By In the early 18th century, Dubai was nothing but a fishing and pearl-diving village. Everything suddenly changed when oil was first discovered in 1966 in Dubai at the offshore Fateh Field. With that, the late Sheik Rashid bin Saeed Al Maktoum began the development of Dubai and turned it into a modern port, city, and commercial hub. Ever since then, the country has been backed by the oil trading business in Dubai.
Today, the UAE ranks 7th on the list of top 10 oil-producing countries. Since oil is a popular commodity among entrepreneurs across the globe, the demand for oil rapidly increasing, and at volatile market prices, starting an oil business in Dubai can be highly profitable.
If you are an Indian entrepreneur who wants to start an oil business in Dubai, this blog will walk you through all there is to learn about the oil trading business in Dubai. Read about the benefits, the process, and the cost of setting up one. So, let’s dive in.
What are The Benefits of Starting an Oil Trading Business in Dubai?
Although the entrepreneurs and investors already know the benefits of the oil trading business in Dubai, here is a list of the major ones:
- Earn high profits
- Low-income corporate and custom tax rates.
- Easily trade overseas
- You can undertake any commercial activity involving UAE oil reserves.
- Fast and reliable company set up process
- Constant support from the government
- Easy networking and collaboration with some of the world’s most important oil markets.
- Complete repatriation of capital and profits.
- No currency restrictions from the Dubai government.
- A strategic geographic location that helps with seamless transportation.
What are The Steps to Start an Oil Business in Dubai?
The oil company setup process is incredibly straightforward in Dubai. There are a couple of additional steps due to a highly regulated industry, but they won’t affect the process in any way. If you follow the given steps, you can establish your oil business in the smart city within a matter of days.
1. Understand the Oil Market
To understand the oil market, you must learn a little about the oil option and the oil futures. Oil futures are contracts through which a trader agrees to exchange a set amount of oil at a precise price on a set date. It is one of the most regularly used methods of selling and buying oil in the country, and you can contract them on futures exchanges.
Oil futures trades on exchanges, similar to shares. But unlike stocks, you can commence them in the form of oil benchmarks. In UAE, ADNOC is the dominant shareholder with the CNPC owning the rest.
Coming to oil option, it is similar to oil futures, but there is one difference. You can buy a set amount of oil before a set date at a fixed price with an oil option. Also, there is no hard and fast rule to trade if you don’t want to.
2. Decide Way of Trading
Decide whether you want to trade via CFDs, buy futures or options, make an oil investment or open your company in Dubai.
3. Select a Location
There are over 25 active free zones and the option to set up your oil company in a mainland region in Dubai. Both the locations have their own set of advantages. So, you must weigh all the pros and cons and then decide where to set up your business.
4. Business Plan
It is essential to have a detailed business plan to start oil trading in Dubai. Some jurisdictions or legal authorities may ask you to present your business plan. The following is what it must include:
- Markets
- Number of employees
- Products you want to sell
- Information about official operating space
- Amount you wish to invest.
- Details of business partners and financing
- Critical success factors
- Competitors
- List of suppliers
- Marketing efforts
You have the option to start off with a wholesale outlet in the market or tie-up with a more extensive foreign manufacturer to sell their products in the region.
5. Select Business Name
Decide upon a business name and register it with the concerned legal department. But before you finalize and submit it, make sure it complies with all the set naming rules by the government. For instance, it must not include any foul words or references to Allah or any other religion. Also, if you want to name it after a person, use their full name. Whichever name you decide upon, ensure that it does not collide with the name of an already existing company.
6. Complete License Application Process
You can either go for a commercial license or a general trading license which costs higher but allows you to trade in the broader region. Once you have chosen, apply for your trade license offline with the concerned legal body. Submit the application form along with all the necessary documents attached to it.
Furthermore, your application will undergo an inspection process. If everything seems in the right place, the government officials will grant you the trade license. This process may take around 3 to 4 working days to complete.
7. Get Additional Approvals
Once you receive your license, you must get additional approvals. Depending upon the nature of your business and the business activities you select, you need to acquire approval from the Supreme Petroleum Council (SPC).
8. Open a Corporate Bank Account
Once you’re done with all the legal formalities, you must open a corporate bank account in Dubai. This will help you and your customers with seamless financial transactions.
