profile uae

ECONOMIC DEVELOPMENT

THE ECONOMY

THE FIFTY-EIGHTH ANNUAL MEETINGS of the Boards of Governors of the World BankGroup and the International Monetary Fund, held in Dubai in September 2003,focused the attentions of the world’s leading financial experts on the impressivestrides taken by the United Arab Emirates in recent years. It was absolutelyclear to all of the 20,000 or so people who came to the UAE for the financialmeetings that they were visiting a forward looking nation that is seeking tocapitalise on the varied assets at its command. Organisation of the IMF/WorldBank Meetings, the facilities provided to visiting delegates and the celebrationsthat accompanied the events were widely commended in the media. It was anoccasion that further enhanced the country’s reputation on the world stage.

ANNUAL REVIEW

At the time of writing, in late 2003, economic reports for 2002 are completed,analysis for 2003 is ongoing and projections for 2004 are available. The followingsummary is primarily based on figures and reports provided by the UAE CentralBank and the Ministry of Planning.

The 2003 Yearbook stated that preliminary data for 2001 indicated a GDP basedon constant 1995 prices of Dh217.025 billion. Subsequent data has since becomeavailable that raises this figure to Dh221.8 billion and pegs the 2002 value atDh225.7 billion. These figures equate to GDP in current prices at Dh254.2 billionin 2001 and Dh260.6 billion in 2002.

As noted above, GDP in 2002 (based on fixed prices for the year 1995),according to the Central Bank, reached Dh225.7 billion. This represented anoverall growth rate on the figure for 2001 of just under 1.8 per cent. The non-oil sector, amounting to Dh177,768 million in 2002 (preliminary data), grew ata rate of 4.8 per cent on its value for 2001 (Dh169,570 million). Meanwhile,hydrocarbon output actually fell by 8.1 per cent in 2002 compared with its valuein 2001 (i.e. Dh48.0 billion in 2002 compared with Dh52.2 billion in 2001). Thedecrease in value-added from the oil and gas sector during the period, when oilprices actually increased by 6.4 per cent, was brought about by an adherence tothe production quota set by OPEC that resulted in reduced exports.

79E C O N O M I C D E V E L O P M E N T

80 81U N I T E D A R A B E M I R A T E S Y E A R B O O K 2 0 0 4 E C O N O M I C D E V E L O P M E N T

(In millions of Dh at constant 1995 prices)

Sectors 2001 2002*

(1) Non-Financial Enterprises Sector ................................... 183,163 ......... 184,342- Agriculture, Livestock, Fishery ................................... 8,500 ........ 9,090- Mining ............................................................... 52,853 ........ 48,653

A. Crude Oil & Natural Gas .................................. 52,181 ........ 47,956B. Quarries ....................................................... 672 ........ 697

- Manufacturing ...................................................... 33,362 ........ 34,691- Electricity, Gas and Water ....................................... 4,748 ........ 4,970- Construction ........................................................ 16,490 ........ 16,970- Wholesale / Retail Trade and Maintenance ................... 21,146 ........ 22,500- Restaurants and Hotels ........................................... 4,990 ........ 5,245- Transportation, Storage and Communication ................ 18,313 ........ 18,682- Real Estate and Business Services ............................. 18,906 ........ 19,420- Social and Private Services ....................................... 3,855 ........ 4,121

(2) Financial Enterprises Sector .......................................... 16,244 ........ 17,480

(3) Government Services Sector ......................................... 25,547 ........ 27,129- Household Services ................................................. 1,862 ........ 2,120

(Less): Imputed Bank Services Charges .............................. 5,065 ........ 5,347

TOTAL ..................................................................... 221,751 ........ 225,724Total Non-Oil Sectors .................................................. 169,570 ........ 177,768

Source : Central Bank, Annual Report 2002 and Ministry of Planning * Preliminary Data

Table 1: Gross Domestic Product at Base Price by Economic Sectors Table 1: Gross Domestic Product at Base Price by Economic Sectors

Table 2: Gross Domestic Product by Sectors (Percentages of Total GDP) Table 2: Gross Domestic Product by Sectors (Percentages of Total GDP)

Sectors Gross Domestic Product Non-Mining GDP*

2000 2001 2002 2000 2001 2002

A. Goods Production Sectors ............ 53.4 52.3 50.7 38.7 37.4 37.1Agriculture, Livestock & Fishery ..... 4.1 3.8 4 5.4 5 5.1Mining .................................... 24.2 23.8 21.6 - - -Manufacturing .......................... 15.5 15 15.4 20.5 19.8 19.6Building & Construction .............. 7.5 7.4 7.5 10 9.8 9.6Electricity, Gas & Water ............... 2.1 2.1 2.2 2.8 2.8 2.8

B. Services Sectors ......................... 46.6 47.7 49.3 61.3 62.6 62.9

* Percentage of GDP at factor cost after excluding mining sector.Source: Central Bank Annual Report, 2002

2000 2001 2002

Non-Financial Enterprises Agriculture, Livestock & Fishery Wholesale/Retail Trade & Maintenance

Financial Enterprises Mining Restaurants & Hotels

Government Services Manufacturing Transportation, Storage & Communications

Electricity, Gas & Water Real Estate & Business Services

Building & Construction Social & Private Services

(3) Government Services

(3) Government Services

36,244

27,129

183,163

184,342

2001

2002*

25,547

17,480

(1) Non-Financial Services

(1) Non-Financial Services

(2) Financial Enterprises

(2) Financial Enterprises

8,500

52,853

33,362

4,748

16,490

21,146

4,990

18,313

18,906

3,855

9,090

48,653

34,691

4,970

16,970

22,500

5,245

18,682

19,420

4,121

Services Mining Building & Agriculture,

Livestock & Fishery Manufacturing Electricity, Gas & Water

Sour

ce:M

inist

ry o

f Pla

nnin

gSo

urce

:Cen

tral B

ank

and

Min

istry

of P

lann

ing


Table 3: Per Capita Gross Domestic Product

Table 4: Population by Gender & Age Groups, Mid-Year Estimates

60 and above40 to less than 6015 to less than 40

Less than 15

FemaleMale

TOTAL


Less than 15

FemaleMale

TOTAL


Less than 15Female

MaleTOTAL

2000

2001

2002

0 500,000 1,000,000 1,500,000 2,000,000 2,500,000

2000 2001 2002

GDP* (Dh Millions) 214,327 221,751 225,724

Population (Thousands) 3,247 3,488 3,754

GDP Per Capita (Dh) 66,008 63,575 60,129

400,254 517,315 117,803 21,628 1,057,000434,736 1,249,373 474,025 31,866 2,190,000834,990 1,766,688 591,828 53,494 3,247,000

426,658 553,467 125,932 22,943 1,129,000465,791 1,347,571 511,632 34,006 2,359,000892,449 1,901,038 637,564 56,949 3,488,000

456,679 594,729 135,181 24,411 1,211,000499,132 1,454,816 552,802 36,250 2,543,000955,811 2,049,545 687,983 60,661 3,754,000

SECTORS 2000 2001 2002*

Non-Financial Enterprises Sector............................... 1,330,605 ........ 1,497,125 ......... 1,575,268– Agriculture, Livestock and Fisheries.................. 120,242 ........ 154,043 ......... 163,192– Mining Industries............................................. 27,639 ........ 30,248 ......... 31,702

A. Crude Oil & Natural Gas........................... 23,465 ........ 25,945 ......... 27,197B. Quarries................................................... 4,174 ........ 4,303 ......... 4,505

– Manufacturing Industries................................. 226,090 ........ 246,910 ......... 262,812– Water, Gas and Electricity................................ 29,650 ........ 31,370 ......... 32,363– Construction and Building............................... 287,198 ........ 305,477 ......... 320,184– Wholesale / Retail Trade and Maintenance....... 336,585 ........ 370,827 ......... 392,651– Restaurants and Hotels................................... 72,008 ........ 84,001 ......... 89,720– Transportation, Storage and Communication.... 107,788 ........ 127,243 ......... 130,923– Real Estate and Business Services.................... 42,260 ........ 56,495 ......... 58,654– Social and Private Services............................... 81,145 ........ 90,511 ......... 93,067

Financial Enterprises Sector...................................... 23,039 ........ 24,825 ......... 25,635Government Services Sector...................................... 203,897 ........ 214,226 ......... 224,633

– Household....................................................... 180,230 ........ 192,846 ......... 205,000TOTAL...................................................................... 1,737,771 ........ 1,929,022 ......... 2,030,536

Source: Central Bank Annual Report, 2002 and Ministry of Planning. * Preliminary Data.

2002*

2001

2000

BR

EAK

DO

WN

OF

NO

N-F

INA

NC

IAL

ENTE

RPR

ISES

SEC

TOR

Table 5: Employees by Economic Sector

Social and PlanningServices

Real Estate andBusiness Services

Transportation, Storageand Communications

Restaurants and Hotels

Wholesale / Retail Tradeand Maintenance

Construction andBuilding

Water, Gas and Electricity

Manufacturing Industries

Mining Industries

Agriculture, Livestockand Fisheries

0 100,000 200,000 300,000 400,000

Continued development of the non-oil sectors further emphasised the impactof diversification with 78.8 per cent of GDP in 2002 (compared with 76.5 percent in 2001) resulting from output of this sector. Meanwhile, the UAE hasintensified a drive over the past few years to give the private sector a greaterrole in the domestic economy through privatisation of public institutions andexpansion of incentives for private productive ventures. As a result, the shareof the private sector in the gross domestic product has steadily increased to alevel where, if one excludes oil and gas, it surpasses that of the public sector.

The growth of the financial services sector, considered to be of pivotal importancein the UAE’s development strategy, has continued apace. Its expansion at a rate of7.6 per cent over 2001 figures represented the fastest growth rate of any sector. Interms of its overall importance, the financial services sector comprised 7.3 per centof overall output in 2001, increasing to 7.7 per cent in 2002. Other notable growthrates included the public services sector (6.2 per cent above 2001 level); hotelsand restaurants sector (5.1 per cent above 2001 level); agriculture, livestock andfishery sector (6.9 per cent above 2001 level); and the wholesale/retail trade andmaintenance sector (6.4 per cent above 2001 levels).

Population and GDPThe UAE’s strong economy, healthy social development and its political stabilityhave continued to support a steady rise in population over the past few decades(increasing to reach an estimated 3.75 million by January 2003). A quarter ofthe population is less than 15 years old; 55 per cent is aged from 15 to 39 yearsold; 18 per cent from 40 to 59 years old; and 2 per cent 60 or over. Thesefigures emphasise the youthful nature of the UAE’s demographic structure andunderpin the priority that government has placed on development of educationfacilities. The relatively high rate of population increase (7.6 per cent higher in2002, compared to 2001) combined with the modest increase in GDP over thesame period (only 1.9 per cent) led to a continuation of the trend for GDP percapita to be reduced. In fact it decreased by 5.4 per cent, reaching Dh60,100in 2002 compared with Dh63,600 in 2001.

FINANCIAL MARKETS

Trading in shares of major companies within the UAE and in the Arabian regionis carried out at two recently established Financial Markets, the Abu DhabiSecurities Market (ADSM) and the Dubai Financial Market (DFM). Both thesemarkets have shown very significant growth and are now well established. Thevolume of shares traded in 2002 at ADSM reached Dh800.98 million while DFMrecorded a trading volume of Dh1.55 billion. Trading at ADSM was valued atDh3.69 billion in 2003. The daily average was Dh5.4 million, peaking in Septemberwith a figure of Dh636.2 million. The banking sector at Dh1.63 billion formed

85E C O N O M I C D E V E L O P M E N T84 U N I T E D A R A B E M I R A T E S Y E A R B O O K 2 0 0 4

(%)

2000 2001 2002Population (000) 3247 3488 3754GDP, in Current Prices, (Dh billion) 258 254.2 280.6GDP, at constant 1995 prices, (Dh billion) 214.3 221.8 225.7Real GDP Growth Rate (%) 12.3 3.5 1.8Changes in Consumer Price Index (%) 1.4 2.7 2.9Employees (000) 1736 1929 2031Nominal Rate of Growth of Final Consumption (%) 11.7 4.2 6Nominal Rate of Growth of Fixed Capital Formation (%) 6.5 4.8 2.7Total Exports & Re-Exports (Dh billion) 1 183.02 179.12 182.14Crude Oil Exports (Dh billion) 79.46 65.2 62.24Total Re-Exports (Dh billion) 48.15 51.18 53.53Total Imports (Dh billion) 2 128.57 136.96 143.73Trade Balance (Dh billion) 54.44 42.16 38.41Current Account Balance (Dh billion) 50.5 36.54 31Capital Account Balance (Dh billion) -40.09 -34.76 -32.52Balance of Payments Overall (Dh billion) 10.41 1.78 -1.52Average Oil Price (US$ Per Barrel) 27.2 23.3 24.8AED Exchange Rate for each US Dollar 3 3.6725 3.6725 3.6725

Source: Central Bank of the UAE; Ministry of Planning; Customs Departments of Local Governments1 Including Free Zones Exports and Non-Monetary Gold.2 Including Free Zones Imports and Non-Monetary Gold.3 Effective Nov. 1997, the AED Exchange Rate has been adjusted to AED 3.6725 for each US Dollar

Table 6: Selected Economic Indicators

2000 2001 2003 2000 2001 2003 2000 2001 2003

Population GDP in Current Prices GDP at Constant 1995 Prices

(000) (Dh billion) (Dh billion)

(%) (%) (000)

(%) (%) (Dh billion)

(Dh billion) (Dh billion) (Dh billion)

(Dh billion) (Dh billion) (Dh billion)

(Dh billion) US$ per barrel) (Dh per US$)

Real GDP Growth Rate Consumer Price Index Employees

Final Consumption Fixed Capital Formation Total Exports & Re-Exports

Crude Oil Exports Total Re-Exports Total Imports

Trade Balance Current Account Balance Capital Account Balance

Balance of Payments Overall Average Oil Price Average AED Exchange Rate

3800

3500

3200

2900

12

8

4

0

12

8

4

0

80604020

0

60

40

20

0

12

8

4

0

-4

285

270

255

240

3

2

1

0

6

4

2

0

54

51

48

45

60

40

20

0

27

25

23

21

226

220

214

208

205019501850175016501550

183

181

179

177

145140135130125120

0

-15

-30

-45

43210


Expenditure decreased in 2002 by Dh9.1 billion (9.5 per cent), reaching Dh86.4 billion, againstDh95.5 billion in 2001.

Current ExpenditureCurrent expenditure constituted 83.8 per cent of total expenditures in 2002, reaching Dh72.4billion, against Dh77.0 billion in 2001.

Expenditure on salaries and wages rose in 2002 by Dh429 million (3.1 per cent) to reachDh14.4 billion. Expenditure on goods and services also increased by Dh592 million to reachDh22.1 billion. Meanwhile, expenditure on subsidies and transfers dropped by Dh3.7 billion(20.0 per cent) to reach Dh15.0 billion. Other unclassified current expenditure decreased byDh1.9 billion (8.5 per cent) to reach Dh20.8 billion.

Development ExpenditureDevelopment expenditure dropped by 6.2 per cent to reach Dh12.5 billion in 2002, againstDh13.3 billion in 2001.

Loans and Equity ParticipationLoans and equity participation declined by 70.1 per cent in 2002 compared to its level in 2001,reaching Dh1.5 billion, of which 38.3 per cent was spent locally.

Revised budget figures for 2002, published in late 2003 by the Ministry of Planning, indicatedthat the Consolidated Finance Account (CFA) deficit widened to around Dh25.6 billion fromDh22.7 billion in 2001. The lower deficit than that estimated earlier in the year (and reportedin the Central Bank Annual Report for 2002) was related to lower than expected expendituresduring the year. The increase in deficit for 2002 compared to 2001 was mainly due to a sharpdecline in revenue, especially from the oil sector.

ITEMS 2001* 2002**

REVENUES 68,633 57,209

Tax Revenues ...................................................................... 6,274 6,881Customs Revenues ........................................................ 1,846 1,663Other ............................................................................ 4,428 5,218

Non-Tax Revenues .............................................................. 62,359 50,328Oil and Gas .................................................................. 51,648 40,926Enterprise Profits ........................................................... 3,385 3,357Other ............................................................................ 7,326 6,045

EXPENDITURES .......................................................................... 95,459 86,364

Current Expenditures .......................................................... 77,005 72,364Salaries and Wages ....................................................... 14,019 14,448Goods and Services ....................................................... 21,553 22,145Subsidies and Transfers ................................................. 18,750 15,009Other Unclassified ......................................................... 22,683 20,762

Development Expenditures ................................................. 13,283 12,466

Loans and Equity ................................................................ 5,171 1,544Domestic ...................................................................... 903 592Foreign .......................................................................... 4,268 952

OVERALL SURPLUS (+) OR DEFICIT (-) ...................................... (-)26,826 (-)29,165

Financing ............................................................................. 26,826 29,165Changes in net Government Deposits with Banks........... -2,349 -4,339Other(1)........................................................................... 24,477 33,504

Source : Ministry of Finance and Industry and Local Governments Finance Departments*Adjusted data ** Preliminary data (1)Transfers from returns on government’s investments.

Table 7: The Consolidated Government Finance AccountPUBLIC FINANCE 2002

REVENUES

EXPENDITURES

THE DEFICIT

Primarily due to the reduced income from oil and gas exports, total revenues dropped by 16.6per cent in 2002 to reach Dh57.2 billion, against Dh68.6 billion in 2001.

Tax RevenuesTax revenues (customs duties, fees and other charges) increased in 2002 by 9.7 per cent toreach Dh6.9 billion, against Dh6.3 billion in 2001, accounting for 12.0 per cent of totalrevenues. The increase occurred in ‘other tax revenues’, which rose by Dh790 million (17.8 percent). Meanwhile, customs revenues fell Dh183 million to a total figure of Dh1.7 billion.

Non-Tax RevenuesNon-tax revenues decreased by 19.3 per cent in 2002, to reach Dh50.3 billion, against Dh62.4billion in 2001, forming 88.1 per cent of total revenues. This was attributed to a drop of Dh10.7billion (20.8 per cent) in receipts from oil and gas sales that recorded Dh40.9 billion in 2002against Dh51.6 billion in 2001.

100,000

80,000

60,000

40,000

20,000

01998 1999 2000 2001 2002

DEFICIT

TOTAL REVENUES

TOTAL EXPENDITURES

Mill

ions

ofAE

Ds

2001* 2002**Current Account Balance ................................................ 36.54 31.00- Trade Balance ................................................................ 42.16 38.41

Oil Exports ............................................................ 65.20 62.24Gas Exports .......................................................... 13.13 12.42Total Goods Exports (FOB) .................................... 49.61 53.95Petroleum Products ............................................... 9.47 12.12Free Zone Exports .................................................. 24.95 26.02Other Exports (1) .................................................... 15.19 15.81Re-Exports ............................................................ 51.18 53.53Total Exports and Re-Exports (FOB) ....................... 179.12 182.14Total Imports (CIF) ................................................ –136.96 –143.73Free Zone Imports ................................................. –24.59 –25.73Other Imports (2) ................................................... –112.38 –118.0

- Income & Services (Net) ................................................ 9.84 8.75Investment Income ................................................ 18.60 18.32Services (3) ............................................................ –8.76 –9.57

- Transfers (Net) ............................................................... –15.46 –16.16Private .................................................................. –14.36 –15.20Public .................................................................... –1.10 –0.96

Capital Account Balance ( Net ) ..................................... –34.76 –32.52- Official Loans and Equity Participations ......................... 0.22 0.32- Short-Term Private Capital ............................................. –3.86 –13.75- Government Institutions, Private Capital

Flow & Net Errors and Omissions .................................. –31.12 –19.08

Overall Surplus (+) or Deficit (-) ...................................... 1.78 –1.52

Changes in Reserves {(-) Indicates Increase} .................. –1.78 1.52- Net Foreign Assets with Central Bank ............................ –1.73 1.84- Reserve Position with IMF ............................................. –0.05 –0.32

(1) Including estimates of the exports of petroleum products, fertilisers, lubricants, other exports from all UAE and theexports of non-monetary gold.

(2) Included imports of non-monetary gold.(3) Included travel, transport and government services.

* Revised* * Preliminary Data Source: UAE Central Bank Annual Report 2002


It should be stated here that the published deficit figures for government finances do not reflectthe fact that a significant portion of Abu Dhabi’s oil earnings are paid directly into reserveaccounts and that the UAE generates considerable income from its overseas investments. Thesetwo very significant income sources are used to fund part of the deficit.

Dirham Exchange RateDue to its fixed peg to the US dollar, the dirham depreciated as a result of depreciation of theUS dollar against most major currencies during 2002. It depreciated against the euro (6.1 percent), the pound sterling (4.6 per cent), the Japanese yen (1.0 per cent), the Swiss franc (7.2 percent) and the SDR (1.7 per cent). The rate of exchange of the dirham remained unchangedagainst all GCC currencies, except for the Kuwaiti dinar which appreciated against the dirhamby 0.9 per cent in 2002, compared to its level in 2001.

Consumer Price Index NumbersData published by the Ministry of Planning on consumer price index numbers indicate that thegeneral consumer price index number (1995 base year) rose from 113.7 in 2001 to 117.0 in2002 (2.9 per cent). The increment was due to price rises in all major expenditure groups. Theindex number for the medical care and medical services group rose from 138.8 in 2001 to 150.0in 2002. Likewise, the index number for the housing and related housing services rose from 99.0in 2001 to 104.3 in 2002 and that for the recreation, education and cultural services group rosefrom 125.0 in 2001 to 131.0 in 2002. The index numbers for the remaining groups registeredonly slight rises.

Preliminary estimates of the balance of payments indicate a decline in the surpluses of both thetrade balance and the current account during 2002. The trade balance surplus decreased fromDh42.2 billion in 2001 to Dh38.4 billion in 2002 (8.9 per cent). Similarly, the current account

MONETARY AND CREDIT POLICY

THE BALANCE OF PAYMENTS

(Foreign Currency Units Per Dirham) (1999=100)

Currency 1999 2000 2001 2002

US Dollar 100.0 100.0 100.0 100.0

Japanese Yen 100.0 105.0 123.0 121.8

Euro 100.0 109.4 113.0 106.1

Pound Sterling 100.0 106.3 112.0 106.8

Swiss Franc 100.0 106.4 105.6 98.0

SDR 100.0 104.0 107.8 106.0

Table 8: Dirham Exchange Rate Index

PUBLIC FINANCE 2002 Table 9: Estimates of UAE Balance of Payments (Billions of AEDs)

91E C O N O M I C D E V E L O P M E N T90

surplus dropped from Dh36.5 billion in 2001 to Dh31.0 billion in 2002. The decline in tradebalance surplus was connected with the decline in value of crude oil and liquefied gas exportson the one hand, and to the increase in value of commodity imports on the other. The formeroccurred despite a background of oil price increases during 2002. The weighted average priceof crude oil rose from US$23.3 a barrel in 2001 to US$24.8 a barrel in 2002 (6.4 per cent). Aspreviously noted in the introductory remarks to this chapter, the key factor causing the reducedearnings from the oil and gas sector was the state’s adherence to its production quota (seetable 18) which resulted in a 4.5 per cent drop in the value of its crude oil exports in 2002compared to 2001. Meanwhile, the value of gas exports also declined from Dh13.1 billion in2001 to Dh12.4 billion in 2002.

The negative impact of these reductions was partially offset by rises elsewhere. The value ofpetroleum products exports increased from Dh9.5 billion in 2001 to Dh12.1 billion in 2002(27.9 per cent). Likewise, the value of other exports (including non-monetary gold and freezones’ exports) rose from Dh40.1 billion in 2001 to Dh41.8 billion in 2002 (4.2 per cent) andthe value of re-exports also rose to Dh53.5 billion in 2002 against Dh51.2 billion in 2001 (4.6per cent).

Due to a pick up in activity in domestic non-oil sectors, an increase in the value of re-exports,particularly to neighbouring countries in the region, and stronger domestic demand owing toincreases in income levels and population, the value of total imports (including estimatedcommodity imports of all emirates plus free zone imports and imports of non-monetary gold)rose by 4.9 per cent in 2002, reaching Dh143.7 billion. As a result of the depreciation of thedirham against currencies of the country’s major trade partners and the moderate increase inprices of commodities in countries of origin, the value of imports in 2002 does not fully reflectan increase in volumes compared to 2001.

With regard to the structure of imports in 2002, estimates indicate consumer goodsaccounted for 52.9 per cent of total imports. Capital goods reached 35.1 per cent whileintermediary goods remained almost unchanged at the level of 12.0 per cent recorded in 2001.

Within the current account, the balance of investment income achieved by public and privateinvestment institutions dropped in 2002 by Dh300 million compared to 2001, reaching Dh18.3billion. Meanwhile, the tourism, travel and government services debit balance continued to rise,reaching Dh9.6 billion in 2002, against Dh8.8 billion in 2001.

The capital account net balance reached Dh32.5 billion in 2002 against Dh34.8 billion in2001. Within this account, private short-term capital recorded an outflow of Dh13.8 billion in2002, against Dh3.9 in 2001. Capital flows through government institutions, private capital andnet errors and omissions declined from Dh31.1 billion in 2001 to Dh19.1 billion in 2002.Meanwhile, the overall position of the balance of payments in 2002 reflected a deficit of Dh1.5billion, against a surplus of Dh1.8 billion in 2001. This was mainly due to the increase in theforeign liabilities of the Central Bank during 2002 compared to 2001 levels.

U N I T E D A R A B E M I R A T E S Y E A R B O O K 2 0 0 4

% Wt.Kgs % Value Dh

Abu Dhabi ...... 12.90 ....... 4,467,670,909.00 .......... 18.40 ........... 22,535,607,567.00Dubai ............. 36.70 ....... 12,713,332,469.00 .......... 73.60 ........... 90,257,037,916.00Sharjah .......... 7.80 ....... 2,687,272,962.00 .......... 5.50 ........... 6,695,810,195.00RAK ............... 42.00 ....... 14,553,146,000.00 .......... 1.00 ........... 1,204,982,692.00Fujairah ......... 0.70 ....... 232,642,460.00 .......... 1.50 ........... 1,889,035,202.00

% Wt.Kgs % Value Dh

Abu Dhabi ........ 2.00 ....... 508,856,304.00 .......... 11.40 ............. 983,309,952.00Dubai ............... 8.80 ....... 2,192,775,504.00 .......... 73.70 ............. 6,377,923,681.00Sharjah ............ 0.40 ....... 97,769,224.00 .......... 1.50 ............. 129,593,798.00RAK ................ 67.60 ....... 16,891,112,000.00 .......... 9.60 ............. 827,172,791.00Fujairah .......... 21.20 ....... 5,283,568,209.00 .......... 3.80 ............. 331,496,466.00

% Wt. Kgs % Value Dh

Abu Dhabi ...... 2.00 ......... 194,768,233.00 .......... 3.30 ........... 1,347,981,955.00Dubai ............. 35.30 ......... 3,394,489,780.00 .......... 72.00 ........... 29,615,925,905.00Sharjah ........... 4.20 ......... 405,891,082.00 .......... 12.80 ........... 5,268,554,728.00RAK ............... 57.90 ......... 5,572,872,000.00 .......... 9.30 ........... 3,814,821,284.00Fujairah ......... 0.50 ......... 51,747,655.00 .......... 2.60 ........... 1,077,638,362.00

Table 10: Trade Figures* for 2002

IMPORTS

NON-OIL EXPORTS

RE-EXPORTS

Weight Value

Value

Value

Weight

Weight

PUBLIC FINANCE 2002

*Figures for Ajman and Umm al-Qaiwain are not included

44.3 per cent of the total in terms of contribution to overall value, followed byservices (Dh1.39 billion), industry (Dh264.7 million), hotels (256.5 million), andinsurance (Dh140.4 million).

Etisalat achieved the highest trading value for the year, with a tally ofDh953.1 million, nearly 26 per cent of the total. Abu Dhabi Islamic Bank(Dh592.9 million), First Gulf Bank (Dh331.2 million), Union National Bank(Dh274.7 million) and the Abu Dhabi Commercial Bank (Dh274.1 million) werenext in that order. The number of traded shares in 2003 stood at 235.2million, the daily average of traded shares reaching nearly 868,000.

By the close of 2003, 30 companies were registered at ADSM, their subscribedshares amounting to 3.1 billion with a total capital of Dh13.8 billion. The variationin share price was a significant feature in 2003, the market index rising to 1756.9points at the end of 2003. Market capitalisation of listed companies reachedDh111.5 billion in 2003.

Meanwhile, a record index rise of 21.3 per cent by the end of the secondquarter of 2003 compared to the same period in 2002 placed DFM in topposition among Arab securities markets. The Kuwaiti Securities Market rankedsecond, with a rise of 20.9 per cent, followed by the Oman Securities Market andADSM with 20.5 per cent each.

BANKING SECTOR

It is the responsibility of the Central Bank, the country’s regulatory bank, toformulate and implement the UAE’s banking, credit and monetary policy in orderto support the UAE’s economic policy objectives, including price stability, and tosupport the UAE dirham, guaranteeing its value, stability and its free convertibilityinto all currencies.

There are many aspects to the role the Central Bank plays in supporting thenational economy of the United Arab Emirates. In addition to acting as banker toother banking institutions operating in the country, it is also the banker and financialadvisor to the government.

Anti-Money LaunderingA key issue occupying the attention of the Central Bank in 2002, and since then,has been to ensure that adequate controls are in place to prevent money laundering.With this in mind, the National Committee for Anti-Money Laundering attendedthe meetings of the Financial Action Task Force (FATF–GAFI) that were held inHong Kong from 28 January to 1 February 2002. This international body concludedthat the UAE has established a comprehensive Anti-Money Laundering System,comprising legislation, regulations and procedures. As such, the UAE is fullycooperative in the internationally declared fight against money laundering.

92 U N I T E D A R A B E M I R A T E S Y E A R B O O K 2 0 0 4

In establishing its position with regard to this important issue the UAE teampresented a series of facts to FATF-GAFI. These included the observation that theUAE was one of the first countries to adopt Anti-Money Laundering Articles in theprovisions of its Federal Law No. 3 of 1987. In addition to other actions to ensureproper identification of customers, the Central Bank established a FinancialInformation Unit in July 1999 (under the name Anti-Money Laundering andSuspicious Cases Unit). It doubled the staff level of this unit soon after the tragicevents of 11 September 2001 in USA. The unit has access to all relevant authoritiesin the UAE, as well as to those abroad, through the workings and practices of theNational Anti-Money Laundering Committee.

In October 2001 the Central Bank reduced the thresholds for official identificationof financial customers to Dh2000 from Dh200,000 for moneychangers (NoticeNo. 1815/2001) and from Dh200,000 to Dh40,000 for banks. The Central Bankalso issued directions to financial institutions in the UAE to carry out search andfreeze operations relating to any accounts, deposits and investments in the namesof terrorist leaders, organisations, and those who assisted terrorists. The resultshave been compiled and provided to the concerned authorities in the UAE.

A new Anti-Money Laundering Law was passed by the Cabinet of Ministers inOctober 2001, and by the Federal National Council on 25 December 2001,whereupon it was approved by the Supreme Council and signed by the Presidenton 22 January 2002, as Federal Law No. 4 of 2002.

The UAE has earned solid praise from international regulatory watchdogs forits banking system and its efforts to control money laundering. The Paris-basedFinancial Action Task Force gave a clean bill of health to the country’s financialsystem and the IMF has also expressed confidence in the Central Bank’s supervisoryrole and commended its anti-money laundering measures as a model for othercountries to follow.

The Hawala SystemHawala predates traditional or ‘Western’ banking in the Middle East and Asia. Priorto establishment of Asia’s first ‘Western’ bank (the Bank of Hindustan establishedin Calcutta around 1770) sarafs and potedars, primarily moneychangers andessentially predecessors of present day hawaladars, played a vital role in nearlyall commercial and financial transactions.

During the Vietnam War many Americans were exposed to hawala through theoperations of Indian merchants in Saigon. They often took advantage of their hawalaservice to remit money home. Today, both hawala and Western style banking systemsplay vital and frequently intertwined roles in the economies of India, Pakistanand Bangladesh. The UAE’s large population of migrant workers from these countrieshas supported a significant growth in the hawala business in the Emirates.

94 U N I T E D A R A B E M I R A T E S Y E A R B O O K 2 0 0 4 95E C O N O M I C D E V E L O P M E N T

2001 2002 Growth%Interest Income ............................... 16,122,785 12,392,719 -23.14Interest Expenses ............................. ( 8,556,264 ) ( 4,592,075 ) -46.33Net Interest Income .......................... 7,566,521 7,800,644 3.09Other Income ................................... 3,474,211 4,169,494 20.01Operating Income ............................ 11,040,732 11,970,138 8.42Admin.& General Expenses .............. ( 4,310,176 ) ( 4,635,071 ) 7.54Provision & Other Expenses .............. ( 1,431,568 ) ( 1,217,545 ) -14.95Net Profit Before Taxes ..................... 5,298,988 6,117,522 15.45Taxes ............................................... ( 364,588 ) ( 414,645 ) 13.73Profit For The Year ............................ ( 8,011 ) ( 23,915 ) 198.53Retained Earning .............................. 4,926,389 5,678,962 15.28Others .............................................. 5,458,102 5,582,504 2.28Minority Interests ............................. ( 73,547 ) ( 16,444 ) 0.00Profit Available For Appropriation...... 10,310,944 11,245,022 9.06Proposed Appropriation ....................Legal Reserves ................................. ( 460,589 ) ( 555,039 ) 20.51Other Reserves ................................. ( 989,498 ) ( 823,337 ) -16.79Directors' Remuneration ................... ( 27,963 ) ( 26,705 ) -4.50Cash Dividend .................................. ( 1,976,486 ) ( 2,029,841 ) 2.70Proposd Bonus Shares ...................... ( 419,047 ) ( 545,718 ) 30.23Transfer To Head Office .................... ( 741,035 ) ( 1,398,745 ) 88.76Others .............................................. ( 113,831 ) ( 23,107 ) 0.00Retained Earnings Carried Forward ... 5,582,504 5,888,744 5.49

Thousands AEDNational Bank Of Abu Dhabi .............................................................................. 39,046,144National Bank Of Dubai P.J.S.C. ........................................................................... 35,164,370Abu Dhabi Commercial Bank .............................................................................. 27,683,363Emirates Bank International PJSC ........................................................................ 27,215,668Mashreq Bank P.S.C. ........................................................................................... 23,683,180Dubai Islamic Bank P.J.S.C .................................................................................. 19,597,790Union National Bank ........................................................................................... 14,715,184Abu Dhabi Islamic Bank ...................................................................................... 7,937,308Commercial Bank Of Dubai P.S.C ......................................................................... 7,869,254Arab Bank For Investment & Foreign Trade .......................................................... 5,798,514First Gulf Bank .................................................................................................... 4,983,887The National Bank Of Ra’s al-Khaimah P.S.C ........................................................ 2,930,383Commercial Bank International PLC .................................................................... 2,902,931Investbank .......................................................................................................... 2,753,073National Bank of Fujairah P.S.C .......................................................................... 2,685,441National Bank Of Sharjah ................................................................................... 2,399,498Bank Of Sharjah ................................................................................................. 2,221,745United Arab Bank P.J.S.C. .................................................................................... 2,112,276Middle East Bank PJSC. ....................................................................................... 2,009,016National Bank Of Umm al-Qaiwain P.S.C ............................................................. 1,676,442

Source: Emirates Bank Association

Table 11: Aggregate Performance of UAE Commercial Banks (000 AEDs)

Table 12: National Banks Ranked by Total Assets – 2002

quarters of 2003 banks almost reached the total results for 2002! This reflects theinnovative efforts of UAE banks to deal with reduction in earnings from lowerinterest rates. Diversification has been a key focus, with banks entering newareas of business and packaging their existing products in more attractive ways.

Retail banking was particularly active, with competing banks offering customersa range of irresistible incentives from free air tickets and raffles to dream homesand holidays. Mortgage finance was also a new growth sector as the boomingproperty sector brought in more and more home-buyers. Several banks also tookmajor steps in the leasing business.

THE ECONOMY IN 2003

If 2002 was a relatively slow year for the UAE economy, the predicted growthrate for 2003 was considerably more buoyant with a GDP rise of 4.7 per centexpected, almost double the 2002 figure. This, at a time of relatively slack economicgrowth on a global scale, underlines the robustness of the UAE’s economic model.The increase in the expected GDP was linked to strong oil prices during the year.These were expected to deliver the highest crude exports earnings since theUAE began supplying oil to the markets.

Investments were expected to rise by 2.7 per cent in 2003, to reach Dh63.5billion, reflecting increases in investment in oil and gas, development of industrialareas in Abu Dhabi; projects in Dubai including the free zones; and ventures insome other emirates.

The trade balance also improved and was expected to record a larger surplus ofaround Dh44 billion in 2003 compared with Dh38 billion in 2002. This took placedespite a rise in imports from around Dh144 billion to Dh151 billion. Exportswere also projected to grow from Dh182 billion to Dh195 billion.

ECONOMIC OUTLOOK FOR 2004

Official government reports do not provide economic predictions beyond thecurrent year, based on analysis of partial figures for the year. A number ofeconomic ‘think-tanks’ however make forward predictions using informationcurrently available. Whilst these may prove imprecise as a result of unforeseencircumstances, they are interesting in so far as they calculate how presentperformance and economic decisions are likely to impact on future growth. TheEconomist Intelligence Unit (EIU) is one such ‘think-tank’ that issues regularupdates on projected economic performance of a large number of countries,including the UAE. In late 2003 it issued a report that suggested the relativelyhigh economic growth rate for 2003 (which it estimated to reach 5.2 per cent asagainst the Ministry of Planning prediction of 4.7 per cent) would slow to around4.0 per cent in 2004. This would be related to reductions in OPEC production

At a conference on the sidelines of the IMF-World Bank Annual Meetings inDubai in September 2003, the Central Bank’s Governor, Sultan Nasser Al Suwaidi,defended hawala as a legitimate way of transferring money and asserted that itwas recognised as such in 62 countries, including G7 nations whose financialtransactions control 80 per cent of the world financial order.

The Central Bank has taken measures to bring the system under control, issuinglicences to more than 60 hawala operators in the country so that these dealerscan carry on their business within a legal framework. Al Suwaidi has stated thatthe age-old practice has a genuine economic role to play, particularly in third-world countries where banking has only limited reach and that hawala is nomore prone to abuse than any other banking and financial channel.

By regulating the hawala system the Central Bank has placed the onus on hawaladealers to report any suspicious transactions to the authorities. It was the previousanonymity and scant documentation that made the hawala system vulnerableto abuse by individuals and groups transferring funds to finance illegal activities.

Reduced Costs of BorrowingIn June 2003 the Central Bank announced that it had reduced interest rates onCertificates of Deposit (CDs), which it issues to banks operating in the country,to the new level of interbank interest rates on US dollar deposits in InternationalFinancial Markets. CDs are the mechanism through which interest rates on theUAE dirham are reduced (or raised) in the banking system. Commercial banksuse these rates as an indicator for accepting deposits as well as for extending loansto customers.

The reduction in interest rates on CDs was designed to stimulate a lowering ofthe cost of financing economic activities within the country, particularly investmentspending. This is expected to reflect positively on the national economy, andlocal shares turnover, and to boost share prices.

Commercial BanksThe aggregate performance of the UAE’s commercial banks is summarised intable 11. As the figures for 2002 indicate the sector grew in most areas withretained earnings showing an increase of 5.49 per cent over the figure for 2001.The UAE’s top 20 National Banks are listed in table 12, where they are rankedin order of assets. The largest such bank is the National Bank of Abu Dhabi withassets at the end of 2002 of over Dh39 billion.

By early 2004, as this book was going to press, results were in from the bankingsector for the first three quarters of 2003. These indicated spectacular performancesacross the sector with combined profits of Dh5.25 billion, up from Dh4.52 billionrecorded over the same period in 2002. Given that the aggregate net profit ofbanks for the whole of 2002 was Dh5.795 billion, it seems that in the first three


quotas that were expected to reduce average output by around 7 per cent eachyear. However, the negative impact of reduced oil output is expected to be offset,to some extent at least, by continued increases in output from the non-oil sectors,including industrial and manufacturing output and the service sector.

The EIU expected a similar pattern of growth in 2005, albeit with a modestincrease in growth rate to around 5 per cent as OPEC quotas are relaxed. Thereport also stated that rapid population increase, largely as a result of an increasein the expatriate workforce linked to various major development projects, wouldcreate strong domestic demand, underpinning the local economy.

LOOKING FURTHER AHEAD

Abu Dhabi, blessed with over 90 per cent of oil and natural gas reserves in theUAE, is likely to maintain its focus on upstream hydrocarbon resources anddownstream industrial projects, especially in the petrochemicals sector. It is likelyto continue to exert the greatest influence over the Federation’s public financesand to remain at the forefront of the privatisation process.

Diversification of the UAE’s economy will continue to play a key role inmaintaining growth and stabilising the impact of oil production decreases orprice fluctuations. Continued efforts will be made to attract foreign direct investmentand indications are that these efforts will bear fruit, becoming increasinglysignificant contributors to economic growth. Dubai, in particular, will concentrateon diversification in order to offset its dwindling oil income. Projects alreadyestablished such as Dubai Internet City and Dubai Media City will be expandedwhile the focus on tourism, media, transport and communications will be joinedby other major areas of interest including the establishment of a ‘financial freezone’, Dubai International Financial Centre.

THE BUSINESS ENVIRONMENT

Following years of success in promoting diversification of the UAE’s economyand creating numerous opportunities for private investment in UAE-basedbusinesses, leading government officials and finance experts are the first toadmit that there is still considerable scope for investment growth, both throughencouragement of private national investment in the UAE, and through furtherattraction of foreign direct investment (FDI). It is also clear that businessopportunities by themselves are not enough to promote investment. Attentionhas therefore been focused on creating an even more positive business environmentthat adopts best practice methods, appropriate legal frameworks and is transparent.

Much progress has already been made in this regard. The World Bank hasidentified the UAE as one of the least cumbersome countries in which to set up


storey buildings totalling 9500 square metres, 24 warehouse units, each of 353square metres and 207,000 square metres of undeveloped land for companiesto build their own structures.

The purpose of the free zone is to provide foreign investors with the facilitiesand services required to operate their business in Dubai. Companies establishedin the zone enjoy the freedom of 100 per cent ownership and tax exemptions,in addition to other incentives.

The Airport Free Zone encourages companies who deal with high value andlow volume products. DAFZ established companies include such internationallyknown corporations as Boeing, Chanel, Estee Lauder, Fedex, Logistics, Johnson& Johnson, Matsushita Avionics, Porsche, Ricoh, Samsonite and Tag Heuer.

Dubai Technology & Media Free ZoneThe Dubai Technology and Media Free Zone (DTMFZ) was originally establishedby Dubai Law No.1 in 2000, and is an umbrella entity for the emirate’s driveto become a regional centre for technology, e-commerce and media. DTMFZpresently has three main sections: Dubai Internet City (DIC), Dubai Media City(DMC), and Dubai Knowledge Village (KV) (see also section on Media andInformation).

Dubai Internet CityDTMFZ’s first project, Dubai Internet City (DIC), provides what is described asa ‘Knowledge Economy Ecosystem’ that is designed to support the businessdevelopment of information and communications technology (ICT) companies.DIC is the Middle East’s biggest IT infrastructure built inside a free trade zone,and it has the largest commercial Internet Protocol (IP) telephony system in theworld. It is a strategic base for companies targeting emerging markets in a vastregion extending from the Middle East to the Indian subcontinent, and Africato the CIS countries, covering 1.6 billion people with a combined GDP ofUS$1.1 trillion.

The cluster of ICT companies in Dubai Internet City comprise those involved insoftware and website development, business services and e-commerce, consultancy,education and training, sales and marketing, and back office operations. DIC alsoprovides a scalable state-of-the-art technology platform that caters to companiesseeking to provide cost effective business process outsourcing (BPO) services suchas call centre operations.

Dubai Media CityThe second DTMFZ project, Dubai Media City (DMC), brings to the media communityan advanced infrastructure that provides excellent communications options andmedia facilities required by those working in media-related companies. A wide

a new business. According to a recently released report, the World Bank reportedthat only 29 days is needed to set up a new business in UAE whereas the averageperiod for the MENA region is 60 days. According to the World Bank report, thecost of setting up a new business (as a percentage of gross national income) inthe UAE, at 24.4 per cent, is also relatively very low compared with the MENAaverage of 76.1 per cent. Again, at ten procedures for setting up a new business,the UAE is also lower than the MENA average of 12.

Foreign investment has, to some extent, been affected by legislation that prohibitednon-nationals owning more than 49 per cent of registered enterprises. However,in the various free zones 100 per cent ownership by non-nationals is permitted.

FREE ZONES AND COMMERCIAL CLUSTERS

Successive UAE Yearbooks have charted the growth of free zones and commercialclusters (or special cities) in the UAE from the early stages, when Jebel Ali FreeZone was the pioneer of this type of business innovation.

The concept has proved to be uniquely attractive to both national and non-national investors and the zones have promoted all forms of business activityfrom manufacturing to service industries. Over 4000 companies were active inthe UAE’s free zones at the end of 2002. Some of the world’s leading industrialestablishments have located in the Emirates, promoting the growth of ancillaryindustries, boosting support sectors, including banking, construction and air travelas well as creating many new jobs.

Jebel Ali Free ZoneJebel Ali Free Zone (JAFZ) is located on approximately 100 square kilometres ofland in Dubai, south-west of Jumeirah, adjacent to the main Abu Dhabi to Dubaimotorway. Created around the world’s largest man-made port, which was literallydug out of the coastal desert sands, it has become a key warehousing, distributionand industrial hub that provides access to major consumer market. It is the firstfree zone in the world to achieve ISO 9002 certification.

Jebel Ali Free Zone is home to over 2300 companies from some 100 countries.28 per cent of the companies are from the Asia Pacific region; 35 per cent from theGCC and Middle East; 27 per cent from Europe and the remainder are from theAmerican continent and elsewhere. Companies with global brands like Acer, Black& Decker, Compaq, Daewoo, GAP, Honda, Johnson & Johnson, Nestle, Nissan, Nivea,Philips, Samsung, Sony, Bridgestone, Bayer, Hewlett-Packard, Xerox, Nokia, Toshibaamd DaimlerChrysler, among others, have established a presence in the JAFZ.

Dubai Airport Free ZoneEstablished in 1996, Dubai Airport Free Zone (DAFZ) is wholly owned by theDubai government. DAFZ is located within the boundary of Dubai InternationalAirport. The first phase was completed in January 1999 and included two four-


Dubai Metals & Commodities CentreDMCC was launched as a new free zone on 1 May 2002. It’s core objective is toprovide the market infrastructure for its three core segments – gold, diamonds andcommodities. Offering unique business opportunities for participants in a wide rangeof metals and commodities industries, DMCC provides facilities that bring togetherthe gold trade, the diamond trade, and trading in other selected commodities. Thecentre aims to attract key players throughout the entire value chain, together withrelevant support industries such as finance, logistics and insurance.

The Centre includes the Dubai Diamond Exchange along with the Gold andCommodity Exchanges. The first phase of the Dubai Diamond Exchange isscheduled to be operational by the first half of 2004, while the second phaseshould be operational in 2005. In addition to the region’s only diamond exchange,the tower will house vaulting facilities for safe custody of diamonds and otherprecious commodities.

Dubai International Financial CentreEstablished under Dubai Law No. 3 of 2002, the intention is that DIFC will initiallyfocus on five areas of activity related to the financial services industry. Theseinclude asset management, Islamic finance, reinsurance, back-office operations,and the establishment of a regional financial exchange to foster a cross-border,efficient and liquid capital market. Details of DIFC were still pending as this bookwent to press.

Dubai Humanitarian CityDubai Humanitarian City project, launched in late 2003, is situated close to DubaiInternational Airport. This 3.6-million-square-feet free zone will cater to the needsof non-governmental organisations and will help to make the UAE a centre forhumanitarian projects administration. The unique cluster development will helpthe UAE, and the region in general, to build stronger bonds with many othernon-governmental organisations. The fact that all the participating establishmentswill be working from the same base will allow for economies of scale throughthe use of shared facilities such as conference halls and meetings centres.

Dubai Maritime CityConstruction of a new Dh649.6 million (US$177million) maritime developmentcommenced in mid-2003 between Port Rashid and Dubai Drydocks. Dubai MaritimeCity will be located on a man-made peninsula measuring 25 million square feet,connected to the mainland by a causeway. Facilities will be provided for a widevariety of maritime industries and services under a number of headings.

Marine management services will range from cargo, vessel and life insuranceagencies to law firms. Marine-related marketing will include exhibitions and tradeshows. Marine research and education will take the form of a ‘marine academy’

variety of media businesses, including broadcasting, publishing, advertising, publicrelations, research, music, new media, and film production and post productionhave offices within the DMC building complex.

Knowledge VillageAlso located in the Dubai Technology and Media Free Zone, the recently completedKnowledge Village (KV) aims to provide a conducive working location fororganisations and individuals involved with generation and dissemination ofknowledge. It promotes the development of scholarship, education, training,creativity, innovation and entrepreneurial expertise. Organisations that havechosen to base their operations in KV include international accredited universities,professional training centres, e-learning bodies, education service providers,innovation centres, and certification and testing organisations.

International Media Production ZoneThe International Media Production Zone (IMPZ) was launched in July 2003 asthe first dedicated trade zone created in the region for media-related productionactivities. The zone’s first production cluster will concentrate on the printingindustry, providing a complete infrastructure for print production including landand pre-built printing, production and warehousing units as well as communicationsand technology facilities. Companies joining the zone will have the same benefitsas those based in Dubai Media City.

Subsequent clusters will include music, broadcast and film and it is hoped thatthe interaction within and between the clusters will generate an enhanced creativity.

Dubai Cars & Automotive ZoneSituated at Ra’s al-Khor in Dubai, DUCAMZ was established with the objectiveof re-exporting used cars to the Asian and African regions where the demandcontinues to grow. The zone includes a one-million-square-metre bonded areawith convenient access to all airport and seaports in the region.

Companies with 100 per cent foreign ownership may establish themselvesin the zone and enjoy exemption from import duties and other free-zone benefits.

Gold & Diamond Park Free ZoneThe Gold and Diamond Park Free Zone, associated with the Jebel Ali Free ZoneArea, has around 120 workshops for manufacture of products using gold anddiamonds, and it includes 30 retail outlets. A special feature of the zone ishallmarking controlled by the Dubai Municipality for all gold manufactured andsold from the Gold and Diamond Park. There is also a visitors’ centre that attractsmany tourists and shoppers. A shuttle bus transports people between the Goldand Diamond Park and the Gold Souq.


where curricula like marine engineering, marine transportation, naval science,maritime operations and technology, logistics and intermodal transportation andpilot and navigation simulations will be covered. Builders and designers of yachts,traditional ships and recreational boats will be based at Dubai Maritime City,along with ship repair and maintenance services and ship modification companies.

The first development phase, to be completed by mid-2004, involves landreclamation and construction of the ship repair facilities.

Dubai Techno Park Bids for the construction of the first phase of Dubai Techno Park were closed inOctober 2003. The Techno Park is designed to attract foreign direct investment inresearch into oil and gas, desalinisation and environmental management. Phaseone of the Techno Park facing Sheikh Zayed Road will be finished in 2005.

Fujairah Free Zone Fujairah Free Zone (FFZ) is adjacent to the port of Fujairah. Companies establishedin the zone have easy access to all Arabian Gulf ports, the Red Sea, Iran, Indiaand Pakistan on weekly feeder vessels. Main shipping lines arrive from northernEurope, the Mediterranean, the Far East and North America on a weekly basis.The free zone is also close to Fujairah International Airport and it offers a fullrange of free-zone benefits including 100 per cent ownership and tax exemption.Over 220 companies from 22 countries are already established at the zone,involving an investment of over Dh572 million, and employing over 3020 people.

Sharjah Airport International Free ZoneWith over 1090 companies operating out of SAIF Zone, it has the distinction of beingthe first ISO certified airport free zone in the world. Easily accessible to seaports onthe Indian Ocean (Port Khor Fakkan) and the Arabian Gulf (Port Khalid), SAIF Zoneis built adjacent to Sharjah International Airport. Approximately 14 per cent of thecompanies in the SAIF Zone are industrial manufacturing enterprises whilst mostare involved in trading. It has registered phenomenal growth since its inception in1995 and in order to support this expansion it was recently allotted 5 million extrasquare metres of land as an extension to its existing 10-million-square-metre facility.

Hamriyah Free ZoneThe logic behind Sharjah’s Hamriyah Free Zone (HFZ), which was established on12 November1995, was to attract companies to locate themselves next to itsdeepwater port. Land is allocated for heavy, light, service and commercialindustries. HFZ was the first in the Middle East to obtain ISO 14001 certificationfor environmental management, and it is encouraging steel and heavy industriesbecause of perceived long-term growth prospects in these fields. Sharjah recentlyannounced that a new industrial area, No.18, is to be built alongside HFZ.


annually, compared to an annual purchase amount of US$1314 in the US, US$1072in the UK, and US$875 in Germany.

Another growing e-commerce website in the UAE is UAEmall.com. This issimilar in format to the global auction website Ebay and provides a ‘buy now’or ‘make your best offer’ option on a wide range of goods. It is especially popularfor buying and selling second hand cars and works by introducing buyers andsellers rather than direct selling.

A recent addition to the site is the opportunity for users to establish their owne-shop. The facility can be used to introduce a new product without having tobear the overheads of maintaining a physical presence. It also caters to thosewho would like to test the market prior to making a significant investment, allfrom the convenience of their home, office or a café.

The site, which has over 3500 sellers registered with it from all over the world,including the US, Europe and GCC countries, does not allow card transactions.Sellers and buyers conclude deals through other modes of payment such as banktransfers or cash on delivery.

INDUSTRIAL DEVELOPMENT

The UAE’s main industrial activities, apart from the oil and gas sector which iscovered elsewhere, are in construction, aluminium, chemicals and plastics, metalsand heavy equipment, clothing and textiles, and food. Each emirate in the UAE hastaken steps to nurture the development of these (and other) non-oil industries, bothin terms of providing attractive structures and support mechanisms and throughdevelopment of improved facilities such as industrial zones, business parks andvital energy and transport networks. There has been significant restructuring inthe UAE’s manufacturing sector in order to meet the challenges it will face whennew WTO regulations come into effect in 2005. The main thrust is in establishingprojects with production privileges that will enable them to penetrate new marketsand increase exports.

The value of the manufacturing sector’s contribution to gross domestic productpeaked at nearly Dh33.5 billion (US$9.12 billion) in 2002, second only to theoil sector’s value of around Dh72 billion (US$19.6 billion). The sector expandedby around 5.3 per cent and accounted for nearly 13.6 per cent of GDP. Totalcapital in industrial projects exceeds US$7 billion. The UAE manufacturing sector,covering mainly light and medium products, is poised for further expansion asthe country pushes ahead with a programme to diversify its economy and easereliance on oil export earnings.

Clusters of industrial projects have been established at locations such as AbuDhabi Industrial City (ADIC) at Mussafah (not to be confused with Abu Dhabi

Ajman Free Zone Over 730 companies were listed as members of the Ajman Free Zone (AFZ) atthe end of 2003. Formation of the free zone has given a strong impetus toindustrial activity in Ajman. Situated close to the entrance of the Arabian Gulf,Ajman Free Zone is well placed to serve the eastern and western markets. Thefree zone’s proximity to both Sharjah and Dubai ensures easy accessibility totwo international airports and four seaports.

Ra’s al-Khaimah Free ZoneOpened on 1 May 2000, the free trade zone in Ra’s al-Khaimah aims to provideworld-class customer service, state-of-the-art facilities, and the most competitiverates in the UAE. A port upgrade is planned to meet growing demand fromindustries registered in the free trade zone. By the end of 2002 a total investedcapital of Dh120 million had taken place in around 100 projects, including ashipbuilding company. By the end of 2003 another 90 companies, with a grossbusiness volume of Dh141 million, were expected to be established there. Investorshave come from Iran, North America, Europe, the Indian subcontinent, China andthe former Soviet states.

Ahmed bin Rashed Free ZoneThe Ahmed bin Rashed Port and Free Zone is located on the west coast of theUAE, in the emirate of Umm al-Qaiwain. The free-zone complex consists of 845metres of quay wall with 400 metres capable of handling ocean-going vessels,and 118,000 square metres of land reserved for light industrial development.

OnLine MarketingIn line with the massive efforts being made by the UAE, in general, and Dubai, inparticular, to promote use of modern technology in its business development,especially utilisation of the Internet as a communications and marketing tool,it is not surprising that it has taken the lead in certain aspects of online selling.

The global e-commerce market has been predicted to reach US$7 trillion in2004, of which 2 per cent is forecasted growth for the Middle East. The figuresindicate that the UAE is primed for rapid e-commerce development, providedthat the infrastructure and incentives are in place.

The leading e-commerce business-to-business (B2B) web marketing andauctioning company in the Middle East is UAE-based Tejari. One of Tejari’s keystrengths is that it has focused on government and private sector contracts andtendering procedures, enabling both national and international companies easieraccess to participation in development projects. Use of the Internet amongprocurement agencies is rapidly increasing with 17 per cent of organisations withinthe Gulf Cooperation Council (GCC) states engaged in online procurement. Theaverage GCC resident purchases US$1068 worth of goods and services online


Investment Company, also known as ADIC), Jebel Ali Free Zone and HamriyahFree Zone. ADIC, for example, has shown very rapid recent growth with 355 majormanufacturing companies employing more than 30,000 workers establishedthere in 2002. Like other industrial zones, it has been actively promoting itselfas a location for inward investment in major projects. Abu Dhabi launched theindustrial park on the basis of UAE’s traditional role as a centre for export-importtrade, keeping in mind the rapid growth of regional economies and their growingdemand for services and products. Abu Dhabi, as the UAE’s capital city, is wellpositioned to provide a stable and secure location for major global manufacturers.The industrial city’s infrastructure provides all basic services and facilities for variousindustrial activities including food processing, textiles, plastics, chemicals, timber,building materials and high technology. Of the 355 manufacturing units in ADIC inearly 2003, 36 were engaged in the petrochemical sector, 28 in foodstuffmanufacture, 15 in garments and textiles, 58 in fibreglass, 75 in constructionmaterials, 23 in computers and equipment assembling and 81 in metallic industries.

Dubai has dramatically stepped up its own drive to attract capital and expandits manufacturing base to gradually replace its dwindling earnings from oil exportswhich generate less than 12 per cent of the emirate’s GDP. But, despite its industrialbase, Dubai is not a major manufacturer. The vast majority of goods passing throughits ports are in transit. The Dubai Authority for Investment and Developmentwas created in April 2002 and provides a focal point for attracting investors toDubai’s new business ventures.

THE UAE OFFSETS GROUP

The UAE Offsets Group (UOG), created in 1992 to implement the UAE OffsetsProgramme, is now playing the role of a commercial and economic think-tankfor the UAE, especially for Abu Dhabi. Several multi-million dollar projects includingenergy-related ventures, shipyards, fish farms, district cooling units and aircraftleasing companies have been created by UOG as joint ventures between localand international investors.

The UAE Offsets Programme requires all defence contractors signing deals worthmore than US$10 million with the UAE Armed Forces to fulfil offset obligationsand UOG plays the role of a conduit between the joint venture partners. Offsets’ventures should yield profits of 60 per cent of a contract’s value over a periodof several years (the typical duration of an offset obligation is seven years) andearn offset credits that are evaluated at several milestones during the life ofeach offset project. The performance of the joint ventures is closely monitoredby UOG and if defence contractors fail to fulfil obligations they are required to payliquidated damages of 8.5 per cent on the unfulfilled portion of the obligation,calculated at each milestone.


government), and 24.5 per cent each by Total and Occidental Petroleum. Theprojects aim at stimulating industrial development in the country by providingsecure sources of energy.

Under a mandate from the Abu Dhabi government, UOG also facilitated thedevelopment of the 656 MW power generation and 100 million gallons a day(mg/d) water desalination plant at Qidfa, in Fujairah.

INDUSTRY NEWS

The manufacturing sector plays a vital role in the government’s diversificationstrategy. The total contribution of the manufacturing sector to the GDP stood atDh72.7 billion in 2002, registering an annual growth of 4.5 per cent. There were2509 factories on government record books in 2002, employing 12.9 per centof the country’s manpower.

Dubai has been focusing especially on development of trade, tourism, financeand communication; Sharjah continues to focus on textiles and light industries;while other Northern Emirates have continued their investments in agriculture,ceramics, cement and maritime industries.

Mubadala Development Company (MDC)Mubadala Development Company (MDC), a wholly owned venture of the AbuDhabi government, was set up through an Amiri decree issued in October 2002by Abu Dhabi Crown Prince and Deputy Supreme Commander of the UAEArmed Forces HH Sheikh Khalifa bin Zayed Al Nahyan.

Based in Abu Dhabi, MDC has been created to initiate and participate in newdevelopment projects on behalf of the Abu Dhabi government. The company’s briefis to set up joint ventures and energy related economic development projectsin the UAE and abroad in partnership with leading international players.

MDC has a 51 per cent stake in Dolphin Energy Limited (DEL), which isimplementing the multi-billion dollar Dolphin gas project. It also has stakes inseveral other ventures in Abu Dhabi and is expected to play a major role in theemirate’s industrial development.

ADDARADDAR Real Estate Services LLC (ADDAR), a full-service development and assetmanagement company, intends to develop real estate projects for the communitythrough public private partnerships. Forty per cent of ADDAR is owned byMubadala Development Company and 15 per cent each by Abu Dhabi InvestmentCompany (ADIC), Abu Dhabi National Hotels (ADNH), the National Corporationfor Tourism & Hotels (NCTH), and The National Investor.

The company is currently working on a development portfolio worth morethan Dh1.1 billion (US$299.6 million). Its flagship project is the Dh46 million

Recent offsets projects include a new venture, Denel-Al Jaber Maintenance &Technology Company LLC (DAMTEC), which has been set up as a partnershipbetween Abu Dhabi-based Al Jaber Transport & General Contracting Establishment(AJE), part of the Al Jaber Group, and the South African defence equipmentmanufacturer, Denel. Fifty-one per cent of the Dh20.2 million (US$5.5 million)project is owned by AJE and 49 per cent by Denel. It will provide maintenance,operation and fleet management services as well as product system managementservices to owners of commercial and military fleets. By setting up this joint venture,Denel is seeking to fulfil part of its offset obligation emanating from defenceequipment supply contracts with the UAE Armed Forces. DAMTEC will offercomprehensive outsourced vehicle maintenance using Denel’s systems, based onthe company’s Maintenance Management Information System (MMIS) package,which includes managing preventive maintenance, minimising costs of spare partsthrough effective supply chain management and optimising vehicle fleet use.

Marketing studies conducted for DAMTEC by Chescor Capital Middle East haveshown that there are about 750,000 vehicles in the UAE. The company aims tocapture 10 per cent of that market. Immediate opportunities come from AJE’s5000 vehicles, plus potential contracts with government entities.

DAMTEC is the second offsets project set up by AJE in partnership with a SouthAfrican company. In mid-2002, it established Safewater Chemicals in partnershipwith Specialist Mechanical Engineers (SME), which was the first offsets projectset up in the UAE with the participation of a South African company.

UOG’s Offsets Venture Unit – responsible for implementing the UAE OffsetsProgramme – is currently working on a number of other project ideas and hassigned new offset agreements with several defence contractors. These offsetagreements will generate further opportunities to invest in new ventures, eitherdirectly or through offset investment funds. Local investors and defence contractorscould take advantage of the lucrative opportunities offered by such initiatives.

Since its inception in 1992, implementation of the UAE Offsets Programme hasbeen UOG’s core business, but over the years the group’s role has matured anddiversified into that of a venture capital organisation and an economic think-tank.

The group also assists the Abu Dhabi government to implement projects ona fast-track basis and seeks to develop strategic ventures. Not all the projectsmanaged by the Offsets Group are part of the Offsets Programme. The US$3.5billion Dolphin gas project is the biggest non-offset scheme being implementedby UOG. It entails the production and transportation of up to 2 billion cubic feeta day (cu ft/day) of natural gas from Qatar’s North Field for the markets of theUAE via a 440-kilometre subsea pipeline. The project is a commercial venturebeing developed by Dolphin Energy Limited (DEL), 51 per cent of which is ownedby Mubadala Development Company (itself wholly owned by the Abu Dhabi


(US$12.5 million) redevelopment of the Al Jimi Shopping Centre in Al Ain, whichis owned by the Al Ain Municipality and Town Planning Department.

Tabreed – The National Central Cooling CompanyTabreed has been providing energy-efficient, gas-fired and electric-powered districtcooling solutions in the UAE for over five years and has become the leading districtcooling services provider in the region. The company has recently extended itsoperations to Qatar and is in the process of doing so in Saudi Arabia.

Tabreed’s current installed district cooling capacity in the UAE stands at morethan 132,000 refrigeration tonnes, which are under contract for a range of military,commercial and residential properties across the country. Total installed capacityis set to increase to more than 170,000 tonnes by the end of 2004 and will risefurther with new commercial and residential developments. At present, Tabreedis providing district cooling services to several commercial buildings in Dubai,to Zayed Military City of the UAE Armed Forces in Sweihan and a number ofcommercial properties in Abu Dhabi, Al Ain and Ra’s al-Khaimah.

Industrial Directory for DubaiIn October 2003, Dubai Chamber of Commerce and Industry (DCCI) issued theIndustrial Directory 2000–04, which lists industrial companies and establishmentsin Dubai. The directory, which is published in Arabic and English and printed inone volume, is also available on CD-ROM. It contains detailed information aboutthe procedures for setting up an industrial establishment, as well as integrateddata and statistics relevant to the industrial sector.

International Developments for RAK CeramicsRAK Ceramics, one of the world’s largest ceramic tiles and sanitary waremanufacturing companies, supplies ceramic and Gres Porcellanato tiles andsanitary ware worldwide, with marketing and distribution subsidiaries inSwitzerland, France, the UK, Germany, Italy and Belgium. The company hasrecently opened a new factory in China, and another one in Sudan. The factory inChina started its initial production in October 2003. The US$19 million new factoryin Sudan commences initial production in 2004. Meanwhile, as a further part of itsglobal expansion, RAK Ceramics began work on a factory in Iran.

The company also has manufacturing plants in Bangladesh and Slovakia. Thenew Bangladesh sanitary ware plant, with a capacity to manufacture 400,000pieces a year, started production in September 2003, doubling the previous capacity.

Iron and SteelEmirates Iron and Steel Factory (EISF), established in Abu Dhabi in 2001, is currentlyoperating at 70 per cent of its producing capacity but has expansion plans involvingsignificant investment. UAE steel production presently accounts for about a quarter


of the total local demand and the remaining requirements are met through imports.Further expansion of the Abu Dhabi manufacturer will increase capacity of thecompany for all types of steel from 500,000 to 800,000 tonnes per year.

Demand is likely to remain strong as a result of several key factors. Firstly, thehigh rate of population growth in the GCC states and the subsequent rise inconstruction-related activities is expected to increase the demand for steel in thenear future. Furthermore, the rolled steel producers of the UAE are also expectingmajor demand from ongoing reconstruction activities in Iraq.

The local market used 1.2 million metric tonnes of steel in 2002 and approximately1.3 million metric tonnes in 2003. Production at Abu Dhabi’s EISF reached around390,000 metric tonnes in 2003, up from 190,000 metric tonnes in 2002.

Textiles and ClothingA 557,000-square-metre plot of land was allotted for the Dubai Textile City (DTC)project in late 2003. Project development will exceed Dh200 million, withconstruction work scheduled for completion in late 2005. According to a studyreleased by the Emirates Industrial Bank (EIB) in late 2003, the outlook for theUAE garment industry remains somewhat mixed. The EIB predicts a demise inproduction of low value-added garments resulting in further declines in the totaloutput of the industry in the short term, but in the medium term the industry islikely to stabilise, and may have opportunities to grow in the longer term. The UAEremains the major garment exporter in the Gulf region. It has approximately 180garment factories; four weaving and spinning factories, and about 33 factoriesengaged in the production of textile furniture accessories, bed sheets, pillows etc.

A key emerging feature of the garment industry is the change in its structure.Firstly, broadly speaking, there is a shift in production in favour of the woven(non-knitted) category. While both categories have fallen, the decline inproduction of knitted garments has been far greater, and is currently less than40 per cent of the peak reached in 1997. Woven garments now account foralmost three quarters of the production, compared to two-thirds in 1997, andhave registered successive increases in the last two years.

CarpetsThe UAE has only three carpet factories but the industry could expand in the futureto meet growing demand in the GCC, Iraq and other markets. While woollen andtextile carpet production can grow, the greatest potential is for growth in tuftedcarpets (made of raw materials produced by the petrochemical industry) and,according to Emirates Investment Bank, the UAE could become a key producerin this sector. The bank states that ‘omens are positive for the UAE to take onthe world markets in tufted carpet manufacturing . . . there is a sizeable domesticand regional market to target before penetrating the world . . . regional demand


can support several more carpet manufacturing units, which can be expectedto grow substantially in the coming years with the added demand from the Iraqreconstruction effort’.

Since the vast majority of carpet products are now made from synthetic fibres,manufacture of tufted carpets, as a downstream activity of the oil/petrochemicalindustry, has potential to contribute to the UAE’s industrial diversification.

ChemicalsA new chemical plant, Safewater Chemicals, has been built as a joint venturebetween the Abu Dhabi-based Al Jaber Group (65 per cent) and South Africa’sSME (35 per cent) under the UAE Offsets Programme. The Dh75 million(US$20.4 million) Chlor-Alkali plant in the new Abu Dhabi Industrial City atMussafah will produce 12,000 tons a year (t/y) of hydrochloric acid, 30,000 t/y ofsodium hypochlorite and 8,000 t/y of caustic soda, using sodium chloride, waterand electricity as primary feedstocks. The plant, which was financed through a65:35 debt/equity package, was completed in 2003. Safewater’s key markets willbe the oil and gas, water desalination and transmission and the wastewater sectors.The company will also target other industrial and commercial applications.

AluminiumThe largest industrial venture in Dubai is the aluminium smelter at Jebel Ali run bythe Dubai Aluminium Company, also known as DUBAL. The highly successfulproject, taking raw bauxite from Australia and converting it to high gradealuminium, is currently undergoing an expansion which will raise productioncapacity to 710,000 metric t/y. Meanwhile, DUBAL produced 560,000 tonnes ofaluminium in 2003, a 5 per cent increase on 2002. The company also soldmore than 616,000 tonnes of metal alloy products in 2003, up 7 per cent on2002. At the same time DUBAL managed to trim unit costs to a level whichpushed it into the ranks of the world’s top 20 lowest cost aluminium producers.

There are a number of local companies that take aluminium from DUBAL andprocess it into a wide range of products. One new venture in this category is anew rolling mill for production of sheet aluminium that is being developed byEmiroll, a company jointly owned by Pechiney (a French company), DubaiInvestments and the local company, Ghurair Private Company. This modernplant will have a capacity of 33,000 t/y and is located close to DUBAL in theDubai Investments Park near Jebel Ali Free Zone.

DUBAL’s success with its aluminium smelter at Jebel Ali has led it to seek newopportunities for development close to primary energy sources and in May 2003an agreement for a new joint venture was signed between DUBAL and Qatar’sUnited Development Company (UDC). According to the agreement, the two sideswill enter into a joint venture to build, own and operate a primary aluminium


CRUDE OIL PIPELINES Owner/Operator Length (miles) Diameter (inches)Murban/Jebel Dhanna ADCO 3x50 24,24,36Umm Shaif/Das Island ADMA 22 30Lower Zakum/Das Island ADMA 56 30Upper Zakum/Zirku Island ZADCO 40 42Bunduq/Das Island Government 18 16Mubarraz/Mubarraz Island ADOC 21 24

NATURAL GAS PIPELINES Owner/Operator Length (miles) Diameter (inches)Habshan/Maqta ADNOC 81 42Bab/Maqta ADNOC 83 30Maqta/Baniyas ADNOC 11 16Bab/Ruwais ADNOC 68 30Maqta/Taweelah ADNOC 2x33 24,36Maqta/Al Ain ADNOC 100 30MP21/Ruwais GASCO 41 24Murgam/Jebel Ali Dubai government 47 24Sajaa/Sharjah Emarat 27 18,6,4

PRODUCT PIPELINES Owner/Operator Length (miles) Diameter (inches)UAN Refinery/Al Ain ADNOC-FOD 104 12UAN Refinery/AD Airport ADNOC-FOD 11 10UAN Refinery/Mussafah ADNOC-FOD 2x10 8,12

Source: OPEC Statistical Bulletin

Table 15: Pipelines for Crude Oil, Natural Gas and Products – 2002

Table 16: Crude Oil Production in the UAE (1000 b): 1962–2002

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PEC

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1962 1972 1982 1992 2002

Daily average 14.2 1,202.70 1,248.80 2,235.70 1,900.30

Cumulative 5183 1,987,377 8,168,382 13,480,186 21,251,327

2500

2000

1500

1000

500

0

DA

ILY

AVER

AG

E(1

000

barr

els)

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

0

CU

MU

LATIVED

AILY

AVERAG

E(1000

barrels)


North America 27,646Latin America 111,173Eastern Europe 79,190Western Europe 18,268Middle East 698,906Africa 93,550Asia and Pacific 38,434Total 1,067,167

OPEC 847,719OPEC% 79.4

UAE 97,800UAE/World% 9.16%UAE/OPEC% 11.53%

North America 6,989Latin America 7,507Eastern Europe 57,493Western Europe 6,955Middle East 71,546Africa 13,207Asia and Pacific 14,118Total 177,724

OPEC 86,828OPEC% 48.9

UAE 6,060UAE/World% 3.41%UAE/OPEC% 6.98%

OIL (million barrels)

NATURAL GAS (billion standard cu m)

1998 1999 2000 2001 2002North America....................... 2.5 ------ 1.3 19.6 10United States......................... 2.5 1.3 19.6 10Latin America........................ 7.5 ------ ------ ------ ------Western Europe..................... 13 1 1.3 6.1 3France.................................... 11.2 ------ 0.1 5.1 ------Netherlands........................... ------ ------ 1.2 ------ ------United Kingdom.................... 1.3 ------ ------ ------ ------Middle East........................... ------ 4 ------ ------ ------Africa.................................... 57 39 34.3 37 26Asia and Pacific..................... 1959 1875 1778 1724 1575Japan.................................... 1205 1085 1065.8 1066.8 1182.8Total World........................... 2039 1919 1814.9 1786.7 1614

Table 14: UAE Crude Oil Exports by Destination: 1998–2002 (1000 b/d)

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Table 13: World Proven Crude Oil & Gas Reserves by Region

WORLD PROVEN CRUDE OIL RESERVES BY REG

IONOPEC RESERVES AS % OF WORLD

TO

TAL

UAE

RESERVES AS % OF WORLD

TOTA

L

UAERESERVES AS % OF OPEC

TOTA

L

WORLD PROVEN NATURAL GAS RESERVES BY

REGIO

N

OPEC RESERVES AS % OF WORLDTO

TAL

UAE

RESERVES AS % OF WORLD

TOTA

L

UAERESERVES AS % OF OPEC

TOTA

L

figure is somewhat less than 25 per cent of total consumption, supplies fromUAE and other major OPEC producers are projected to exceed 30 million b/d by2020 when other sources will have receded or been seriously depleted. It isagainst this background that the UAE has committed to major developments inits oil and gas production and supply facilities.

Notwithstanding major progress in diversification, the UAE’s oil and gas sectorcontinues to occupy prime status in the UAE’s economic profile — a fact bolsteredby confirmed hydrocarbon reserves now standing at 97.8 billion barrels of oiland 212.1 trillion cubic feet of natural gas. On the worldwide stage these figuresrank the UAE in fifth place in terms of the size of its oil reserves and fourth withrespect to its natural gas reserves. Presently acknowledged oil reserves in the UAEwould allow the country to pump oil at 2.55 million barrels per day for the next105 years. In reality, of course, pumping rates will vary and oil field exploration willadd new recoverable reserves so this ‘expiration’ date will almost certainly beextended further into the future. It has been suggested by oil exploration experts thatthere could be approximately double the presently discovered reserves in deeperlayers, where drilling has so far not taken place. Based on current knowledge, theUAE’s oil reserves, at 97.8 billion barrels, account for 9.1 per cent of the world’stotal oil reserves, estimated at 1068 billion barrels. By far the greatest portion of theUAE’s oil reserves are located in Abu Dhabi emirate, with 92.2 billion barrels of thetotal bulk, followed by Dubai with 4 billion barrels, Sharjah with 1.5 billion and Ra’sal-Khaimah with 100 million. Natural gas reserves are also concentrated in Abu Dhabi,which has 196.1 trillion cubic feet, followed by Sharjah with 10.7 trillion cubic feet,Dubai with 4.1 trillion cubic feet and Ra’s al-Khaimah with 1.2 trillion cubic feet.

Abu Dhabi National Oil Company (ADNOC), one of the biggest oil companiesin the world, has been engaged in a major oil and gas expansion capacityprogramme over the past decade in collaboration with its Western and Japanesecorporate partners. Oil and gas investments during this period exceed US$25billion. The UAE plans to increase sustainable oil production capacity to 3.58million b/d by 2006, from the current 2.63 million b/d. A crucial element in thisplan is the development of Upper Zakum from its present level of 550,000 b/dto 1.2 million b/d and ADCO’s onshore developments at Bab, Al Dabb’iya, JarnYaphour, Rumaitha and Shanayel due to add 200,000 b/d capacity, bringing thecombined capacity of these fields to 460,000 b/d. In addition, developmentwork at the Bu Hasa field, due for completion in 2006, is planned to increaseproduction there from 550,000 b/d to 730,000 b/d. Work at Huwaila and Sahilfields will also enhance their production capabilities.

The federal dimension in the hydrocarbon sector is relatively limited since mostof the relevant activities such as oil and gas exploration, production, processingand export activities are controlled by each emirate’s own government. One recent

smelter at Ra’s Laffan Industrial City in Qatar. The smelter will initially produce516,000 metric tonnes a year of primary aluminium with the potential to expandin phases to over one million metric tonnes a year.

The smelter’s primary electrical energy requirements will be met by a dedicatedpower plant with natural gas supplied from Qatar’s huge North Field (provenreserves of 900 trillion cubic feet). The smelter will utilise DUBAL’s ‘CD 26’ technologydeveloped jointly with COMALCO Aluminium Ltd of Australia. DUBAL’s pure grademetal is sold to customers across the world, from Japan and the Pacific Rim, tothe US, Europe and the Middle East.

Cable ManufactureIn its first major expansion outside Dubai, DUCAB, the Dubai Cable CompanyLtd, announced the construction of a state-of-the-art factory in Abu Dhabi, to becommissioned by November 2004, for manufacturing a wide range of power cables.It will also add capacity at its existing factory in Jebel Ali. Total investment will beDh125 million. DUCAB (Abu Dhabi), under construction in the new Abu DhabiIndustrial City at Mussafah, has been designed to increase the combined copperprocessing capacity of DUCAB in the two plants to 60,000 tonnes from the current35,000 tonnes at DUCAB (Dubai). The new plant will have a copper processingcapacity nearly similar to that of DUCAB (Dubai) but will also make complementaryproducts. It will primarily serve the UAE, as well as export markets in the GCCand beyond.

Maritime IndustriesBoat-building, ship repair and marine dredging are important maritime industriesin the UAE. Information on the Abu Dhabi Ship Building Company (ADSB) andDubai Drydocks Company is given under the heading of Seaports and Shipping inthe section on Infrastructure. The new marine-orientated zone Dubai Maritime Citywill also assist in promoting maritime industries in the Emirates. In addition,mention should be made of bunkering for which the UAE now ranks among thetop three locations in the world. This, in turn, has spawned a healthy growth in theship supply business with around 40 companies operating in this field in theEmirates as a whole, amounting to an annual turnover of around US$300 million.

OIL AND GAS

By the end of 2003 cumulative production of UAE oil had exceeded 22 billionbarrels. OPEC’s five largest oil producers, the UAE, Saudi Arabia, Kuwait, Iraq andIran, control more than 60 per cent of global oil reserves and currently supplyworld markets with around 16 million barrels per day (b/d). Whilst the latter

118 U N I T E D A R A B E M I R A T E S Y E A R B O O K 2 0 0 4 119E C O N O M I C D E V E L O P M E N T


1998 1999 2000 2001 2002Flowing 1069 1075 1143 1063 1068Artificial Lift 382 349 362 347 349

1998

1999

2000

2001

2002

0 250 500 750 1000 1250 1500 1750

1998 1999 2000 2001 2002Government 1208 1103 1171 1138 1023BP 169 155 164 159 143TotalFinaElf 183 167 177 172 155Exxon 78 71 75 73 66Mobil 78 71 75 73 66Shell 100 91 97 94 84Others 429 392 416 404 363

Note: TotalFina merged with Elf on February 9, 2000 and is now known as Total; Exxon and Mobil merged onNovember 30, 1999; BP and Amoco merged on December 31, 1998; Chevron and Texaco merged in October 2001.

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Table 20: Producing Wells in the UAE: 1998–2002

1400

1200

1000

800

600

400

200

0

20022001

20001999

1998

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Table 17: Crude Oil Production by Companies in the UAE: 1998–2002 Table 19: Parent Companies’ Estimated Gross Share of Crude Oil Production: 1998–2002

Abu Dhabi 1998 1999 2000 2001 2002ADCO 1047.3 956.2 1014.9 986.7 886.9ADMA 477.2 435.6 462.4 449.5 404.1Total 30.2 27.5 29.2 28.4 25.5ADOC 23.7 21.7 23 22.3 20.1Amerada Hess 10.4 9.5 10.1 9.8 8.8Zadco 331.4 302.6 321.2 312.2 280.6

Dubai 1998 1999 2000 2001 2002DPC 316.9 289.3 307.1 298.5 268.3

Sharjah 1998 1999 2000 2001 2002Buttes 7 6.4 6.8 6.6 5.9

Total 2244.1 2048.8 2174.7 2114.2 1900.3

(Note: sum of figures may not equal totals due to unavailability of data for some companies)

1200

1000

800

600

400

200

0

20022001

20001999

1998

Table 18: OPEC Production Quotas for UAE (000s b/d)

2500

2000

1500

1000

500

0Apr-00 Oct-00 Feb-01 Apr-01 Sep-01 Dec-02 Nov-03

2,157 2,289 2,201 2,113 2,025 1,894 2,138

Thou

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rday

Thou

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rday

CMYK

exception to this general rule was announced in March 2002 when the federalMinistry of Petroleum and Minerals awarded a Dh37 million contract to the BritishGeological Survey (BGS) to undertake a comprehensive geological and geophysicalsurvey of the UAE’s mountainous zone stretching from Ra’s al-Khaimah in thenorth to the city of Al Ain, in Abu Dhabi, to the south. The project team is alsoproducing both geological and tectonic maps covering the whole of UAE territory.The latter will be used to choose suitable locations for seismic monitoring equipment.Project work commenced in November 2002 and is expected to continue untilmid-2006.

OIL PRODUCTION AND CRUDE RESERVES

Crude oil production ceilings are set by OPEC members at regular conferences.The UAE production quota at the end of 2002 was 1.894 million b/d, a level thathad not been so low for ten years. The quotas were increased during 2003, setat 2.138 million b/d from 1 November.

Abu DhabiThe emirate of Abu Dhabi, with proven crude oil reserve estimated at 92.2 billionbarrels, has 94.3 per cent of the UAE’s total reserves and 8.6 per cent of the provenworld oil reserves (1068 billion barrels); and with 5.892 trillion cubic metres ofnatural gas, 3.65 per cent of world natural gas reserves (161.2 trillion cu m). Itslargest oilfield, Upper Zakum, contains an estimated 48 billion barrels of reservesin-situ and estimated recoverable reserves of 16 to 20 billion barrels (using extensivewater injection).

Output of crude oil in Abu Dhabi during 2002 averaged about 1.69 million b/d,down from1.834 million b/d in 2001 as a result of reduced OPEC quotas. Theemirate’s oil production is split on a roughly 50-50 basis between onshore andoffshore fields. Onshore production in 2002 averaged 850,000 b/d, whilst offshorecontributed 840,000 b/d. Abu Dhabi Company for Onshore Oil Operations (ADCO),with current production capacity at around 1.0 million b/d, generates more than halfof Abu Dhabi’s oil production, and it is one of the 10 largest oil companies in theworld and the largest crude oil producer in the southern Arabian Gulf. The companyplans to invest about US$800 million in major project work aimed at boostingoil production to 1.4 million barrels per day by 2005. Meanwhile, ADCO alsoproduces 130,000 b/d of 57.5° API condensate (0.11 per cent sulphur) from theThamama formation of the Bab/Habshan field, which started up in 1996.

Offshore, ADMA-OPCO’s two fields, Umm Shaif and Lower Zakum, betweenthem produced 380,000 b/d in 2002, while Upper Zakum and the other four fieldsoperated by ZADCO contributed 400,000 b/d, with the remaining offshore fields(Mubarraz/Neewat al-Ghalan, Umm al-Anbar, al-Bunduq and Abu al-Bukhoosh)


AR A B I A N

G U L F

QATAARAA

Doha

AjmaSharjahDubai

OMAN

SAUDI ARABIA

SAUDI ARABIA

ADNOC ADCO ADMA-OPCO

Concession areas:

Oil producing field

Abu Dhabi boundary

International boundary

SATAH

MMUMMHAIFSHHA

ZAKUM

BAB

MUMMMUMUMAAAL-DDAALL-

HABU HHASAA

SHAHSHSH

SAHHILAHILIL

ABSAAASAASA

Abu Musa

Sib

N'

r

maDalmama

AbuAl-Abyaadhadhh

MarawahSirBaniYas Al Ain

U N I TTT E DAAA

RR AAAAB

E

MMMI

RA

TTEE

S

D h a b ib ub u D h a bD h a bA b u b u aaDD

QR

0

0

Miles

Kilometres

75

1000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Onshore 774 990 991 900 920 950 975 960 900 820 1,015 935 850

Offshore 942 1,050 1,009 1,000 886 838 925 990 1,012 870 975 900 840

TOTAL 1,716 2,040 2,000 1,900 1,806 1,788 1,900 1,950 1,912 1,690 1,990 1,835 1,690

Exports 1,544 1,836 1,795 1,650 1,614 1,573 1,665 1,685 1,675 1,460 1,770 1,615 1,450

Abu Dhabi Oil Fields and Concessions

Table 21: Abu Dhabi Oil Production and Exports

2500

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500

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il &

Gas

Dire

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and it produced an estimated 440 million cu ft/day of gas and 19,000 b/d ofcondensate in 2002. BP drilled two more horizontal wells at Saja’a in 2000,bringing the total number of wells in operation there to 40, compared with fourat Moveyeid and seven at Kahaif.

Meanwhile, the Kahaif field has had a gas gathering network and re-injectionfacilities installed and produced around 140 million cu ft/day of natural gas and10,000 b/d of condensate in 2002.

Ra’s al-KhaimahRa’s al-Khaimah’s hydrocarbon reserves consist of 100 million barrels of crudeand condensate and 1.2 trillion cubic feet of natural gas, while it continues toextract 500 b/d of condensate from the Saleh field, the only hydrocarbon structureto have been brought into production in the emirate.

There has been a recent surge of exploration activity in Ra’s al-Khaimah withthree companies active in this field. The Ra’s al-Khaimah Oil and Gas Companywas granted exploration licences for most the emirate’s land and seabed (withthe exception of the area around the Baih field or B structure) in 1996. Its firstwell, spudded in December 1997, went down as far as 17,850 feet but provedto be dry.

Atlantis Holdings, which was taken over by China National Chemicals Import &Export Corporation (Sinochem) in January 2002 and also holds exploration licencesin the emirates of Sharjah, Ajman and Umm al-Qaiwain, has been reassessinga small offshore tract known as B structure, where a non-commercial find wasmade in the 1970s.

In June 2002 Novus Petroleum, an Australian company, signed a new agreementto explore the onshore Haqil acreage occupying much of the northern region,covering an area of 600 square kilometres and thought to have potential for wetgas. Novus Petroleum is already active in operating the Bukha gas and condensatefield in the Straits of Hormuz near Ra’s al-Khaimah, and it pipes gas from thereto the LPG plant at Khor Khwair.

An announcement in early 2003, made by the Ra’s al-Khaimah government,stated that a new exploration, referred to as ‘C’, had struck gas.

AjmanAjman may soon be earning revenues from development of an offshore gasfield, the Zora field that it shares with Sharjah. This is being exploited under theterms of an agreement signed by both governments and by the respective licenceholders Atlantis Holdings (recently taken over by China National ChemicalsImport & Export Corporation (Sinochem) and Crescent Petroleum. The latterdiscovered the field while exploring in Sharjah’s waters and it represents a realbonus for Ajman.

together producing about 60,000 b/d. In late 2002 however, production levelsat ADMA-OPCO’s two fields were increased by 40,000 b/d, with Lower Zakumflowing at 220,000 b/d and Umm Shaif at 200,000b/d.

DubaiDubai’s proven oil reserves were still officially estimated at 4 billion barrels inJanuary 2003, but the recoverable portion may be less than half this figure, withindustry sources estimating them at 1.6 to 2 billion barrels. Based on the moreoptimistic figures, Dubai could keep pumping at a rate of 250,000 b/d foralmost 44 years, whilst more pessimistic estimates suggest that around 20years is all that are left of viable production. Almost all of the emirate’s oil reservesare located in the original concession area of the Dubai Petroleum Company(DPC), whose four offshore fields account for its entire output of crude oil andassociated gas. Oil output has steadily declined despite a programme of fielddevelopment, entailing the drilling of infill wells, horizontal production wells andwater injectors. The company has installed water and gas injection facilities on alarge scale to maximise recovery rates, and all the associated gas produced at itsfour fields is now re-injected into oil reservoirs.

SharjahSharjah’s hydrocarbon reserves are put at 1.5 billion barrels of oil and condensateand 10,700 billion cubic feet of natural gas. The three onshore gas and condensatefields account for the bulk of the emirate’s hydrocarbon reserves, since theMubarak field contains less than 50 million barrels of oil and 1500 billion cubicfeet of associated gas.

The emirate’s hydrocarbon production is now declining. In 2002 it consistedof 44,000 b/d of liquids, down from 48,000 b/d in 2001 (50,000 b/d in 2000)and around 70,000 b/d in 1996–97, and about 700 million cu ft/day of naturalgas, compared with 1 billion cu ft/day in 1997–98. Liquids production was madeup of about 5000 b/d of crude and 10,000 b/d of condensate from the offshoreMubarak field and 29,000 b/d of condensate from the onshore Saja’a field, whilegas production consisted of 120 million cu ft/day of associated gas from Mubarakand 580 million cu ft/day of non-associated gas from the three onshore fields.

The Zora gas field, which straddles Sharjah’s border with Ajman, will provideadditional gas once it comes on stream. This is under development as part of ajoint agreement between Sharjah and Ajman, with Crescent Petroleum and AtlantisHoldings involved as licence holders of the exploration blocks.

The Mubarak field is exploited, despite declining production, under a protocolsigned between Sharjah and Iran in 1972. Sharjah also passes on some of therevenues to Umm al-Qaiwain and Ajman. Sharjah’s onshore Saja’a field, operatedby BP, has also experienced some difficulties in maintaining production levels


The Abu Dhabi Company for Onshore Oil Operations (ADCO), the UAE’s largest oil-producer,celebrated 40 years of exports from its Jebel Dhanna Terminal in mid-December 2003. Jointlyowned by the Abu Dhabi National Oil Company (ADNOC) (60 per cent) and a consortium offoreign companies, including BP, Shell, Total, ExxonMobil and Partex, ADCO currently has installedproduction capacity of over one million barrels a day, with a major field development programmeunder way to increase capacity by several hundred thousand barrels by the end of this decade.

The origins of the company date back over 70 years when the existing foreign shareholders, ortheir predecessor companies, already active in Iraq, established Petroleum Concessions Limited (PCL)to seek oil exploration concessions elsewhere in the region. Initial surface surveys began in the UnitedArab Emirates, at this time known as the Trucial States, in the 1930s, during which the geologicalteams were guided around Abu Dhabi’s deserts by UAE President HH Sheikh Zayed bin Sultan AlNahyan, then still in his teens. On 11 January 1939, PCL signed a concession agreement with theAbu Dhabi Ruler, Sheikh Shakhbut, assigning that agreement to a specially-established subsidiary,Petroleum Concessions (Trucial Coast), later Petroleum Development (Trucial Coast), [PD(TC)].

Detailed survey work got under way after the Second World War, and in 1950, the Companydrilled the UAE’s first oil well, at Ra’s Sadr, north-east of Abu Dhabi. The well, completed in 1951at a depth of 13,001 feet, was, at the time, the deepest ever drilled in the Middle East, beginninga series of technological achievements that has continued ever since. Ra’s Sadr-1, however, wasa ‘dry hole’ – as were several other wells drilled over the course of the early 1950s. One well,however, at Murban, produced shows of hydrocarbons, and after the drilling of a second and thena third well, the company was finally able, in 1959, to declare the discovery of a commerciallyviable field. This was named Bab, after the area in which it was located, although the nameMurban survives today as the name of the blend of crude oils from Abu Dhabi’s onshore fields.

Four years of development work followed, involving the drilling of more wells and constructionof field treatment facilities in the Bab area, the laying of a 112-kilometre pipeline and the buildingof a tank farm and export facilities at Jebel Dhanna, 200 kilometres west of Abu Dhabi. On 14December 1963, the first cargo of 33,818 tons of crude oil from the Bab field left Jebel Dhannaonboard the tanker ‘Esso Dublin’ for a refinery in Milford Haven, Wales, inaugurating thecommencement of Abu Dhabi’s onshore oil production.

In the same year, another major oilfield, that of Bu Hasa, was discovered and was swiftly broughtinto production, and, by 1966, the Company’s activities had grown to such an extent that it movedits headquarters of operations from Bahrain to Abu Dhabi town. It also surrendered all of itsconcessions in other emirates, and changed its name to the Abu Dhabi Petroleum Company (ADPC).

That year, 1966, coincided with the accession of Sheikh Zayed as Ruler of Abu Dhabi, and thebeginning of the process of rapid development that has resulted in today’s UAE. The revenuesfrom the company’s oil production, and also those from its offshore sister, Abu Dhabi MarineAreas (now Abu Dhabi Marine Operating Company, ADMA-OPCO), were crucial to those earlystages of development, as, indeed, they are to the country’s continuing growth.

ADCO – 40 Year Anniversary of Oil Exports


One of Sheikh Zayed’s first objectives was to establish a formal government structure in AbuDhabi. In terms of the oil industry, this meant, first, the establishment of the Department ofPetroleum and then, in 1971, of the Abu Dhabi National Oil Company (ADNOC).

During the early 1970s, ADNOC obtained a majority shareholding in the oil concessions, and in1979 the Abu Dhabi Company for Onshore Oil Operations (ADCO) was established to act asoperator of the onshore concession. ADPC, still with an office in Abu Dhabi, groups together theforeign shareholders.

In the 25 years since ADCO took over operations, the company has continued to grow and isnow one of Abu Dhabi’s largest employers, with over 1000 UAE nationals on its staff. It has alsomaintained the record of technological achievement that it began back at Ra’s Sadr, and is one ofthe oil industry’s leaders in techniques such as horizontal drilling. With major new projects like thedevelopment of the Northeast Bab fields of Dabb’iya, Shanayel and Rumaitha now well under way,ADCO is set to continue playing a major role the country’s development for many years to come.

The Dh1.2 billion project is planned to be completed towards the end of 2006.It also includes gas and water injection facilities with a capacity of 150 millionmetric cubic metres of gas per day (MMscd) and 120,000 barrels water per day.

Work on a relatively new onshore field, Huwaila, located 30 kilometres south ofthe Bu Hasa field, began in August 2003. It is planned to bring it to a productionof up to 10,000 b/d of oil by 2006. Veco Engineering, Abu Dhabi, was awardedthe front-end engineering and design contract for the development of the field. Itis an innovative development using multi-phase pumps to feed into the pipelinerather than individual pumps.

The second phase of development of the Sahil field will also add productioncapacity to Abu Dhabi’s oil budget, probably increasing capacity by 20,000 b/dduring 2004 as a result of introduction of water injection systems.

Abu Dhabi already applies the most up-to-date production and drilling technologyat its oilfields. Both water and gas injection are in wide use at older fields to sustainreservoir pressure and maintain flow rates. Moreover, operators are drilling agrowing number of horizontal wells to improve well productivity and boost recoveryrates. Operators in the emirate have acquired considerable expertise in deflecteddrilling methods and utilise short, medium and long radius drilling techniquesin conjunction with both oriented and conventional coring. The longest horizontalhole drilled in Abu Dhabi was a 5500-feet section drilled by ADMA-OPCO.

Gas development projects are continuing at onshore oilfields, and ADNOC isnow studying the possibility of utilising acid gas injection to boost flow rates atvarious oil fields. It currently uses non-corrosive gas, but given its abundant suppliesof gas with a high carbon dioxide and hydrogen sulphide content, it wants to developtechnologies for extracting these reserves and utilising them for injection purposes,especially at the onshore Bab field. A joint feasibility study carried out by ADNOCand Shell Oil, which explored several options for utilising acid gas, was completedin April 2002.

In addition to its activities in oil field development ADCO also carries outdevelopment of gas production and processing facilities on behalf of ADNOC.The two gas development projects currently under way are both scheduled forcompletion in 2007. OGD- 3 calls for the expansion of the Bab Thamama Freservoir to produce an additional 1.2 billion cu ft/day of gas, in addition toinstallation of gas re-injection facilities to recycle the gas into the Thamama Freservoir. It will also increase condensate production by approximately 140,000 b/d.The second project, AGD-2, entails an expansion of the Asab gas plant’s processing,sweetening and NGL recovery capacity by 800 million cu ft/day.ADMA-OPCOThe Abu Dhabi Marine Operating Company (ADMA-OPCO) is the second biggestoil producer in the UAE after ADCO. The two companies account for more than

Umm al-QaiwainA small offshore gas field discovered in 1976 was redrilled in 2001 by AtlantisHoldings of Norway (which, as noted above, was taken over by China NationalChemicals Import & Export Corporation (Sinochem) in January 2002). UAQ-3 wasspudded in April 2001. At the present time however, Umm al-Qaiwain’s sole interestin hydrocarbon production remains its share of the revenues derived from theoffshore Mubarak field in Sharjah, part of which lies under its territorial waters.

EXPLORATION AND FIELD DEVELOPMENT

Abu DhabiAbu Dhabi National Oil Company (ADNOC) has two subsidiary companies thatare engaged in exploration work, ADCO and ADMA-OPCO. Their explorationprogramme has already yielded huge reserves of oil and the research emphasishas now shifted from finding new fields to a more thorough examination ofexisting known reserves, together with some high-tech exploration of deep oiland gas prospects. The aim is to maximise the output of each structure throughimprovements in extraction methods and expansion programmes. It ispredicted that efforts currently under way, involving an investment of overUS$10 billion, will raise the UAE’s sustainable crude output capacity fromaround 2.5 million b/d to 3.6 million b/d in 2005 and 4 million in 2010. ADCOADCO has succeeded in proving sufficient new reserves each year to counteractthe volumes extracted so that the level of overall confirmed reserves has beensustained. Current exploration techniques are primarily based on extensive useof 2D and 3D seismic surveys. These have included a 3D survey of the Al-Dabbiya/Bu Labyad areas and an infill 2D survey of the Mender/Mashhur areas.The US company Western Geophysical has also conducted a 3D seismic surveyof the Bu Hasa field and a similar survey over the southern portion of ADCO’sconcession area. Enhanced knowledge of the structures of these fields should leadto boosts in their productivity.

ADCO has committed to undertake expansion projects to increase its crudeoil production to 1.4 million b/d by 2006. Projects involved in this programmeinclude expansion of the onshore Bab field (adding 100,000 b/d) to achieve acapacity of 350,000 b/d and full field development of the four north-eastern fields(Al Dabb’iya, Jarn Yaphour, Rumaitha and Shanayel) to increase their capacityfrom 10,000 b/d to 110,000 b/d. The work is scheduled for completion in thefourth quarter of 2005 and will provide capacity of 70,000 b/d at the Al Dabb’iyaand Jarn Yaphour fields and 40,000 b/d at Rumaitha/Shanayel.

Meanwhile, new work on the Bu Hasa field (boosting capacity from 550,000b/d to 730,000 b/d) commenced in October 2003 when ADCO awarded Italy-based Snamprogetti the Engineering, Procurement and Construction (EPC) contract.


ZADCO operates the supergiant Upper Zakum field, as well as four small offshorefields: Umm al-Dalkh, Satah, Hair Dalma and Jarnein. Whilst Upper Zakum’spresent capacity is said to be 550,000 b/d, ZADCO’s entire production in 2002 wasreported by OPEC to be around 280,000 b/d. In late September 2002, ZADCOannounced that it had completed the pilot phase for the major gas injection projectat the field. The project involves the utilisation of a 4000-tonne gas injectionplatform with a capacity to inject up to 100 million cu ft/day of high-pressurehydrocarbon gas to each of the Lower and Upper Zakum reservoirs. The Zakumfield contains an estimated 50 billion barrels of crude oil in place but, becauseof the low pressure and the poor porosity of the rock, the recovery rate is verylow, despite the large-scale use of water injection as well as gas injection. Usinggas to inject into oil bearing reservoirs, increasing the pressure and enhancingflow rates is clearly more feasible in the UAE than in countries lacking the UAE’svast reserves of natural gas and oil in close proximity.Abu Dhabi Oil Company (ADOC) and Mubarraz Oil Company (MOCO)ADOC operates the Mubarraz field where water and gas injection has been usedto increase reservoir pressure. ADOC-GA, a subsidiary of ADOC, operates Neewatal-Ghalan, which has an output of around 5000 b/d of crude, piped to ADOC’sprocessing facilities on Mubarraz Island. The latter facility also handles crude fromthe Umm al-Anbar field (approx 5000 b/d) operated by Mubarraz Oil Company.

Following ADOC’s installation of an acid gas injection system at Mubarraz in2001, the company reported that oil recovery rates had been substantially increased.Furthermore, the project resulted in the elimination of gas flaring since any recoveredassociated gas is now re-injected into oil reservoirs. The Mubarraz, West Mubarrazand Neewat al-Ghalan fields presently produce around 31,000–32,000 b/d ofcrude oil.Al Bunduq Oil Company (BOC)The Al Bunduq field straddles the border between Abu Dhabi and Qatar. In May1969 the two countries agreed to share revenues accruing from the field’s oilproduction on an equal basis. Al Bunduq produces approximately 12,000 to15,000 b/d for Abu Dhabi.Total Abu al-Bukhoosh Oil Company (TBK)Total Abu al-Bukhoosh Oil Company was set up to develop the Abu al-Bukhooshfield by ADMA-OPCO in 1969. The field now yields between 25,000 to 30,000 b/dof crude.

DubaiIn 2002 oil contributed only 7 per cent of Dubai’s GDP, whereas in 1985 it accountedfor just under half, and in 1993, 24 per cent. The government’s expectation is thatby 2010 it will account for less than 1 per cent.

80 per cent of Abu Dhabi’s total crude oil production. ADMA-OPCO, which celebratedthe fortieth anniversary of the first oil shipment from the country in 2002, isresponsible for development and operation of the Umm Shaif and Lower Zakumoffshore fields. Situated approximately 140 kilometres north-west of Abu DhabiCity, in an area of 360 square kilometres, Umm Shaif has 268 producing wellsand an output of around 200,000 b/d. The Zakum field is located about 65kilometres north-west of Abu Dhabi City and currently produces 220,000 b/d,making it one of the largest offshore oil fields in the world. Water injection wasadopted from 1978 to maintain pressure in the reservoir. Zakum comprises fivemain layers but, given their massive reserves, production and development hasbeen initially concentrated on the lower layers (Lower Zakum).

These two offshore fields operated by ADMA-OPCO, Lower Zakum and UmmShaif, have rated capacities of 320,000 b/d and 280,000 b/d respectively. As notedabove, the company currently produces around 420,000 b/d of oil that is obtainedvia multiple wells tapping into the productive zones. ADMA-OPCO is focused onmaintaining capacity at the current level through the drilling of additional productionand injection wells and, in particular, the expansion of gas injection systems.

The Umm Shaif crestal gas injection project entails re-injection of 600 millioncu ft/day of gas from the field’s Khuff reservoir into the Arab C and D oilreservoirs and is scheduled for completion in 2006. The project will double thegas injection capacity of the Umm Shaif field.

The Lower Zakum field boasts two collecting centres, Zakum West super complexand Zakum central super complex. A pilot gas injection project at Lower Zakumwas commissioned in October 2002. With a capacity of 100 million cu ft/day,the high pressure injection system forces gas into the Zakum structures, enhancingthe capability to extract oil. The gas required by the project is being drawn fromthe Khuff gas reservoir under the Umm Shaif field, which is being connectedvia a gasline to the Zakum West Supercomplex, where an additional 200 millioncu ft/day compressor is being installed on the gas injection platform.

Installation of new and improved pumps in 2001 permitted all the associatedgas produced at Lower Zakum to be processed and pumped at high pressure toDas Island instead of flaring it off above the rig. The Zakum Central Supercomplexwas demothballed and recommissioned as part of the Lower Zakum developmentprogramme, enabling easier access to the Thamama IV and V reservoirs. A10-kilometre, 24-inch pipe was also built linking Zakum Central and Zakum West.Zakum Development Company (ZADCO)Upper Zakum is of considerable significance in relation to the UAE’s intentionto increase oil production capacity from the present level of 2.63 million b/d toa new sustainable capacity of 3.58 million b/d by 2006. Upper Zakum’s productioncapacity is set to increase from its present level of 550,000 b/d to 1.2 million b/d.


Dubai has installed enhanced recovery systems and other facilities to maximiseflow rates at its oilfields in a bid to slow the decline in production. Furtherdevelopment work is taking place at the Margham gas field to stem the fall ingas/condensate output there. Dubai Petroleum Company (DPC), by far the largestproducing venture in the emirate, has drilled infill wells and horizontal productionwells to boost recovery at four main oilfields, Fateh, Southwest Fateh, Rashid andFalah, which are all located offshore. There have been some impressive successes,such as the tripling of production at Falah D from 10,000 b/d to 30,000 b/d followinghorizontal drilling at the site. But, despite these efforts, the seemingly inexorabledecline in Dubai’s oil production continues. Faced with limited resources within itsown territory, Dubai has been looking elsewhere for opportunities in oil explorationand development. One such venture is Dragon Oil (an Irish registered companycontrolled by Emirates National Oil Company, ENOC), which has an interest inoil production in Turkmenistan where it produced around 15000 b/d in 2003.

SharjahSharjah’s main hydrocarbon production is in natural gas and the emirate’s onlyoil field is the offshore Mubarak field, which has been in production since 1972.A continuous fall in production at this field led Crescent Petroleum to embark ona secondary development programme that entailed drilling more wells, includingsome horizontal wells, tapping into the Thamama formation and development ofa new gas processing platform to handle Thamama gas. The platform is equippedfor condensate separation and stabilisation, together with gas dehydration andcompression. After this processing, 100 million cu ft/day of gas is sent througha 16-inch trunk line to Jebel Ali in Dubai. The secondary development programmealso impacted positively on Sharjah’s oil production and, after a temporary surge,production has levelled out to an estimated 15,000 b/d of liquids (5000 b/d ofcrude and 10,000 b/d of condensate) and 120 million cu ft/day of gas.

OIL REFINING

The UAE exported 398,200 b/d of refined products in 2001, which increased to485,500 b/d in 2002. Significant growth in the refining sector is attributable tocompletion of the expansion of Abu Dhabi Oil Refining Company’s (Takreer) Ruwaisrefinery, which has a full production capacity of 420,000 b/d, and Emirates NationalOil Company’s (ENOC) 120,000 b/d condensate-processing plant at Jebel Ali FreeZone. But 400,000 b/d of the UAE’s total refining capacity is for condensate ratherthan crude oil, made up by the two 140,000 b/d units at Ruwais and the two 60,000b/d units at Jebel Ali. Economic conditions for the UAE’s refiners were difficult in2002 and 2003 when high oil prices made feedstock expensive. It was in thissomewhat negative climate that the Fujairah refinery closed down for severalmonths and the ENOC facility at Jebel Ali temporarily halved its output.


1 3 5 7 9 11 13 15 17 19 21

Table 23: Export of Refined Products by UAE: 1990–2002

Table 22: UAE Refinery Capacity*: 1990–2002

500

450

400

350

300

250

200

150

100

50

0

500

450

400

350

300

250

200

150

100

50

0

UAE REFINERY CAPACITY (000b/d)

EXPORTS OF UAE REFINED PRODUCTS (000b/d)

Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Capacity 192.5 192.5 192.5 205 205 211 246 291 291 411 420 491.3 491.3

Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Products 165 170 173 160 155 269.1 271.9 323.1 319.1 331 391.7 398.2 485.5

REFI

NER

YC

APA

CIT

Y00

0b/d

EXPO

RTED

REFI

NER

YPR

OD

UC

TS00

0b/d

* Does not indicate maximum production. In some years refineries operated above design capacity.

Sour

ce:O

PEC

Annu

al S

tatis

tical

Bul

letin

200

2So

urce

:OPE

C An

nual

Sta

tistic

al B

ulle

tin 2

002

Abu DhabiAbu Dhabi Oil Refining Company (Takreer) operates the emirate’s two refineries atRuwais and Umm al-Nar, which have capacities of 420,000 b/d and 88,500 b/drespectively. The Ruwais plant includes two 140,000 b/d condensate processingtrains, which came on stream in 2000, tripling its capacity from 126,000 b/d to420,000 b/d and increasing Abu Dhabi’s total refining capacity from 211,000 b/dto 508,500 b/d. Light products produced at Ruwais are mainly exported to Japanand India, while fuel oil produced there is sold locally for domestic power generation.

Unleaded gasoline units are being installed at both refineries. The Ruwais facilityhas also installed a low-sulphur gas oil (LSGO) plant and expanded its hydrocracker.The other units to be added are central environmental protection facilities (CEPF),including for the processing of toxic waste, a 300,000 tons/year (t/y) base oil refinery(BOR), and additional sulphur loading facilities in the port of Ruwais. This ambitiousdevelopment programme at Ruwais, which will increase the refinery’s output ofunleaded gasoline and other light products, reduce the sulphur content of gasoil and increase lubricants production, is being undertaken in a series of stagesstarting with a ULG unit and a low sulphur gas oil (LSGO) plant, expansion of thehydrocracking capacity and erection of additional storage tanks. Initial constructioncontracts were awarded in July 2002, with completion dates of July 2005.

Meanwhile, the present condensate plant at Ruwais, comprising two 140,000b/d units, is to be increased to 360,000 b/d by 2006. This is being done in orderto process the extra 135,000 b/d of condensate that will be produced by theexpanded onshore Asab field when developments taking place there are completed.Interestingly, the increased capacity has been achieved by debottlenecking theexisting splitters to increase their effective capacity by 30 per cent.

Abu Dhabi already produces lubricants at the two oil refineries, as well as ata 30,000 t/y lube oil-blending plant that started up in the late 1980s and a 4000t/y grease plant in Umm al-Nar. The Ruwais BOR provides a further boost to AbuDhabi’s lubricants production from 50,000 t/y, to 90,000 t/y by 2005–06.

DubaiWhilst Dubai does not have any crude oil refining facilities, it does possess a120,000 b/d condensate refinery that began operations in 1999. It was developedby state-owned Emirates National Oil Company (ENOC) at a cost of Dh1.3 billionand consists of two 60,000 b/d trains, one for sweet and one for sour condensate.The plant produces a large proportion of the LPG, jet fuel, gas oil and bunker fuelconsumed in Dubai, as well as exporting some 66,000 b/d of naphtha. High oil pricesin 2003 impacted on the profitability of several refineries and ENOC temporarilyshut down one of its condensate trains. It was expected to go back on stream againin late 2003 as condensate feedstock became available in sufficient quantitiesand at affordable prices.

Table 24: Refineries in the UAE and their Respective Capacities: 1998–2002

450

400

350

300

250

200

150

100

50

0

1998 1999 2000 2001 2002Abu Dhabi National Oil Company (ADNOC)Al Ruwais 126 126 140 140 420Umm al-Nar 85 85 90 90 90

Metro Oil*Fujairah 80 80 70 70 70.0*

Emirates National Oil Company (ENOC)

Jebel Ali - 120 120 120 120* The refinery at Fujairah was operated under the name Metro Oil but was closed down in March 2003 due to negativeeconomic factors. It is now fully owned by the Fujairah government which is planning to reopen the plant.

REFI

NER

YC

APA

CIT

IES

000

B/P


Sour

ce:O

PEC

Annu

al S

tatis

tical

Bul

letin

200

2

However, the refinery was again closed in March 2003 because it was losing moneyand was subsequently taken over by the Fujairah government, which announcedplans, in November 2003, to reopen the plant. At the time of its most recent closurethe refinery was producing only diesel oil and fuel oil, which were sold on thespot market, but there were plans for installing facilities for the production ofkerosene, jet fuel and possibly gasoline.

OIL EXPORTS

Abu DhabiAs a result of the successive cuts in output due to reductions in OPEC quotas forthe UAE, Abu Dhabi’s oil exports fell for the second year in succession, averaging1.45 million b/d in 2002, compared with 1.62 million b/d in 2001. It, nevertheless,retained its position as Japan’s main source of crude oil, supplying 23.6 per centof the country’s oil imports and sending more than half the UAE’s crude oil toJapan. Almost all of ADNOC’s exports, comprising four grades of crude, Murban(39° API), Lower Zakum (30° API), Umm Shaif (37° API) and Upper Zakum (34°API), are sold to the Far East. After Japan, the main importers are SouthKorea, Taiwan, Thailand, India, Pakistan, Sri Lanka and Bangladesh.

Abu Dhabi condensate exports continued to rise in 2002, reaching almost400,000 b/d, following a sharp increase in 2001. These exports have no effect onthe amount of crude that the emirate can export, since condensate is not coveredby OPEC’s oil production quota arrangements.

Abu Dhabi’s refined products are exported by ADNOC Distribution (ADNOC-FOD),which sells oil products and lubricants both to the Far East and to Arab and Africancountries. India is the leading export market for Abu Dhabi’s refined products,absorbing over half its gas oil exports as well as substantial volumes of keroseneand LPG. Japan now accounts for about one-third of the emirate’s refined productexports, down from 50 per cent in 1993, but remains the largest market for naphtha.

DubaiDubai exports all the crude it produces, mostly to the Far East. Dubai crude (31°API) is mainly sold on the spot market, and, despite its very limited volume, servesas a price marker for some other Gulf producers. In 2002 the price averagedUS$24.50/b, as against US$22.61/b in 2001, US$26.20/b in 2000, US$19.10/bin 1999 and US$16.10/b in 1998.

GAS

The UAE’s natural gas reserves of 212 trillion cubic feet (tcf) are the world’sfourth largest after Russia, Iran, and Qatar. The largest reserves of 196.1 tcf arelocated in Abu Dhabi with the rest shared through the other emirates.

Several oil reprocessing and lube oil blending plants are situated at Jebel Ali,including a lube oil blending and packaging plant that can produce 50,000 t/yof lubricants; its output is marketed throughout the Gulf region as well as in theUAE. A lube oil recycling plant (developed by the Western Oil Company of India)produces base stock for processing into lubricating oil or fuel oil. Most of its60,000 t/y is exported to India. An oil processing plant for producing gasolineadditives and conditioning products which has been developed by Ducham, asubsidiary of Abu Dhabi-based Star Energy Corporation, has a capacity of20,000 b/d of unleaded gasoline, 360 ton/day (t/d) of aromatics and 240 t/d ofraffinate. Gadgil Western Corporation (GWC) runs a fuel oil reprocessing plant witha capacity of 275,000 t/y. In November 2002 Total gave permission to ENOC toutilise its Jebel Ali based lube oil blending plant to produce 5 million litres/yearof lubricants, with a possible increase to 6.5 million litres/year at some future date.

SharjahFal Oil operates a lubricants plant in Sharjah that started up in 1979 producinga variety of products for automotive, marine and industrial use. This was theemirate’s second lube oil blending plant, following that developed in 1976 bySharjah National Lube Oil Company (SHARLU).

A bulk oil products storage facility was established at Hamriyah in April 2001.Developed by National Oil Storage Company (NOSCO), a 50-50 per cent jointventure between two Sharjah-based companies, Gulf Energy and Union Energy,it comprises six storage tanks for holding diesel oil, fuel oil and bitumen, twoof 10,000 tons, two of 6000 tons and two of 5000 tons.

FujairahDespite the fact that Fujairah has never been a producer of either oil or gas, andno exploration is taking place in the emirate, it does possess an 80,000 b/d oilrefinery that has had a somewhat rocky history. Fujairah has succeeded incapitalising on its strategic location on the Gulf of Oman by providing oil storageand bunkering services to shipping. It is the world’s third largest ship refuellingcentre and has the second largest container terminal in the UAE.

The Fujairah refinery had an initial capacity of 35,000 b/d, which subsequentlyrose to 40,000 b/d before being doubled to 80,000 b/d in October 1997, when asecond 40,000 b/d crude and condensate distillation unit started up. In February1998 however, the operator was forced to close the refinery which was subsequentlytaken over by Fujairah Refinery Company (FRC), a specially created joint venturebetween the government of Fujairah, Swiss-based Glencore International, anda group of financial institutions. The refinery was brought back on stream inSeptember 2000 with an effective capacity of 52,000 b/d. A second 38,000-b/dunit started up in October 2001, restoring the refinery’s capacity to 80,000 b/d.


expansion, making available more natural gas. Qatari gas under the mega DolphinGas initiative will also be available in 2006.

Even the UAE’s cars are likely to switch to gas as a fuel in the future. ADNOCDistribution has been engaged in a pilot project for use of natural gas by taxisin Abu Dhabi. Initially, 48 taxis in the capital have been fitted with gas insteadof gasoline. The natural gas filling station is near Mina Zayed. Future plans includethe use of natural gas by all taxis in Abu Dhabi, Al Ain and nearby areas.

Dolphin Energy LtdIn 2003, Dolphin Energy Ltd undertook an essential step in implementing oneof the largest energy initiatives in the Middle East, the Dolphin Project, by movingfrom the planning and design stage to detailed infrastructure and engineeringdevelopment. The company also signed binding agreements to supply gas to twoinitial key customers. Dolphin Energy was established in Abu Dhabi in 1999 inorder to undertake the Dolphin Project that will produce, process and transportQatari natural gas via pipeline to the UAE. Gas is scheduled to begin flowing throughthe new pipeline in 2006. The company has also launched an additional strategicproject due to come on stream in 2004, i.e. the supply of Dolphin gas to the newpower and desalination plant in Fujairah. Other significant ventures by DolphinEnergy are expected in future.

Dolphin Energy Ltd is 51 per cent owned by the Mubadala DevelopmentCompany (itself wholly owned by the Abu Dhabi government), with Total of Franceand Occidental Petroleum of the USA each owning 24.5 per cent. Dolphin Energy’smandate is set out in Qatari and Abu Dhabi Emiri Decrees issued respectivelyin 2001 and 2002. The company’s principal technical focus in 2003 has thereforebeen to translate its responsibilities under these decrees into fully realised front-end engineering design (FEED) documentation; to issue commercial tenders toselected bidders; to evaluate the resulting bids; and to and award Engineering,Procurement and Construction (EPC) contracts.

Before gas can be transported from the Qatar gas field to UAE it must be processedand the Dolphin Project is undertaking this task. Firstly, raw natural gas will beextracted from Qatar’s offshore North Field through specially built productionplatforms, and then transported by marine pipelines to Dolphin’s dedicatedProcessing Plant onshore in Qatar’s Ra’s Laffan Industrial City. In January 2004Dolphin Energy Ltd officially announced substantial construction and equipmentcontracts for the Qatar located parts of the Dolphin Gas Project. These contractscovered engineering, procurement and construction (EPC) for both the new gasprocessing and compression plant at Ra’s Laffan (worth approx. US$1.6 billion,awarded to JGC Corporation of Japan) and two offshore gas production platforms–as well as the supply of the compression trains for the plant. The processing plant,due to come on line in 2006, will receive wet gas from Dolphin’s facilities in Qatar’s

The non-associated Khuff gas reservoirs beneath the Umm Shaif and Abu al-Bukhush oil fields in Abu Dhabi rank among the world’s largest. Current gas reservesare projected to last for about 150 to 170 years at present rates of production. Thereduced OPEC oil production quotas and increased domestic consumption ofelectricity, plus the growing demand from the petrochemical industry, have providedincentives for the UAE to increase its use of natural gas. The development of gasfields also increases exports of condensates, which are not subject to OPEC quotas.Abu Dhabi Gas Industries Ltd (GASCO) handles associated gas from ADCO’sonshore crude production and processes it through three NGL extraction plantsat Bab, Bu Hasa and Asab. Offshore, the Abu Dhabi Gas Liquefaction Company(ADGAS) handles associated and non-associated gas from offshore fields at itsplant on Das Island. The bulk of the output is sold to Japan.

The country’s power stations, desalination plants and other industrial projectsdepend on burning gas, rather than oil, driving gas consumption to 4 billion cu ft/dayin 2002. The UAE has been a producer and exporter of natural gas since 1977.At the present time it produces around 5.8 billion cu ft/day — a significant increaseon the figures from 1995 when 2.5 billion cu ft/day were produced. The improvementfollows a development programme involving three separate projects to enhancerecovery of associated and non-associated Khuff gas from onshore reservoirs.The rate of industrial and domestic growth in the UAE is such that national demandsfor gas are approaching a point where they place severe strains on available suppliesand the UAE has therefore embarked upon an ambitious project, established byDolphin Energy, to deliver gas from Qatar’s North Dome gas field through an800-kilometre gasline to Abu Dhabi, from where it will be piped to the centres ofuse such as Fujairah’s new power and water complex and Jebel Ali’s industrialzone. A pipeline to bring gas from Oman has also been completed and, at alater date, this may in fact deliver gas back into the Omani grid.

If confirmation was needed that the UAE sees gas and not oil as the answer toits future energy needs, construction of a new project for natural gas distributionthroughout Abu Dhabi should persuade any doubters that this is indeed the wayforward. The new pipeline network will deliver clean burning natural gas forcommercial and residential purposes. The estimated Dh1 billion initiative comeson the back of increased natural gas availability as several development andexpansion projects are under way. In the first phase, the natural gas distributionnetwork will cover 120,000 commercial and residential users in Abu Dhabi, AlAin and one or two nearby towns. ADNOC Distribution, a subsidiary of ADNOC,is overseeing the project.

Industry sources and government officials share the view that Abu Dhabi willhave an abundance of natural gas once major expansions come on stream. TheOnshore Gas Development 2 and 3, Bu Hasa, Habshan and others are all under


offshore North Field, and will strip out valuable hydrocarbon liquids includingcondensate and NGL products, for processing, marketing and sale. The plant willcompress the resulting dry gas for transportation by Dolphin’s export pipeline tothe UAE.

In October 2003, Dolphin Energy realised a further strategic objective for theDolphin Project by signing binding agreements for supply of its gas to two ofthe UAE’s leading power and water companies, Abu Dhabi Water & ElectricityAuthority (ADWEA) and Union Water & Electricity Company (UWEC). Substantialquantities of Dolphin gas from Qatar will now be supplied for a minimum of 25 yearsto each of these organisations for power generation and water desalination.

Dolphin Energy has constructed a gas pipeline between Al Ain and Fujairahon the UAE’s East Coast, in order to supply the emirate’s new UWEC power anddesalination plant. The 182-kilometre pipeline will initially supply Dolphin naturalgas from Oman to UWEC in the first quarter of 2004. Once Dolphin gas fromQatar becomes available from 2006, the switch to this longer-term supply sourcewill be made. In the future Oman will also be able to receive Dolphin gas fromQatar through the Al Ain link, as and when required. The Al Ain–Fujairah pipelinewas completed in November 2003, ready for final commissioning early in 2004.

Abu DhabiThe government of Abu Dhabi is sole owner of all natural gas resources on itsterritory, both onshore and offshore, whether in associated or non-associated form.The Abu Dhabi National Oil Company (ADNOC) is responsible for developing andmarketing these resources on the government’s behalf and is authorised to formpartnerships with foreign companies for that purpose, so long as it retains at leasta 51 per cent interest in any venture. Abu Dhabi’s proven natural gas reserves wereestimated at 5.55 trillion cubic metres as at 1 January 2002, representing around92.5 per cent of the UAE’s total gas reserves of 6.01 trillion cubic metres. Meanwhile,Abu Dhabi’s gross gas production reached 60 billion cubic metres in 2002.

The impressive production figures are the result of a sustained developmentprogramme involving the second and third onshore gas development projects(OGD-2 at the Bab field and AGD-1 at the Asab field). These are operated by theAbu Dhabi Gas Company (GASCO), which was established in July 1978 as a jointventure between ADNOC (68 per cent), Total (15 per cent), Shell Gas (15 per cent)and Partex (2 per cent). In May 2001, the company was enlarged by the take-overof a wholly-owned subsidiary of ADNOC, Abu Dhabi Gas Company (Atheer), whichwas created in June 1999 to take charge of ADNOC’s onshore gas development,production and processing operations. The enlarged entity retains the GASCO name.

GASCO operates the massive gas processing plant at Habshan, built in 1983to process associated gas from the Thamama C reservoir of the Bab oilfield, andwhich today also processes non-associated gas from the Thamama B, D and F


1 2 3 4 5 6 7 8 9 10 11 12 13

2002

2001

2000

1999

1998

Table 25: Natural Gas Production 1998–2002

Table 26: UAE Natural Gas Exports 1990–2002

billion standard cu m 0 10 20 30 40 50 60 70

1998 1999 2000 2001 2002Marketed Production 37.1 39.0 38.4 44.9 46.1Flaring 1.5 1.3 1.3 1.3 1.2Reinjection 7.2 7.4 7.5 10.0 10.5Shrinkage 3.3 3.3 3.4 4.1 4.3TOTAL 49.1 51.0 50.6 60.3 59.1

Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Exports 3200 3450 3420 3350 4150 6530 6740 7310 6720 7070 6950 7460 7113

EXPORTS OF UAE NATURAL GAS (millions standard cu m)

7500

7000

6500

6000

5500

5000

4500

4000

3500M

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Gas

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2002

With oil reservoirs maturing in onshore Abu Dhabi, demand is rising for gasre-injection. With a production of some 1300 million cubic feet a day, the OGD-3/AGD-2 is expected to provide the fillip. In addition, the OGD-3/AGD-2 will deliversignificant quantities of gas liquids. Some 135,000 barrels a day of condensateand up to 24,000 tonnes a day of natural gas liquids (NGL) will be delivered toRuwais for processing. Products will be either exported or used as feedstock foradditional petrochemical capacity. The project is a joint effort between ADNOC,ADCO, Takreer and GASCO.

Abu Dhabi began exporting natural gas from its onshore fields to Dubai by pipelinein June 2001, following completion of the OGD-2 project. After an initial rate of 200million cu ft/day, the volume sent through the 112-kilometre gasline reached thecontractual rate of 500 million cu ft/day by mid-July 2002. The gas is being lifted byDubai Supply Authority, whose contract with ADNOC provides for its imports to beincreased to 900 million cu ft/day, the maximum capacity of the gasline, by 2004.

In October 2003 Fluor Corporation was awarded an engineering, procurementand construction contract worth US$22 million by GASCO. Fluor will use its expertiseto modify existing facilities at GASCO’s Habshan gas processing plant and installa new propane refrigeration package and absorber column. The work will maximiseethane recovery at the site. Upon completion the plant will extract 400 tons of ethaneper day. The ethane will be used as feedstock to downstream petrochemicalcompanies related to GASCO and its parent, ADNOC.

Offshore gas development is also of crucial importance to Abu Dhabi’s economywith current work being focused on increasing efficiency with regard to extractionrates. Most of the gas produced offshore is supplied to the Abu Dhabi GasLiquefaction Company’s (ADGAS) liquefaction plant on Das Island (see below).Following the doubling of the plant’s capacity in 1994, the volume delivered tothe LNG plant was stepped up to 800 million cu ft/day.

One major offshore gas development project currently being undertaken entailsfurther development of the Khuff gas reservoirs under the Abu al-Bukhoosh (ABK)field, 45 kilometres north-west of Das Island. Due to be completed in July 2004,it provides for the volume of gas recovered from the ABK Khuff reservoir to beincreased by 240 million cu ft/day to 540 million cu ft/day. Together with gasproduction from the Umm Shaif oilfield, this will take total gas production by 240million cu ft/day to 1.44 billion cu ft/day.

Associated gas has been produced at Umm Shaif since the existing gas gatheringfacilities were completed in 1988. Two wellhead platforms with a capacity of 150million cu ft/day each were installed at the field, as well as two injector/producerplatforms. They are all connected to the Umm Shaif Supercomplex, where theAbu Dhabi Marine Operating Company (ADMA-OPCO) recently revamped the gastreatment plant.

reservoirs and Thamama Units 6 and 7 at Bab. Associated gas from oil productionat the onshore fields of the Abu Dhabi Company for Onshore Oil Operations (ADCO)is first separated at GASCO facilities at Bab, Bu Hasa and Asab, and is then sentto nearby processing plants. There, the natural gas liquids (NGLs) are extractedand piped to GASCO’s main plant for fractionation into liquefied petroleum gas(LPG). The plant has a processing capacity of some 3 billion cu ft/day. Some of thegas is re-injected into the oil reservoirs of ADCO fields, while the rest is suppliedto the power and water industries, which account for 80 per cent of Abu Dhabi’sgas consumption, as well as to the Umm al-Nar and Ruwais refineries, the Borougepetrochemical complex, the Al Ain cement works, the Fertil fertiliser plant andother industrial plants in the Ruwais industrial zone.

Up until late 2000 the 130,000 b/d of condensate output at Habshan was pipedto a storage and handling facility at Ruwais prior to export. Today, however, the230,000 b/d condensate production is all supplied to the Ruwais refinery forprocessing into petroleum products.

In addition to the OGD-2 and AGD-1 projects completed in 2001, two moreonshore development projects at the Bab and Asab fields, OGD-3 and AGD-2 areunder development. OGD-3 will result in production of higher volumes of natural gasliquids (NGL) and condensate and re-injection of gas into oil fields. Wet gas will beextracted from the Thamama reservoirs at Bab, from which condensate will bestripped out and the dry gas re-injected into oil reservoirs to maintain pressure.The project will involve the construction of a gas plant at Habshan to process 1.3billion cubic feet daily of well-stream fluids into 11,000 t/d of NGL, 3400 t/d of ethaneand 125,000 b/d of condensate. The Asab-2 project involves setting up two new gastreatment plants plus two NGL recovery units to process 750 million cu ft/day of gasinto 4500 t/d of NGL and 1700 t/d of ethane. Project completion is planned for mid-2007. These two projects, undertaken by GASCO, will yield additional volumes ofassociated and non-associated gas for supply to the domestic market.

At US$2.3 billion, the OGD-3/AGD-2 project (for which six prequalified companieswere announced in October 2003) represents the biggest single investment inthe history of upstream Abu Dhabi gas. The six companies pre-qualified for theEPC contract were France’s Technip-Coflexip, Italy’s Snamprogetti, JGC Corp andChiyoda Corp, both from Japan, Canada’s SNC Lavalin and the UAE’s PetrofacInternational. The EPC contract involves construction of gas gathering facilitiesand injection of sour gas at Habshan and installation of five trunk lines andassociated facilities.

Unlike OGD-1 and OGD-2, the latest scheme is not designed to produce anydry gas feedstock for the local power sector, one of the biggest gas consumersin Abu Dhabi emirate. The OGD-3/AGD-2 project is essentially a gas recyclingproject geared towards oilfield re-injection.


Dubai’s proven natural gas reserves were estimated at 4100 billion cubic feetas of 1 January 2003. The only domestic source of natural gas for end users is theMargham field, since all the associated gas produced at the offshore oilfields is nowre-injected. Margham’s gas production has been declining for some years andthis fall accelerated in 2001. After averaging 330 million cu ft/day in 2000, downfrom 350 million cu ft/day in 1999 and 380 million cu ft/day in 1998, productionwas reported to be running at no more than 230 million cu ft/day of natural gasin early 2002, plus 20,000 b/d of condensate. The slump in output led DME toembark on a further development programme in 2001 to sustain, if not increase,the field’s gas production.

Dubai depends heavily upon imported gas to meet its energy needs. Its powerstations, desalination plants and factories could not operate without natural gas asan energy source and plans are under way to ensure that future needs are met byambitious and innovative projects such as the Dolphin Energy gas pipeline networklinking Qatar, Abu Dhabi, Dubai, Fujairah and Oman. At present, Dubai is importing300 million cu ft/day from Sharjah and approximately 900 million cu ft/dayfrom Abu Dhabi. Once the Dolphin Energy project begins to deliver to Dubai in2006, the emirate will experience a significant boost in available energy.

SharjahSharjah LPG Company (SHALCO) operates a gas processing plant in Sharjah. Locatedin Saja’a, it handles output of the Saja’a and Moveyeid fields and was originallydesigned to process up to 440 million cu ft/day of natural gas for the production of230,000 t/y of propane, 170,000 t/y of butane and 220,000 t/y of condensate. Theplant’s capacity was increased to 700–800 million cu ft/day in 1994 to enable it tohandle gas from the Kahaif field as well. The propane and butane produced by Shalcoare marketed by Itochu and the condensate by BP. Condensate is carried by a 32-kilometre, 12-inch pipeline to Al Hamriyah on the coast, where BP has its own jettycapable of accommodating tankers of up to 83,000 dead weight tonnage (dwt). Theterminal includes two storage tanks with a combined capacity of 110,000 cubicmetres. The bulk of the condensate is shipped to Japan, although small quantitiesare exported to Western Europe and North America. The condensate has low sulphurcontent (0.01 per cent) and a naphtha yield of almost 80 per cent. BP also exportsmuch of the natural gas it produces, although most goes to industrial and householdconsumers within the emirate. A new compressed natural gas (CNG) plant has beenunder development in the Hamriyah Free Zone by a company called CompressedGas Technology, established in 2003. The plant will produce CNG both for the localmarket and for export. CGT also designs and assembles CNG filling stations.

Sharjah Electricity & Water Authority (SEWA) has been developing a naturalgas distribution network to supply gas direct to residential, commercial andindustrial users.

ADGAS is responsible for the gas liquefaction plant on Das Island, which beganoperations in 1977. From the outset, all the plant’s LNG and most of its LPG werepurchased by Tokyo Electric Power Company (TEPCO) under a 20-year contractthat took effect in 1977 and provided for TEPCO to lift 2 million t/y of LNG and500,000 t/y of LPG. In 1990 the company decided to more than double theplant’s capacity to 5.4 million t/y of LNG, 1.7 million t/y of LPG and 535,000 t/y ofpentane-plus. The expansion entailed the installation, in 1994, of a third liquefactiontrain with a capacity of 2.3 million t/y of LNG and 250,000 t/y of LPG. Like theoriginal units, the third liquefaction train has consistently operated in excess of itsdesign capacity.

In 2000 Japan’s imports from Abu Dhabi included US$1.4 billion of LNG, US$712million of propane and US$50.9 million of butane, mainly from offshore. The plant’sLNG capacity was further increased in August 2001, when ADGAS completed therevamp of the propane compressor serving its third liquefaction train, boosting itsproduction capacity from 320 tons/hour to 380 tons/hour. In early 2002, thecompany signed a front-end engineering and design (FEED) contract with theChiyoda Corporation for an additional LPG train with a capacity of approximately 1million t/y. Shortly afterwards, in October 2002, ADGAS signed an agreementwith BP Gas Marketing Company for the supply of up to 750,000 t/y of LNG. Thecontract is for an initial period of three years, starting in 2002, and could be extendedto five years, depending on BP’s requirements. Whilst TEPCO remains ADGAS’ majorcustomer, marketing development has considerably broadened the client basein recent years. In addition to the sales to BP mentioned above, the company hassold its gas products to European, American and Asian clients.

A new pipeline from Oman has been built to link with the new Dolphin pipelineat Al Ain, thus connecting the UAE gas network with Oman’s gas network. Omanigas will flow to Fujairah until Dolphin gas from Qatar comes on stream in 2006.Oman Oil Company will deliver the gas at the Oman–UAE border. As discussedunder the heading of Electricity and Water in the section on Infrastructure, DolphinEnergy will then supply it to both UWEC’s 656 MW power generation plant andits 100 million gallons-per-day desalination plant, through its new 24-inch pipeline.By 2006, when Dolphin’s new pipeline system from Qatar is in operation, Qatarnatural gas will flow directly to Fujairah via ADNOC’s existing land lines to Al Ainand thereafter the new Dolphin link. The link lays the foundation for a regionalgas supply network in the future.

DubaiDubai’s gas demand is growing by 10–15 per cent per year. Consumption in 2002averaged 700–750 million cu ft/day (not counting gas used for re-injection of oilreservoirs. Peak summer demand can exceed 1 billion cu ft/day and it has beenestimated that average demand could reach 1.1 billion cu ft/day by 2005.


PETROCHEMICALS AND FERTILISERS

Abu DhabiAbu Dhabi has two major petrochemical and fertiliser industrial complexes, theRuwais Fertiliser Industries company (Fertil) and the Abu Dhabi Polymers Company(Borouge). Fertil was established to utilise lean gas supplied from onshore field ofBab, Asab and Thamama C to produce fertilisers and market them locally andinternationally. Fertil brought its existing nitrogenous fertiliser plant in Ruwaison stream in April 1984. It consists of a 1050 t/d ammonia plant and a 1500 t/durea plant, but both have operated at over 130 per cent of capacity in recent years(1310 t/d of ammonia and 1850 t/d of urea), enabling them to produce 470,000tons of ammonia and 650,000 tons of urea in 2002.

Borouge is a joint venture between ADNOC with 60 per cent and Copenhagen-based Borealis, itself partly owned by Abu Dhabi, with 40 per cent. Its petrochemicalcomplex in Ruwais cost an estimated US$1.2 billion to develop and includes a600,000 t/y ethane cracker that supplies ethylene feedstock to two 225,000 t/ypolyethylene units. Borouge produces up to 450,000 tonnes of Borstar bimodalhigh-, medium-, and linear low-density polyethylene per year. Combining goodprocessability with excellent mechanical properties, Borouge Borstar products arestronger, lighter, environmentally friendly and more malleable than conventionalpolyethylene, resulting in material savings of up to 30 per cent.

Borouge’s products are used for the manufacture of plastic film and mouldingpackaging for industries such as pharmaceuticals, food and beverage, cosmetics,and chemicals. Borouge’s products are also suitable for the manufacture ofhigh-pressure pipe used in agriculture, mining, water, gas and sewage distribution,as well as coating of steel pipelines.

In addition to promoting its own polyethylene products, Borouge also oversees thedistribution and marketing of Borealis’ entire range of polyolefins in the Middle Eastand Asia Pacific. These products include polyethylene for extrusion coating, moulding,and wire and cable, as well as polypropylene for film, moulding, hot water pipesand engineering applications. Borealis has signed a contract with ADNOC toextend the polyethelene plant at Ruwais to almost double the existing capabilityof 225,000 tonnes of high- and low-density polyethelene. The increasedproduction will be supplied by ethane gas using the new pipeline from GASCO’scomplex at Habshan.

Total is to build a melamine plant at Ruwais, the first of its kind in the region.The US$112 million project calls for the construction, by Fertil, of a 50,000 t/yunit. Production, likely to commence in 2006, will primarily be shipped to Europe.

Dubai Dubai’s first fertiliser plant, a joint venture between Kemira Agro Oy of Finland(49 per cent) and the local firm Union Agricultural Group (51 per cent), has the

Sharjah started exporting natural gas to Dubai in 1986. The initial contractprovided for BP to supply 140 million cu ft/day of gas from the Saja’a field overa three-year period starting in March 1986. A 75-kilometre, 24-inch gaslinewas built from Hamriyah to Jebel Ali for the purpose. That volume soonproved insufficient for Dubai, and at the end of 1986 a second agreementwas signed providing for supplies to be stepped up to 250 million cu ft/daywith effect from the middle of 1987. The capacity of the gasline was increasedaccordingly through the installation of two additional compression stations.Amoco, the original concessionaire (now part of BP), concluded another gassupply agreement in June 1994, providing for it to deliver natural gas to theNorthern Emirates as well, once the Kahaif field was in production. CrescentPetroleum also began exporting gas to Dubai in January 1993, following thesigning of an agreement with DUGAS for the supply of 100 million cu ft/day ofgas for delivery to its plant in Jebel Ali. The gas is carried by an 87-kilometre,16-inch subsea gasline from the gas-processing platform that came on streamat the Mubarak field in November 1992. At the present time Sharjah exportsaround 300 million cu ft/day to Dubai.

Ra’s al-KhaimahRa’s al-Khaimah is reported to have natural gas reserves of 1.2 trillion cubic feet.Following a number of years in which the Saleh field produced limited quantitiesof both oil and gas, the field switched to production of just condensate. The LPGplant at Khor Khwair in Ra’s al-Khaimah now gets its feedstock from the offshoreBukha field in Oman.

AjmanA petroleum production sharing agreement was signed between Sharjah andAjman in early July 2002 to jointly develop the Zora field, a gas reservoirlocated around 40 kilometres off the two coasts. Crescent Petroleum andAtlantis, which hold the concessions from the two respective governments,were also signatories to the agreement. Production is to be shared equallybetween the parties concerned.

Umm al-QaiwainA survey carried out during late 2001 and early 2002 resulted in discovery of gasreserves off the emirate by Atlantis Holdings. The discovery was made followingtests conducted on the UAQ 3 offshore well that revealed recoverable reservesof up to 500 billion cubic feet of gas and 5 million barrels of condensates. Subseapipelines are being laid from Umm al-Qaiwain port to the offshore gas discoveryat a concession awarded by the government in December 1999 to AtlantisHoldings. It is understood that the feedstock will be processed in Umm al-Qaiwain,which is likely to provide gas to utility projects in the Northern Emirates.


capacity to produce 6000 t/y of water-soluble compound fertilisers. Developedby the same group the Kemira Emirates Fertiliser Company (Kefco), a secondmuch larger fertiliser plant with a capacity of 60,000 t/y was brought on streamin 2001 in the Jebel Ali Free Zone. Another plant, with a capacity to produce226,000 t/y of ammonia and 400,000 t/y of granular urea has been built at JebelAli. The plant is being supplied with 40,000 million British Thermal Units per day(Btu/day) of natural gas feedstock by Dubai Natural Gas Company, DUGAS, andwill export its output to India. Meanwhile, a 500,000 t/y Methyl Tertiary ButylEther (MTBE) plant, established in 1995, utilises the butane isomerisation processof Lummus, the Catofin dehydrogenation process, and CD MTBE synthesistechnology for converting butane into MTBE.

AjmanAjman has a 600 t/d fertiliser plant that came on stream in December 1987.

TOURISM

One of the key engines for growth in tourism is the expansion of local airlines.Gulf Air and the ever expanding Emirates airline have now been joined by newarrivals Ettihad and Air Arabia, all offering slightly different packages transportingpeople to, from, and through, the UAE’s airports at Abu Dhabi, Al Ain, Dubai,Sharjah, Ra’s al-Khaimah and Fujairah.

If the scale and rate of expansion of the tourism/travel sector seems at times todefy logic it is, contrary to nay-sayers, all based on solid statistics and well integratedplanning. The airport expansion plan at Dubai, due to be completed in 2006, is sizedto handle expected growth in passenger numbers. The airport handled 16 millionpassengers in 2002, whilst Dubai’s hotels and serviced apartments hosted over 4.75million guests during the year. A plan for Dubai’s tourism expansion, entitled DubaiVision 2010, is based on ten million people visiting Dubai as tourists by 2010, whilepassenger throughput by that stage is expected to exceed 30 million. Previous plansfor the airport were based upon 60 million passengers by 2020, but it recentlybecame clear that growth rates were exceeding predictions, so the new plan catersfor 70 million people a year by 2020. And it is by no means only Dubai thatis gearing up for increased passenger throughput and a surge in tourist numbers. Allthe country’s airports have recently completed, or are in the midst of ambitiousexpansion plans for their airports. Abu Dhabi International Airport, for example, hasbeen through a major development programme that has resulted in a doubling of itspassenger handling capacity (see also section on Airports and Aviation).

The UAE’s tourism industry is also experiencing dramatic developments inhotel and leisure infrastructure. Iconic projects such as Burj al-Arab, several times


nominated as ‘the world’s finest hotel’, the nearby Jumeirah Beach Hotel andtraditional Royal Mirage Hotel are impressive expressions of what the country canoffer discerning visitors. As each year passes, more top-class hotels are added to thelist, and almost as soon as they are built they are achieving 100 per cent occupancy.

A case in point is Mina A’Salaam Hotel, also part of the Jumeirah Hotels Group.This traditional Arab hospitality centre is an integral part of Madinat Jumeirah,a large realistic and atmospheric simulation of a traditional Arabian town, repletewith narrow streets, coffee shops, spice markets and even its own mini ‘creek’on which real abras (wooden motorised launches) carry visitors around the village.Opened in the autumn of 2003, it immediately recorded full occupancy and hasremained full, or nearly full, ever since.

Projects such as these, built to high standards and created with real imagination,are helping to create a tourism destination that is reaching a ‘critical mass’ wherethe investments have resulted in such a substantial list of attractions, with such anefficient supporting infrastructure, that they themselves are spawning furtherdevelopment, new investments and exponential growth in visitor numbers.

As we have seen in Dubai, land reclamation can be turned to the advantage oftourism development through creation of attractive islands and many kilometresof new beaches. But coastal lands are also being used for important infrastructuredevelopments such as new highways. Land reclamation for these projects hasalready placed existing shoreline properties, like the Abu Dhabi Hilton Hotel,further back from the coast. Current work involving further realignment of AbuDhabi City’s Corniche is having its own impact on major hotels. The capital city’sSheraton Hotel, which until recently had its own private beach, now sits behindthe reclaimed land that will carry a major highway from the city’s centre to thenorth, linking up with the road to Dubai. Innovative design has, however,succeeded in retaining the beachside feel of this historic hotel and a majorrefurbishment has consolidated its five-star status, as well as its unique charm.

Whilst Dubai is clearly at the forefront of the UAE’s tourism expansion, itwould be wrong to give the impression that it is the only emirate where tourismdevelopments are taking place. Abu Dhabi, Sharjah, Ra’s al-Khaimah, Ajman,Umm al-Qaiwain and Fujairah have each made significant strides in their tourismprogrammes. Brand new hotels, and recently renovated ones, can be foundthroughout the UAE; the visitor is almost spoilt for choice.

In economic terms tourism is seen as an important future contributor to GDP.The figures already indicate that this is within reach, but there is also a senseof an additional ingredient in planning of the UAE’s tourism infrastructure. Itseems that it is not simply a question of creating a viable economic model, butalso of having fun with developing new concepts. Creativity and imaginationhave been given such rein that few barriers exist to what can be achieved. Thus,for example, when Dubai’s available beachfront area was clearly destined to reach


AGRICULTURE

Despite its extreme climate, the UAE’s cultivated area now extends over 2.7 milliondonums (891,089 acres). This supports over 40 million date palms, together withvarious types of fruits and vegetables, including mangoes, tomatoes, beans,cucumber and pepper. The UAE’s agricultural research strategic plan has beenrecently revised in order to focus on integrated and comprehensive researchdirected at achieving sustainable and significant growth in the sector. Progress todate has been achieved by increasing cultivable land and by enhancing productionmethods. The timely use of fertilisers, the use of improved seeds, pest and diseasecontrol, improvement of the quality of services to producers, especially in the formof agricultural guidance, as well as provision of adequate irrigation facilitiesand the development of support methods during both production andmarketing stages contributed to these accomplishments.

By 2003, the UAE produced 30 per cent of its food-grain requirements, whilesome surplus vegetables and fruits are exported. Significant priority is given toagricultural development, in general, and sustainable date palm production, inparticular. The UAE is 100 per cent self-sufficient in dates and fish, and grows 58 percent of its vegetable needs. Meat and poultry production reach 31 per cent and 17per cent, respectively, of requirements. The country produces 83 per cent of itsdaily consumption of fresh milk and 39 per cent of national demand for eggs.

The challenges and obstacles to successful agriculture in the UAE have beenprimarily related to the country’s extreme aridity, nutrient poor soil, and highsummer temperatures. It is a great tribute to the determination of its President,Sheikh Zayed, that seemingly insurmountable obstacles have been overcome.Support for farmers has come in the form of reclamation and distribution ofagricultural land; provision of necessary equipment and training; large scaleplanting of palm trees to create suitable shaded areas for farming; together withprovision of fresh water and seedstock.

The country is striving at all times to optimise productivity through work carriedout at agricultural research centres and with agricultural guidance to farmers.

ENVIRONMENTAL IMPACT OF AFFORESTATION

Whilst the extensive tree-planting programme has brought major benefits to theUAE, the sustained efforts to ‘green the desert’ have not been without theirenvironmental impact. One issue that has recently been examined is thecompetition between introduced trees and native species. A study carried out atthe UAE University in Al Ain has highlighted some of the problems that have beencreated. The research project’s aim was to evaluate the potentiality of differentkinds of forests in the country in protecting the floral diversity and to determine themost suitable conditions for enhancement of floral biodiversity.

saturation point the government conceived a massive new offshore developmentdesigned to solve the problem. And so the two Palms, presently approachingcompletion, were born. Each island will add 60 kilometres of shoreline to Dubai,increasing the emirate’s beachfront by 166 per cent. To make this happen, 7million cubic metres of rocks per island were brought in from 16 different quarriesthroughout the UAE. Each Palm comprises approximately 100 million cubicmetres of sand and rock. According to the developers, if all the fill materialsused to build one Palm Island were placed end to end, a wall two metres high andhalf a metre thick could circle the world three times!

The Palms will each accommodate a number of new hotels, residential villas,shoreline apartments, marinas, water theme parks, restaurants, shopping malls,sports facilities, health spas and cinemas. By the end of 2003 all the availableproperties on the Jumeirah Palm had been sold, whilst half those on the JebelAli Palm were already taken.

But that is by no means all that is happening on the mega-tourism project front.Other projects on a grand scale include ‘The World’, a cluster of 250 man-madeislands arranged in the shape of the seven continents and located 4 kilometresoff the Jumeirah coastline, between Burj al-Arab and Port Rashid. Each of theseislands will be sold to private developers.

Meanwhile, the biggest terrestrial tourism development in the UAE, the Dh18 billionDubailand, is also under way. Constructed on a 2-billion-square-foot area adjacent toEmirates Road, Nad al-Sheba, Al Quoz and Al Barsha, the massive development isexpected to attract approximately 200,000 visitors daily and will boast the biggestmall in the world – Mall of Arabia. Other attractions include a sprawling AdventureWorld, Sports World, Eco Tourism World, Shopping World, Family City World andKids World. The Dubai government intends to spend Dh2.6 billion to develop theproject’s infrastructure and is inviting participation by national and internationaldevelopers in creating the main attractions of the leisure centre.

It is quite clear from the above summary of current events in the tourism sectorthat when tourism authorities in the UAE speak of a ‘growth industry’ they aredoing so from a secure knowledge that infrastructure will be in place to handlethe expected increase in demand.

Conde Naste Traveler magazine, with a readership of over two million per issue,voted Dubai the ‘safest destination’ from its list of top-20 tourism destinations.In making the award, the magazine’s editor remarked: ‘More than a shoppingstopover or a beach holiday, Dubai is a phenomenon: a Muslim, Arab societyreinventing itself with all the ethnic diversity, economic energy, and architecturalambition of early 20th-century Los Angeles, Manhattan, and Chicago. Burj Al Arabis the hotel aficionado’s Mount Everest.’

Meanwhile, the World Tourism Organisation commended Dubai for postingthe world’s highest growth of 31 per cent in international arrivals in 2002.


Tree plantations presently occupy an area of 300,000 hectares in the UAE. Oneof the most numerous exotic trees that have been planted is Prosopis juliflorawhich, unfortunately, has invasive tendencies that have resulted in ‘serious impacton native plants’. The study states that ‘In the highly invaded areas, Prosopis juliflorahas completely replaced native species, resulting in a complete destruction ofmost perennial species.’

Whilst acknowledging the role that tree plantations have played in enrichingvegetation and soil amelioration in the UAE, this research has also highlightedthe need for the replacement of exotic tree with native trees as they are morecompatible with the environment and use comparatively less water. The fascinatingstudy also showed that medium and smaller trees encourage greater diversity andabundance of plants than larger trees. This suggests the importance of reducingthe crown of the forests in the UAE. Such reduction, in addition to increasingspecies abundance and diversity, will also reduce the amount of water consumedby trees and provide dry forage for animals.

Salinity is another key area of importance for research and crop managementin the UAE. The above study revealed heightened salinity levels among irrigationplots. The fact that certain native species have a high tolerance to saline soils has notbeen lost on the UAE’s agricultural teams. The Dubai-based International Centrefor Biosaline Agriculture (ICBA) is an important contributor in this regard. Trainingand workshops have figured prominently in its list of activities and while muchof the effort is directed toward GCC countries, links have also been made with CentralAsian states, namely Uzbekistan, Kazakhstan and Kyrgyzstan, as well as, amongstother countries, with Bangladesh and Egypt. ICBA’s activities are acknowledged andsupported by United Nations Educational, Scientific and Cultural Organisation(UNESCO), the Arab Fund for Economic and Social Development (AFESD),International Fund for Agricultural Development (IFAD), Islamic Development Bankand the OPEC Fund for International Development. ICBA produces a newsletterthree times yearly, available electronically at www.biosaline.org.

Biodiversity itself is of much greater significance than from purely academic orconservation perspectives. Many native plants have medicinal properties that arenow well recognised. The Ministry of Agriculture and Fisheries recently begana project to conserve the genetic resources of the flora of the country, particularlythose plants known to possess medicinal properties.

MUNICIPAL PLANTING

Virtually all cities in the UAE have been greatly enhanced by planting schemes,turning roadsides into gardens and roundabouts into mini-parks. In addition thereare extensive recreation parks where the shade from trees creates a pleasantenvironment, even in the summer months. The rate of change in the UAE is

Al Wathba Marionnet, the date-palm cloning joint venture set upthrough the UAE Offsets Group (UOG) in 1997, has expanded itsoperations by adding 5000 metres of new shedding area at itsfacilities in the Al Khabisi area of Al Ain. The company now hastwo greenhouses of 500 square metres each and three shedscovering a total area of 13,000 square metres. The expansionwill allow production of cloned date palms to reach 300,000plants a year in early 2004.

Al Wathba Marionnet uses tissue-culture technology toproduce identical date palms of 19 types and qualities, whichare supplied to the local and regional markets and exported toseveral countries. A rising number of farmers in the UAE arenow turning to the tissue-culture technology for growing date palms. They are getting betteryields, faster growth and easier field and plantation management. Tissue culture also ensuresuniformity and homogeneity of plants, enabling each producer to grow several thousand treesof the same size.

Al Wathba Marionnet supplies more than 70 per cent of its date palms to private clients andgovernment organisations in the UAE, including the Abu Dhabi Municipality and the Ministry ofAgriculture. The remaining 25 per cent are exported to Kuwait, Jordan, Yemen, Qatar, Bahrain,Namibia and Somalia. It has recently added Niger and Columbia to the list of importers of itsdate palms.

The company is also one of the official suppliers of date palms to the Food and AgriculturalOrganisation (FAO) of the United Nations. Through the FAO, agreements have been signed withSudan and Burkina Faso for the supply of several types of date palms. The company is also inthe process of setting up pilot projects in African countries to produce dates and by-productssuch as wood and dry leaves, which will be used to build huts and houses.

Compared to the lengthy traditional production process, which requires three to four yearsfor a date palm to grow up to 50 centimetres, tissue culture produces viable date palms inconsiderably less time. The trees are also free of disease, produce good quality dates, andprovide a more robust feedstock for associated products such as ropes.

The plants are initially grown in the laboratory in test tubes for 18 months and thentransferred to the greenhouses to be acclimatised for four to six months. At this stage they aremoved to sheds for six months where they grow two to three adult leaves and are ready to beplanted in the open air.

At Digdaga, in Ra’s al-Khaimah, the Ministry of Agriculture’s Experimental Station is growingall varieties. At its laboratory in Al Ain, the company also conducts research on productionimprovement techniques and research is also being carried out to ensure gene stability of thedate palms.


DATE-PALM CLONING


reflected in these city beautification projects. In 1974, there was only one publicpark in Abu Dhabi with very little greenery, but today the number has increasedto about 40, covering an area of more than 3 million square metres. Seven ofthese parks have been built exclusively for women and children.

In Dubai the Public Parks and Horticulture Department recently announced that ithad achieved great success in growing flowers that blossom in both winter andsummer. Prior to the annual meetings of the boards of governors of the InternationalMonetary Fund (IMF) and the World Bank Group (Dubai 2003), 300,000 squaremetres was added to Dubai’s greenbelt. The expansion of the green areas in theemirate is in line with the department’s goal of planting greenery on 8 per centof Dubai’s total urban area. At present the planted area amounts to around 3.19per cent or 2200 hectares.

THREE YEAR STRATEGIC PLAN ON FARM RESEARCH

The Ministry of Agriculture and Fisheries has finalised a three-year strategic planon agricultural research to find practical solutions for obstacles faced by the sector.The comprehensive plan is based on a four-point programme. The first stageconsists of research and experiment on palm trees, dates and fruit; the second isresearch on fodder, pastoral and wild plants; the third is for long-term experimentson agricultural diseases and the fourth is research on protected agriculture, or plantsgrown in greenhouses.

In the area of palm trees, dates and fruit trees, research activity is divided into twobranches: research on improving the growth of palm trees and dates, using theremnants of palm trees and combating red weevil; and research on improving thegrowth of fruit trees, similar to parallel studies currently being carried out by oneof the ministry’s centres on improving the production of mango and citrus trees.A total of 40 million palm trees have been planted in the UAE and the Ministryis carrying out a project to increase the number of these trees even furtheralongside research into palm saplings and the use of high technology. As partof this and other related work, the Ministry has established research centres atAl Hamraniyyah, Dibba and Fujairah.

Meanwhile, the Ministry is also considering adopting a sustainable agriculturalsystem for producing different types of fodder that can withstand the country’sclimatic conditions and can survive on little water. Studies are also under wayon combating salinity and the capacity of different types of fodder plants towithstand high salt content in the soil. The plan also aims to encourage furtherresearch on use of biological control methods to combat agricultural diseases,rather than resorting to the use of insecticides, which the Ministry is seeking toreduce. The fourth axis of the plan is focusing on producing alternate vegetableproducts through use of greenhouses.


F ISHERIESThe fishing industry in the UAE is mainly traditional in nature. National fishermenare assisted by the government through a system of subsidies on boats and engines.Fishing gear in common use includes traps, hook and line, and gill nets. Thestandard of fishing boats has improved greatly in recent years, enabling fishermento spend longer at sea and to work on fishing grounds that were previously difficultto reach. It is a safer and more productive industry than in the past, but these andother improvements have had an adverse effect on the available fish stocks. Inorder to conserve stocks, the Ministry of Agriculture and Fisheries has issuedregulations concerning the fishing gear, fishing areas, seasons and the structureof the workforce. It is illegal to catch undersize fish; to use less than 2 inch meshin fish traps or less than one and a half inch mesh in fishing nets; to carry outthe fishing operations in spawning and nursery areas during the restrictedperiod; and also to fish without the presence of a national on board the vessel.In order to protect the seabed and its demersal fisheries, bottom trawling is notpermitted in the territorial waters of UAE. But despite all these serious effortsto conserve fisheries there have been dramatic reductions in all key stocks. Thisappears to be due to a combination of factors including fishing, land reclamation,dredging, and pollution (see section on the Environment).

The Environmental Research and Wildlife Development Agency (ERWDA)instigated a study of demersal (bottom-living) and pelagic fish resources that wascarried out during 2002 and early 2003. The study was based on acoustic surveysbacked up by actual fishing operations and was aimed at providing informationon stocks that could be applied to fisheries management. It took part throughout theUAE Exclusive Economic Zone (EEZ). Oceanographic data indicated a seawatertemperature range off Abu Dhabi of 21˚C to 35˚C whilst salinities in excess of40 ppt were recorded throughout the year. The latter compare with normal oceanicsalt levels of 36 ppt. East Coast waters, being more open, have a smaller temperaturerange and lower salinity levels. The study states that ‘There is a close correlationbetween the abundance and distribution of fish resources on one hand, andoceanographic environmental conditions on the other hand’.

The study encountered 280 species and estimated the total biomass of demersalresources, firstly on the basis of acoustic surveys and secondly based on catch rates.The former gave a result of 20,000 to 100,000 tons, whilst the latter suggested afigure between 22,000 tons and 45,000 tons. These figures lump commercial andnon-commercial fish together so that actual biomass of fish caught for consumptionis lower. In fact, the study isolated 20 key species that between them constituted86 per cent of the catch and fishery surveys of landings suggest that there havebeen ‘major declines in demersal fish abundances since the last survey in 1978’.This is vividly illustrated in table 30.



ABU DHABI DUBAI SHARJAH AJMAN UMM AL-QAIWAIN RA’S AL-KHAIMAH FUJAIRAH



1400

1200

1000

800

600

400

200

0

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

5000

4500

4000

3500

3000

2500

2000

1500

1000

500

0

Num

bero

fBoa

tsN

umbe

rofF

isher

men

Qua

ntity

ofFi

shin

Tons


Emirate Petrol Diesel Total

Abu Dhabi 735 244 979

Dubai 534 200 734

Sharjah 864 142 1006

Ajman 140 32 172

Umm al-Qaiwain 348 30 378

Ra’s al-Khaimah 1272 72 1344

Fujairah 554 24 578

TOTAL 4447 744 5191

Emirate Petrol Boats Diesel Boats Total Coastal Net Total

Abu Dhabi 21803 7483 29286 1171 30457

Dubai 13841 4680 18521 926 19447

Sharjah 14542 2509 17051 1323 18374

Ajman 1411 345 1756 176 1932

Umm al-Qaiwain 3507 324 3831 383 4214

Ra’s al-Khaimah 8792 228 9020 902 9922

Fujairah 4866 425 5291 7937 13228

TOTAL 68762 15994 84756 12818 97574

UAE Nationals Other Nationalities Total

Abu Dhabi 2736 2091 4827

Dubai 1055 1913 2968

Sharjah 1563 1741 3304

Ajman 407 922 1329

Umm al-Qaiwain 427 801 1228

Ra’s al-Khaimah 1272 1176 2448

Fujairah 563 597 1160

TOTAL 8023 9241 17264

Table 27: The Fishing Fleet – 2002

Table 28: The Fishermen – 2002

Table 29: The Catch (Estimation of Fish Quantities in Tons According to Emirate – 2002)

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Table 27: The Fishing Fleet – 2002

Table 28: The Fishermen – 2002

Table 29: The Catch (Estimation of Fish Quantities in Tons According to Emirate – 2002)


The survey also looked at pelagic fish stocks (primarily migratory species) whosepopulations show significant differences between summer and winter. The biomassof these was estimated at 43,000 tons in summer and 200,000 tons in winter.Around 60 per cent of this mid-water fish stock is composed of anchovies andsardines. Unlike the situation with demersal stocks, the pelagic stocks seem to haveheld up very well since the 1978 survey with no significant difference in overall sizeof the biomass noted. This new survey of the UAE’s fishery resources has producedkey data and some important results for future management of commercial fishing.Some additional findings are discussed in the section on Environment.

With demersal stocks in serious decline, fish-farming is seen as a potentialmeans to meet the rising demand for local fish. The Marine Resources ResearchCentre (MRRC) produces fingerlings of rabbitfish, seabream and grouper for usein mariculture programmes. In addition it cultures the shrimp Penaeus semisulcatus.Mariculture has received a major boost from establishment of the UAE Offsetscompany Asmak, which has built state of the art cage farming facilities in Ra’s al-Khaimah and Fujairah. These are producing sea bream, sobaity, and other marinefish, with a present capacity of 1200 tonnes per year. Production will increase as theexpansion phases in Ra’s al-Khaimah, Fujairah and Abu Dhabi take effect.

Since early 2001 the company has also been operating a 2500 tonnes per yearcapacity marine fish farm in operation in Oman (Quriyat Aquaculture LLC). Thisproduces seabream, seabass, grey mullet and other marine fish. A major hatcheryproject is under construction in Umm al-Qawain. In 2003 Asmak launched aunique project to ranch yellow-fin tuna at Bandar Khairan in Oman – the first ofits kind in the world.

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