Enoc Group: petrol stations in Northern Emirates won't change hands

Breaking a weeks-long silence, the company says officials are 'actively discussing the matter of fuel distribution in the Northern Emirates' as its stations remain dry.

Sharjah , United Arab Emirates- June  24, 2011:  A dry Eppco Petrol station  near the University Area in Sharjah .  ( Satish Kumar / The National ) For Business

DUBAI // Enoc Group said yesterday there were no plans to sell its petrol stations in the Northern Emirates.

Video:Drivers react to petrol shortages in Dubai

Last Updated: June 08, 2011 UAE

Emarat and Eppco petrol stations in RAK, Sharjah and Dubai have all reportedly been suffering from shortages recenty. Drivers at an Emarat station in Dubai react after being told by staff that the station's supply has run dry.

The Dubai-based oil firm said reports that Adnoc would take over its petrol stations were “baseless, speculative and unverified”.

The issue of Enoc’s facilities in the Northern Emirates became a pressing one for Sharjah residents more than a month ago after the facilities stopped pumping petrol. Two weeks ago, its stations in the emirate were shut down by the Sharjah Executive Council after the company failed to meet a 72-hour deadline to resume fuel supplies.

The future of those stations has been unclear. But Enoc said in a news release that although the matter was still under debate, there were no plans to hand over management.

“The concerned authorities are actively discussing the matter of fuel distribution in the Northern Emirates,” the statement said. “Enoc reiterates that there has been no expression of interest by any organisation on taking over the operations of the company’s retail outlets.”

The disruptions began at the end of May, when, after shortages caused huge tailbacks at some stations, Enoc Group announced “technical upgrades” to fuel pumps were at the root of the problem.

But no such upgrades have been visible at any of its outlets in the Northern Emirates. And experts said the company may be trying to ration its supply in the face of damaging losses. The company must buy fuel on the international market at inflated prices and sell it at the pump for lower, Government-mandated rates.

Enoc said in April that selling fuel at a regulated price cost it Dh1.5?billion last year, and it expects this year’s bill to be Dh2.7bn.

After weeks of shortages and long lines, Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi, intervened and ordered Adnoc to solve the problem.

The company had earlier said it would increase fuel supplies to the Northern Emirates by 40 per cent at its 59 stations there.

A spokesman for Adnoc was not available for comment yesterday.

From Enoc’s statement, it is clear that the future of the stations is still under negotiation, said Thaddeus Malesa, an independent energy analyst based in Dubai.

“The stations outside of gasoline are profitable,” he said. “They have the distribution network that they’ve already developed, which was obviously a long-term investment. I don’t see why they’d want to lose that.”

He said, however, that recent developments have “accelerated the decision point. It seems clear that Adnoc is being charged to take over Enoc and Eppco’s role, but they don’t have a built-up distribution network or the downstream stations.

“The only option is for them to buy them from Eppco and Enoc. But are they willing to pay a price that Enoc considers acceptable? ”

Enoc may be hoping to keep one or two stations, but it was clear that the majority in the Northern Emirates would need to change hands eventually, said Samuel Ciszuk, senior Middle East and North Africa energy analyst at IHS Global Insight, a consultancy in the UK.

“I doubt they want to hang onto the whole network, otherwise they would have supplied them,” he said. “We’ve gone beyond that point now.

“It’s all speculation of course, but Enoc may just be trying to get a better price for them.”