DUBAI - Regional Perspective.

The problem with falling production has regional implications, because Dubai crude oil is the world's only marker for trading in heavy/sour grades. Iran and its Arab GCC neighbours price their east-bound crude oil sales according to the average spot market prices of Dubai and Oman.

The Omani ministry of petroleum and gas has its own pricing formula, setting the value of Oman retroactively according to spot market price quotations during the previous month. The crude is not traded at outright prices. Spot Oman trades are linked to spot Dubai. While only 10 cargoes of Dubai are traded on spot basis every month, the crude is largely traded in swaps markets. The New York Mercantile Exchange (NYMEX) this month launched a Middle East sour crude contract based on Dubai (see Part 2)

The local government of Dubai has a strategy to lessen its dependence on oil and diversify the economy. In late 1996, it launched a programme with $12 bn worth of projects to boost non-oil productivity per capita to rates that would rival those in the developed nations. Accordingly, the non-oil sectors' contribution to GDP was to rise from 81.2% in 1996 to 88.7% in 2000, 97.5% in 2010 and 100% by 2015. Dubai is already established as a regional trading hub and is promoting itself as a centre for business and tourism. More impressive, the Middle East's first "Internet city" is being established in Dubai (see Downstream Trends of this week) and the world's first "e-government" will function in Dubai from October 2001 (see who's who in Part 3).