Fuel firms ordered to end petrol shortages

Sharjah's Supreme Council gives petrol companies deadline of this afternoon to explain and come up with a solution to crippling fuel shortages.

Fuel shortages spread this week from Sharjah and Ajman to Dubai and Ras al Khaimah.

Petrol firms have been given a deadline of this afternoon to explain the fuel shortages crippling the northern Emirates, and come up with a solution.

Sharjah Executive Council issued the ultimatum at their weekly meeting on Tuesday, led by the emirate's Crown Prince, Sheikh Sultan bin Mohammed Al Qassimi. It was made public yesterday.

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"The council discussed the need to end the petrol crisis and asked the Enoc group, which owns Enoc and Eppco retailers, to explain the real reasons they stopped their supplies at their stations, causing so much damage to the emirate and its residents," the council said.

The shortages began in Sharjah more than two weeks ago, and the companies' filling stations in the emirate have been completely dry for days. As drivers head both north and south to fill up, the increased demand has led to shortages in Dubai and elsewhere.

Company representatives say some filling stations are closed for technical upgrades to fuel dispensers, and the closures have led to increased demand and short supply elsewhere. However, there is no evidence of this upgrade work at any filling station in Sharjah.

Eppco and Enoc could not be reached for comment yesterday.

Th

e two retailers and their competitor Emarat sell fuel at loss: the price at which they buy it on the international market is higher than the federally imposed retail price at the pumps.

"What we are seeing now is overwhelmingly a cash-flow problem for Enoc," said Thaddeus Malesa, an independent energy analyst based in Dubai.

"Because they aren't allowed to alter the subsidy regime, this is really hurting them. What they are trying to do now is to control supply. That's why we are seeing shortages.

"Enoc is owned by the Dubai Government and they'd much rather deal with issues that they face in the emirate of Dubai."

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

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Saeed Khoory, the chief executive of Enoc, said in January 2010 his company lost money on petrol sales whenever global crude oil prices rose above $45 (Dh165) a barrel. Benchmark West Texas Intermediate reached more than $101 a barrel yesterday.

Two price increases, amounting to a 27 per cent rise, were allowed last year, but further increases are unlikely.

"They budgeted for having much higher revenues, but instead they got status quo," said Samuel Ciszuk, senior Middle East and North Africa energy analyst at IHS Global Insight, a consultancy in the UK.

"At the same time, their costs sky-rocketed with the crude price rise earlier in the year. That's speeded up the need for a cash injection.

"Dubai is basically bankrolling the subsidies for the northern Emirates and it doesn't make economic sense for them to continue doing that."

Dr Dalton Garis, associate professor of Economics at the Petroleum Institute in Abu Dhabi, said the cuts in the fuel supply in the northern Emirates could be a cry for help.

"They could be saying, we are suffering over here, and can you help us out?" he said. "We don't really know what the role of Adnoc [Abu Dhabi National Oil Company] is. However, adding more Adnoc stations is something that can't come overnight."

At yesterday's Opec meeting in Vienna, the Oil Minister, Mohammed al Hamli, said: "I do not want to talk about the petrol shortage. Today is about Opec."

Motorists, however, say relief must come soon. "We are one person, if we hear that our brothers in Sharjah city have a fuel crisis we are saddened and know it's just a matter of time before we are also affected," said Mahmoud al Zaabi, an Emirati who was refilling at the Emarat station in Al Dhaid.

Drivers in Dubai complained of time-consuming hunts for petrol, sometimes with the air conditioning turned off to save what fuel was left.

Some stations had long queues, others were completely dry. One Emarat station in Bur Dubai had run out by late afternoon. "So I have to go to another station," said Salam Mahmoud, a 41-year-old engineer from Iraq who was driving back to Sharjah.

The timing was especially bad for Baitullah, 30, a Pakistani taxi driver who needed to fill his vehicle and hand it over on time to his partner for the night shift.

"We don't want to waste our time or my partner's time," he said. "It's a big problem for us."

Ahmed al Jumairi, a 20-year-old Emirati student, visited several stations with no fuel. A few days earlier, at a station near Sharjah, he was allowed to buy only Dh50 worth.

Silvia, a 33-year-old sales executive from Germany, drove for 45 minutes to seven empty stations in Dubai and Sharjah before pulling into a crowded one with petrol, where she waited for another 45 minutes. She kept her air conditioning off to save fuel.

"There should be somebody to tell people, 'Listen, we have this problem'," she said. "Anybody you ask, nobody knows."

In RAK, Eppco stations remained closed and demand has remained high at other stations throughout the emirate. Staff at several petrol stations said commuters were now filling their tanks instead of putting in just enough to see them to Ajman.

"We have more faces every day. It's not just our regular customers any more," said Sivalingam Puveendran, manager at Emirates Petrol in Nakheel.

Another Emirates Petrol manager said the high demand and reduced supply worried him. "There's no shortages yet, but we've been restricted to half a tanker instead of a full one," said Faiyaz Ahmed. "Our supply is still good but we don't know about tomorrow."

Emarat is tendering for an additional 100,000 tonnes of petrol to cover its additional needs from June to September, traders said yesterday. The company already has term contracts in place to receive 80,000 tonnes a month, Reuters reported.

* Martin Croucher reported from Dubai and Yasin Kakande from Sharjah. Additional reporting by Carol Huang in Dubai, Anna Zacharias in Ras al Khaimah and Tamsin Carlisle in Vienna