Start an Oil Trading Company in the UAE

by commitbizadmin 17, Aug 2020

Start an Oil Trading Company in the UAE

The UAE comprises seven emirates, which are Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al-Khaimah, Sharjah and Umm Al-Quwain. The country covers an area of around 84000 square kilometres and has a population of approximately 10 million.  The UAE is a member of OPEC(Organization of the Petroleum Exporting Countries).OPEC sets UAE's production targets and strategies. Oil and gas output constitutes about 30 per cent of the country's GDP.

According to the Oil & Gas Journal, the UAE holds the seventh position in proven reserves of oil in the world. During the meeting held at ADNOC(Abu Dhabi National Oil Company) headquarters, the Council revealed the discovery of new hydrocarbon reserves estimated at 58 trillion standard cubic feet of conventional gas and 7 billion barrels of crude oil, making UAE shift from the seventh position to sixth position in terms of global gas and oil reserves.

Statistics Of Oil Consumption in the UAE

In UAE majority of the population use natural gas as an energy source followed by crude oil, with coal and renewables making up the remainder. Most of the natural gas reserves are in Abu Dhabi, constituting about 94 per cent of the total reserves.

UAE has total reserves of 273 trillion cubic ft and 105 billion barrels of conventional gas. The Council also announced the invention of 160 trillion standard cubic ft of unconventional gas resources. Below table gives some numbers regarding oil demand, exports and reserves of oil and gas reserves in UAE.

Particulars

Value

value of total exports (million dollars)

388179

value of petroleum exports(million dollars)

74940

proven crude oil reserves(million barrels)

74940

proven crude oil reserves(million barrels)

97800

proven natural gas reserves(billion cu.m.)

6091

crude oil production(1000 b/d)

3008.3

market production of natural gas(million cu.m.)

47624

crude oil exports(1000 b/d)

2296.5

petroleum products exports(1000 b/d)

916

natural gas exports(million cu.m.)

7087

oil demand(1000 b/d)

885.2

How to Trade Oil?

Oil is a popular commodity among traders. The demand for oil is always increasing, and the market price of oil is volatile. Oil trading can be done in three steps,

1. Learn Oil Market Dynamics

To understand the oil market one needs to know about oil futures and oil option.

Oil futures are contracts in which trader agrees to exchange a set amount of oil at a particular price on a set date. They are contracted on futures exchanges and are the most regularly used method of selling and buying oil.

Oil futures trades on exchanges, just like shares. But unlike stocks, they are commerced in the form of oil benchmarks. Oil quality is not similar in all the locations. Therefore oil benchmarks enable traders to quickly identify the drilling location and quality of the oil they are buying and selling. In UAE, ADNOC is the dominant shareholder and owns 60% of the company, with CNPC owning the remaining 40%.

An oil option is analogous to a futures contract, but with one minor difference. With an oil option, you have an authority to buy a set amount of oil before a set date at a fixed price, but there is no constraint to trade if you don't want to. Options also facilitate a method of trading on the price movements of oil without taking the delivery of the material itself.

2. Choose a Way for Trading

Select the type of trading based on your convenience

Here are three ways of trading

  • Trade via CFDs
  • Buy futures or options
  • Oil investment
  • Open your company

Procedure For Setting Up A Oil And Gas Company In UAE

UAE is a viable location for setting up a business because of its business-friendly policies and transparency. Earlier UAE was more dependent on its oil and gas revenues. Nowadays, this industry is highly regulated, and therefore offshore or free zone companies are not allowed to do these business activities.

It is crucial to note that approval from SPC(Supreme Petroleum Council)) is necessary for setting up an oil and gas company. SPC is the regulatory authority established to loof after the petroleum policy of the UAE. SPC  forms the board of directors of ADNOC.

Here are some Steps Involved in Setting up an Oil and Gas Company in the UAE

  1. Decide and shortlist 3 -4 business names
  2. Decide the legal form and prime activities  for the proposed business
  3. obtain initial approval from the authority and Check the name availability
  4. Find out the working space and arrange the documents, for example, Lease Deed, Ejari etc.
  5. Prepare documents as instructed by the authority at the time of acceptance of initial approval
  6. The authority may ask the company to obtain consent from other regulatory authorities before issuing the license.
  7. Submit the documents to authorities to obtain a trade license
  8. Once after getting a trade licence, open a company Bank account
  9. Register the Company with Immigration and Labor Department
  10. Find out the right people to work for you and obtain their employment permits and visas.

Why Commitbiz?

Setting up an oil and gas company is an easy task, but it requires an expert's eye. It is advisable to take help from specialists to establish your business. Commitbiz is a company which can help you through the process of setting up your business. If you have made up your thoughts to set up a business, then feel free to contact us. We are overwhelmed to help you!!!!