Wizards of oud: How a rare Thai oil coveted by Saudis became ‘liquid gold’

At Rouf & Sons’ emporium in Bangkok, a sweet smoke drifts across the glass cabinets and shelves filled with high-grade wood chips and alluring bottles of dark, precious oils from one of the planet’s most expensive trees.

Agarwood, and the oud oil distilled from its resin, is in demand like never before - and Bangkok is at the heart of the trade.

Owned by an Indian, run by Thai Muslims and coveted by Middle Eastern - mainly Saudi - buyers, Rouf & Sons is in the middle of the city’s Arab quarter, a global hub for oud emanating from a small warren of streets, where a tea-drinking, chain-smoking clientele start the evening late and flit between the scores of shops deep into the night.

Agarwood is found inside the Aquilaria tree, which grows mainly in Southeast Asia’s sticky tropics but has virtually vanished from its natural forests. Instead, it is now cultivated, and Thailand has some of the most extensive plantations anywhere.

“Our best seller is ‘My Trat’ - people love its sweet aroma,” Shakirul Hoque, the owner of Rouf & Sons, tells TRT World. “It’s natural, there are no chemicals, and the smell lingers longer than other types.”

A kilo of Agarwood chips goes for $2,000, Shakirul says, adding he ships around 100 kilos monthly to the Middle East alone.

Agarwood emerges after the tree’s natural defences are activated against infection by a mould that sweetens and textures the trunk, transforming an otherwise odourless wood into a high-value commodity whose resin is dubbed “liquid gold”.

Thai farmers, traders and middlemen are building up their stakes in a business estimated to be worth hundreds of millions of dollars a year but is projected to reach multiples of that over the coming years.

Demand is driven by Arab traders and experts that buy oud with a collector’s eye, hunting for the rarest, most fragrant pieces and the oldest oils which deliver the deepest scent. Most of the sticks and chips on sale in Bangkok come from Thailand, Cambodia, Vietnam and India.

But in Shakirul’s boutique, the most expensive variety sits in a silver box on the top shelf. “It’s from the Philippines, and only the real experts ask for it,” says a young Thai Muslim sales representative, who, like many women staffing the oud shops, also speaks Arabic for the most lucrative clientele.

It costs about $450 per tola, a measurement of around 12 grams, or about $40,000 a kilo. The finest wood and oils can go for much as $80,000-$100,000 a kilo - gold is currently around $60,000.

But for customers from the Middle East, it is a price worth paying. Perfume is mentioned in the Islamic Hadiths, cementing its importance to Muslims, and oud wood is burned for spiritual, medicinal and decorative purposes, in addition to being worn for its scent and status.

That links the shops of Bangkok to the malls of Dubai and Saudi Arabia. “Our biggest concern is we can’t produce fast enough to meet the demand there,” says Chalermchai Sommung, president of the Agarwood Community of Thailand.

“There’s no limit, they’ll buy everything we have,” he tells TRT World.

Billion-dollar business

Estimates vary, but several marketing firms forecast the overall market for Agarwood products to reach over two billion dollars a year by 2028.

The essential oils made from oud are in hot demand for aromatherapy, medicine, acne cures and stress-relievers, while the perfume market is also surging.

Charlermchai says his collective of hundreds of farmers sell around five tonnes of oud per year to the Middle East for over $500 million, a reflection of the growing recognition of the Aquilaria Crassna variety from Trat in eastern Thailand, where vast plantations curve across the landscape.

Centuries of demand have seen most of the naturally occurring trees chopped down across Southeast Asia. In 2004, that prompted CITES - an intergovernmental treaty that monitors endangered species of plants and animals - to control the destruction and trade of the tree over deforestation fears.

Equally, the money on offer means conmen frequently try to push inferior products as high grade, experts say. Extreme climate events like drought or floods are also making harvests less predictable.

Across Trat, Chalermchai’s collective is seeking to provide a steady income during the uncertainties of a booming market.

“Trat is the world’s number one oud exporter, we have 25 million trees,” says Chalermchai.

To control quality and prevent illegally harvested wood from entering the supply chain, his group has turned to the blockchain, tagging each tree they grow for the market.

“You can trace each tree to find out when it was planted, by whom and where it meant to go after being cut,” he says. “For example, cancer patients who use essential oils in Germany want to know exactly what they’re getting.”

At the same time, Chalermchai says using blockchain provides a level of accountability to CITES that helps address the chopping down of native forests.

It also allows farmers to claim carbon credits to prove they have cultivated trees on arable land.

“If a member trades one ton of Agarwood (around one or two trees), they’ll receive an extra 400 baht ($12),” he explains of the credit scheme run by European nations.

The money in Agarwood - and the luck of geography and climate - is helping eastern Thailand’s farming communities surge up the value chain.

For 54-year-old Chuanchom Kridsanakan, the oud business has helped him leave part-time work in a pub band and as a factory worker making charcoal briquettes.

“We can earn hundreds of thousands of baht per harvest,” he says of his 100-member cooperative in Chonburi province in eastern Thailand.

Scent of success

The boom owes much to the super-rich Saudi customers who have been flocking in increasing numbers since Thailand opened its border after the pandemic and a long-running diplomatic feud between their governments ended.

Thailand’s premier Prayuth Chan-o-Cha visited Riyadh in January 2022 - the first leader-level meeting between the nations in over thirty years. In turn, Crown Prince Mohammed bin Salman visited Thailand last November with a large business delegation as Bangkok hosted the APEC summit.

“We’re very fortunate to have customers from Saudi Arabia,” says Chuanchom. “They are in the top-tier market, and that means they pay upfront.”

As night falls around the Arab quarter and crowds buzz between open-air restaurants and tea shops just a hundred metres - but a world away - from the Go-Go bars of Bangkok’s biggest red light district, customers begin to throng the oud shops - casual buyers, gift givers and the serious experts.

“Thailand is the hub of ‘oud people’,” Shakirul explains. “The products are better, the prices are good, and it’s more sophisticated here in terms of certification and paperwork … and that makes it an easy trade for our customers.”