masaood Oil Industry Supplies & Service Co., and Halliburton.
Best Prospects for U.S. Exporters
Oil and gas demand will continue to rise, extending the country’s dependence on imported fuels, pipeline gas and LNG. The pace of demand growth will slow owing to a mix of fuel switching, efficiency gains, and subsidy reform.
The medium-to-long term outlook remains broadly unchanged and experts maintain a bullish outlook on both the upstream and downstream sectors in the UAE, which remains among the most attractive destinations for investment globally.
Unconventional resources are a new focus. According to ADNOC, a lot of infrastructure will be available to U.S. companies including to those already well-established in the local market. The UAE has unveiled the Ruwais Derivatives Park, a fast-growing industrial hub for the chemical derivatives sector in Abu Dhabi. The Park is located within ADNOC’s long-established refining and petrochemicals cluster in Ruwais and is targeted to become the world’s largest integrated refinery and petrochemicals complex. The value of Phase 1 alone is estimated at over $5 billion. ADNOC is inviting U.S. petrochemicals and derivatives manufacturers to participate in the development of the Ruwais Derivatives Park.
Opportunities in the field of hydrogen include: potential partnerships with ADNOC, Mubadala and ADQ once a clear strategy has been set by this newly formed alliance; collaboration in the production of low-cost blue and green hydrogen in the UAE directly or by partnering with well-established U.S. corporations; development of end-use properties for clean hydrogen to create a demand for it and contribute to UAE’s export of hydrogen; and development of security features for the handling on hydrogen.
Market Entry Strategies
In most sectors, foreign firms seeking to establish themselves within the UAE market no longer need to have a local sponsor or agent and are not limited to a minority ownership position.
Free Trade Zones allow 100% foreign ownership, quick registration, advanced logistical support, and are often organized along sectoral lines. For example, the Dubai Multicommodities Centre (DMCC) caters to firms in the financial services sector. However, with few exceptions, companies in FTZs still must have 51% UAE-owned distributors “onshore” (outside the FTZ structure) in order to sell into the local UAE market. Companies planning to use the UAE to sell regionally and not in the UAE can forgo this step. In July 2019, the UAE Cabinet approved outright foreign ownership across 13 additional economic sectors including information technology, manufacturing, renewable energy, space, and agriculture.
As a regional trade hub supporting significant international business activity, the UAE is a market where American firms can expect to face strong multinational competition. Successful American firms often rely on technological and qualitative advantages to compete with foreign competition that may have lower price points.
Many American firms looking to do business in the Middle East often find practical advantages in a regional approach to their marketing activities in the Gulf.
An extremely advantageous point of market entry for U.S. exporters is the Dubai Expo 2020. Due to COVID-19 disruptions, the new dates will be October 1, 2021 to March 31, 2022. This event will not only help international companies find potential partners but also increase country tourism and private consumption. Post-expo, UAE GDP is expected to grow at 3.2%.
Technical Barriers & Tariffs
The UAE abolished the requirement for foreign-owned companies to have Emirati shareholders and an Emirati majority on the board of directors. Federal Decree-Law No. 12 of 2020, effective as of December 1, 2020, promulgated significant amendments to Federal Law No. 2 of 2015 on Commercial Companies. The Decree offers a major boost to attracting foreign direct investments into the UAE amid the challenges posed by the Covid-19 pandemic. It also encourages greater transparency and good corporate governance. It will generate more high-skill and high-wage jobs and increase economic competition in the country.
The changes apply to limited liability companies and joint stock companies and supersede the Foreign Direct Investment Law (Federal Law by Decree No. 19 of 2018). The new law does not apply to some sectors such as oil and gas, utilities and transport.
The customs duties for most items are calculated on Cost, Insurance, and Freight (CIF) value at the rate of 5 percent. CIF value will normally be calculated by reference to the commercial invoices covering the related shipment, but customs is not bound to accept the figures shown therein and may set an estimated value on the goods, which shall be final, as far as duty is concerned.
Effective January 1, 2018, the UAE started applying the Value Added Tax (VAT). Companies that provide taxable goods or services, with annual revenue of more than $102,000 will be required to register with Ministry of Finance. Businesses with taxable supplies below $102,000 but over $51,000 will have the option to register. Businesses not registered for VAT cannot charge VAT on their sales and cannot claim any VAT incurred on their inputs.
Procurement & Tenders
The UAE has a two-tier government with federal and emirate levels. Each emirate has specific provisions regulating government procurement activities. Public sector work is generally awarded based on Federal Regulation of Conditions of Purchases, Tenders and Contracts, Financial Order No. 16 of 1975 (the “Public Tenders Law”), which prescribes minimum standards in relation to government procurement across the UAE. Abu Dhabi and Dubai also have their own specific government procurement laws. To bid for contracts of Abu Dhabi Government, contractors and suppliers must have an established presence in Abu Dhabi and must possess the licenses needed to carry on business activities in Abu Dhabi. Dubai, on the other hand, requires suppliers to utilize the online e-Supply portal operated by Dubai eGovernment for any type of government procurement projects.
In Abu Dhabi, suppliers should register to the ADNOC Commercial Directory in order to be considered for tendering opportunities from across the Group.
Key Requirements:
A Mainland Abu Dhabi DED Licence is required. This may be in the form of an LLC or Foreign Branch.
The Trade Licence will need Supreme Petroleum Council (SPC) Approval.
The activities listed on the Licence will need to match the services and products you wish to undertake with ADNOC.
Please see below link for supplier registration guide:
Supplier guideline new - ADNOCadnoc.ae › files › suppliers › supplier-registration-guide
In 2018, ADNOC introduced the In-Country Value (ICV) program, which will increase the company’s contribution to the continued development of the UAE economy and strengthen its relationship with the UAE’s private sector. All business partnerships with ADNOC now include an ICV assessment integrated into the tender evaluation and award process.
Trade Finance
Checks are an important payment instrument in the UAE for transactions of large amounts. The Image Check Clearing System (ICCS) introduced in 2008 greatly accelerated checks processing. Bounced checks are considered a criminal offense and could be punished by prison sentences.
Electronic fund transfers are also widely used in the UAE. The Central Bank operates the UAE Funds Transfer System (UAEFT) the only Real-time gross settlement (RTGS) system serving retail and large value payments. It also introduced the International Bank Account Numbers (IBAN) system for use by all bank customers in the country in November 2011. The system is designed to minimize the risk of errors during cross-border transactions.
Trade financing has become increasingly common in the UAE, and most local and international banks offer services to small and medium-sized enterprises, allowing them to trade with local and international markets. Commercial Letters of Credit (LCs) are extensively used as a means of payment in overseas trade. The most commonly used types of LCs include: Sight, Deferred Payment, and Revolving. Provisions of the Commercial Transactions Law (CTL) are complementary to the parties’ intentions and who often elect to be governed instead by International Chamber of Commerce (ICC) Uniform Custom and Practice for Documentary Credit. According to the CTL, in absence of any clear indication, the LC is considered be irrevocable in contrast to international standards.
Industry Sub-Sectors
Upstream
ADNOC’s 2030 Integrated Strategy seeks to enhance the profitability of the firm’s upstream assets, as well as provide the firm with the crude resources necessary to meet projected increases in global crude oil demand. Consequently, ADNOC Group announced in November 2018 that it plans to augment its daily crude production capacity to 4 million B/D by 2020, and to 5 million B/D by 2030, joining the United States, Russia and Saudi Arabia as the only producers capable of producing 5 million B/D.
Further, ADNOC Group plans to further augment its oil upstream through concession agreements for new exploration and production. ADNOC has traditionally engaged foreign partners via negotiated joint ventures, however in April 2018, ADNOC announced the launch of its first competitive licensing round for six onshore and offshore concessions. Though the first exploration and production licenses have yet to be awarded, ADNOC announced in November 2018 that the competitive bidding process had already led to new discoveries of 1 billion barrels of oil in place.
The 2030 Integrated Strategy shows a major shift in corporate strategy as it regards the deployment of the firm’s natural gas assets, emphasized by the November 2018 announcement of the firm’s new Integrated Natural Gas Strategy, and 15 TcF of new natural gas discoveries.
Downstream
The expansion of ADNOC Group’s downstream activities will be critical to the success of the 2030 Integrated Strategy. It is imperative that producers like ADNOC, primarily active in crude exports, insulate themselves from projected, and potentially crippling changes in global hydrocarbon energy consumption, as markets begin to adjust to new cost competitive renewable energy and natural gas, as well as increased global interest in climate-change mitigation. As such, ADNOC Group has embarked on an ongoing $45bn effort to upgrade its downstream operations, leveraging preexisting assets and new downstream investments to strengthen market share and enhance corporate sustainability. ADNOC seeks to build a new 600,000 B/D refinery to increase the Ruwais complex’s feedstock flexibility and augment its refined products output beyond its current maximum capacity of 817,000 B/D.
Also, in natural gas processing, ADNOC Group subsidiary ADNOC LNG has announced the award of an EPC contract for Phase II of its Integrated Gas Development Expansion (IGD-E) project. The Phase II of the IGD-E project will add 245 million cubic feet per day of associated gas to the 1.4 billion cubic feet per day of offshore gas sent from Das Island to ADNOC Gas Processing’s Habshan gas facilities to be processed for use in power generation.
In keeping with the 2030 Integrated Strategy, ADNOC LNG seeks to secure its natural gas supply, and diversify its customer base in service of long-term sustainability. In November 2018, ADNOC announced an agreement with its partners in ADNOC LNG, Mitsui, BP and Total, to supply ADNOC LNG with natural gas until 2040. At the same time, ADNOC LNG also disclosed that it had inked term contracts with seven buyers for the sale of LNG. “The contracts, which cover the supply of LNG on a mid-term basis starting April 2019, have been signed with various international well-established LNG buyers, including Japan’s JERA Co., which announced, in August, it plans to purchase up to 8 cargoes per annum of LNG from ADNOC LNG, for a period of three years, starting in April 2019.”
ADNOC Group is also engaging new international partners to help expand downstream market share and access to critical Asia Pacific growth markets. In November 2018, ADNOC and Wanhua Chemical Group of China signed a ten-year contract, whereby ADNOC agreed to supply Wanhua with 1 million metric tons of liquified petroleum gas (LPG) annually. ADNOC’s work with Wanhua compliments its earlier strategic cooperation framework agreement with China National Petroleum Corporation (CNPC). The comprehensive agreement mentions multiple areas of envisioned technical collaboration, as well as that “CNPC will ‘explore potential Chinese investment in a number of planned downstream projects [in the U.A.E. and China], including an aromatics plant, a mixed-feed cracker, and a new refinery.’”
In 2018, ADNOC notched several notable successes in its efforts to upgrade its engagement with the Indian market. In the U.A.E., ADNOC agreed to sell a 10% stake in the Lower Zakum concession to an Indian consortium led by Oil and Natural Gas Corporation (ONGC). While in India, ADNOC became the “only foreign oil and gas company to invest, by way of crude oil” in the Indian Strategic Petroleum Reserves (ISPRL), shipping 5.86 million barrels of crude oil for storage at ISPRL’s Mangalore facility and signing a preliminary agreement to potentially store millions of additional barrels at ISPRL’s Padur facility. Also in India, ADNOC entered into an agreement with Saudi Aramco for a shared 50% stake in Ratnagiri Refinery and Petrochemicals Limited (RRPCL), a joint venture with plans to build a $44 billion, 1.2 million B/D capacity mega-refinery on India’s western Coast.
Upcoming Trade Events
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