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ECONOMIC DEVELOPMENT

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ECONOMIC DEVELOPMENT
THE ECONOMY
THE FIFTY-EIGHTH ANNUAL MEETINGS of the Boards of Governors of the World Bank Group and the International Monetary Fund, held in Dubai in September 2003, focused the attentions of the worlds leading nancial experts on the impressive strides taken by the United Arab Emirates in recent years. It was absolutely clear to all of the 20,000 or so people who came to the UAE for the nancial meetings that they were visiting a forward looking nation that is seeking to capitalise on the varied assets at its command. Organisation of the IMF/World Bank Meetings, the facilities provided to visiting delegates and the celebrations that accompanied the events were widely commended in the media. It was an occasion that further enhanced the countrys 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 following summary is primarily based on gures and reports provided by the UAE Central Bank and the Ministry of Planning. The 2003 Yearbook stated that preliminary data for 2001 indicated a GDP based on constant 1995 prices of Dh217.025 billion. Subsequent data has since become available that raises this gure to Dh221.8 billion and pegs the 2002 value at Dh225.7 billion. These gures equate to GDP in current prices at Dh254.2 billion in 2001 and Dh260.6 billion in 2002. As noted above, GDP in 2002 (based on xed prices for the year 1995), according to the Central Bank, reached Dh225.7 billion. This represented an overall growth rate on the gure for 2001 of just under 1.8 per cent. The nonoil sector, amounting to Dh177,768 million in 2002 (preliminary data), grew at a 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 value in 2001 (i.e. Dh48.0 billion in 2002 compared with Dh52.2 billion in 2001). The decrease in value-added from the oil and gas sector during the period, when oil prices actually increased by 6.4 per cent, was brought about by an adherence to the production quota set by OPEC that resulted in reduced exports.

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


(In millions of Dh at constant 1995 prices)

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


(3) Government Services 36,244 (2) Financial Enterprises (1) Non-Financial Services 25,547 183,163

Sectors
(1) Non-Financial

2001 Enterprises Sector ................................... - Agriculture, Livestock, Fishery ................................... - Mining ............................................................... A. Crude Oil & Natural Gas .................................. B. Quarries ....................................................... - Manufacturing ...................................................... - Electricity, Gas and Water ....................................... - Construction ........................................................ - Wholesale / Retail Trade and Maintenance ................... - Restaurants and Hotels ........................................... - Transportation, Storage and Communication ................ - Real Estate and Business Services ............................. - Social and Private Services ....................................... Enterprises Sector .......................................... 183,163 8,500 52,853 52,181 672 33,362 4,748 16,490 21,146 4,990 18,313 18,906 3,855

2002* ......... 184,342 ........ 9,090 ........ 48,653 ........ 47,956 ........ 697 ........ 34,691 ........ 4,970 ........ 16,970 ........ 22,500 ........ 5,245 ........ 18,682 ........ 19,420 ........ 4,121

8,500 52,853 33,362 4,748 16,490 21,146 4,990 18,313 18,906 3,855

2001
(3) Government Services 27,129 (2) Financial Enterprises (1) Non-Financial Services 184,342 17,480
9,090 48,653 34,691 4,970 16,970 22,500 5,245 18,682 19,420

(2) Financial (3)

16,244 ........ 17,480 25,547 ........ 27,129 1,862 ........ 2,120 5,065 ........ 5,347

4,121

2002*
Non-Financial Enterprises Financial Enterprises Government Services Agriculture, Livestock & Fishery Mining Manufacturing Electricity, Gas & Water Building & Construction Wholesale/Retail Trade & Maintenance Restaurants & Hotels Transportation, Storage & Communications Real Estate & Business Services Social & Private Services

Government Services Sector ......................................... - Household Services ................................................. (Less): Imputed Bank Services Charges ..............................

TOTAL ..................................................................... 221,751 ........ 225,724 Total Non-Oil Sectors .................................................. 169,570 ........ 177,768
Source : Central Bank, Annual Report 2002 and Ministry of Planning * Preliminary Data

Table 2: Gross Domestic Product by Sectors (Percentages of Total GDP) Sectors Gross Domestic Product 2000 A. Goods Production Sectors ............ 53.4 Agriculture, Livestock & Fishery ..... 4.1 Mining .................................... 24.2 Manufacturing .......................... 15.5 Building & Construction .............. 7.5 Electricity, Gas & Water ............... 2.1 B. Services Sectors ......................... 46.6 2001 52.3 3.8 23.8 15 7.4 2.1 47.7 2002 50.7 4 21.6 15.4 7.5 2.2 49.3 Non-Mining GDP* 2000 38.7 5.4 20.5 10 2.8 61.3 2001 37.4 5 19.8 9.8 2.8 62.6 2002 37.1 5.1 19.6 9.6 2.8 62.9
Services Livestock & Fishery

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

2000

2001

2002

Mining Manufacturing

Building & Agriculture, Electricity, Gas & Water

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

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Table 3: Per Capita Gross Domestic Product

Table 5: Employees by Economic Sector


Social and Planning Services

Transportation, Storage and Communications Source: Central Bank and Ministry of Planning

2002*
Restaurants and Hotels Wholesale / Retail Trade and Maintenance Construction and Building

2000 GDP* (Dh Millions) Population (Thousands) GDP Per Capita (Dh) 214,327 3,247 66,008

2001 221,751 3,488 63,575

2002 225,724 3,754 60,129

2001

Water, Gas and Electricity

Manufacturing Industries

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


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

Mining Industries Agriculture, Livestock and Fisheries

60 and above 40 to less than 60 15 to less than 40 Less than 15 Female Male TOTAL 60 and above 40 to less than 60 15 to less than 40 Less than 15 Female Male TOTAL 60 and above 40 to less than 60 15 to less than 40 Less than 15 Female Male
426,658 465,791 892,449 553,467 1,347,571 1,901,038 125,932 511,632 637,564 22,943 34,006 56,949 1,129,000 2,359,000 3,488,000 400,254 434,736 834,990 517,315 1,249,373 1,766,688 117,803 474,025 591,828 21,628 31,866 53,494 1,057,000 2,190,000 3,247,000

2 0 0 0 2 0 0 1

2000
SECTORS

BREAKDOWN OF NON-FINANCIAL ENTERPRISES SECTOR


100,000

Real Estate and Business Services

200,000

300,000

400,000

2000 ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........

2001 1,497,125 154,043 30,248 25,945 4,303 246,910 31,370 305,477 370,827 84,001 127,243 56,495 90,511 24,825 214,226 192,846 1,929,022

2002* ......... 1,575,268 ......... 163,192 ......... 31,702 ......... 27,197 ......... 4,505 ......... 262,812 ......... 32,363 ......... 320,184 ......... 392,651 ......... 89,720 ......... 130,923 ......... 58,654 ......... 93,067 ......... 25,635 ......... 224,633 ......... 205,000 ......... 2,030,536

Source: Ministry of Planning

TOTAL

456,679 499,132 955,811

594,729 1,454,816 2,049,545

135,181 552,802 687,983

24,411 36,250 60,661

1,211,000 2,543,000 3,754,000

2 0 0 2

Non-Financial Enterprises Sector............................... 1,330,605 Agriculture, Livestock and Fisheries.................. 120,242 Mining Industries............................................. 27,639 A. Crude Oil & Natural Gas........................... 23,465 B. Quarries................................................... 4,174 Manufacturing Industries................................. 226,090 Water, Gas and Electricity................................ 29,650 Construction and Building............................... 287,198 Wholesale / Retail Trade and Maintenance....... 336,585 Restaurants and Hotels................................... 72,008 Transportation, Storage and Communication.... 107,788 Real Estate and Business Services.................... 42,260 Social and Private Services............................... 81,145 Financial Enterprises Sector...................................... 23,039 Government Services Sector...................................... 203,897 Household....................................................... 180,230 TOTAL...................................................................... 1,737,771
Source: Central Bank Annual Report, 2002 and Ministry of Planning.

* Preliminary Data.

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Continued development of the non-oil sectors further emphasised the impact of diversication with 78.8 per cent of GDP in 2002 (compared with 76.5 per cent in 2001) resulting from output of this sector. Meanwhile, the UAE has intensied a drive over the past few years to give the private sector a greater role in the domestic economy through privatisation of public institutions and expansion of incentives for private productive ventures. As a result, the share of the private sector in the gross domestic product has steadily increased to a level where, if one excludes oil and gas, it surpasses that of the public sector. The growth of the nancial services sector, considered to be of pivotal importance in the UAEs development strategy, has continued apace. Its expansion at a rate of 7.6 per cent over 2001 gures represented the fastest growth rate of any sector. In terms of its overall importance, the nancial services sector comprised 7.3 per cent of overall output in 2001, increasing to 7.7 per cent in 2002. Other notable growth rates included the public services sector (6.2 per cent above 2001 level); hotels and restaurants sector (5.1 per cent above 2001 level); agriculture, livestock and shery sector (6.9 per cent above 2001 level); and the wholesale/retail trade and maintenance sector (6.4 per cent above 2001 levels).

Table 6: Selected Economic Indicators


2000
3800 3500 3200 2900 12 8 4 0 12 8 4 0 80 60 40 20 0 60 40 20 0 12 8 4 0 -4

2001

2003
285 270

2000

2001

2003
226 220

2000

2001

2003

(000) Population

255 240 3 2 1 0 6 4 2 0 54 51

(Dh billion) GDP in Current Prices

214 208 2050 1950 1850 1750 1650 1550 183 181 179 177 145 140 135 130 125 120 0 -15

(Dh billion) GDP at Constant 1995 Prices

(%) Real GDP Growth Rate

(%) Consumer Price Index

(000) Employees

(%) Final Consumption

(%) (%)

(Dh billion) Total Exports & Re-Exports

Fixed Capital Formation

(Dh billion) Crude Oil Exports

48 45 60 40

(Dh billion) Total Re-Exports

(Dh billion) Total Imports

Population and GDP


The UAEs strong economy, healthy social development and its political stability have 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 of the population is less than 15 years old; 55 per cent is aged from 15 to 39 years old; 18 per cent from 40 to 59 years old; and 2 per cent 60 or over. These gures emphasise the youthful nature of the UAEs demographic structure and underpin the priority that government has placed on development of education facilities. The relatively high rate of population increase (7.6 per cent higher in 2002, compared to 2001) combined with the modest increase in GDP over the same period (only 1.9 per cent) led to a continuation of the trend for GDP per capita to be reduced. In fact it decreased by 5.4 per cent, reaching Dh60,100 in 2002 compared with Dh63,600 in 2001.

(Dh billion) Trade Balance

20 0 27 25 23 21

(Dh billion) Current Account Balance

-30 -45 4 3 2 1 0

(Dh billion) Capital Account Balance

(Dh billion) Balance of Payments Overall

US$ per barrel) Average Oil Price

(Dh per US$) Average AED Exchange Rate 2001 3488 254.2 221.8 3.5 2.7 1929 4.2 4.8 179.12 65.2 51.18 136.96 42.16 36.54 -34.76 1.78 23.3 3.6725 2002 3754 280.6 225.7 1.8 2.9 2031 6 2.7 182.14 62.24 53.53 143.73 38.41 31 -32.52 -1.52 24.8 3.6725

FINANCIAL MARKETS
Trading in shares of major companies within the UAE and in the Arabian region is carried out at two recently established Financial Markets, the Abu Dhabi Securities Market (ADSM) and the Dubai Financial Market (DFM). Both these markets have shown very signicant growth and are now well established. The volume of shares traded in 2002 at ADSM reached Dh800.98 million while DFM recorded a trading volume of Dh1.55 billion. Trading at ADSM was valued at Dh3.69 billion in 2003. The daily average was Dh5.4 million, peaking in September with a gure of Dh636.2 million. The banking sector at Dh1.63 billion formed

Population (000) GDP, in Current Prices, (Dh billion) GDP, at constant 1995 prices, (Dh billion) Real GDP Growth Rate (%) Changes in Consumer Price Index (%) Employees (000) Nominal Rate of Growth of Final Consumption (%) Nominal Rate of Growth of Fixed Capital Formation (%) Total Exports & Re-Exports (Dh billion) 1 Crude Oil Exports (Dh billion) Total Re-Exports (Dh billion) Total Imports (Dh billion) 2 Trade Balance (Dh billion) Current Account Balance (Dh billion) Capital Account Balance (Dh billion) Balance of Payments Overall (Dh billion) Average Oil Price (US$ Per Barrel) AED Exchange Rate for each US Dollar 3
1 2

2000 3247 258 214.3 12.3 1.4 1736 11.7 6.5 183.02 79.46 48.15 128.57 54.44 50.5 -40.09 10.41 27.2 3.6725

Source: Central Bank of the UAE; Ministry of Planning; Customs Departments of Local Governments

Including Free Zones Exports and Non-Monetary Gold. 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

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PUBLIC FINANCE 2002 REVENUES


Millions of AEDs

Table 7: The Consolidated Government Finance Account


100,000 TOTAL EXPENDITURES 80,000 60,000 40,000 20,000 0 1998 1999 2000 2001 2002 TOTAL REVENUES DEFICIT

Primarily due to the reduced income from oil and gas exports, total revenues dropped by 16.6 per cent in 2002 to reach Dh57.2 billion, against Dh68.6 billion in 2001. Tax Revenues Tax revenues (customs duties, fees and other charges) increased in 2002 by 9.7 per cent to reach Dh6.9 billion, against Dh6.3 billion in 2001, accounting for 12.0 per cent of total revenues. The increase occurred in other tax revenues, which rose by Dh790 million (17.8 per cent). Meanwhile, customs revenues fell Dh183 million to a total gure of Dh1.7 billion. Non-Tax Revenues Non-tax revenues decreased by 19.3 per cent in 2002, to reach Dh50.3 billion, against Dh62.4 billion in 2001, forming 88.1 per cent of total revenues. This was attributed to a drop of Dh10.7 billion (20.8 per cent) in receipts from oil and gas sales that recorded Dh40.9 billion in 2002 against Dh51.6 billion in 2001. EXPENDITURES Expenditure decreased in 2002 by Dh9.1 billion (9.5 per cent), reaching Dh86.4 billion, against Dh95.5 billion in 2001. Current Expenditure Current expenditure constituted 83.8 per cent of total expenditures in 2002, reaching Dh72.4 billion, against Dh77.0 billion in 2001. Expenditure on salaries and wages rose in 2002 by Dh429 million (3.1 per cent) to reach Dh14.4 billion. Expenditure on goods and services also increased by Dh592 million to reach Dh22.1 billion. Meanwhile, expenditure on subsidies and transfers dropped by Dh3.7 billion (20.0 per cent) to reach Dh15.0 billion. Other unclassied current expenditure decreased by Dh1.9 billion (8.5 per cent) to reach Dh20.8 billion. Development Expenditure Development expenditure dropped by 6.2 per cent to reach Dh12.5 billion in 2002, against Dh13.3 billion in 2001. Loans and Equity Participation Loans 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. THE DEFICIT Revised budget gures for 2002, published in late 2003 by the Ministry of Planning, indicated that the Consolidated Finance Account (CFA) decit widened to around Dh25.6 billion from Dh22.7 billion in 2001. The lower decit than that estimated earlier in the year (and reported in the Central Bank Annual Report for 2002) was related to lower than expected expenditures during the year. The increase in decit for 2002 compared to 2001 was mainly due to a sharp decline in revenue, especially from the oil sector.

ITEMS REVENUES

2001* 68,633 6,274 1,846 4,428 62,359 51,648 3,385 7,326 95,459 77,005 14,019 21,553 18,750 22,683 13,283 5,171 903 4,268 (-)26,826 26,826 -2,349 24,477

2002** 57,209 6,881 1,663 5,218 50,328 40,926 3,357 6,045 86,364 72,364 14,448 22,145 15,009 20,762 12,466 1,544 592 952 (-)29,165 29,165 -4,339 33,504

Tax Revenues ...................................................................... Customs Revenues ........................................................ Other ............................................................................ Non-Tax Revenues .............................................................. Oil and Gas .................................................................. Enterprise Prots ........................................................... Other ............................................................................
EXPENDITURES ..........................................................................

Current Expenditures .......................................................... Salaries and Wages ....................................................... Goods and Services ....................................................... Subsidies and Transfers ................................................. Other Unclassied ......................................................... Development Expenditures ................................................. Loans and Equity ................................................................ Domestic ...................................................................... Foreign ..........................................................................
OVERALL SURPLUS (+) OR DEFICIT (-) ...................................... Financing ............................................................................. Changes in net Government Deposits with Banks........... Other(1)...........................................................................

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

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PUBLIC FINANCE 2002 It should be stated here that the published decit gures for government nances do not reect the fact that a signicant portion of Abu Dhabis oil earnings are paid directly into reserve accounts and that the UAE generates considerable income from its overseas investments. These two very signicant income sources are used to fund part of the decit. MONETARY AND CREDIT POLICY Dirham Exchange Rate Due to its xed peg to the US dollar, the dirham depreciated as a result of depreciation of the US dollar against most major currencies during 2002. It depreciated against the euro (6.1 per cent), the pound sterling (4.6 per cent), the Japanese yen (1.0 per cent), the Swiss franc (7.2 per cent) and the SDR (1.7 per cent). The rate of exchange of the dirham remained unchanged against all GCC currencies, except for the Kuwaiti dinar which appreciated against the dirham by 0.9 per cent in 2002, compared to its level in 2001. Table 8: Dirham Exchange Rate Index
(Foreign Currency Units Per Dirham) (1999=100)

Table 9: Estimates of UAE Balance of Payments (Billions of AEDs) 2001* Current Account Balance ................................................ 36.54 - Trade Balance ................................................................ 42.16 Oil Exports ............................................................ 65.20 Gas Exports .......................................................... 13.13 Total Goods Exports (FOB) .................................... 49.61 Petroleum Products ............................................... 9.47 Free Zone Exports .................................................. 24.95 Other Exports (1) .................................................... 15.19 Re-Exports ............................................................ 51.18 Total Exports and Re-Exports (FOB) ....................... 179.12 Total Imports (CIF) ................................................ 136.96 Free Zone Imports ................................................. 24.59 Other Imports (2) ................................................... 112.38 - Income & Services (Net) ................................................ 9.84 Investment Income ................................................ 18.60 Services (3) ............................................................ 8.76 - Transfers (Net) ............................................................... 15.46 Private .................................................................. 14.36 Public .................................................................... 1.10 Capital Account Balance ( Net ) ..................................... - Official Loans and Equity Participations ......................... - Short-Term Private Capital ............................................. - Government Institutions, Private Capital Flow & Net Errors and Omissions .................................. Overall Surplus (+) or Decit (-) ...................................... Changes in Reserves {(-) Indicates Increase} .................. - Net Foreign Assets with Central Bank ............................ - Reserve Position with IMF .............................................
(1) (2) (3)

Currency US Dollar Japanese Yen Euro Pound Sterling Swiss Franc SDR

1999 100.0 100.0 100.0 100.0 100.0 100.0

2000 100.0 105.0 109.4 106.3 106.4 104.0

2001 100.0 123.0 113.0 112.0 105.6 107.8

2002 100.0 121.8 106.1 106.8 98.0 106.0

2002** 31.00 38.41 62.24 12.42 53.95 12.12 26.02 15.81 53.53 182.14 143.73 25.73 118.0 8.75 18.32 9.57 16.16 15.20 0.96 32.52 0.32 13.75 19.08 1.52 1.52 1.84 0.32

Consumer Price Index Numbers Data published by the Ministry of Planning on consumer price index numbers indicate that the general consumer price index number (1995 base year) rose from 113.7 in 2001 to 117.0 in 2002 (2.9 per cent). The increment was due to price rises in all major expenditure groups. The index number for the medical care and medical services group rose from 138.8 in 2001 to 150.0 in 2002. Likewise, the index number for the housing and related housing services rose from 99.0 in 2001 to 104.3 in 2002 and that for the recreation, education and cultural services group rose from 125.0 in 2001 to 131.0 in 2002. The index numbers for the remaining groups registered only slight rises. THE BALANCE OF PAYMENTS Preliminary estimates of the balance of payments indicate a decline in the surpluses of both the trade balance and the current account during 2002. The trade balance surplus decreased from Dh42.2 billion in 2001 to Dh38.4 billion in 2002 (8.9 per cent). Similarly, the current account

34.76 0.22 3.86 31.12 1.78 1.78 1.73 0.05

Including estimates of the exports of petroleum products, fertilisers, lubricants, other exports from all UAE and the exports of non-monetary gold. Included imports of non-monetary gold. Included travel, transport and government services. Source: UAE Central Bank Annual Report 2002

* Revised * * Preliminary Data

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PUBLIC FINANCE 2002 surplus dropped from Dh36.5 billion in 2001 to Dh31.0 billion in 2002. The decline in trade balance surplus was connected with the decline in value of crude oil and liqueed gas exports on the one hand, and to the increase in value of commodity imports on the other. The former occurred despite a background of oil price increases during 2002. The weighted average price of crude oil rose from US$23.3 a barrel in 2001 to US$24.8 a barrel in 2002 (6.4 per cent). As previously noted in the introductory remarks to this chapter, the key factor causing the reduced earnings from the oil and gas sector was the states adherence to its production quota (see table 18) which resulted in a 4.5 per cent drop in the value of its crude oil exports in 2002 compared to 2001. Meanwhile, the value of gas exports also declined from Dh13.1 billion in 2001 to Dh12.4 billion in 2002. The negative impact of these reductions was partially offset by rises elsewhere. The value of petroleum 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 free zones exports) rose from Dh40.1 billion in 2001 to Dh41.8 billion in 2002 (4.2 per cent) and the value of re-exports also rose to Dh53.5 billion in 2002 against Dh51.2 billion in 2001 (4.6 per 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 to increases in income levels and population, the value of total imports (including estimated commodity 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 the dirham against currencies of the countrys major trade partners and the moderate increase in prices of commodities in countries of origin, the value of imports in 2002 does not fully reect an increase in volumes compared to 2001. With regard to the structure of imports in 2002, estimates indicate consumer goods accounted for 52.9 per cent of total imports. Capital goods reached 35.1 per cent while intermediary 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 private investment institutions dropped in 2002 by Dh300 million compared to 2001, reaching Dh18.3 billion. 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 in 2001. Within this account, private short-term capital recorded an outow of Dh13.8 billion in 2002, against Dh3.9 in 2001. Capital ows through government institutions, private capital and net 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 reected a decit of Dh1.5 billion, against a surplus of Dh1.8 billion in 2001. This was mainly due to the increase in the foreign liabilities of the Central Bank during 2002 compared to 2001 levels. IMPORTS

Table 10: Trade Figures* for 2002 *Figures for Ajman and Umm al-Qaiwain are not included

Weight

Value

% Abu Dhabi ...... Dubai ............. Sharjah .......... RAK ............... Fujairah .........

Wt.Kgs

Value Dh

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

NON-OIL EXPORTS

Weight

Value

Wt.Kgs

Value Dh

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

Weight

Value

Wt. Kgs

Value Dh

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

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44.3 per cent of the total in terms of contribution to overall value, followed by services (Dh1.39 billion), industry (Dh264.7 million), hotels (256.5 million), and insurance (Dh140.4 million). Etisalat achieved the highest trading value for the year, with a tally of Dh953.1 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) were next in that order. The number of traded shares in 2003 stood at 235.2 million, the daily average of traded shares reaching nearly 868,000. By the close of 2003, 30 companies were registered at ADSM, their subscribed shares amounting to 3.1 billion with a total capital of Dh13.8 billion. The variation in share price was a signicant feature in 2003, the market index rising to 1756.9 points at the end of 2003. Market capitalisation of listed companies reached Dh111.5 billion in 2003. Meanwhile, a record index rise of 21.3 per cent by the end of the second quarter of 2003 compared to the same period in 2002 placed DFM in top position among Arab securities markets. The Kuwaiti Securities Market ranked second, with a rise of 20.9 per cent, followed by the Oman Securities Market and ADSM with 20.5 per cent each.

BANKING SECTOR
It is the responsibility of the Central Bank, the countrys regulatory bank, to formulate and implement the UAEs banking, credit and monetary policy in order to support the UAEs economic policy objectives, including price stability, and to support the UAE dirham, guaranteeing its value, stability and its free convertibility into all currencies. There are many aspects to the role the Central Bank plays in supporting the national economy of the United Arab Emirates. In addition to acting as banker to other banking institutions operating in the country, it is also the banker and nancial advisor to the government.

Anti-Money Laundering
A 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 attended the meetings of the Financial Action Task Force (FATFGAFI) that were held in Hong Kong from 28 January to 1 February 2002. This international body concluded that the UAE has established a comprehensive Anti-Money Laundering System, comprising legislation, regulations and procedures. As such, the UAE is fully cooperative in the internationally declared ght against money laundering.

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In establishing its position with regard to this important issue the UAE team presented a series of facts to FATF-GAFI. These included the observation that the UAE was one of the rst countries to adopt Anti-Money Laundering Articles in the provisions of its Federal Law No. 3 of 1987. In addition to other actions to ensure proper identication of customers, the Central Bank established a Financial Information Unit in July 1999 (under the name Anti-Money Laundering and Suspicious Cases Unit). It doubled the staff level of this unit soon after the tragic events of 11 September 2001 in USA. The unit has access to all relevant authorities in the UAE, as well as to those abroad, through the workings and practices of the National Anti-Money Laundering Committee. In October 2001 the Central Bank reduced the thresholds for official identication of nancial customers to Dh2000 from Dh200,000 for moneychangers (Notice No. 1815/2001) and from Dh200,000 to Dh40,000 for banks. The Central Bank also issued directions to nancial institutions in the UAE to carry out search and freeze operations relating to any accounts, deposits and investments in the names of terrorist leaders, organisations, and those who assisted terrorists. The results have been compiled and provided to the concerned authorities in the UAE. A new Anti-Money Laundering Law was passed by the Cabinet of Ministers in October 2001, and by the Federal National Council on 25 December 2001, whereupon it was approved by the Supreme Council and signed by the President on 22 January 2002, as Federal Law No. 4 of 2002. The UAE has earned solid praise from international regulatory watchdogs for its banking system and its efforts to control money laundering. The Paris-based Financial Action Task Force gave a clean bill of health to the countrys nancial system and the IMF has also expressed condence in the Central Banks supervisory role and commended its anti-money laundering measures as a model for other countries to follow.

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


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

Table 12: National Banks Ranked by Total Assets 2002


National Bank Of Abu Dhabi .............................................................................. National Bank Of Dubai P.J.S.C. ........................................................................... Abu Dhabi Commercial Bank .............................................................................. Emirates Bank International PJSC ........................................................................ Mashreq Bank P.S.C. ........................................................................................... Dubai Islamic Bank P.J.S.C .................................................................................. Union National Bank ........................................................................................... Abu Dhabi Islamic Bank ...................................................................................... Commercial Bank Of Dubai P.S.C ......................................................................... Arab Bank For Investment & Foreign Trade .......................................................... First Gulf Bank .................................................................................................... The National Bank Of Ras al-Khaimah P.S.C ........................................................ Commercial Bank International PLC .................................................................... Investbank .......................................................................................................... National Bank of Fujairah P.S.C .......................................................................... National Bank Of Sharjah ................................................................................... Bank Of Sharjah ................................................................................................. United Arab Bank P.J.S.C. .................................................................................... Middle East Bank PJSC. ....................................................................................... National Bank Of Umm al-Qaiwain P.S.C .............................................................
Source: Emirates Bank Association

The Hawala System


Hawala predates traditional or Western banking in the Middle East and Asia. Prior to establishment of Asias rst Western bank (the Bank of Hindustan established in Calcutta around 1770) sarafs and potedars, primarily moneychangers and essentially predecessors of present day hawaladars, played a vital role in nearly all commercial and nancial transactions. During the Vietnam War many Americans were exposed to hawala through the operations of Indian merchants in Saigon. They often took advantage of their hawala service to remit money home. Today, both hawala and Western style banking systems play vital and frequently intertwined roles in the economies of India, Pakistan and Bangladesh. The UAEs large population of migrant workers from these countries has supported a signicant growth in the hawala business in the Emirates.

Thousands AED 39,046,144 35,164,370 27,683,363 27,215,668 23,683,180 19,597,790 14,715,184 7,937,308 7,869,254 5,798,514 4,983,887 2,930,383 2,902,931 2,753,073 2,685,441 2,399,498 2,221,745 2,112,276 2,009,016 1,676,442

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At a conference on the sidelines of the IMF-World Bank Annual Meetings in Dubai in September 2003, the Central Banks Governor, Sultan Nasser Al Suwaidi, defended hawala as a legitimate way of transferring money and asserted that it was recognised as such in 62 countries, including G7 nations whose nancial transactions control 80 per cent of the world nancial order. The Central Bank has taken measures to bring the system under control, issuing licences to more than 60 hawala operators in the country so that these dealers can carry on their business within a legal framework. Al Suwaidi has stated that the age-old practice has a genuine economic role to play, particularly in thirdworld countries where banking has only limited reach and that hawala is no more prone to abuse than any other banking and nancial channel. By regulating the hawala system the Central Bank has placed the onus on hawala dealers to report any suspicious transactions to the authorities. It was the previous anonymity and scant documentation that made the hawala system vulnerable to abuse by individuals and groups transferring funds to nance illegal activities.

quarters of 2003 banks almost reached the total results for 2002! This reects the innovative efforts of UAE banks to deal with reduction in earnings from lower interest rates. Diversication has been a key focus, with banks entering new areas of business and packaging their existing products in more attractive ways. Retail banking was particularly active, with competing banks offering customers a range of irresistible incentives from free air tickets and raffles to dream homes and holidays. Mortgage nance was also a new growth sector as the booming property sector brought in more and more home-buyers. Several banks also took major steps in the leasing business.

THE ECONOMY IN 2003


If 2002 was a relatively slow year for the UAE economy, the predicted growth rate for 2003 was considerably more buoyant with a GDP rise of 4.7 per cent expected, almost double the 2002 gure. This, at a time of relatively slack economic growth on a global scale, underlines the robustness of the UAEs 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 the UAE began supplying oil to the markets. Investments were expected to rise by 2.7 per cent in 2003, to reach Dh63.5 billion, reecting increases in investment in oil and gas, development of industrial areas in Abu Dhabi; projects in Dubai including the free zones; and ventures in some other emirates. The trade balance also improved and was expected to record a larger surplus of around Dh44 billion in 2003 compared with Dh38 billion in 2002. This took place despite a rise in imports from around Dh144 billion to Dh151 billion. Exports were also projected to grow from Dh182 billion to Dh195 billion.

Reduced Costs of Borrowing


In June 2003 the Central Bank announced that it had reduced interest rates on Certicates 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 International Financial Markets. CDs are the mechanism through which interest rates on the UAE dirham are reduced (or raised) in the banking system. Commercial banks use these rates as an indicator for accepting deposits as well as for extending loans to customers. The reduction in interest rates on CDs was designed to stimulate a lowering of the cost of nancing economic activities within the country, particularly investment spending. This is expected to reect positively on the national economy, and local shares turnover, and to boost share prices.

ECONOMIC OUTLOOK FOR 2004


Official government reports do not provide economic predictions beyond the current year, based on analysis of partial gures for the year. A number of economic think-tanks however make forward predictions using information currently available. Whilst these may prove imprecise as a result of unforeseen circumstances, they are interesting in so far as they calculate how present performance and economic decisions are likely to impact on future growth. The Economist Intelligence Unit (EIU) is one such think-tank that issues regular updates on projected economic performance of a large number of countries, including the UAE. In late 2003 it issued a report that suggested the relatively high economic growth rate for 2003 (which it estimated to reach 5.2 per cent as against the Ministry of Planning prediction of 4.7 per cent) would slow to around 4.0 per cent in 2004. This would be related to reductions in OPEC production

Commercial Banks
The aggregate performance of the UAEs commercial banks is summarised in table 11. As the gures for 2002 indicate the sector grew in most areas with retained earnings showing an increase of 5.49 per cent over the gure for 2001. The UAEs top 20 National Banks are listed in table 12, where they are ranked in order of assets. The largest such bank is the National Bank of Abu Dhabi with assets at the end of 2002 of over Dh39 billion. By early 2004, as this book was going to press, results were in from the banking sector for the rst three quarters of 2003. These indicated spectacular performances across the sector with combined prots of Dh5.25 billion, up from Dh4.52 billion recorded over the same period in 2002. Given that the aggregate net prot of banks for the whole of 2002 was Dh5.795 billion, it seems that in the rst three

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quotas that were expected to reduce average output by around 7 per cent each year. 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 modest increase in growth rate to around 5 per cent as OPEC quotas are relaxed. The report also stated that rapid population increase, largely as a result of an increase in the expatriate workforce linked to various major development projects, would create 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 the UAE, is likely to maintain its focus on upstream hydrocarbon resources and downstream industrial projects, especially in the petrochemicals sector. It is likely to continue to exert the greatest inuence over the Federations public nances and to remain at the forefront of the privatisation process. Diversification of the UAEs economy will continue to play a key role in maintaining growth and stabilising the impact of oil production decreases or price uctuations. Continued efforts will be made to attract foreign direct investment and indications are that these efforts will bear fruit, becoming increasingly signicant contributors to economic growth. Dubai, in particular, will concentrate on diversication in order to offset its dwindling oil income. Projects already established such as Dubai Internet City and Dubai Media City will be expanded while the focus on tourism, media, transport and communications will be joined by other major areas of interest including the establishment of a nancial free zone, Dubai International Financial Centre.

THE BUSINESS ENVIRONMENT


Following years of success in promoting diversication of the UAEs economy and creating numerous opportunities for private investment in UAE-based businesses, leading government officials and finance experts are the first to admit that there is still considerable scope for investment growth, both through encouragement of private national investment in the UAE, and through further attraction of foreign direct investment (FDI). It is also clear that business opportunities by themselves are not enough to promote investment. Attention has therefore been focused on creating an even more positive business environment that adopts best practice methods, appropriate legal frameworks and is transparent. Much progress has already been made in this regard. The World Bank has identied the UAE as one of the least cumbersome countries in which to set up

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a new business. According to a recently released report, the World Bank reported that only 29 days is needed to set up a new business in UAE whereas the average period for the MENA region is 60 days. According to the World Bank report, the cost of setting up a new business (as a percentage of gross national income) in the UAE, at 24.4 per cent, is also relatively very low compared with the MENA average 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 prohibited non-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 commercial clusters (or special cities) in the UAE from the early stages, when Jebel Ali Free Zone was the pioneer of this type of business innovation. The concept has proved to be uniquely attractive to both national and nonnational investors and the zones have promoted all forms of business activity from manufacturing to service industries. Over 4000 companies were active in the UAEs free zones at the end of 2002. Some of the worlds leading industrial establishments have located in the Emirates, promoting the growth of ancillary industries, boosting support sectors, including banking, construction and air travel as well as creating many new jobs.

storey buildings totalling 9500 square metres, 24 warehouse units, each of 353 square metres and 207,000 square metres of undeveloped land for companies to build their own structures. The purpose of the free zone is to provide foreign investors with the facilities and services required to operate their business in Dubai. Companies established in 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 and low volume products. DAFZ established companies include such internationally known corporations as Boeing, Chanel, Estee Lauder, Fedex, Logistics, Johnson & Johnson, Matsushita Avionics, Porsche, Ricoh, Samsonite and Tag Heuer.

Dubai Technology & Media Free Zone


The Dubai Technology and Media Free Zone (DTMFZ) was originally established by Dubai Law No.1 in 2000, and is an umbrella entity for the emirates drive to become a regional centre for technology, e-commerce and media. DTMFZ presently has three main sections: Dubai Internet City (DIC), Dubai Media City (DMC), and Dubai Knowledge Village (KV) (see also section on Media and Information).

Dubai Internet City


DTMFZs rst project, Dubai Internet City (DIC), provides what is described as a Knowledge Economy Ecosystem that is designed to support the business development of information and communications technology (ICT) companies. DIC is the Middle Easts biggest IT infrastructure built inside a free trade zone, and it has the largest commercial Internet Protocol (IP) telephony system in the world. It is a strategic base for companies targeting emerging markets in a vast region extending from the Middle East to the Indian subcontinent, and Africa to the CIS countries, covering 1.6 billion people with a combined GDP of US$1.1 trillion. The cluster of ICT companies in Dubai Internet City comprise those involved in software and website development, business services and e-commerce, consultancy, education and training, sales and marketing, and back office operations. DIC also provides a scalable state-of-the-art technology platform that caters to companies seeking to provide cost effective business process outsourcing (BPO) services such as call centre operations.

Jebel Ali Free Zone


Jebel Ali Free Zone (JAFZ) is located on approximately 100 square kilometres of land in Dubai, south-west of Jumeirah, adjacent to the main Abu Dhabi to Dubai motorway. Created around the worlds largest man-made port, which was literally dug out of the coastal desert sands, it has become a key warehousing, distribution and industrial hub that provides access to major consumer market. It is the rst free zone in the world to achieve ISO 9002 certication. Jebel Ali Free Zone is home to over 2300 companies from some 100 countries. 28 per cent of the companies are from the Asia Pacic region; 35 per cent from the GCC and Middle East; 27 per cent from Europe and the remainder are from the American 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, Toshiba amd DaimlerChrysler, among others, have established a presence in the JAFZ.

Dubai Airport Free Zone


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

Dubai Media City


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

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variety of media businesses, including broadcasting, publishing, advertising, public relations, research, music, new media, and lm production and post production have offices within the DMC building complex.

Dubai Metals & Commodities Centre


DMCC was launched as a new free zone on 1 May 2002. Its core objective is to provide the market infrastructure for its three core segments gold, diamonds and commodities. Offering unique business opportunities for participants in a wide range of metals and commodities industries, DMCC provides facilities that bring together the gold trade, the diamond trade, and trading in other selected commodities. The centre aims to attract key players throughout the entire value chain, together with relevant support industries such as nance, logistics and insurance. The Centre includes the Dubai Diamond Exchange along with the Gold and Commodity Exchanges. The rst phase of the Dubai Diamond Exchange is scheduled to be operational by the rst half of 2004, while the second phase should be operational in 2005. In addition to the regions only diamond exchange, the tower will house vaulting facilities for safe custody of diamonds and other precious commodities.

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

International Media Production Zone


The International Media Production Zone (IMPZ) was launched in July 2003 as the rst dedicated trade zone created in the region for media-related production activities. The zones rst production cluster will concentrate on the printing industry, providing a complete infrastructure for print production including land and pre-built printing, production and warehousing units as well as communications and technology facilities. Companies joining the zone will have the same benets as those based in Dubai Media City. Subsequent clusters will include music, broadcast and lm and it is hoped that the interaction within and between the clusters will generate an enhanced creativity.

Dubai International Financial Centre


Established under Dubai Law No. 3 of 2002, the intention is that DIFC will initially focus on ve areas of activity related to the nancial services industry. These include asset management, Islamic nance, reinsurance, back-office operations, and the establishment of a regional nancial exchange to foster a cross-border, efficient and liquid capital market. Details of DIFC were still pending as this book went to press.

Dubai Humanitarian City


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

Dubai Cars & Automotive Zone


Situated at Ras al-Khor in Dubai, DUCAMZ was established with the objective of re-exporting used cars to the Asian and African regions where the demand continues to grow. The zone includes a one-million-square-metre bonded area with convenient access to all airport and seaports in the region. Companies with 100 per cent foreign ownership may establish themselves in the zone and enjoy exemption from import duties and other free-zone benets.

Gold & Diamond Park Free Zone


The Gold and Diamond Park Free Zone, associated with the Jebel Ali Free Zone Area, has around 120 workshops for manufacture of products using gold and diamonds, and it includes 30 retail outlets. A special feature of the zone is hallmarking controlled by the Dubai Municipality for all gold manufactured and sold from the Gold and Diamond Park. There is also a visitors centre that attracts many tourists and shoppers. A shuttle bus transports people between the Gold and Diamond Park and the Gold Souq.

Dubai Maritime City


Construction of a new Dh649.6 million (US$177million) maritime development commenced in mid-2003 between Port Rashid and Dubai Drydocks. Dubai Maritime City 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 wide variety of maritime industries and services under a number of headings. Marine management services will range from cargo, vessel and life insurance agencies to law rms. Marine-related marketing will include exhibitions and trade shows. Marine research and education will take the form of a marine academy

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where curricula like marine engineering, marine transportation, naval science, maritime operations and technology, logistics and intermodal transportation and pilot 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 modication companies. The rst development phase, to be completed by mid-2004, involves land reclamation and construction of the ship repair facilities.

Dubai Techno Park


Bids for the construction of the rst phase of Dubai Techno Park were closed in October 2003. The Techno Park is designed to attract foreign direct investment in research into oil and gas, desalinisation and environmental management. Phase one of the Techno Park facing Sheikh Zayed Road will be nished in 2005.

Fujairah Free Zone


Fujairah Free Zone (FFZ) is adjacent to the port of Fujairah. Companies established in the zone have easy access to all Arabian Gulf ports, the Red Sea, Iran, India and Pakistan on weekly feeder vessels. Main shipping lines arrive from northern Europe, 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 full range of free-zone benets 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 Zone


With over 1090 companies operating out of SAIF Zone, it has the distinction of being the rst ISO certied airport free zone in the world. Easily accessible to seaports on the Indian Ocean (Port Khor Fakkan) and the Arabian Gulf (Port Khalid), SAIF Zone is built adjacent to Sharjah International Airport. Approximately 14 per cent of the companies in the SAIF Zone are industrial manufacturing enterprises whilst most are involved in trading. It has registered phenomenal growth since its inception in 1995 and in order to support this expansion it was recently allotted 5 million extra square metres of land as an extension to its existing 10-million-square-metre facility.

Hamriyah Free Zone


The logic behind Sharjahs Hamriyah Free Zone (HFZ), which was established on 12 November1995, was to attract companies to locate themselves next to its deepwater port. Land is allocated for heavy, light, service and commercial industries. HFZ was the rst in the Middle East to obtain ISO 14001 certication for environmental management, and it is encouraging steel and heavy industries because of perceived long-term growth prospects in these elds. Sharjah recently announced that a new industrial area, No.18, is to be built alongside HFZ.

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Ajman Free Zone


Over 730 companies were listed as members of the Ajman Free Zone (AFZ) at the end of 2003. Formation of the free zone has given a strong impetus to industrial 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. The free zones proximity to both Sharjah and Dubai ensures easy accessibility to two international airports and four seaports.

Ras al-Khaimah Free Zone


Opened on 1 May 2000, the free trade zone in Ras al-Khaimah aims to provide world-class customer service, state-of-the-art facilities, and the most competitive rates in the UAE. A port upgrade is planned to meet growing demand from industries registered in the free trade zone. By the end of 2002 a total invested capital of Dh120 million had taken place in around 100 projects, including a shipbuilding company. By the end of 2003 another 90 companies, with a gross business volume of Dh141 million, were expected to be established there. Investors have come from Iran, North America, Europe, the Indian subcontinent, China and the former Soviet states.

annually, compared to an annual purchase amount of US$1314 in the US, US$1072 in the UK, and US$875 in Germany. Another growing e-commerce website in the UAE is UAEmall.com. This is similar 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 popular for buying and selling second hand cars and works by introducing buyers and sellers rather than direct selling. A recent addition to the site is the opportunity for users to establish their own e-shop. The facility can be used to introduce a new product without having to bear the overheads of maintaining a physical presence. It also caters to those who would like to test the market prior to making a signicant investment, all from the convenience of their home, office or a caf. 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 bank transfers or cash on delivery.

Ahmed bin Rashed Free Zone


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

INDUSTRIAL DEVELOPMENT
The UAEs main industrial activities, apart from the oil and gas sector which is covered elsewhere, are in construction, aluminium, chemicals and plastics, metals and heavy equipment, clothing and textiles, and food. Each emirate in the UAE has taken steps to nurture the development of these (and other) non-oil industries, both in terms of providing attractive structures and support mechanisms and through development of improved facilities such as industrial zones, business parks and vital energy and transport networks. There has been signicant restructuring in the UAEs manufacturing sector in order to meet the challenges it will face when new WTO regulations come into effect in 2005. The main thrust is in establishing projects with production privileges that will enable them to penetrate new markets and increase exports. The value of the manufacturing sectors contribution to gross domestic product peaked at nearly Dh33.5 billion (US$9.12 billion) in 2002, second only to the oil sectors value of around Dh72 billion (US$19.6 billion). The sector expanded by around 5.3 per cent and accounted for nearly 13.6 per cent of GDP. Total capital in industrial projects exceeds US$7 billion. The UAE manufacturing sector, covering mainly light and medium products, is poised for further expansion as the country pushes ahead with a programme to diversify its economy and ease reliance on oil export earnings. Clusters of industrial projects have been established at locations such as Abu Dhabi Industrial City (ADIC) at Mussafah (not to be confused with Abu Dhabi

OnLine Marketing
In line with the massive efforts being made by the UAE, in general, and Dubai, in particular, 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 in 2004, of which 2 per cent is forecasted growth for the Middle East. The gures indicate that the UAE is primed for rapid e-commerce development, provided that the infrastructure and incentives are in place. The leading e-commerce business-to-business (B2B) web marketing and auctioning company in the Middle East is UAE-based Tejari. One of Tejaris key strengths is that it has focused on government and private sector contracts and tendering procedures, enabling both national and international companies easier access to participation in development projects. Use of the Internet among procurement agencies is rapidly increasing with 17 per cent of organisations within the Gulf Cooperation Council (GCC) states engaged in online procurement. The average GCC resident purchases US$1068 worth of goods and services online

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Investment Company, also known as ADIC), Jebel Ali Free Zone and Hamriyah Free Zone. ADIC, for example, has shown very rapid recent growth with 355 major manufacturing companies employing more than 30,000 workers established there in 2002. Like other industrial zones, it has been actively promoting itself as a location for inward investment in major projects. Abu Dhabi launched the industrial park on the basis of UAEs traditional role as a centre for export-import trade, keeping in mind the rapid growth of regional economies and their growing demand for services and products. Abu Dhabi, as the UAEs capital city, is well positioned to provide a stable and secure location for major global manufacturers. The industrial citys infrastructure provides all basic services and facilities for various industrial activities including food processing, textiles, plastics, chemicals, timber, building materials and high technology. Of the 355 manufacturing units in ADIC in early 2003, 36 were engaged in the petrochemical sector, 28 in foodstuff manufacture, 15 in garments and textiles, 58 in breglass, 75 in construction materials, 23 in computers and equipment assembling and 81 in metallic industries. Dubai has dramatically stepped up its own drive to attract capital and expand its manufacturing base to gradually replace its dwindling earnings from oil exports which generate less than 12 per cent of the emirates GDP. But, despite its industrial base, Dubai is not a major manufacturer. The vast majority of goods passing through its ports are in transit. The Dubai Authority for Investment and Development was created in April 2002 and provides a focal point for attracting investors to Dubais new business ventures.

THE UAE OFFSETS GROUP


The UAE Offsets Group (UOG), created in 1992 to implement the UAE Offsets Programme, is now playing the role of a commercial and economic think-tank for the UAE, especially for Abu Dhabi. Several multi-million dollar projects including energy-related ventures, shipyards, sh farms, district cooling units and aircraft leasing companies have been created by UOG as joint ventures between local and international investors. The UAE Offsets Programme requires all defence contractors signing deals worth more than US$10 million with the UAE Armed Forces to full offset obligations and UOG plays the role of a conduit between the joint venture partners. Offsets ventures should yield prots of 60 per cent of a contracts value over a period of several years (the typical duration of an offset obligation is seven years) and earn offset credits that are evaluated at several milestones during the life of each offset project. The performance of the joint ventures is closely monitored by UOG and if defence contractors fail to full obligations they are required to pay liquidated damages of 8.5 per cent on the unfullled portion of the obligation, calculated at each milestone.

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Recent offsets projects include a new venture, Denel-Al Jaber Maintenance & Technology Company LLC (DAMTEC), which has been set up as a partnership between Abu Dhabi-based Al Jaber Transport & General Contracting Establishment (AJE), part of the Al Jaber Group, and the South African defence equipment manufacturer, 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 eet management services as well as product system management services to owners of commercial and military eets. By setting up this joint venture, Denel is seeking to full part of its offset obligation emanating from defence equipment supply contracts with the UAE Armed Forces. DAMTEC will offer comprehensive outsourced vehicle maintenance using Denels systems, based on the companys Maintenance Management Information System (MMIS) package, which includes managing preventive maintenance, minimising costs of spare parts through effective supply chain management and optimising vehicle eet use. Marketing studies conducted for DAMTEC by Chescor Capital Middle East have shown that there are about 750,000 vehicles in the UAE. The company aims to capture 10 per cent of that market. Immediate opportunities come from AJEs 5000 vehicles, plus potential contracts with government entities. DAMTEC is the second offsets project set up by AJE in partnership with a South African company. In mid-2002, it established Safewater Chemicals in partnership with Specialist Mechanical Engineers (SME), which was the rst offsets project set up in the UAE with the participation of a South African company. UOGs Offsets Venture Unit responsible for implementing the UAE Offsets Programme is currently working on a number of other project ideas and has signed new offset agreements with several defence contractors. These offset agreements will generate further opportunities to invest in new ventures, either directly or through offset investment funds. Local investors and defence contractors could take advantage of the lucrative opportunities offered by such initiatives. Since its inception in 1992, implementation of the UAE Offsets Programme has been UOGs core business, but over the years the groups role has matured and diversied into that of a venture capital organisation and an economic think-tank. The group also assists the Abu Dhabi government to implement projects on a fast-track basis and seeks to develop strategic ventures. Not all the projects managed by the Offsets Group are part of the Offsets Programme. The US$3.5 billion Dolphin gas project is the biggest non-offset scheme being implemented by UOG. It entails the production and transportation of up to 2 billion cubic feet a day (cu ft/day) of natural gas from Qatars North Field for the markets of the UAE via a 440-kilometre subsea pipeline. The project is a commercial venture being developed by Dolphin Energy Limited (DEL), 51 per cent of which is owned by Mubadala Development Company (itself wholly owned by the Abu Dhabi

government), and 24.5 per cent each by Total and Occidental Petroleum. The projects aim at stimulating industrial development in the country by providing secure sources of energy. Under a mandate from the Abu Dhabi government, UOG also facilitated the development 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 governments diversication strategy. The total contribution of the manufacturing sector to the GDP stood at Dh72.7 billion in 2002, registering an annual growth of 4.5 per cent. There were 2509 factories on government record books in 2002, employing 12.9 per cent of the countrys manpower. Dubai has been focusing especially on development of trade, tourism, nance and 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 Abu Dhabi government, was set up through an Amiri decree issued in October 2002 by Abu Dhabi Crown Prince and Deputy Supreme Commander of the UAE Armed Forces HH Sheikh Khalifa bin Zayed Al Nahyan. Based in Abu Dhabi, MDC has been created to initiate and participate in new development projects on behalf of the Abu Dhabi government. The companys brief is to set up joint ventures and energy related economic development projects in the UAE and abroad in partnership with leading international players. MDC has a 51 per cent stake in Dolphin Energy Limited (DEL), which is implementing the multi-billion dollar Dolphin gas project. It also has stakes in several other ventures in Abu Dhabi and is expected to play a major role in the emirates industrial development.

ADDAR
ADDAR Real Estate Services LLC (ADDAR), a full-service development and asset management company, intends to develop real estate projects for the community through public private partnerships. Forty per cent of ADDAR is owned by Mubadala Development Company and 15 per cent each by Abu Dhabi Investment Company (ADIC), Abu Dhabi National Hotels (ADNH), the National Corporation for Tourism & Hotels (NCTH), and The National Investor. The company is currently working on a development portfolio worth more than Dh1.1 billion (US$299.6 million). Its agship project is the Dh46 million

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UNITED ARAB EMIRATES YEARBOOK 2004

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

Tabreed The National Central Cooling Company


Tabreed has been providing energy-efficient, gas-red and electric-powered district cooling solutions in the UAE for over ve years and has become the leading district cooling services provider in the region. The company has recently extended its operations to Qatar and is in the process of doing so in Saudi Arabia. Tabreeds current installed district cooling capacity in the UAE stands at more than 132,000 refrigeration tonnes, which are under contract for a range of military, commercial and residential properties across the country. Total installed capacity is set to increase to more than 170,000 tonnes by the end of 2004 and will rise further with new commercial and residential developments. At present, Tabreed is providing district cooling services to several commercial buildings in Dubai, to Zayed Military City of the UAE Armed Forces in Sweihan and a number of commercial properties in Abu Dhabi, Al Ain and Ras al-Khaimah.

Industrial Directory for Dubai


In October 2003, Dubai Chamber of Commerce and Industry (DCCI) issued the Industrial Directory 200004, which lists industrial companies and establishments in Dubai. The directory, which is published in Arabic and English and printed in one volume, is also available on CD-ROM. It contains detailed information about the procedures for setting up an industrial establishment, as well as integrated data and statistics relevant to the industrial sector.

International Developments for RAK Ceramics


RAK Ceramics, one of the worlds largest ceramic tiles and sanitary ware manufacturing companies, supplies ceramic and Gres Porcellanato tiles and sanitary ware worldwide, with marketing and distribution subsidiaries in Switzerland, France, the UK, Germany, Italy and Belgium. The company has recently opened a new factory in China, and another one in Sudan. The factory in China started its initial production in October 2003. The US$19 million new factory in Sudan commences initial production in 2004. Meanwhile, as a further part of its global expansion, RAK Ceramics began work on a factory in Iran. The company also has manufacturing plants in Bangladesh and Slovakia. The new Bangladesh sanitary ware plant, with a capacity to manufacture 400,000 pieces a year, started production in September 2003, doubling the previous capacity.

Iron and Steel


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

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of the total local demand and the remaining requirements are met through imports. Further expansion of the Abu Dhabi manufacturer will increase capacity of the company 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, the high rate of population growth in the GCC states and the subsequent rise in construction-related activities is expected to increase the demand for steel in the near future. Furthermore, the rolled steel producers of the UAE are also expecting major demand from ongoing reconstruction activities in Iraq. The local market used 1.2 million metric tonnes of steel in 2002 and approximately 1.3 million metric tonnes in 2003. Production at Abu Dhabis EISF reached around 390,000 metric tonnes in 2003, up from 190,000 metric tonnes in 2002.

can support several more carpet manufacturing units, which can be expected to grow substantially in the coming years with the added demand from the Iraq reconstruction effort. Since the vast majority of carpet products are now made from synthetic bres, manufacture of tufted carpets, as a downstream activity of the oil/petrochemical industry, has potential to contribute to the UAEs industrial diversication.

Chemicals
A new chemical plant, Safewater Chemicals, has been built as a joint venture between the Abu Dhabi-based Al Jaber Group (65 per cent) and South Africas SME (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 at Mussafah will produce 12,000 tons a year (t/y) of hydrochloric acid, 30,000 t/y of sodium hypochlorite and 8,000 t/y of caustic soda, using sodium chloride, water and electricity as primary feedstocks. The plant, which was nanced through a 65:35 debt/equity package, was completed in 2003. Safewaters key markets will be the oil and gas, water desalination and transmission and the wastewater sectors. The company will also target other industrial and commercial applications.

Textiles and Clothing


A 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, with construction work scheduled for completion in late 2005. According to a study released by the Emirates Industrial Bank (EIB) in late 2003, the outlook for the UAE garment industry remains somewhat mixed. The EIB predicts a demise in production of low value-added garments resulting in further declines in the total output of the industry in the short term, but in the medium term the industry is likely to stabilise, and may have opportunities to grow in the longer term. The UAE remains the major garment exporter in the Gulf region. It has approximately 180 garment factories; four weaving and spinning factories, and about 33 factories engaged 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 in production of knitted garments has been far greater, and is currently less than 40 per cent of the peak reached in 1997. Woven garments now account for almost three quarters of the production, compared to two-thirds in 1997, and have registered successive increases in the last two years.

Aluminium
The largest industrial venture in Dubai is the aluminium smelter at Jebel Ali run by the Dubai Aluminium Company, also known as DUBAL. The highly successful project, taking raw bauxite from Australia and converting it to high grade aluminium, is currently undergoing an expansion which will raise production capacity to 710,000 metric t/y. Meanwhile, DUBAL produced 560,000 tonnes of aluminium in 2003, a 5 per cent increase on 2002. The company also sold more than 616,000 tonnes of metal alloy products in 2003, up 7 per cent on 2002. At the same time DUBAL managed to trim unit costs to a level which pushed it into the ranks of the worlds top 20 lowest cost aluminium producers. There are a number of local companies that take aluminium from DUBAL and process it into a wide range of products. One new venture in this category is a new rolling mill for production of sheet aluminium that is being developed by Emiroll, a company jointly owned by Pechiney (a French company), Dubai Investments and the local company, Ghurair Private Company. This modern plant will have a capacity of 33,000 t/y and is located close to DUBAL in the Dubai Investments Park near Jebel Ali Free Zone. DUBALs success with its aluminium smelter at Jebel Ali has led it to seek new opportunities for development close to primary energy sources and in May 2003 an agreement for a new joint venture was signed between DUBAL and Qatars United Development Company (UDC). According to the agreement, the two sides will enter into a joint venture to build, own and operate a primary aluminium

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

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Table 13: World Proven Crude Oil & Gas Reserves by Region OIL (million barrels)
North America Latin America Eastern Europe Western Europe Middle East Africa Asia and Pacic Total OPEC OPEC% UAE UAE/World% UAE/OPEC% 27,646 111,173 79,190 18,268 698,906 93,550 38,434 1,067,167 847,719 79.4 97,800 9.16% 11.53%

Table 15: Pipelines for Crude Oil, Natural Gas and Products 2002 CRUDE OIL PIPELINES Murban/Jebel Dhanna Umm Shaif/Das Island Lower Zakum/Das Island Upper Zakum/Zirku Island Bunduq/Das Island Mubarraz/Mubarraz Island NATURAL GAS PIPELINES Habshan/Maqta Bab/Maqta Maqta/Baniyas Bab/Ruwais Maqta/Taweelah Maqta/Al Ain MP21/Ruwais Murgam/Jebel Ali Sajaa/Sharjah PRODUCT PIPELINES UAN Renery/Al Ain UAN Renery/AD Airport UAN Renery/Mussafah
Source: OPEC Statistical Bulletin

Owner/Operator ADCO ADMA ADMA ZADCO Government ADOC Owner/Operator ADNOC ADNOC ADNOC ADNOC ADNOC ADNOC GASCO Dubai government Emarat Owner/Operator ADNOC-FOD ADNOC-FOD ADNOC-FOD

Length (miles) 3x50 22 56 40 18 21 Length (miles) 81 83 11 68 2x33 100 41 47 27 Length (miles) 104 11 2x10

Diameter (inches) 24,24,36 30 30 42 16 24 Diameter (inches) 42 30 16 30 24,36 30 24 24 18,6,4 Diameter (inches) 12 10 8,12

F VES LD AS % O OR O RV E S A S % O F W LD T RE RL R R SE R D Y WO V ES A S % OF PR SB OV VE EN C R RU D E O IL R E SE
OP
EC

RE

ES

ER

OP

SE

EC T TO OTAL TA L TA EG L IO N

UA

E
E UA

NATURAL GAS (billion standard cu m)


North America Latin America Eastern Europe Western Europe Middle East Africa Asia and Pacic Total OPEC OPEC% UAE UAE/World% UAE/OPEC% 6,989 7,507 57,493 6,955 71,546 13,207 14,118 177,724 86,828 48.9 6,060 3.41% 6.98%

Source: OPEC Statistical Bulletin

P FO D L AS % O OR O RV E EC F W LD T S AS % O LD RE SE R OR BY PR V ES A S % OF W OV ES EN RV NATU R GA S R E S E AL

ES

OP

RE

ER

SE

VES

EC T TO OTAL TA TA L L RE GI ON

UA

E
E UA

Table 14: UAE Crude Oil Exports by Destination: 19982002 (1000 b/d)
North America....................... United States......................... Latin America........................ Western Europe..................... France.................................... Netherlands........................... United Kingdom.................... Middle East........................... Africa.................................... Asia and Pacic..................... Japan.................................... Total World........................... 1998 2.5 2.5 7.5 13 11.2 -----1.3 -----57 1959 1205 2039 1999 ----------1 ---------------4 39 1875 1085 1919 2000 1.3 1.3 -----1.3 0.1 1.2 ----------34.3 1778 1065.8 1814.9 2001 19.6 19.6 -----6.1 5.1 ---------------37 1724 1066.8 1786.7 2002 10 10 -----3 --------------------26 1575 1182.8 1614

DAILY AVERAGE (1000 barrels)

Source: OPEC Statistical Bulletin

Source: OPEC Statistical Bulletin

Table 16: Crude Oil Production in the UAE (1000 b): 19622002
2500 25,000,000 CUMULATIVE DAILY AVERAGE (1000 barrels)

OR

2000

20,000,000

1500

15,000,000

1000

10,000,000

500

5,000,000

1962 Daily average Cumulative 14.2 5183

1972 1,202.70 1,987,377

1982 1,248.80 8,168,382

1992 2,235.70

2002 1,900.30

13,480,186 21,251,327

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smelter at Ras Laffan Industrial City in Qatar. The smelter will initially produce 516,000 metric tonnes a year of primary aluminium with the potential to expand in phases to over one million metric tonnes a year. The smelters primary electrical energy requirements will be met by a dedicated power plant with natural gas supplied from Qatars huge North Field (proven reserves of 900 trillion cubic feet). The smelter will utilise DUBALs CD 26 technology developed jointly with COMALCO Aluminium Ltd of Australia. DUBALs pure grade metal is sold to customers across the world, from Japan and the Pacic Rim, to the US, Europe and the Middle East.

Cable Manufacture
In its rst major expansion outside Dubai, DUCAB, the Dubai Cable Company Ltd, announced the construction of a state-of-the-art factory in Abu Dhabi, to be commissioned 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 be Dh125 million. DUCAB (Abu Dhabi), under construction in the new Abu Dhabi Industrial City at Mussafah, has been designed to increase the combined copper processing capacity of DUCAB in the two plants to 60,000 tonnes from the current 35,000 tonnes at DUCAB (Dubai). The new plant will have a copper processing capacity nearly similar to that of DUCAB (Dubai) but will also make complementary products. It will primarily serve the UAE, as well as export markets in the GCC and beyond.

Maritime Industries
Boat-building, ship repair and marine dredging are important maritime industries in the UAE. Information on the Abu Dhabi Ship Building Company (ADSB) and Dubai Drydocks Company is given under the heading of Seaports and Shipping in the section on Infrastructure. The new marine-orientated zone Dubai Maritime City will also assist in promoting maritime industries in the Emirates. In addition, mention should be made of bunkering for which the UAE now ranks among the top three locations in the world. This, in turn, has spawned a healthy growth in the ship supply business with around 40 companies operating in this eld in the Emirates 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 billion barrels. OPECs ve largest oil producers, the UAE, Saudi Arabia, Kuwait, Iraq and Iran, control more than 60 per cent of global oil reserves and currently supply world markets with around 16 million barrels per day (b/d). Whilst the latter

gure is somewhat less than 25 per cent of total consumption, supplies from UAE and other major OPEC producers are projected to exceed 30 million b/d by 2020 when other sources will have receded or been seriously depleted. It is against this background that the UAE has committed to major developments in its oil and gas production and supply facilities. Notwithstanding major progress in diversication, the UAEs oil and gas sector continues to occupy prime status in the UAEs economic prole a fact bolstered by conrmed hydrocarbon reserves now standing at 97.8 billion barrels of oil and 212.1 trillion cubic feet of natural gas. On the worldwide stage these gures rank the UAE in fth place in terms of the size of its oil reserves and fourth with respect to its natural gas reserves. Presently acknowledged oil reserves in the UAE would allow the country to pump oil at 2.55 million barrels per day for the next 105 years. In reality, of course, pumping rates will vary and oil eld exploration will add new recoverable reserves so this expiration date will almost certainly be extended further into the future. It has been suggested by oil exploration experts that there could be approximately double the presently discovered reserves in deeper layers, where drilling has so far not taken place. Based on current knowledge, the UAEs oil reserves, at 97.8 billion barrels, account for 9.1 per cent of the worlds total oil reserves, estimated at 1068 billion barrels. By far the greatest portion of the UAEs oil reserves are located in Abu Dhabi emirate, with 92.2 billion barrels of the total bulk, followed by Dubai with 4 billion barrels, Sharjah with 1.5 billion and Ras al-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 Ras al-Khaimah with 1.2 trillion cubic feet. Abu Dhabi National Oil Company (ADNOC), one of the biggest oil companies in the world, has been engaged in a major oil and gas expansion capacity programme over the past decade in collaboration with its Western and Japanese corporate partners. Oil and gas investments during this period exceed US$25 billion. The UAE plans to increase sustainable oil production capacity to 3.58 million b/d by 2006, from the current 2.63 million b/d. A crucial element in this plan is the development of Upper Zakum from its present level of 550,000 b/d to 1.2 million b/d and ADCOs onshore developments at Bab, Al Dabbiya, Jarn Yaphour, Rumaitha and Shanayel due to add 200,000 b/d capacity, bringing the combined capacity of these elds to 460,000 b/d. In addition, development work at the Bu Hasa eld, due for completion in 2006, is planned to increase production there from 550,000 b/d to 730,000 b/d. Work at Huwaila and Sahil elds will also enhance their production capabilities. The federal dimension in the hydrocarbon sector is relatively limited since most of the relevant activities such as oil and gas exploration, production, processing and export activities are controlled by each emirates own government. One recent

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Table 17: Crude Oil Production by Companies in the UAE: 19982002


1200

Table 19: Parent Companies Estimated Gross Share of Crude Oil Production: 19982002
1400 Thousands of barrels per day 1200 1000 800 600 400 200 0
2002 2001 2000 1999 1998

Thousands of barrels per day

1000 800 600 400 200 0 2002 2001 2000 1999 1998
Source: OPEC Statistical Bulletin

Source: OPEC Statistical Bulletin

Abu Dhabi 1998 ADCO 1047.3 ADMA 477.2 Total 30.2 ADOC 23.7 Amerada Hess 10.4 Zadco 331.4 Dubai DPC Sharjah Buttes Total 1998 316.9 1998 7 2244.1

1999 956.2 435.6 27.5 21.7 9.5 302.6 1999 289.3 1999 6.4 2048.8

2000 1014.9 462.4 29.2 23 10.1 321.2 2000 307.1 2000 6.8 2174.7

2001 986.7 449.5 28.4 22.3 9.8 312.2 2001 298.5 2001 6.6 2114.2

2002 886.9 404.1 25.5 20.1 8.8 280.6 2002 268.3 2002 5.9 1900.3

Government BP TotalFinaElf Exxon Mobil Shell Others

1998 1208 169 183 78 78 100 429

1999 1103 155 167 71 71 91 392

2000 1171 164 177 75 75 97 416

2001 1138 159 172 73 73 94 404

2002 1023 143 155 66 66 84 363

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

Table 20: Producing Wells in the UAE: 19982002

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

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


2500 Thousands of barrels per day 2000 1500 1000 500 0 Apr-00 2,157
Source: OPEC Statistical Bulletin

1998 1999 2000 2001 2002

Source: OPEC Statistical Bulletin

250

500

750

1000

1250

1500

1750

1998
Flowing Articial Lift 1069 382

Oct-00 2,289

Feb-01 2,201

Apr-01 2,113

Sep-01 2,025

Dec-02 1,894

Nov-03 2,138

1999 1075 349

2000 1143 362

2001 1063 347

2002 1068 349

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Source: Arab Oil Journal. Note: Boundaries only indicative.

exception to this general rule was announced in March 2002 when the federal Ministry of Petroleum and Minerals awarded a Dh37 million contract to the British Geological Survey (BGS) to undertake a comprehensive geological and geophysical survey of the UAEs mountainous zone stretching from Ras al-Khaimah in the north to the city of Al Ain, in Abu Dhabi, to the south. The project team is also producing 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 until mid-2006.

Abu Dhabi Oil Fields and Concessions


LF GU
UM M MM SHA H HAIF
Abu Musa
Q

QATA R A Doha

AN BI

SATAH
Dalma ma Sir Bani Yas Marawah

ZAKUM UMM UMM AL-DA L L-D


Abu Al-Abyadh adh a h

'

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 that had not been so low for ten years. The quotas were increased during 2003, set at 2.138 million b/d from 1 November.

BAB

E
SAHIL AHIL H

A b u
SAUDI ARABIA

D h a b i

BU HA HASA A

U N I T E D
SH SHAH

ASA SA A AB

M
OM AN International boundary Abu Dhabi boundary Oil producing field Concession areas: 0 Miles Kilometres 100 0 75 SAU DI ARABI A

Abu Dhabi
The emirate of Abu Dhabi, with proven crude oil reserve estimated at 92.2 billion barrels, has 94.3 per cent of the UAEs total reserves and 8.6 per cent of the proven world oil reserves (1068 billion barrels); and with 5.892 trillion cubic metres of natural gas, 3.65 per cent of world natural gas reserves (161.2 trillion cu m). Its largest oileld, Upper Zakum, contains an estimated 48 billion barrels of reserves in-situ and estimated recoverable reserves of 16 to 20 billion barrels (using extensive water 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. The emirates oil production is split on a roughly 50-50 basis between onshore and offshore elds. Onshore production in 2002 averaged 850,000 b/d, whilst offshore contributed 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 half of Abu Dhabis oil production, and it is one of the 10 largest oil companies in the world and the largest crude oil producer in the southern Arabian Gulf. The company plans to invest about US$800 million in major project work aimed at boosting oil production to 1.4 million barrels per day by 2005. Meanwhile, ADCO also produces 130,000 b/d of 57.5 API condensate (0.11 per cent sulphur) from the Thamama formation of the Bab/Habshan eld, which started up in 1996. Offshore, ADMA-OPCOs two elds, Umm Shaif and Lower Zakum, between them produced 380,000 b/d in 2002, while Upper Zakum and the other four elds operated by ZADCO contributed 400,000 b/d, with the remaining offshore elds (Mubarraz/Neewat al-Ghalan, Umm al-Anbar, al-Bunduq and Abu al-Bukhoosh)

ADNOC

ADCO

ADMA-OPCO

Table 21: Abu Dhabi Oil Production and Exports


2500
Source: OPEC Statistical Bulletin; Arab Oil & Gas Directory; Abu Dhabi Dept. of Planning

2000 Thousands of barrels per day

1500

1000

500

0 Onshore Offshore TOTAL Exports 1990 774 942 1,716 1,544 1991 990 1,050 2,040 1,836 1992 991 1,009 2,000 1,795 1993 900 1,000 1,900 1,650 1994 920 886 1,806 1,614 1995 950 838 1,788 1,573 1996 975 925 1,900 1,665 1997 960 990 1,950 1,685 1998 900 1,012 1,912 1,675 1999 820 870 1,690 1,460 2000 1,015 975 1,990 1,770 2001 935 900 1,835 1,615 2002 850 840 1,690 1,450

A
Al Ain

E S

Ajma Sharjah Dubai


Si
b
N

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together producing about 60,000 b/d. In late 2002 however, production levels at ADMA-OPCOs two elds were increased by 40,000 b/d, with Lower Zakum owing at 220,000 b/d and Umm Shaif at 200,000b/d.

Dubai
Dubais proven oil reserves were still officially estimated at 4 billion barrels in January 2003, but the recoverable portion may be less than half this gure, with industry sources estimating them at 1.6 to 2 billion barrels. Based on the more optimistic gures, Dubai could keep pumping at a rate of 250,000 b/d for almost 44 years, whilst more pessimistic estimates suggest that around 20 years is all that are left of viable production. Almost all of the emirates oil reserves are located in the original concession area of the Dubai Petroleum Company (DPC), whose four offshore elds account for its entire output of crude oil and associated gas. Oil output has steadily declined despite a programme of eld development, entailing the drilling of inll wells, horizontal production wells and water injectors. The company has installed water and gas injection facilities on a large scale to maximise recovery rates, and all the associated gas produced at its four elds is now re-injected into oil reservoirs.

and it produced an estimated 440 million cu ft/day of gas and 19,000 b/d of condensate in 2002. BP drilled two more horizontal wells at Sajaa in 2000, bringing the total number of wells in operation there to 40, compared with four at Moveyeid and seven at Kahaif. Meanwhile, the Kahaif eld has had a gas gathering network and re-injection facilities installed and produced around 140 million cu ft/day of natural gas and 10,000 b/d of condensate in 2002.

Ras al-Khaimah
Ras al-Khaimahs hydrocarbon reserves consist of 100 million barrels of crude and condensate and 1.2 trillion cubic feet of natural gas, while it continues to extract 500 b/d of condensate from the Saleh eld, the only hydrocarbon structure to have been brought into production in the emirate. There has been a recent surge of exploration activity in Ras al-Khaimah with three companies active in this eld. The Ras al-Khaimah Oil and Gas Company was granted exploration licences for most the emirates land and seabed (with the exception of the area around the Baih eld or B structure) in 1996. Its rst well, spudded in December 1997, went down as far as 17,850 feet but proved to be dry. Atlantis Holdings, which was taken over by China National Chemicals Import & Export Corporation (Sinochem) in January 2002 and also holds exploration licences in the emirates of Sharjah, Ajman and Umm al-Qaiwain, has been reassessing a small offshore tract known as B structure, where a non-commercial nd was made in the 1970s. In June 2002 Novus Petroleum, an Australian company, signed a new agreement to explore the onshore Haqil acreage occupying much of the northern region, covering an area of 600 square kilometres and thought to have potential for wet gas. Novus Petroleum is already active in operating the Bukha gas and condensate eld in the Straits of Hormuz near Ras al-Khaimah, and it pipes gas from there to the LPG plant at Khor Khwair. An announcement in early 2003, made by the Ras al-Khaimah government, stated that a new exploration, referred to as C, had struck gas.

Sharjah
Sharjahs hydrocarbon reserves are put at 1.5 billion barrels of oil and condensate and 10,700 billion cubic feet of natural gas. The three onshore gas and condensate elds account for the bulk of the emirates hydrocarbon reserves, since the Mubarak eld contains less than 50 million barrels of oil and 1500 billion cubic feet of associated gas. The emirates hydrocarbon production is now declining. In 2002 it consisted of 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 199697, and about 700 million cu ft/day of natural gas, compared with 1 billion cu ft/day in 199798. Liquids production was made up of about 5000 b/d of crude and 10,000 b/d of condensate from the offshore Mubarak eld and 29,000 b/d of condensate from the onshore Sajaa eld, while gas production consisted of 120 million cu ft/day of associated gas from Mubarak and 580 million cu ft/day of non-associated gas from the three onshore elds. The Zora gas eld, which straddles Sharjahs border with Ajman, will provide additional gas once it comes on stream. This is under development as part of a joint agreement between Sharjah and Ajman, with Crescent Petroleum and Atlantis Holdings involved as licence holders of the exploration blocks. The Mubarak eld is exploited, despite declining production, under a protocol signed between Sharjah and Iran in 1972. Sharjah also passes on some of the revenues to Umm al-Qaiwain and Ajman. Sharjahs onshore Sajaa eld, operated by BP, has also experienced some difficulties in maintaining production levels

Ajman
Ajman may soon be earning revenues from development of an offshore gas eld, the Zora eld that it shares with Sharjah. This is being exploited under the terms of an agreement signed by both governments and by the respective licence holders Atlantis Holdings (recently taken over by China National Chemicals Import & Export Corporation (Sinochem) and Crescent Petroleum. The latter discovered the eld while exploring in Sharjahs waters and it represents a real bonus for Ajman.

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ADCO 40 Year Anniversary of Oil Exports The Abu Dhabi Company for Onshore Oil Operations (ADCO), the UAEs largest oil-producer, celebrated 40 years of exports from its Jebel Dhanna Terminal in mid-December 2003. Jointly owned by the Abu Dhabi National Oil Company (ADNOC) (60 per cent) and a consortium of foreign companies, including BP, Shell, Total, ExxonMobil and Partex, ADCO currently has installed production capacity of over one million barrels a day, with a major eld development programme under 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, or their 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 United Arab Emirates, at this time known as the Trucial States, in the 1930s, during which the geological teams were guided around Abu Dhabis deserts by UAE President HH Sheikh Zayed bin Sultan Al Nahyan, then still in his teens. On 11 January 1939, PCL signed a concession agreement with the Abu 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 Company drilled the UAEs rst oil well, at Ras Sadr, north-east of Abu Dhabi. The well, completed in 1951 at a depth of 13,001 feet, was, at the time, the deepest ever drilled in the Middle East, beginning a series of technological achievements that has continued ever since. Ras Sadr-1, however, was a 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 then a third well, the company was nally able, in 1959, to declare the discovery of a commercially viable eld. This was named Bab, after the area in which it was located, although the name Murban survives today as the name of the blend of crude oils from Abu Dhabis onshore elds. Four years of development work followed, involving the drilling of more wells and construction of eld treatment facilities in the Bab area, the laying of a 112-kilometre pipeline and the building of a tank farm and export facilities at Jebel Dhanna, 200 kilometres west of Abu Dhabi. On 14 December 1963, the rst cargo of 33,818 tons of crude oil from the Bab eld left Jebel Dhanna onboard the tanker Esso Dublin for a renery in Milford Haven, Wales, inaugurating the commencement of Abu Dhabis onshore oil production. In the same year, another major oileld, that of Bu Hasa, was discovered and was swiftly brought into production, and, by 1966, the Companys activities had grown to such an extent that it moved its headquarters of operations from Bahrain to Abu Dhabi town. It also surrendered all of its concessions 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 the beginning of the process of rapid development that has resulted in todays UAE. The revenues from the companys oil production, and also those from its offshore sister, Abu Dhabi Marine Areas (now Abu Dhabi Marine Operating Company, ADMA-OPCO), were crucial to those early stages of development, as, indeed, they are to the countrys continuing growth. One of Sheikh Zayeds rst objectives was to establish a formal government structure in Abu Dhabi. In terms of the oil industry, this meant, rst, the establishment of the Department of Petroleum 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 in 1979 the Abu Dhabi Company for Onshore Oil Operations (ADCO) was established to act as operator of the onshore concession. ADPC, still with an office in Abu Dhabi, groups together the foreign shareholders. In the 25 years since ADCO took over operations, the company has continued to grow and is now one of Abu Dhabis largest employers, with over 1000 UAE nationals on its staff. It has also maintained the record of technological achievement that it began back at Ras Sadr, and is one of the oil industrys leaders in techniques such as horizontal drilling. With major new projects like the development of the Northeast Bab elds of Dabbiya, Shanayel and Rumaitha now well under way, ADCO is set to continue playing a major role the countrys development for many years to come.

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Umm al-Qaiwain
A small offshore gas eld discovered in 1976 was redrilled in 2001 by Atlantis Holdings of Norway (which, as noted above, was taken over by China National Chemicals Import & Export Corporation (Sinochem) in January 2002). UAQ-3 was spudded in April 2001. At the present time however, Umm al-Qaiwains sole interest in hydrocarbon production remains its share of the revenues derived from the offshore Mubarak eld in Sharjah, part of which lies under its territorial waters.

EXPLORATION AND FIELD DEVELOPMENT

Abu Dhabi
Abu Dhabi National Oil Company (ADNOC) has two subsidiary companies that are engaged in exploration work, ADCO and ADMA-OPCO. Their exploration programme has already yielded huge reserves of oil and the research emphasis has now shifted from nding new elds to a more thorough examination of existing known reserves, together with some high-tech exploration of deep oil and gas prospects. The aim is to maximise the output of each structure through improvements in extraction methods and expansion programmes. It is predicted that efforts currently under way, involving an investment of over US$10 billion, will raise the UAEs sustainable crude output capacity from around 2.5 million b/d to 3.6 million b/d in 2005 and 4 million in 2010. ADCO ADCO has succeeded in proving sufficient new reserves each year to counteract the volumes extracted so that the level of overall conrmed reserves has been sustained. Current exploration techniques are primarily based on extensive use of 2D and 3D seismic surveys. These have included a 3D survey of the AlDabbiya/Bu Labyad areas and an inll 2D survey of the Mender/Mashhur areas. The US company Western Geophysical has also conducted a 3D seismic survey of the Bu Hasa eld and a similar survey over the southern portion of ADCOs concession area. Enhanced knowledge of the structures of these elds should lead to boosts in their productivity. ADCO has committed to undertake expansion projects to increase its crude oil production to 1.4 million b/d by 2006. Projects involved in this programme include expansion of the onshore Bab eld (adding 100,000 b/d) to achieve a capacity of 350,000 b/d and full eld development of the four north-eastern elds (Al Dabbiya, Jarn Yaphour, Rumaitha and Shanayel) to increase their capacity from 10,000 b/d to 110,000 b/d. The work is scheduled for completion in the fourth quarter of 2005 and will provide capacity of 70,000 b/d at the Al Dabbiya and Jarn Yaphour elds and 40,000 b/d at Rumaitha/Shanayel. Meanwhile, new work on the Bu Hasa eld (boosting capacity from 550,000 b/d to 730,000 b/d) commenced in October 2003 when ADCO awarded Italybased Snamprogetti the Engineering, Procurement and Construction (EPC) contract.

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 million metric cubic metres of gas per day (MMscd) and 120,000 barrels water per day. Work on a relatively new onshore eld, Huwaila, located 30 kilometres south of the Bu Hasa eld, began in August 2003. It is planned to bring it to a production of up to 10,000 b/d of oil by 2006. Veco Engineering, Abu Dhabi, was awarded the front-end engineering and design contract for the development of the eld. It is an innovative development using multi-phase pumps to feed into the pipeline rather than individual pumps. The second phase of development of the Sahil eld will also add production capacity to Abu Dhabis oil budget, probably increasing capacity by 20,000 b/d during 2004 as a result of introduction of water injection systems. Abu Dhabi already applies the most up-to-date production and drilling technology at its oilelds. Both water and gas injection are in wide use at older elds to sustain reservoir pressure and maintain ow rates. Moreover, operators are drilling a growing number of horizontal wells to improve well productivity and boost recovery rates. Operators in the emirate have acquired considerable expertise in deected drilling methods and utilise short, medium and long radius drilling techniques in conjunction with both oriented and conventional coring. The longest horizontal hole drilled in Abu Dhabi was a 5500-feet section drilled by ADMA-OPCO. Gas development projects are continuing at onshore oilelds, and ADNOC is now studying the possibility of utilising acid gas injection to boost ow rates at various oil elds. It currently uses non-corrosive gas, but given its abundant supplies of gas with a high carbon dioxide and hydrogen sulphide content, it wants to develop technologies for extracting these reserves and utilising them for injection purposes, especially at the onshore Bab eld. A joint feasibility study carried out by ADNOC and Shell Oil, which explored several options for utilising acid gas, was completed in April 2002. In addition to its activities in oil eld development ADCO also carries out development of gas production and processing facilities on behalf of ADNOC. The two gas development projects currently under way are both scheduled for completion in 2007. OGD- 3 calls for the expansion of the Bab Thamama F reservoir to produce an additional 1.2 billion cu ft/day of gas, in addition to installation of gas re-injection facilities to recycle the gas into the Thamama F reservoir. It will also increase condensate production by approximately 140,000 b/d. The second project, AGD-2, entails an expansion of the Asab gas plants processing, sweetening and NGL recovery capacity by 800 million cu ft/day. ADMA-OPCO The Abu Dhabi Marine Operating Company (ADMA-OPCO) is the second biggest oil producer in the UAE after ADCO. The two companies account for more than

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80 per cent of Abu Dhabis total crude oil production. ADMA-OPCO, which celebrated the fortieth anniversary of the rst oil shipment from the country in 2002, is responsible for development and operation of the Umm Shaif and Lower Zakum offshore elds. Situated approximately 140 kilometres north-west of Abu Dhabi City, in an area of 360 square kilometres, Umm Shaif has 268 producing wells and an output of around 200,000 b/d. The Zakum eld is located about 65 kilometres north-west of Abu Dhabi City and currently produces 220,000 b/d, making it one of the largest offshore oil elds in the world. Water injection was adopted from 1978 to maintain pressure in the reservoir. Zakum comprises ve main layers but, given their massive reserves, production and development has been initially concentrated on the lower layers (Lower Zakum). These two offshore elds operated by ADMA-OPCO, Lower Zakum and Umm Shaif, have rated capacities of 320,000 b/d and 280,000 b/d respectively. As noted above, the company currently produces around 420,000 b/d of oil that is obtained via multiple wells tapping into the productive zones. ADMA-OPCO is focused on maintaining capacity at the current level through the drilling of additional production and injection wells and, in particular, the expansion of gas injection systems. The Umm Shaif crestal gas injection project entails re-injection of 600 million cu ft/day of gas from the elds Khuff reservoir into the Arab C and D oil reservoirs and is scheduled for completion in 2006. The project will double the gas injection capacity of the Umm Shaif eld. The Lower Zakum eld boasts two collecting centres, Zakum West super complex and Zakum central super complex. A pilot gas injection project at Lower Zakum was commissioned in October 2002. With a capacity of 100 million cu ft/day, the high pressure injection system forces gas into the Zakum structures, enhancing the capability to extract oil. The gas required by the project is being drawn from the Khuff gas reservoir under the Umm Shaif eld, which is being connected via a gasline to the Zakum West Supercomplex, where an additional 200 million cu ft/day compressor is being installed on the gas injection platform. Installation of new and improved pumps in 2001 permitted all the associated gas produced at Lower Zakum to be processed and pumped at high pressure to Das Island instead of aring it off above the rig. The Zakum Central Supercomplex was demothballed and recommissioned as part of the Lower Zakum development programme, enabling easier access to the Thamama IV and V reservoirs. A 10-kilometre, 24-inch pipe was also built linking Zakum Central and Zakum West. Zakum Development Company (ZADCO) Upper Zakum is of considerable signicance in relation to the UAEs intention to increase oil production capacity from the present level of 2.63 million b/d to a new sustainable capacity of 3.58 million b/d by 2006. Upper Zakums production capacity is set to increase from its present level of 550,000 b/d to 1.2 million b/d.

ZADCO operates the supergiant Upper Zakum eld, as well as four small offshore elds: Umm al-Dalkh, Satah, Hair Dalma and Jarnein. Whilst Upper Zakums present capacity is said to be 550,000 b/d, ZADCOs entire production in 2002 was reported by OPEC to be around 280,000 b/d. In late September 2002, ZADCO announced that it had completed the pilot phase for the major gas injection project at the eld. The project involves the utilisation of a 4000-tonne gas injection platform with a capacity to inject up to 100 million cu ft/day of high-pressure hydrocarbon gas to each of the Lower and Upper Zakum reservoirs. The Zakum eld contains an estimated 50 billion barrels of crude oil in place but, because of the low pressure and the poor porosity of the rock, the recovery rate is very low, despite the large-scale use of water injection as well as gas injection. Using gas to inject into oil bearing reservoirs, increasing the pressure and enhancing ow rates is clearly more feasible in the UAE than in countries lacking the UAEs vast reserves of natural gas and oil in close proximity. Abu Dhabi Oil Company (ADOC) and Mubarraz Oil Company (MOCO) ADOC operates the Mubarraz eld where water and gas injection has been used to increase reservoir pressure. ADOC-GA, a subsidiary of ADOC, operates Neewat al-Ghalan, which has an output of around 5000 b/d of crude, piped to ADOCs processing facilities on Mubarraz Island. The latter facility also handles crude from the Umm al-Anbar eld (approx 5000 b/d) operated by Mubarraz Oil Company. Following ADOCs installation of an acid gas injection system at Mubarraz in 2001, the company reported that oil recovery rates had been substantially increased. Furthermore, the project resulted in the elimination of gas aring since any recovered associated gas is now re-injected into oil reservoirs. The Mubarraz, West Mubarraz and Neewat al-Ghalan elds presently produce around 31,00032,000 b/d of crude oil. Al Bunduq Oil Company (BOC) The Al Bunduq eld straddles the border between Abu Dhabi and Qatar. In May 1969 the two countries agreed to share revenues accruing from the elds oil production on an equal basis. Al Bunduq produces approximately 12,000 to 15,000 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-Bukhoosh eld by ADMA-OPCO in 1969. The eld now yields between 25,000 to 30,000 b/d of crude.

Dubai
In 2002 oil contributed only 7 per cent of Dubais GDP, whereas in 1985 it accounted for just under half, and in 1993, 24 per cent. The governments expectation is that by 2010 it will account for less than 1 per cent.

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Source: OPEC Annual Statistical Bulletin 2002

Dubai has installed enhanced recovery systems and other facilities to maximise ow rates at its oilelds in a bid to slow the decline in production. Further development work is taking place at the Margham gas eld to stem the fall in gas/condensate output there. Dubai Petroleum Company (DPC), by far the largest producing venture in the emirate, has drilled inll wells and horizontal production wells to boost recovery at four main oilelds, Fateh, Southwest Fateh, Rashid and Falah, 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 following horizontal drilling at the site. But, despite these efforts, the seemingly inexorable decline in Dubais oil production continues. Faced with limited resources within its own territory, Dubai has been looking elsewhere for opportunities in oil exploration and development. One such venture is Dragon Oil (an Irish registered company controlled by Emirates National Oil Company, ENOC), which has an interest in oil production in Turkmenistan where it produced around 15000 b/d in 2003.

Table 22: UAE Refinery Capacity*: 19902002


500 450 400

REFINERY CAPACITY 000b/d

350 300 250 200 150 100 50 0

UA E RE FI N ERY CA PACI TY (0 00 b/ d)

Sharjah
Sharjahs main hydrocarbon production is in natural gas and the emirates only oil eld is the offshore Mubarak eld, which has been in production since 1972. A continuous fall in production at this eld led Crescent Petroleum to embark on a secondary development programme that entailed drilling more wells, including some horizontal wells, tapping into the Thamama formation and development of a new gas processing platform to handle Thamama gas. The platform is equipped for condensate separation and stabilisation, together with gas dehydration and compression. After this processing, 100 million cu ft/day of gas is sent through a 16-inch trunk line to Jebel Ali in Dubai. The secondary development programme also impacted positively on Sharjahs oil production and, after a temporary surge, production has levelled out to an estimated 15,000 b/d of liquids (5000 b/d of crude and 10,000 b/d of condensate) and 120 million cu ft/day of gas.

Year Capacity

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 192.5 192.5 192.5 205 205 211 246 291 291 411 420 491.3 491.3

* Does not indicate maximum production. In some years reneries operated above design capacity. Table 23: Export of Refined Products by UAE: 19902002
500 450

EXPORTED REFINERY PRODUCTS 000b/d

400 350 300 250 200 150 100 50 0

OIL REFINING
The UAE exported 398,200 b/d of rened products in 2001, which increased to 485,500 b/d in 2002. Signicant growth in the rening sector is attributable to completion of the expansion of Abu Dhabi Oil Rening Companys (Takreer) Ruwais renery, which has a full production capacity of 420,000 b/d, and Emirates National Oil Companys (ENOC) 120,000 b/d condensate-processing plant at Jebel Ali Free Zone. But 400,000 b/d of the UAEs total rening capacity is for condensate rather than crude oil, made up by the two 140,000 b/d units at Ruwais and the two 60,000 b/d units at Jebel Ali. Economic conditions for the UAEs reners were difficult in 2002 and 2003 when high oil prices made feedstock expensive. It was in this somewhat negative climate that the Fujairah renery closed down for several months and the ENOC facility at Jebel Ali temporarily halved its output.

Source: OPEC Annual Statistical Bulletin 2002

EX PO RT S O F UA E RE FI N ED PR O D U CT S (0 00 b/ d)

Year Products

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 165 170 173 160 155 269.1 271.9 323.1 319.1 331 391.7 398.2 485.5

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Abu Dhabi
Abu Dhabi Oil Rening Company (Takreer) operates the emirates two reneries at Ruwais and Umm al-Nar, which have capacities of 420,000 b/d and 88,500 b/d respectively. The Ruwais plant includes two 140,000 b/d condensate processing trains, which came on stream in 2000, tripling its capacity from 126,000 b/d to 420,000 b/d and increasing Abu Dhabis total rening capacity from 211,000 b/d to 508,500 b/d. Light products produced at Ruwais are mainly exported to Japan and India, while fuel oil produced there is sold locally for domestic power generation. Unleaded gasoline units are being installed at both reneries. The Ruwais facility has 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 renery (BOR), and additional sulphur loading facilities in the port of Ruwais. This ambitious development programme at Ruwais, which will increase the renerys output of unleaded gasoline and other light products, reduce the sulphur content of gas oil and increase lubricants production, is being undertaken in a series of stages starting with a ULG unit and a low sulphur gas oil (LSGO) plant, expansion of the hydrocracking capacity and erection of additional storage tanks. Initial construction contracts were awarded in July 2002, with completion dates of July 2005. Meanwhile, the present condensate plant at Ruwais, comprising two 140,000 b/d units, is to be increased to 360,000 b/d by 2006. This is being done in order to process the extra 135,000 b/d of condensate that will be produced by the expanded onshore Asab eld when developments taking place there are completed. Interestingly, the increased capacity has been achieved by debottlenecking the existing splitters to increase their effective capacity by 30 per cent. Abu Dhabi already produces lubricants at the two oil reneries, as well as at a 30,000 t/y lube oil-blending plant that started up in the late 1980s and a 4000 t/y grease plant in Umm al-Nar. The Ruwais BOR provides a further boost to Abu Dhabis lubricants production from 50,000 t/y, to 90,000 t/y by 200506.

Table 24: Refineries in the UAE and their Respective Capacities: 19982002
450 Source: OPEC Annual Statistical Bulletin 2002 400

REFINERY CAPACITIES 000 B/P

350 300 250 200 150 100 50 0

Dubai
Whilst Dubai does not have any crude oil rening facilities, it does possess a 120,000 b/d condensate renery that began operations in 1999. It was developed by state-owned Emirates National Oil Company (ENOC) at a cost of Dh1.3 billion and 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 fuel consumed in Dubai, as well as exporting some 66,000 b/d of naphtha. High oil prices in 2003 impacted on the protability of several reneries and ENOC temporarily shut down one of its condensate trains. It was expected to go back on stream again in late 2003 as condensate feedstock became available in sufficient quantities and at affordable prices.

1998 1999 Abu Dhabi National Oil Company (ADNOC) Al Ruwais 126 126 Umm al-Nar 85 85 Metro Oil* Fujairah 80 80

2000 140 90 70

2001 140 90 70

2002 420 90 70.0*

Emirates National Oil Company (ENOC) Jebel Ali 120 120 120 120 * The renery at Fujairah was operated under the name Metro Oil but was closed down in March 2003 due to negative
economic factors. It is now fully owned by the Fujairah government which is planning to reopen the plant.

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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/y of lubricants; its output is marketed throughout the Gulf region as well as in the UAE. 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 its 60,000 t/y is exported to India. An oil processing plant for producing gasoline additives and conditioning products which has been developed by Ducham, a subsidiary of Abu Dhabi-based Star Energy Corporation, has a capacity of 20,000 b/d of unleaded gasoline, 360 ton/day (t/d) of aromatics and 240 t/d of raffinate. Gadgil Western Corporation (GWC) runs a fuel oil reprocessing plant with a capacity of 275,000 t/y. In November 2002 Total gave permission to ENOC to utilise its Jebel Ali based lube oil blending plant to produce 5 million litres/year of lubricants, with a possible increase to 6.5 million litres/year at some future date.

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

OIL EXPORTS

Abu Dhabi
As a result of the successive cuts in output due to reductions in OPEC quotas for the UAE, Abu Dhabis oil exports fell for the second year in succession, averaging 1.45 million b/d in 2002, compared with 1.62 million b/d in 2001. It, nevertheless, retained its position as Japans main source of crude oil, supplying 23.6 per cent of the countrys oil imports and sending more than half the UAEs crude oil to Japan. Almost all of ADNOCs 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 South Korea, Taiwan, Thailand, India, Pakistan, Sri Lanka and Bangladesh. Abu Dhabi condensate exports continued to rise in 2002, reaching almost 400,000 b/d, following a sharp increase in 2001. These exports have no effect on the amount of crude that the emirate can export, since condensate is not covered by OPECs oil production quota arrangements. Abu Dhabis rened products are exported by ADNOC Distribution (ADNOC-FOD), which sells oil products and lubricants both to the Far East and to Arab and African countries. India is the leading export market for Abu Dhabis rened products, absorbing over half its gas oil exports as well as substantial volumes of kerosene and LPG. Japan now accounts for about one-third of the emirates rened product exports, down from 50 per cent in 1993, but remains the largest market for naphtha.

Sharjah
Fal Oil operates a lubricants plant in Sharjah that started up in 1979 producing a variety of products for automotive, marine and industrial use. This was the emirates second lube oil blending plant, following that developed in 1976 by Sharjah 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 joint venture between two Sharjah-based companies, Gulf Energy and Union Energy, it comprises six storage tanks for holding diesel oil, fuel oil and bitumen, two of 10,000 tons, two of 6000 tons and two of 5000 tons.

Fujairah
Despite the fact that Fujairah has never been a producer of either oil or gas, and no exploration is taking place in the emirate, it does possess an 80,000 b/d oil renery that has had a somewhat rocky history. Fujairah has succeeded in capitalising on its strategic location on the Gulf of Oman by providing oil storage and bunkering services to shipping. It is the worlds third largest ship refuelling centre and has the second largest container terminal in the UAE. The Fujairah renery had an initial capacity of 35,000 b/d, which subsequently rose to 40,000 b/d before being doubled to 80,000 b/d in October 1997, when a second 40,000 b/d crude and condensate distillation unit started up. In February 1998 however, the operator was forced to close the renery which was subsequently taken over by Fujairah Renery Company (FRC), a specially created joint venture between the government of Fujairah, Swiss-based Glencore International, and a group of nancial institutions. The renery was brought back on stream in September 2000 with an effective capacity of 52,000 b/d. A second 38,000-b/d unit started up in October 2001, restoring the renerys capacity to 80,000 b/d.

Dubai
Dubai 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, serves as a price marker for some other Gulf producers. In 2002 the price averaged US$24.50/b, as against US$22.61/b in 2001, US$26.20/b in 2000, US$19.10/b in 1999 and US$16.10/b in 1998.

GAS
The UAEs natural gas reserves of 212 trillion cubic feet (tcf) are the worlds fourth largest after Russia, Iran, and Qatar. The largest reserves of 196.1 tcf are located in Abu Dhabi with the rest shared through the other emirates.

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The non-associated Khuff gas reservoirs beneath the Umm Shaif and Abu alBukhush oil elds in Abu Dhabi rank among the worlds largest. Current gas reserves are projected to last for about 150 to 170 years at present rates of production. The reduced OPEC oil production quotas and increased domestic consumption of electricity, plus the growing demand from the petrochemical industry, have provided incentives for the UAE to increase its use of natural gas. The development of gas elds also increases exports of condensates, which are not subject to OPEC quotas. Abu Dhabi Gas Industries Ltd (GASCO) handles associated gas from ADCOs onshore crude production and processes it through three NGL extraction plants at Bab, Bu Hasa and Asab. Offshore, the Abu Dhabi Gas Liquefaction Company (ADGAS) handles associated and non-associated gas from offshore elds at its plant on Das Island. The bulk of the output is sold to Japan. The countrys power stations, desalination plants and other industrial projects depend on burning gas, rather than oil, driving gas consumption to 4 billion cu ft/day in 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 signicant increase on the gures from 1995 when 2.5 billion cu ft/day were produced. The improvement follows a development programme involving three separate projects to enhance recovery of associated and non-associated Khuff gas from onshore reservoirs. The rate of industrial and domestic growth in the UAE is such that national demands for gas are approaching a point where they place severe strains on available supplies and the UAE has therefore embarked upon an ambitious project, established by Dolphin Energy, to deliver gas from Qatars North Dome gas eld through an 800-kilometre gasline to Abu Dhabi, from where it will be piped to the centres of use such as Fujairahs new power and water complex and Jebel Alis industrial zone. A pipeline to bring gas from Oman has also been completed and, at a later date, this may in fact deliver gas back into the Omani grid. If conrmation was needed that the UAE sees gas and not oil as the answer to its future energy needs, construction of a new project for natural gas distribution throughout Abu Dhabi should persuade any doubters that this is indeed the way forward. The new pipeline network will deliver clean burning natural gas for commercial and residential purposes. The estimated Dh1 billion initiative comes on the back of increased natural gas availability as several development and expansion projects are under way. In the rst phase, the natural gas distribution network will cover 120,000 commercial and residential users in Abu Dhabi, Al Ain 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 will have an abundance of natural gas once major expansions come on stream. The Onshore Gas Development 2 and 3, Bu Hasa, Habshan and others are all under

expansion, making available more natural gas. Qatari gas under the mega Dolphin Gas initiative will also be available in 2006. Even the UAEs cars are likely to switch to gas as a fuel in the future. ADNOC Distribution has been engaged in a pilot project for use of natural gas by taxis in Abu Dhabi. Initially, 48 taxis in the capital have been tted with gas instead of gasoline. The natural gas lling station is near Mina Zayed. Future plans include the use of natural gas by all taxis in Abu Dhabi, Al Ain and nearby areas.

Dolphin Energy Ltd


In 2003, Dolphin Energy Ltd undertook an essential step in implementing one of the largest energy initiatives in the Middle East, the Dolphin Project, by moving from the planning and design stage to detailed infrastructure and engineering development. The company also signed binding agreements to supply gas to two initial key customers. Dolphin Energy was established in Abu Dhabi in 1999 in order to undertake the Dolphin Project that will produce, process and transport Qatari natural gas via pipeline to the UAE. Gas is scheduled to begin owing through the new pipeline in 2006. The company has also launched an additional strategic project due to come on stream in 2004, i.e. the supply of Dolphin gas to the new power and desalination plant in Fujairah. Other signicant ventures by Dolphin Energy are expected in future. Dolphin Energy Ltd is 51 per cent owned by the Mubadala Development Company (itself wholly owned by the Abu Dhabi government), with Total of France and Occidental Petroleum of the USA each owning 24.5 per cent. Dolphin Energys mandate is set out in Qatari and Abu Dhabi Emiri Decrees issued respectively in 2001 and 2002. The companys principal technical focus in 2003 has therefore been to translate its responsibilities under these decrees into fully realised frontend engineering design (FEED) documentation; to issue commercial tenders to selected 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 eld to UAE it must be processed and the Dolphin Project is undertaking this task. Firstly, raw natural gas will be extracted from Qatars offshore North Field through specially built production platforms, and then transported by marine pipelines to Dolphins dedicated Processing Plant onshore in Qatars Ras Laffan Industrial City. In January 2004 Dolphin Energy Ltd officially announced substantial construction and equipment contracts for the Qatar located parts of the Dolphin Gas Project. These contracts covered engineering, procurement and construction (EPC) for both the new gas processing and compression plant at Ras 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 Dolphins facilities in Qatars

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Source: OPEC Annual Statistical Bulletin 2002

offshore North Field, and will strip out valuable hydrocarbon liquids including condensate and NGL products, for processing, marketing and sale. The plant will compress the resulting dry gas for transportation by Dolphins export pipeline to the UAE. In October 2003, Dolphin Energy realised a further strategic objective for the Dolphin Project by signing binding agreements for supply of its gas to two of the UAEs leading power and water companies, Abu Dhabi Water & Electricity Authority (ADWEA) and Union Water & Electricity Company (UWEC). Substantial quantities of Dolphin gas from Qatar will now be supplied for a minimum of 25 years to each of these organisations for power generation and water desalination. Dolphin Energy has constructed a gas pipeline between Al Ain and Fujairah on the UAEs East Coast, in order to supply the emirates new UWEC power and desalination plant. The 182-kilometre pipeline will initially supply Dolphin natural gas from Oman to UWEC in the rst quarter of 2004. Once Dolphin gas from Qatar becomes available from 2006, the switch to this longer-term supply source will be made. In the future Oman will also be able to receive Dolphin gas from Qatar through the Al Ain link, as and when required. The Al AinFujairah pipeline was completed in November 2003, ready for nal commissioning early in 2004.

Table 25: Natural Gas Production 19982002


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

2002 2001 2000 1999 1998

Abu Dhabi
The government of Abu Dhabi is sole owner of all natural gas resources on its territory, both onshore and offshore, whether in associated or non-associated form. The Abu Dhabi National Oil Company (ADNOC) is responsible for developing and marketing these resources on the governments behalf and is authorised to form partnerships with foreign companies for that purpose, so long as it retains at least a 51 per cent interest in any venture. Abu Dhabis proven natural gas reserves were estimated at 5.55 trillion cubic metres as at 1 January 2002, representing around 92.5 per cent of the UAEs total gas reserves of 6.01 trillion cubic metres. Meanwhile, Abu Dhabis gross gas production reached 60 billion cubic metres in 2002. The impressive production gures are the result of a sustained development programme involving the second and third onshore gas development projects (OGD-2 at the Bab eld and AGD-1 at the Asab eld). These are operated by the Abu Dhabi Gas Company (GASCO), which was established in July 1978 as a joint venture 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-over of a wholly-owned subsidiary of ADNOC, Abu Dhabi Gas Company (Atheer), which was created in June 1999 to take charge of ADNOCs 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 1983 to process associated gas from the Thamama C reservoir of the Bab oileld, and which today also processes non-associated gas from the Thamama B, D and F

Marketed Production Flaring Reinjection Shrinkage TOTAL

1998 37.1 1.5 7.2 3.3 49.1

1999 39.0 1.3 7.4 3.3 51.0

2000 38.4 1.3 7.5 3.4 50.6

2001 44.9 1.3 10.0 4.1 60.3

2002 46.1 1.2 10.5 4.3 59.1

Table 26: UAE Natural Gas Exports 19902002


7500 Millions standard cu m of Natural Gas 7000 6500 6000 5500 5000 4500 4000 3500

Source: OPEC Annual Statistical Bulletin 2002

EX P O RTS O F UA E N ATU R A L G A S (m il li o n s st an d ar d cu m )

Year Exports

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 3200 3450 3420 3350 4150 6530 6740 7310 6720 7070 6950 7460 7113

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reservoirs and Thamama Units 6 and 7 at Bab. Associated gas from oil production at the onshore elds of the Abu Dhabi Company for Onshore Oil Operations (ADCO) is rst separated at GASCO facilities at Bab, Bu Hasa and Asab, and is then sent to nearby processing plants. There, the natural gas liquids (NGLs) are extracted and piped to GASCOs main plant for fractionation into liqueed petroleum gas (LPG). The plant has a processing capacity of some 3 billion cu ft/day. Some of the gas is re-injected into the oil reservoirs of ADCO elds, while the rest is supplied to the power and water industries, which account for 80 per cent of Abu Dhabis gas consumption, as well as to the Umm al-Nar and Ruwais reneries, the Borouge petrochemical complex, the Al Ain cement works, the Fertil fertiliser plant and other industrial plants in the Ruwais industrial zone. Up until late 2000 the 130,000 b/d of condensate output at Habshan was piped to a storage and handling facility at Ruwais prior to export. Today, however, the 230,000 b/d condensate production is all supplied to the Ruwais renery for processing into petroleum products. In addition to the OGD-2 and AGD-1 projects completed in 2001, two more onshore development projects at the Bab and Asab elds, OGD-3 and AGD-2 are under development. OGD-3 will result in production of higher volumes of natural gas liquids (NGL) and condensate and re-injection of gas into oil elds. Wet gas will be extracted from the Thamama reservoirs at Bab, from which condensate will be stripped 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 1.3 billion cubic feet daily of well-stream uids into 11,000 t/d of NGL, 3400 t/d of ethane and 125,000 b/d of condensate. The Asab-2 project involves setting up two new gas treatment plants plus two NGL recovery units to process 750 million cu ft/day of gas into 4500 t/d of NGL and 1700 t/d of ethane. Project completion is planned for mid2007. These two projects, undertaken by GASCO, will yield additional volumes of associated and non-associated gas for supply to the domestic market. At US$2.3 billion, the OGD-3/AGD-2 project (for which six prequalied companies were announced in October 2003) represents the biggest single investment in the history of upstream Abu Dhabi gas. The six companies pre-qualied for the EPC contract were Frances Technip-Coexip, Italys Snamprogetti, JGC Corp and Chiyoda Corp, both from Japan, Canadas SNC Lavalin and the UAEs Petrofac International. The EPC contract involves construction of gas gathering facilities and injection of sour gas at Habshan and installation of ve trunk lines and associated facilities. Unlike OGD-1 and OGD-2, the latest scheme is not designed to produce any dry gas feedstock for the local power sector, one of the biggest gas consumers in Abu Dhabi emirate. The OGD-3/AGD-2 project is essentially a gas recycling project geared towards oileld re-injection.

With oil reservoirs maturing in onshore Abu Dhabi, demand is rising for gas re-injection. With a production of some 1300 million cubic feet a day, the OGD3/AGD-2 is expected to provide the llip. In addition, the OGD-3/AGD-2 will deliver signicant quantities of gas liquids. Some 135,000 barrels a day of condensate and up to 24,000 tonnes a day of natural gas liquids (NGL) will be delivered to Ruwais for processing. Products will be either exported or used as feedstock for additional petrochemical capacity. The project is a joint effort between ADNOC, ADCO, Takreer and GASCO. Abu Dhabi began exporting natural gas from its onshore elds to Dubai by pipeline in June 2001, following completion of the OGD-2 project. After an initial rate of 200 million cu ft/day, the volume sent through the 112-kilometre gasline reached the contractual rate of 500 million cu ft/day by mid-July 2002. The gas is being lifted by Dubai Supply Authority, whose contract with ADNOC provides for its imports to be increased to 900 million cu ft/day, the maximum capacity of the gasline, by 2004. In October 2003 Fluor Corporation was awarded an engineering, procurement and construction contract worth US$22 million by GASCO. Fluor will use its expertise to modify existing facilities at GASCOs Habshan gas processing plant and install a new propane refrigeration package and absorber column. The work will maximise ethane recovery at the site. Upon completion the plant will extract 400 tons of ethane per day. The ethane will be used as feedstock to downstream petrochemical companies related to GASCO and its parent, ADNOC. Offshore gas development is also of crucial importance to Abu Dhabis economy with current work being focused on increasing efficiency with regard to extraction rates. Most of the gas produced offshore is supplied to the Abu Dhabi Gas Liquefaction Companys (ADGAS) liquefaction plant on Das Island (see below). Following the doubling of the plants capacity in 1994, the volume delivered to the LNG plant was stepped up to 800 million cu ft/day. One major offshore gas development project currently being undertaken entails further development of the Khuff gas reservoirs under the Abu al-Bukhoosh (ABK) eld, 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 be increased by 240 million cu ft/day to 540 million cu ft/day. Together with gas production from the Umm Shaif oileld, this will take total gas production by 240 million cu ft/day to 1.44 billion cu ft/day. Associated gas has been produced at Umm Shaif since the existing gas gathering facilities were completed in 1988. Two wellhead platforms with a capacity of 150 million cu ft/day each were installed at the eld, as well as two injector/producer platforms. They are all connected to the Umm Shaif Supercomplex, where the Abu Dhabi Marine Operating Company (ADMA-OPCO) recently revamped the gas treatment plant.

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ADGAS is responsible for the gas liquefaction plant on Das Island, which began operations in 1977. From the outset, all the plants LNG and most of its LPG were purchased by Tokyo Electric Power Company (TEPCO) under a 20-year contract that took effect in 1977 and provided for TEPCO to lift 2 million t/y of LNG and 500,000 t/y of LPG. In 1990 the company decided to more than double the plants capacity to 5.4 million t/y of LNG, 1.7 million t/y of LPG and 535,000 t/y of pentane-plus. The expansion entailed the installation, in 1994, of a third liquefaction train with a capacity of 2.3 million t/y of LNG and 250,000 t/y of LPG. Like the original units, the third liquefaction train has consistently operated in excess of its design capacity. In 2000 Japans imports from Abu Dhabi included US$1.4 billion of LNG, US$712 million of propane and US$50.9 million of butane, mainly from offshore. The plants LNG capacity was further increased in August 2001, when ADGAS completed the revamp of the propane compressor serving its third liquefaction train, boosting its production capacity from 320 tons/hour to 380 tons/hour. In early 2002, the company signed a front-end engineering and design (FEED) contract with the Chiyoda Corporation for an additional LPG train with a capacity of approximately 1 million t/y. Shortly afterwards, in October 2002, ADGAS signed an agreement with BP Gas Marketing Company for the supply of up to 750,000 t/y of LNG. The contract is for an initial period of three years, starting in 2002, and could be extended to ve years, depending on BPs requirements. Whilst TEPCO remains ADGAS major customer, marketing development has considerably broadened the client base in recent years. In addition to the sales to BP mentioned above, the company has sold its gas products to European, American and Asian clients. A new pipeline from Oman has been built to link with the new Dolphin pipeline at Al Ain, thus connecting the UAE gas network with Omans gas network. Omani gas will ow to Fujairah until Dolphin gas from Qatar comes on stream in 2006. Oman Oil Company will deliver the gas at the OmanUAE border. As discussed under the heading of Electricity and Water in the section on Infrastructure, Dolphin Energy will then supply it to both UWECs 656 MW power generation plant and its 100 million gallons-per-day desalination plant, through its new 24-inch pipeline. By 2006, when Dolphins new pipeline system from Qatar is in operation, Qatar natural gas will ow directly to Fujairah via ADNOCs existing land lines to Al Ain and thereafter the new Dolphin link. The link lays the foundation for a regional gas supply network in the future.

Dubais proven natural gas reserves were estimated at 4100 billion cubic feet as of 1 January 2003. The only domestic source of natural gas for end users is the Margham eld, since all the associated gas produced at the offshore oilelds is now re-injected. Marghams gas production has been declining for some years and this fall accelerated in 2001. After averaging 330 million cu ft/day in 2000, down from 350 million cu ft/day in 1999 and 380 million cu ft/day in 1998, production was reported to be running at no more than 230 million cu ft/day of natural gas in early 2002, plus 20,000 b/d of condensate. The slump in output led DME to embark on a further development programme in 2001 to sustain, if not increase, the elds gas production. Dubai depends heavily upon imported gas to meet its energy needs. Its power stations, desalination plants and factories could not operate without natural gas as an energy source and plans are under way to ensure that future needs are met by ambitious and innovative projects such as the Dolphin Energy gas pipeline network linking Qatar, Abu Dhabi, Dubai, Fujairah and Oman. At present, Dubai is importing 300 million cu ft/day from Sharjah and approximately 900 million cu ft/day from Abu Dhabi. Once the Dolphin Energy project begins to deliver to Dubai in 2006, the emirate will experience a signicant boost in available energy.

Sharjah
Sharjah LPG Company (SHALCO) operates a gas processing plant in Sharjah. Located in Sajaa, it handles output of the Sajaa and Moveyeid elds and was originally designed to process up to 440 million cu ft/day of natural gas for the production of 230,000 t/y of propane, 170,000 t/y of butane and 220,000 t/y of condensate. The plants capacity was increased to 700800 million cu ft/day in 1994 to enable it to handle gas from the Kahaif eld as well. The propane and butane produced by Shalco are marketed by Itochu and the condensate by BP. Condensate is carried by a 32kilometre, 12-inch pipeline to Al Hamriyah on the coast, where BP has its own jetty capable of accommodating tankers of up to 83,000 dead weight tonnage (dwt). The terminal includes two storage tanks with a combined capacity of 110,000 cubic metres. The bulk of the condensate is shipped to Japan, although small quantities are exported to Western Europe and North America. The condensate has low sulphur content (0.01 per cent) and a naphtha yield of almost 80 per cent. BP also exports much of the natural gas it produces, although most goes to industrial and household consumers within the emirate. A new compressed natural gas (CNG) plant has been under development in the Hamriyah Free Zone by a company called Compressed Gas Technology, established in 2003. The plant will produce CNG both for the local market and for export. CGT also designs and assembles CNG lling stations. Sharjah Electricity & Water Authority (SEWA) has been developing a natural gas distribution network to supply gas direct to residential, commercial and industrial users.

Dubai
Dubais gas demand is growing by 1015 per cent per year. Consumption in 2002 averaged 700750 million cu ft/day (not counting gas used for re-injection of oil reservoirs. Peak summer demand can exceed 1 billion cu ft/day and it has been estimated that average demand could reach 1.1 billion cu ft/day by 2005.

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Sharjah started exporting natural gas to Dubai in 1986. The initial contract provided for BP to supply 140 million cu ft/day of gas from the Sajaa eld over a three-year period starting in March 1986. A 75-kilometre, 24-inch gasline was built from Hamriyah to Jebel Ali for the purpose. That volume soon proved insufficient for Dubai, and at the end of 1986 a second agreement was signed providing for supplies to be stepped up to 250 million cu ft/day with effect from the middle of 1987. The capacity of the gasline was increased accordingly through the installation of two additional compression stations. Amoco, the original concessionaire (now part of BP), concluded another gas supply agreement in June 1994, providing for it to deliver natural gas to the Northern Emirates as well, once the Kahaif eld was in production. Crescent Petroleum also began exporting gas to Dubai in January 1993, following the signing of an agreement with DUGAS for the supply of 100 million cu ft/day of gas 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 stream at the Mubarak eld in November 1992. At the present time Sharjah exports around 300 million cu ft/day to Dubai.

PETROCHEMICALS AND FERTILISERS

Abu Dhabi
Abu Dhabi has two major petrochemical and fertiliser industrial complexes, the Ruwais Fertiliser Industries company (Fertil) and the Abu Dhabi Polymers Company (Borouge). Fertil was established to utilise lean gas supplied from onshore eld of Bab, Asab and Thamama C to produce fertilisers and market them locally and internationally. Fertil brought its existing nitrogenous fertiliser plant in Ruwais on stream in April 1984. It consists of a 1050 t/d ammonia plant and a 1500 t/d urea 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 470,000 tons of ammonia and 650,000 tons of urea in 2002. Borouge is a joint venture between ADNOC with 60 per cent and Copenhagenbased Borealis, itself partly owned by Abu Dhabi, with 40 per cent. Its petrochemical complex in Ruwais cost an estimated US$1.2 billion to develop and includes a 600,000 t/y ethane cracker that supplies ethylene feedstock to two 225,000 t/y polyethylene units. Borouge produces up to 450,000 tonnes of Borstar bimodal high-, medium-, and linear low-density polyethylene per year. Combining good processability with excellent mechanical properties, Borouge Borstar products are stronger, lighter, environmentally friendly and more malleable than conventional polyethylene, resulting in material savings of up to 30 per cent. Borouges products are used for the manufacture of plastic lm and moulding packaging for industries such as pharmaceuticals, food and beverage, cosmetics, and chemicals. Borouges products are also suitable for the manufacture of high-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 the distribution and marketing of Borealis entire range of polyolens in the Middle East and Asia Pacic. These products include polyethylene for extrusion coating, moulding, and wire and cable, as well as polypropylene for lm, moulding, hot water pipes and engineering applications. Borealis has signed a contract with ADNOC to extend the polyethelene plant at Ruwais to almost double the existing capability of 225,000 tonnes of high- and low-density polyethelene. The increased production will be supplied by ethane gas using the new pipeline from GASCOs complex at Habshan. Total is to build a melamine plant at Ruwais, the rst of its kind in the region. The US$112 million project calls for the construction, by Fertil, of a 50,000 t/y unit. Production, likely to commence in 2006, will primarily be shipped to Europe.

Ras al-Khaimah
Ras al-Khaimah is reported to have natural gas reserves of 1.2 trillion cubic feet. Following a number of years in which the Saleh eld produced limited quantities of both oil and gas, the eld switched to production of just condensate. The LPG plant at Khor Khwair in Ras al-Khaimah now gets its feedstock from the offshore Bukha eld in Oman.

Ajman
A petroleum production sharing agreement was signed between Sharjah and Ajman in early July 2002 to jointly develop the Zora eld, a gas reservoir located around 40 kilometres off the two coasts. Crescent Petroleum and Atlantis, which hold the concessions from the two respective governments, were also signatories to the agreement. Production is to be shared equally between the parties concerned.

Umm al-Qaiwain
A survey carried out during late 2001 and early 2002 resulted in discovery of gas reserves off the emirate by Atlantis Holdings. The discovery was made following tests conducted on the UAQ 3 offshore well that revealed recoverable reserves of up to 500 billion cubic feet of gas and 5 million barrels of condensates. Subsea pipelines are being laid from Umm al-Qaiwain port to the offshore gas discovery at a concession awarded by the government in December 1999 to Atlantis Holdings. 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.

Dubai
Dubais rst fertiliser plant, a joint venture between Kemira Agro Oy of Finland (49 per cent) and the local rm Union Agricultural Group (51 per cent), has the

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capacity to produce 6000 t/y of water-soluble compound fertilisers. Developed by the same group the Kemira Emirates Fertiliser Company (Kefco), a second much larger fertiliser plant with a capacity of 60,000 t/y was brought on stream in 2001 in the Jebel Ali Free Zone. Another plant, with a capacity to produce 226,000 t/y of ammonia and 400,000 t/y of granular urea has been built at Jebel Ali. 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, and will export its output to India. Meanwhile, a 500,000 t/y Methyl Tertiary Butyl Ether (MTBE) plant, established in 1995, utilises the butane isomerisation process of Lummus, the Caton dehydrogenation process, and CD MTBE synthesis technology for converting butane into MTBE.

Ajman
Ajman 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 new arrivals Ettihad and Air Arabia, all offering slightly different packages transporting people to, from, and through, the UAEs airports at Abu Dhabi, Al Ain, Dubai, Sharjah, Ras al-Khaimah and Fujairah. If the scale and rate of expansion of the tourism/travel sector seems at times to defy logic it is, contrary to nay-sayers, all based on solid statistics and well integrated planning. The airport expansion plan at Dubai, due to be completed in 2006, is sized to handle expected growth in passenger numbers. The airport handled 16 million passengers in 2002, whilst Dubais hotels and serviced apartments hosted over 4.75 million guests during the year. A plan for Dubais tourism expansion, entitled Dubai Vision 2010, is based on ten million people visiting Dubai as tourists by 2010, while passenger throughput by that stage is expected to exceed 30 million. Previous plans for the airport were based upon 60 million passengers by 2020, but it recently became clear that growth rates were exceeding predictions, so the new plan caters for 70 million people a year by 2020. And it is by no means only Dubai that is gearing up for increased passenger throughput and a surge in tourist numbers. All the countrys airports have recently completed, or are in the midst of ambitious expansion plans for their airports. Abu Dhabi International Airport, for example, has been through a major development programme that has resulted in a doubling of its passenger handling capacity (see also section on Airports and Aviation). The UAEs tourism industry is also experiencing dramatic developments in hotel and leisure infrastructure. Iconic projects such as Burj al-Arab, several times

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nominated as the worlds nest hotel, the nearby Jumeirah Beach Hotel and traditional Royal Mirage Hotel are impressive expressions of what the country can offer discerning visitors. As each year passes, more top-class hotels are added to the list, and almost as soon as they are built they are achieving 100 per cent occupancy. A case in point is Mina ASalaam 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, replete with 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 has remained 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 where the investments have resulted in such a substantial list of attractions, with such an efficient supporting infrastructure, that they themselves are spawning further development, new investments and exponential growth in visitor numbers. As we have seen in Dubai, land reclamation can be turned to the advantage of tourism development through creation of attractive islands and many kilometres of new beaches. But coastal lands are also being used for important infrastructure developments such as new highways. Land reclamation for these projects has already placed existing shoreline properties, like the Abu Dhabi Hilton Hotel, further back from the coast. Current work involving further realignment of Abu Dhabi Citys Corniche is having its own impact on major hotels. The capital citys Sheraton Hotel, which until recently had its own private beach, now sits behind the reclaimed land that will carry a major highway from the citys centre to the north, linking up with the road to Dubai. Innovative design has, however, succeeded in retaining the beachside feel of this historic hotel and a major refurbishment has consolidated its ve-star status, as well as its unique charm. Whilst Dubai is clearly at the forefront of the UAEs tourism expansion, it would be wrong to give the impression that it is the only emirate where tourism developments are taking place. Abu Dhabi, Sharjah, Ras al-Khaimah, Ajman, Umm al-Qaiwain and Fujairah have each made signicant strides in their tourism programmes. Brand new hotels, and recently renovated ones, can be found throughout the UAE; the visitor is almost spoilt for choice. In economic terms tourism is seen as an important future contributor to GDP. The gures already indicate that this is within reach, but there is also a sense of an additional ingredient in planning of the UAEs tourism infrastructure. It seems that it is not simply a question of creating a viable economic model, but also of having fun with developing new concepts. Creativity and imagination have been given such rein that few barriers exist to what can be achieved. Thus, for example, when Dubais available beachfront area was clearly destined to reach

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saturation point the government conceived a massive new offshore development designed to solve the problem. And so the two Palms, presently approaching completion, were born. Each island will add 60 kilometres of shoreline to Dubai, increasing the emirates beachfront by 166 per cent. To make this happen, 7 million cubic metres of rocks per island were brought in from 16 different quarries throughout the UAE. Each Palm comprises approximately 100 million cubic metres of sand and rock. According to the developers, if all the ll materials used to build one Palm Island were placed end to end, a wall two metres high and half 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 available properties on the Jumeirah Palm had been sold, whilst half those on the Jebel Ali 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-made islands arranged in the shape of the seven continents and located 4 kilometres off the Jumeirah coastline, between Burj al-Arab and Port Rashid. Each of these islands will be sold to private developers. Meanwhile, the biggest terrestrial tourism development in the UAE, the Dh18 billion Dubailand, is also under way. Constructed on a 2-billion-square-foot area adjacent to Emirates Road, Nad al-Sheba, Al Quoz and Al Barsha, the massive development is expected to attract approximately 200,000 visitors daily and will boast the biggest mall in the world Mall of Arabia. Other attractions include a sprawling Adventure World, Sports World, Eco Tourism World, Shopping World, Family City World and Kids World. The Dubai government intends to spend Dh2.6 billion to develop the projects infrastructure and is inviting participation by national and international developers in creating the main attractions of the leisure centre. It is quite clear from the above summary of current events in the tourism sector that when tourism authorities in the UAE speak of a growth industry they are doing so from a secure knowledge that infrastructure will be in place to handle the 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 magazines editor remarked: More than a shopping stopover or a beach holiday, Dubai is a phenomenon: a Muslim, Arab society reinventing itself with all the ethnic diversity, economic energy, and architectural ambition of early 20th-century Los Angeles, Manhattan, and Chicago. Burj Al Arab is the hotel acionados Mount Everest. Meanwhile, the World Tourism Organisation commended Dubai for posting the worlds highest growth of 31 per cent in international arrivals in 2002.

AGRICULTURE
Despite its extreme climate, the UAEs cultivated area now extends over 2.7 million donums (891,089 acres). This supports over 40 million date palms, together with various types of fruits and vegetables, including mangoes, tomatoes, beans, cucumber and pepper. The UAEs agricultural research strategic plan has been recently revised in order to focus on integrated and comprehensive research directed at achieving sustainable and signicant growth in the sector. Progress to date has been achieved by increasing cultivable land and by enhancing production methods. The timely use of fertilisers, the use of improved seeds, pest and disease control, improvement of the quality of services to producers, especially in the form of agricultural guidance, as well as provision of adequate irrigation facilities and the development of support methods during both production and marketing stages contributed to these accomplishments. By 2003, the UAE produced 30 per cent of its food-grain requirements, while some surplus vegetables and fruits are exported. Signicant priority is given to agricultural development, in general, and sustainable date palm production, in particular. The UAE is 100 per cent self-sufficient in dates and sh, and grows 58 per cent of its vegetable needs. Meat and poultry production reach 31 per cent and 17 per cent, respectively, of requirements. The country produces 83 per cent of its daily consumption of fresh milk and 39 per cent of national demand for eggs. The challenges and obstacles to successful agriculture in the UAE have been primarily related to the countrys extreme aridity, nutrient poor soil, and high summer 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 of agricultural land; provision of necessary equipment and training; large scale planting of palm trees to create suitable shaded areas for farming; together with provision of fresh water and seedstock. The country is striving at all times to optimise productivity through work carried out at agricultural research centres and with agricultural guidance to farmers.

ENVIRONMENTAL IMPACT OF AFFORESTATION


Whilst the extensive tree-planting programme has brought major benets to the UAE, the sustained efforts to green the desert have not been without their environmental impact. One issue that has recently been examined is the competition between introduced trees and native species. A study carried out at the UAE University in Al Ain has highlighted some of the problems that have been created. The research projects aim was to evaluate the potentiality of different kinds of forests in the country in protecting the oral diversity and to determine the most suitable conditions for enhancement of oral biodiversity.

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Tree plantations presently occupy an area of 300,000 hectares in the UAE. One of the most numerous exotic trees that have been planted is Prosopis juliora which, unfortunately, has invasive tendencies that have resulted in serious impact on native plants. The study states that In the highly invaded areas, Prosopis juliora has completely replaced native species, resulting in a complete destruction of most perennial species. Whilst acknowledging the role that tree plantations have played in enriching vegetation and soil amelioration in the UAE, this research has also highlighted the need for the replacement of exotic tree with native trees as they are more compatible with the environment and use comparatively less water. The fascinating study also showed that medium and smaller trees encourage greater diversity and abundance of plants than larger trees. This suggests the importance of reducing the crown of the forests in the UAE. Such reduction, in addition to increasing species abundance and diversity, will also reduce the amount of water consumed by trees and provide dry forage for animals. Salinity is another key area of importance for research and crop management in the UAE. The above study revealed heightened salinity levels among irrigation plots. The fact that certain native species have a high tolerance to saline soils has not been lost on the UAEs agricultural teams. The Dubai-based International Centre for Biosaline Agriculture (ICBA) is an important contributor in this regard. Training and workshops have gured prominently in its list of activities and while much of the effort is directed toward GCC countries, links have also been made with Central Asian states, namely Uzbekistan, Kazakhstan and Kyrgyzstan, as well as, amongst other countries, with Bangladesh and Egypt. ICBAs activities are acknowledged and supported by United Nations Educational, Scientic and Cultural Organisation (UNESCO), the Arab Fund for Economic and Social Development (AFESD), International Fund for Agricultural Development (IFAD), Islamic Development Bank and the OPEC Fund for International Development. ICBA produces a newsletter three times yearly, available electronically at www.biosaline.org. Biodiversity itself is of much greater signicance than from purely academic or conservation perspectives. Many native plants have medicinal properties that are now well recognised. The Ministry of Agriculture and Fisheries recently began a project to conserve the genetic resources of the ora of the country, particularly those plants known to possess medicinal properties.

DATE-PALM CLONING
Al Wathba Marionnet, the date-palm cloning joint venture set up through the UAE Offsets Group (UOG) in 1997, has expanded its operations by adding 5000 metres of new shedding area at its facilities in the Al Khabisi area of Al Ain. The company now has two greenhouses of 500 square metres each and three sheds covering a total area of 13,000 square metres. The expansion will allow production of cloned date palms to reach 300,000 plants a year in early 2004. Al Wathba Marionnet uses tissue-culture technology to produce identical date palms of 19 types and qualities, which are supplied to the local and regional markets and exported to several countries. A rising number of farmers in the UAE are now turning to the tissue-culture technology for growing date palms. They are getting better yields, faster growth and easier eld and plantation management. Tissue culture also ensures uniformity and homogeneity of plants, enabling each producer to grow several thousand trees of the same size. Al Wathba Marionnet supplies more than 70 per cent of its date palms to private clients and government organisations in the UAE, including the Abu Dhabi Municipality and the Ministry of Agriculture. 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 its date palms. The company is also one of the official suppliers of date palms to the Food and Agricultural Organisation (FAO) of the United Nations. Through the FAO, agreements have been signed with Sudan and Burkina Faso for the supply of several types of date palms. The company is also in the process of setting up pilot projects in African countries to produce dates and by-products such 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 years for a date palm to grow up to 50 centimetres, tissue culture produces viable date palms in considerably less time. The trees are also free of disease, produce good quality dates, and provide 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 then transferred to the greenhouses to be acclimatised for four to six months. At this stage they are moved to sheds for six months where they grow two to three adult leaves and are ready to be planted in the open air. At Digdaga, in Ras al-Khaimah, the Ministry of Agricultures Experimental Station is growing all varieties. At its laboratory in Al Ain, the company also conducts research on production improvement techniques and research is also being carried out to ensure gene stability of the date palms.

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 there are extensive recreation parks where the shade from trees creates a pleasant environment, even in the summer months. The rate of change in the UAE is

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reected in these city beautication projects. In 1974, there was only one public park in Abu Dhabi with very little greenery, but today the number has increased to about 40, covering an area of more than 3 million square metres. Seven of these parks have been built exclusively for women and children. In Dubai the Public Parks and Horticulture Department recently announced that it had achieved great success in growing owers that blossom in both winter and summer. Prior to the annual meetings of the boards of governors of the International Monetary Fund (IMF) and the World Bank Group (Dubai 2003), 300,000 square metres was added to Dubais greenbelt. The expansion of the green areas in the emirate is in line with the departments goal of planting greenery on 8 per cent of Dubais total urban area. At present the planted area amounts to around 3.19 per cent or 2200 hectares.

THREE YEAR STRATEGIC PLAN ON FARM RESEARCH


The Ministry of Agriculture and Fisheries has nalised a three-year strategic plan on agricultural research to nd practical solutions for obstacles faced by the sector. The comprehensive plan is based on a four-point programme. The rst stage consists of research and experiment on palm trees, dates and fruit; the second is research on fodder, pastoral and wild plants; the third is for long-term experiments on agricultural diseases and the fourth is research on protected agriculture, or plants grown in greenhouses. In the area of palm trees, dates and fruit trees, research activity is divided into two branches: research on improving the growth of palm trees and dates, using the remnants of palm trees and combating red weevil; and research on improving the growth of fruit trees, similar to parallel studies currently being carried out by one of the ministrys 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 Ministry is carrying out a project to increase the number of these trees even further alongside research into palm saplings and the use of high technology. As part of this and other related work, the Ministry has established research centres at Al Hamraniyyah, Dibba and Fujairah. Meanwhile, the Ministry is also considering adopting a sustainable agricultural system for producing different types of fodder that can withstand the countrys climatic conditions and can survive on little water. Studies are also under way on combating salinity and the capacity of different types of fodder plants to withstand high salt content in the soil. The plan also aims to encourage further research on use of biological control methods to combat agricultural diseases, rather than resorting to the use of insecticides, which the Ministry is seeking to reduce. The fourth axis of the plan is focusing on producing alternate vegetable products through use of greenhouses.

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FISHERIES
The shing industry in the UAE is mainly traditional in nature. National shermen are 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. The standard of shing boats has improved greatly in recent years, enabling shermen to spend longer at sea and to work on shing grounds that were previously difficult to reach. It is a safer and more productive industry than in the past, but these and other improvements have had an adverse effect on the available sh stocks. In order to conserve stocks, the Ministry of Agriculture and Fisheries has issued regulations concerning the shing gear, shing areas, seasons and the structure of the workforce. It is illegal to catch undersize sh; to use less than 2 inch mesh in sh traps or less than one and a half inch mesh in shing nets; to carry out the shing operations in spawning and nursery areas during the restricted period; and also to sh without the presence of a national on board the vessel. In order to protect the seabed and its demersal sheries, bottom trawling is not permitted in the territorial waters of UAE. But despite all these serious efforts to conserve sheries there have been dramatic reductions in all key stocks. This appears to be due to a combination of factors including shing, 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 sh resources that was carried out during 2002 and early 2003. The study was based on acoustic surveys backed up by actual shing operations and was aimed at providing information on stocks that could be applied to sheries management. It took part throughout the UAE Exclusive Economic Zone (EEZ). Oceanographic data indicated a seawater temperature range off Abu Dhabi of 21C to 35C whilst salinities in excess of 40 ppt were recorded throughout the year. The latter compare with normal oceanic salt levels of 36 ppt. East Coast waters, being more open, have a smaller temperature range and lower salinity levels. The study states that There is a close correlation between the abundance and distribution of sh resources on one hand, and oceanographic environmental conditions on the other hand. The study encountered 280 species and estimated the total biomass of demersal resources, rstly 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 a gure between 22,000 tons and 45,000 tons. These gures lump commercial and non-commercial sh together so that actual biomass of sh caught for consumption is lower. In fact, the study isolated 20 key species that between them constituted 86 per cent of the catch and shery surveys of landings suggest that there have been major declines in demersal sh abundances since the last survey in 1978. This is vividly illustrated in table 30.

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Table 27: The Fishing Fleet 2002 Emirate Abu Dhabi Dubai Sharjah Ajman Umm al-Qaiwain Ras al-Khaimah Fujairah TOTAL Petrol 735 534 864 140 348 1272 554 4447 Diesel 244 200 142 32 30 72 24 744 Total 979 1006 172 378 1344 578 5191
Number of Boats 1400 1200 1000 800 600 400 200 0
ABU DHABI DUBAI SHARJAH AJMAN

Table 27: The Fishing Fleet 2002

734

UMM AL-QAIWAIN

RAS AL-KHAIMAH

FUJAIRAH

Table 28: The Fishermen 2002 UAE Nationals Abu Dhabi Dubai Sharjah Ajman Umm al-Qaiwain Ras al-Khaimah
Source: Ministry of Agriculture and Fisheries, Agriculture Information Centre, 2003

Table 28: The Fishermen 2002 Other Nationalities 2091 1913 1741 922 801 1176 597 9241 Total 4827
Number of Fishermen 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0
ABU DHABI DUBAI SHARJAH AJMAN UMM AL-QAIWAIN RAS AL-KHAIMAH FUJAIRAH

2736 1055 1563 407 427 1272 563 8023

2968 3304 1329 1228 2448 1160 17264

Fujairah TOTAL

Table 29: The Catch (Estimation of Fish Quantities in Tons According to Emirate 2002) Emirate Abu Dhabi Dubai Sharjah Ajman Umm al-Qaiwain Ras al-Khaimah Fujairah TOTAL Petrol Boats 21803 13841 14542 1411 3507 8792 4866 68762 Diesel Boats 7483 4680 2509 345 324 228 425 15994 Total 29286 18521 17051 1756 3831 9020 5291 84756 Coastal Net 1171 926 1323 176 383 902 7937 12818 Total

Table 29: The Catch (Estimation of Fish Quantities in Tons According to Emirate 2002)
35,000 30,000 Quantity of Fish in Tons 25,000 20,000 15,000 10,000 5,000 0
ABU DHABI DUBAI SHARJAH AJMAN UMM AL-QAIWAIN RAS AL-KHAIMAH FUJAIRAH

30457 19447 18374 1932 4214 9922 13228 97574

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The survey also looked at pelagic sh stocks (primarily migratory species) whose populations show signicant differences between summer and winter. The biomass of these was estimated at 43,000 tons in summer and 200,000 tons in winter. Around 60 per cent of this mid-water sh stock is composed of anchovies and sardines. Unlike the situation with demersal stocks, the pelagic stocks seem to have held up very well since the 1978 survey with no signicant difference in overall size of the biomass noted. This new survey of the UAEs shery resources has produced key data and some important results for future management of commercial shing. Some additional ndings are discussed in the section on Environment. With demersal stocks in serious decline, sh-farming is seen as a potential means to meet the rising demand for local sh. The Marine Resources Research Centre (MRRC) produces ngerlings of rabbitsh, seabream and grouper for use in mariculture programmes. In addition it cultures the shrimp Penaeus semisulcatus. Mariculture has received a major boost from establishment of the UAE Offsets company Asmak, which has built state of the art cage farming facilities in Ras alKhaimah and Fujairah. These are producing sea bream, sobaity, and other marine sh, with a present capacity of 1200 tonnes per year. Production will increase as the expansion phases in Ras al-Khaimah, Fujairah and Abu Dhabi take effect. Since early 2001 the company has also been operating a 2500 tonnes per year capacity marine sh farm in operation in Oman (Quriyat Aquaculture LLC). This produces seabream, seabass, grey mullet and other marine sh. A major hatchery project is under construction in Umm al-Qawain. In 2003 Asmak launched a unique project to ranch yellow-n tuna at Bandar Khairan in Oman the rst of its kind in the world.