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International Business Management, Trinity Western University MBA 661 C: Global Economics Competitiveness Submitted by :Geemol john Submitted to Sung Min Yoo June 22, 2024 Executive Summary This summary explains the United Arab Emirates (UAE) oil and gas industry's international competitiveness. In order to evaluate elements like factor conditions, demand conditions, supporting industries, firm strategy, and domestic rivalry, the Porter's diamond model is the primary emphasis of this research. The paper examines a number of aspects of the industry, including its contribution to the Gulf Cooperation Council (GCC) and the global energy market. The research paper discusses how the UAE is diversifying its economy, developing human capital, and transitioning towards a more sustainable future.
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Research Paper: International Competitiveness of the Oil and Gas Industry in the United Arab Emirates International Business Management, Trinity Western University MBA 661 C: Global Economics Competitiveness Submitted by :Geemol john Submitted to Sung Min Yoo June 22, 2024
Executive Summary This summary explains the United Arab Emirates (UAE) oil and gas industry's international competitiveness. In order to evaluate elements like factor conditions, demand conditions, supporting industries, firm strategy, and domestic rivalry, the Porter's diamond model is the primary emphasis of this research. UAE's oil and gas sector has been an important part of the country's economic development, generating significant revenue and employment opportunities. The paper examines a number of aspects of the industry, including its contribution to the Gulf Cooperation Council (GCC) and the global energy market. The research paper discusses how the UAE is diversifying its economy, developing human capital, and transitioning towards a more sustainable future. As a state-owned company, Abu Dhabi National Oil Company (ADNOC) has significant economic and political influence in the UAE. These firm operate in competitive sectors and strike a balance between government and market friendly policies. These firm operate in competitive sectors and strike a balance between government and market friendly policies. Collaboration with technology companies such as IBM has been pursued to improve efficiency and transparency in the oil and gas supply chain management. Furthermore, the demand condition in the international markets are also analysed, considering factors such as government policies, domestic demand and global demand. Abu Dhabi is the major oil and Gas producer in the UAE, which is used for domestic power generation, industrial purpose, and operations. This paper highlights the need of comprehending these demand conditions in order to enhance the UAE's competitiveness in the global marketplaces. This paper analyzes these factors to reflect the UAE's competitiveness position in the global market and provides recommendations for further improving its international
resources, human resources, technical development and physical infra structure. Examines the demand conditions in the global markets considering the factors like government policies and regulations, demand trend etc. In enhancing the UAE’s competitive place approach, the role of financial services, equipment manufacturing, research, and developmental services. Review the firm strategies adopted by the oil and gas companies in the UAE, including market entry, innovation and technology, international partnership, and collaboration. Assess the dynamics of domestic rivalry within the UAE’s oil and gas industry, considering factors such as competitive landscape analysis, government support and initiatives. This paper aims to analyze the many aspects of the oil and gas industry and examine the competitive position of the UAE. It also provides recommendations for improving the country's internationally competitiveness. Competitiveness in the Oil and Gas Industry In May 1991, the Gulf Cooperation Council (GCC) was established, comprising of six nations located in the Arabian Peninsula. The six member countries consist of Kingdom of Saudi Ara). The sultanate of Oman, the United Arab Emirates, the State of Kuwait, the State of Qatar, and the Kingdom of Bahrain (Alharbi & Csala, 2020). The assessment and competitiveness within the oil and gas industry in the Gulf Cooperation Councill (GCC) are essential due to its tactics significance in the global energy markets and its reaching effects on economic growth, employment rates and energy (Bertelsen et al., 2017). Table 1
Details of GCC countries Note: Source citation-Alharbi& Csala ,2020 academic journal Table 1 presents further relevant data about the GCC countries, such as their geographical area measured in square kilometers, population in millions, GDP, as well as their deposits of oil and natural gas. The GCC states combined possess over 30% of the world's oil reserves and a quarter of the worldwide natural gas reserves.. It is worth noting that GCC region’s oil revenues surpassed 156 billion US dollars in 1981 and until recently, the OECD heavily relied on crude oil from region as its primary energy source (Alharbi & Csala, 2020).The impact of oil prices on trade balance in oil rich economies, the need for policies to migrate the effects and the limited literature on this topic in the context of oil exploring countries. Saudi Arabia, Kuwait, and the UAE are major competitors in Oil and gas industry as members of GCC and OPEC, highlighting their dependency on oil revenues. It aims to contribute to the literature by examining the linear and non-linear relationship between oil price and trade balance, considering the interaction effect of exchange rates (Mohammad et al., 2020). The GCC states have established robust knowledge networks with west, particularly the United States. Western academics, government department and private companies have extensive involvement in studying and working with the GCC countries. Many decision
(Ewers et al., 2016). The UAE relies heavily on oil, which accounts for a significant portion of its government revenue and GDP. However, in recent years, the UAE has sought to diversify its economy through industrialization and development of non-oil industries (Ewers et al., 2016). The UAE has both oils based and non-oil-based industries with the former being capital intensive and including petrochemical and natural gas liquification. The contribution of industry to the UAE’s GDP reached 17%in 1984.Interms of Operational research (OR), surveys have been conducted in various developing countries, including the UAE, to assess its awareness, usage, and demand. Table 2 shows the most popular OR techniques in the UAE include inventory theory, forecasting models, cost-benefit analysis, statistical analysis, linear programming, and decision theory, with their selection influenced by simplicity and relevance to the local problem environment (Kemp & Yousef,1993). Table- Techniques Being Used and Their Frequency of Use. Note: Source Citation: From Kemp & Yousef,1993 Academic Journal The UAE aims to nationalize 75%of the oil and gas workforce by the end of 2017. To adapt to globalization and competition, organisations must enhance their learning process and
retain expertise. UAE GAS management wants to evaluate coaching practices for leadership development but requires a culturally suitable model and questionnaire (Al Shamsi et al., 2015). Human capital is valuable and versatile, unlike finite natural resources. Investing in education and training improves productivity and fosters diversification. Obtaining human capital through migration, trade, and investment can assist in addressing the issues posed by a wealth of resources. Successful diversification involves leveraging existing capabilities and creating new revenue sources (Fosu,2013). Porters Diamond Model Porter’s Diamond is an economic model developed by Michael Porter in his book The Competitive Advantage of Nations. The tool is often used to analyse the external competitive environment or marketplace, which helps companies to determine the relative strength and explain why certain industries have become competitive or possess regional advantages.In this model, the regional advantages can be assessed by four factors, which includes:Firm Strategy and Rivalry,Demand Conditions,Related and Supporting Industries and factor Input
Top 10 Countries Exporting Oil. Note:Source Citation - Composed by the Author Bertelesen et al. 2018 Table- Crude Oil Import in China (Million Tons) Note:Source Citation- Composed by the Author Bertelesen et al. 2018 The largest emirate in the UAE is called Abu Dhabi which holds the majority of the country’s gas reserves. It contributes around 90% of the UAE sales gas production,mainly consisting of non-assosiated and partially sour gas.Gas drilling activities started in the 1950’s,with commercial success peaking in the 1960s and 1970s. Gas from Abu Dhabi fields is used for domestic power generation,industrial purpose,re-injection,and operations.The construction of the first LNG plant in Abu Dhabi was promoted by high levels of gas flaring and the emergence of LNG technology in the early 1970’s following the discovery of gaint oil filds in the region.Table 5 demonstrates the UAE supply joint ventures (Wietfelf, 2011).
Table- UAE Supply Joint Ventures Note: Source citation- Paltts (2010, pp.17-18), Wood Mackenzie (2009c, pp, 1-6) *Abu Dhabi National Oil Company Table: 6 Production Characteristics of Top 10 Oil Fields Note Source Citation- Academic Journal-Status, trends and enlightenment of global oil and gas (Wang et al.2022). The LNG plant at Das island is the main offshore gas facility. It has been operational since 1977, primarily exporting LNG to Japan. The facility was expanded in 1994 with an
However, the real estate industry faces challenges such as talent scarcity and high turnover rates (Visvizi, 2022). The Role of State-Owned Firms and Trade Dynamics in the UAE Saudi Arabia is recognized as the richest economy with dominance in oil production and exports, Kuwait and the UAE heavily rely on oil revenues despite ongoing diversification efforts (Faheem et al.,2020) By evaluating the Porter’s force theory, the cost advantage refers to the company’s capacity to manufacture the product more efficiently than its competitors which results in higher profits (Porters,1998). In the UAE, state owned firms, led by the national oil company ADNOC, hold significant economic and political influence. These firms are well maintained and operated in competitive sectors. The state maintains control over these entities, striking a balance between market friendly policies and state intervention. This model supports economic development and provides stability for the country’s income (Gray, 2018). ADNOC has teamed up with IBM to develop a Hyperledger Fabric based system for automated accounting and fast transaction settlement in oil product sales. This collaboration aims to improve efficiency in the oil and gas supply chain by enabling transparent tracking and validation of transactions from well to customers (Ahmad et al.,2022). The UAE has made significant efforts to diversify its trade relationship and attract investments. It has emerged as regional hub, benefiting from extensive diversification since 1990s. The country has successfully marketed itself as an attractive destination for trade and investment, leading to strong prospects for its economy. The UAE’s strategic location and economic size, coupled with its initiatives for economic openness and reform, have generated enthusiasm among investors and trade partners. As a result, the UAE has become a major player in the Gulf region’s trade dynamics and a significant source of outward investments (Gray, 2018).
The UAE, particularly Dubai, uses its favorable geographical location and historical trade significance to establish itself as a prominent global logistics hub. The UAE functions as a crucial re-export hub, linking Asia, Africa, and Europe, thanks to its advanced infrastructure, which includes Al Maktoum Airport and Jebel Ali seaport.. The logistic platform in Dubai operates within a free economic zone, ensuring efficient and readily available transport and logistic service (Shcherbakov & Silkina, 2021). The economies of the Gulf region are influenced not only by natural resources and geographical factors, but also by political structures and dynamics. The region experiences a strong interconnection between politics and economics, where both ruling elites and non-state actors play significant roles. The Gulf economy are influenced by external influences and the interactions between various entities.. Despite of economic changes, the region’s political systems have ensured stability for ruling families and elites amidst social and technological transformations. (Gray, 2018). Distribution and Significance of UAE’s Oil and Gas Field The correlation between oil prices and trade balance can be understood by both direct and indirect impacts. In economies that heavily rely on oil, an increase in oil prices enhances the terms of trade, resulting in higher revenue and an improved trade balance. The indirect effects encompass the consequences on both the supply and demand. Escalating oil prices have a detrimental impact on the imports of nations that rely on oil imports, hence influencing the trade balance of oil-producing countries. Elevated oil prices can generate inflationary pressures, which in turn can drive up import prices and interest rates. Consequently, this can lead to economic contractions and a decrease in oil consumption in countries that rely on oil imports. Oil exporting countries generally benefit from higher oil prices, while lower prices negatively affect their revenues and exports. The relationship is influenced by factors such as exchange rates and the composition of trade. Various studies
impact on the short-term changes in the size of the oil sector. There is a current trend of decreasing reliance on oil and expanding economic diversity, while increasing prices can potentially reverse this tendency. Table 8 represents the dispersion of oil shares in GDP varies among GCC countries, with Bahrain having lower oil production and the UAE being successful in diversification. Oil production levels also impact the oil sector’s contribution to GDP (Luciani & Giacomo, 2012). Table: 8 Contribution of the Oil Sector to GDP Note: Source Citation-United Nations-National Accounts Main Aggregates The UAE is one of the six Gulf states with a well-developed and upper income economy. Al though it heavily relies on oil exports, it has actively sought deeper integration into the global economy. In 2015, the UAE had a high percentage of trade relative to its GDP, indicating extensive links to the world economy which is represented in Table 9. While the UAE’s GDP per person is not the highest among gulf states, it has made significant progress in terms of socio-economic indicators. However, the UAE, like other Gulf economies faces challenges due to its reliance on hydrocarbons resources and need for economic diversification to ensure long term sustainability (Gray, 2018).
Table: 9 Gulf State’s GDP Performance and Indicators, 1975- Note: Source Citation -Based on data from the World Bank’s Development Indicators database: http://data.worldbank.org/country( accessed 26 October 2017) The relationship between rent abundance and rent dependence produces distinct cases, challenges the prevailing understanding of rentier states. Some countries exhibit rent dependence without being rent abundant, suggesting that their rentierism is primarily a symptom of underlying poverty. On the other hand, only few countries including GCC monarchies, Brunei, Norway, Trinidad and Tobago, Equatorial Guinea and Libya can truly be considered rent abundant. Among them Qatar, Kuwait and the UAE stand out as extreme rentiers in terms of per capita exports. However, it is important to note that figures may underestimate rentierism in the Gulf monarchies, as they include all residents rather than just
management and supply chain operations. Overall blockchain shows promise in improving various aspects of the oil and gas industry (Ahmad et al., 2022). UAE’s Transition Towards a Green Economy and Renewable Energy Integration The UAE is actively adopting renewable energy sources as a means to expand the economy and tackle the issue of climate change. The primary contributor to air pollution in the country is the oil and gas sector, which is heavily dependent on desalinated water. Although natural gas presently serves as the predominant fuel for electricity generation, there are apprehensions regarding potential future shortages of gas.. The UAE government aims to have 7% of the energy for the power sector coming from renewable sources by 2020 (Meher et al., 2011). The construction of “Masdar City”, a carbon-neutral and zero-waste city in Abu Dhabi, UAE began in 2006and is set to be completed by 2016.While it claims to be the world’s first city of its kind, there are already carbon-neutral village in existence. It aims to accommodate 90,000 people, host the Masdar Institute and attract sustainable energy companies. The city secures the headquarters of IRENA and offers substantial support (Reiche, 2009). The UAE initiated the vision 2021 strategy in 2010, aiming to reduce reliance on oil and promote a green economy. They launched various programs and initiates to become a global leader in sustainable development, innovative green technologies, and eco-friendly urban facilities. The UAE also focused on managing water and energy sustainably, promoting organic farming, protecting biodiversity, and mitigating climate change. They established committees and partnerships to drive green growth and address climate change effects. Overall, the UAE has been actively working towards a greener and more sustainable future (Kezymowski, 2022). The UAE, a country rich in oil has embarked on a renewable energy journey. Abu Dhabi set an initial target of achieving 7% of total power capacity from renewable sources by
