IntroductionThe UAE is among the major exporters of crude oil and has the sixth largest reserves of crude oil in the world. The oil industry in the UAE is dominated by both state-owned and major international oil companies. The oil and gas industry in the UAE accounts for over 30% of the country’s GDP (Hamdan, 2012).

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Objective
The purpose of this report is to evaluate the external business environment for companies operating in the oil industry in the UAE. The report identified the opportunities and threats in the external environment. Opportunities and threats are major factors of risk analysis on investment in any given country.

Threats
Intense competition in international oil markets
The companies operating in the oil industry in the UAE are subject to global competition in the oil sector. The major producers of oil in the Middle East, including Saudi Arabia, have initiated an economic oil war with the aim of discouraging production in other countries such as the United States. Also, each country is concerned about maintaining its market share by offering competitive prices. The demand for oil in the international markets has been fluctuating with low prices recorded in 2015 (Doshi & Corrigan, 2015). Changes in the demand and price of oil in international market pose a major threat to oil companies in the UAE.

Global economic performance
The oil sector in the UAE is highly influenced by the global economy. During the 2008/2009 global financial crisis, the prices of oil declined in the international markets and companies operating in the UAE were forced to cut production from 2.9 billion to 2.3 million barrels per day (Hamdan, 2012). The performance of the global economy affects the level of demand and thus the price and the number of barrels that can be produced per day.

The culture of Emiratisation
Emiratisation is the policy of nationalization of labor in the UAE (Hamdan, 2012). The policy favors the use of UAE nationals as employees in both the public and private sectors. Currently, the rules on Emiratisation are relaxed in the oil industry in the UAE but the rules can change in future (Business Monitor, 2010). Strict application of the policy of Emiratisation poses a major human resource issue that may affect the operation of companies in the oil industry because of lack of enough qualified personnel and high-cost labor among the UAE nationals (Spraggon & Bodolica, 2014).

Opportunities
Social and political stability
UAE is ranked among the most socially and politically stable countries for doing business (Business Monitor, 2010). There are far less concerns about the security of investments in the oil industry. The UAE is comprised of a federation of seven emirates, each with its system of governance (Hamdan, 2012). The political and social environment provides a stable environment for companies in the oil industry.

Large number of trade zones in oil industry
The UAE provides a large number of free trade zones for firms in the oil industry. UAE laws prohibit foreign majority ownership in companies unless the business is located in the free zone (Spraggon & Bodolica, 2014). Since 2005, the UAE has increased the free zones that permit full foreign ownership of companies in various sectors. The companies in the oil sector have access to free trade zones that offer tax incentives and opportunities for full foreign ownership (Business Monitor, 2010).

Increased investments in infrastructure
The oil sector in the UAE is dominated by government-owned companies, and this has facilitated massive investments in the infrastructure to facilitate transport and processing of oil products (Hamdan, 2012). A significant percentage of revenues from oil production goes into infrastructure development. UAE has a long coastline of more than 650 kilometers and large harbors and ports to facilitate export trade in the oil industry. In 2011, the UAE upgraded two main oil refineries to meet the demand of oil companies operating in the domestic market (Business Monitor, 2010).

Conclusion
The external business environment in the oil industry in the UAE provides both opportunities and threats. The major threat to oil companies is based on international competition and performance of the global economy. The business environment in the UAE is largely stable and provides one of the most stable political and social environments for business among the oil producing countries.

    References
  • Business Monitor. (2010). The UAE oil & gas competitive intelligence report. Retrieved 19 November 2015 from http://www.marjanca.ae/files/reports/4-BMI%20UAE%20Oil%20and%20Gas%20Competitive%20Intelligence%20Report%202010-10-01.pdf
  • Doshi, V. & Corrigan, J. (2015). 2015 Oil and Gas Trends. PWC. Retrieved 19 November 2015 from http://www.strategyand.pwc.com/perspectives/2015-oil-gas-trends
  • Hamdan, Y. (2012). The UAE country risk analysis. European Journal of Business and Management, 4(18), 27-32.
  • Spraggon, M., & Bodolica, V. (2014). Managing organizations in the United Arab Emirates: Dynamic characteristics and key economic developments. New York: Palgrave Macmillan.