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How to Start an Oil Trading Business in the UAE?

The United Arab Emirates is a successful country with its enriching economy. Apart from that, the myriads of hotels, cosmopolitan lifestyles, mesmerizing beaches, top-notch infrastructure, and seamless connectivity make it a more appealing destination to work and live in. However, it owes much of its success to the oil business which is popular all over the world. This, thus, arises a huge demand for oil, at volatile market prices. In such a case, it is more prevalent to start an oil trading business in Dubai. 

UAE has an extremely structured regime when it comes to managing the oil business. The extraction, processing, and sale of oil products require plenty of resources and methods, but one can equally generate better profits in this business. Nevertheless, being such a well-controlled business, an investor or entrepreneur might have to jump a few extra hoops to set up an oil and gas trading business in UAE. Hence, this blog will walk you through all the necessary information about the oil trading business in Dubai, including the benefits, the process, and the cost of setting up one. 

Advantages of starting an oil and gas trading business in UAE

The benefits of trading in oil and gas are well known. The added advantages may also include the following –  

  • Low tax rates 
  • Fast as well as affordable company incorporation process 
  • Strategic geographical location facilitating seamless transportation
  • Scope of earning high profits 
  • Easy international trade 
  • Constant administrative support 
  • Easy to undertake any commercial activity related to UAE oil reserves. 
  • Networking opportunities with the world’s top oil markets
  • Repatriation of profits 
  • No currency restrictions 
  • Updated infrastructure 
  • Availability of inexpensive resources in abundance 

Types of licenses to start an oil trading business in Dubai 

Dubai provides several types of licenses to choose from. For example, 

  • Crude oil trading abroad 
  • Trading refined oil products abroad 
  • Oilfield chemicals trading
  • Petrochemicals trading 
  • Oilfield & Natural Gas Equipment & Spare Parts Trading 
  • Petrol Station Equipment trading 

Steps to start an oil trading business in Dubai

The company formation process for an oil and gas trading business in UAE is completely straightforward. Being a highly regulated industry, you need to follow a couple of steps to complete the process. These steps are as follows: 

  • Learn the market dynamics

If you want to start an oil trading business in Dubai, you first need to understand the dynamics of the oil market in Dubai. it includes oil options and oil futures. 

Oil futures are one of the most regularly used methods of trading oil in the UAE. it is basically a future contract where a trader agrees to exchange an amount of oil at a fixed price on said date. Similarly, the oil option also involves an agreement between the trader and buyer, but with a slight difference in the date from the oil future. In the oil option, the buyer can purchase a set amount of oil before the fixed date at a fixed price.

You may like it: How to Open a Company in Dubai?

  • Determine the way of trading

You need to choose the type of trading you want to go with. For example, 

  • Trade via CFDs 
  • Buy oil futures or oil options 
  • Oil investments
  • Start your own oil trading company 
  • Decide a location

Being such a large and diverse country, UAE offers several options of locations for business setup. Apparently, there are more than 25 active free zones and also mainland regions to start an oil trading business in Dubai. Both of them come with their own set of corporate advantages. So, it is better to weigh all the pros and cons before deciding on the final location for your business. 

  • Prepare a business plan

An oil business requires a well-planned structure. Therefore, it is essential to have a detailed outlay of the oil trading business. Besides, some jurisdictions might also ask you to present a business plan while applying for a business license. Hence, you should make sure to prepare a well-structures plan which highlights the following areas: 

  • Market research 
  • Employee count 
  • Products meant for sale
  • Official operating space details 
  • Investment amount 
  • Details of the shareholders 
  • Financing details 
  • Success factors
  • Potential competitors 
  • Suppliers’ list 
  • Marketing strategy 
  • Choose an appropriate trading name

Just like any other company formation process, the owner of the oil trading business must find a suitable name for the company. Additionally, they must also ensure to abide by the strict naming guidelines set by the UAE government. For example, avoid any offensive terms or blasphemous language as well as any resemblance to well-known organization names. Similarly, avoid using any abbreviations or initials of names. Most importantly, check with the authorities if the selected name is available for registration. 

  • Find a local sponsor/partner

When you engage in a highly regulated business like oil and gas, you need to have close connections with government departments as well as the local UAE market. Hence, you will require a local sponsor or partner who will help you with the same.  The local sponsor can be a UAE citizen or a corporate entity, that will hold a 51% stake in the company. However, the decision-making powers rest with the actual owner itself, and the local sponsor will be paid an annual fee for their services. 

  • Make an application for the license

Now that you are done with all the critical decisions, it’s time to move on to the next most important step, which is license application. If your company location is UAE mainland, you can submit your application for the UAE trade license to the DED (Department of Economic Development). On the other hand, if you choose a free zone for your oil business setup, then the respective free zone authorities will issue the trade license for your business. 

The business formation experts of Shuraa can make the process easy for you and manage all the application formalities. 

  • Obtain necessary approvals

Once you submit the application and all the supportive documents to the licensing authorities, you just need final approvals from their end to acquire your trade license. There might also be a requirement for special approvals depending on the nature of the business activities. For instance, Supreme Petroleum Council (SPC). 

  • Process applications for visa

Once you get hold of your trade license, you need to make applications for your visas. There are several steps involved in a UAE residency visa application, including biometric scanning, medical checkup, chest x-ray, etc. 

An added advantage of securing a business license in the UAE is that you can sponsor others for their visas, such as house helpers, spouses, parents, children, etc. Moreover, UAE offers multiple visa application facilities depending on various factors, such as the size of the company, chosen setup, dependent visas, personal earnings, etc. 

  • Establish a corporate account in the UAE bank

You need a corporate bank account to trade seamlessly in the UAE. However, procuring an account in a UAE bank is not an easy job. The legal formalities can be really tiring. Therefore, it is advisable to seek assistance from a business formation specialist who can suggest to you the best financial institution in Dubai and also help you with the bank account opening. 

The application process may require the business owner to submit the following documents – 

  • Copies of passport of owner/shareholders
  • Passport-sized photographs 
  • UAE visa/entry permit 
  • Business plan 
  • NOC from the current sponsor 

Now that you are well aware of the key process and steps to start an oil trading business in Dubai, you can jump in into the legal formalities today. The company formation experts at Shuraa Business Setup are well versed in the oil and gas business and also the market dynamics of the UAE’s oil industry. Hence, they can guide you at every step, as well as advise you on various trading options. So, all you need to do is connect with us, and share your requirements and we will take care of the rest. 

Call +971 44081900 to speak to Shuraa experts today.

sakinaburhan

Sakina Burhan is a good experience writer, blogger and social media promoter by providing valuable information which helps readers to get more ideas.

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