Illegal diesel trade spells big money

Some transport companies and heavy vehicle drivers in Dubai and Northern Emirates are making a fortune by trading in illegal diesel.

They are cashing in on the difference between the prices charged for the fuel in different parts of the UAE.

Abu Dhabi National Oil Company (Adnoc) sells diesel at a subsidised rate of Dh8.6 per gallon but in Dubai it costs Dh19.25.

Diesel is also subsidised in Saudi Arabia, Oman and Bahrain, where it costs Dh6 per gallon – and smugglers are buying there and bringing it back into the UAE in enlarged fuel tanks.

Transport industry sources told Emirates Business that a truck operator who made Dh100 profit per day from moving one container or load of materials could greatly increase his income through the black market.

"If a truck operator buys 45 gallons of diesel from Adnoc in Abu Dhabi or the Northern Emirates at Dh8.6 per gallon and sells it on the black market at Dh18, a discount of Dh1.25 on the full price in Dubai, he can easily earn a profit of about Dh420 per day," said an industry source.

If the business continues for a month the profit is more than Dh12,000. Many single vehicle owners are believed to be making big profits in this way. And sources claim both fake and legitimate transport companies are engaged in the black market operation, as are free zone companies.

A trading agent in Ajman, who spoke on condition of anonymity, said: "It is a good business because we are able to sell diesel to many companies, especially construction firms, at a discount. For regular customers, we sell at a discounted price of Dh14 per gallon. It is a win-win situation for us and the customers." Another transport operator, who also asked for anonymity, said: "We are attracted to smuggled diesel because it is cheap."

Adeel Kamar, marketing manager of Bahrain Diesel Trading Transport, said: "Dubai is a business hub where all the main businesses are linked to transportation. Whether it is construction, machinery, trade or heavy machinery they all depend on transportation, and high diesel prices will exert inflationary pressure on the UAE. Cement and construction companies use huge amounts of diesel to run their generators and heavy equipment. Diesel was Dh3 per gallon in 1998 and the rate has gone up to Dh19.25.

"Importing diesel legally from Oman and Saudi Arabia through land routes is not possible. And shipping diesel requires storage facilities for 20 million gallons, which small companies cannot afford."

Naresh Bhat, marketing manager of diesel trading and transport firm Zenith Oil Derivatives, said: "It is illegal and virtually impossible to smuggle diesel from Oman, Saudi Arabia or Iraq through land routes. Large companies can import diesel by ship from Bahrain and sell it at a higher price here. However, only big companies can do this. Diesel smuggling from Iraq by fishermen and others has almost stopped and there are many restrictions on transporting diesel from neighbouring countries through land routes."

However, some truck drivers fit enlarged fuel tanks so they can fill up with extra diesel in neighbouring countries. They then smuggle the diesel to Dubai and sell it at a substantial profit.

"Fishermen and launch operators have used similar methods to smuggle diesel into the UAE though these activities are coming under tighter control.

Heavy vehicles such as bulldozers, which cannot be driven to petrol stations, are supplied by trading companies that deliver diesel to worksites in tankers.

Fishermen also buy diesel from such firms. Sources say a number of traders obtain supplies from illicit sources. Some drivers working for diesel transporting companies allegedly steal fuel while they are parked in industrial areas and corrupt employees help traders to buy in bulk at petrol stations.

One trader said: "We can sell diesel at Dh15 per gallon. The managers make a profit too because they can say it costs Dh19.25 per gallon in the account books." All that is needed to start a diesel trading firm in the Northern Emirates is a 500-gallon vehicle and a driver.

A representative of another trading firm said: "There are many new agents in the Northern Emirates who are affecting our genuine business. They don't need any infrastructure such as storage yards or a fleet of vehicles. They buy fuel from smugglers and other dubious players in the market who source cheap-rate supplies from Adnoc."


Dubai companies at disadvantage

A single price should be charged for diesel all across the UAE, says Abdullah Al Sumaid Mezina, Chairman of the Nashwan Land Transport Company.

He said the higher price charged in Dubai put haulage companies in the emirate at a competitive disadvantage.

"To ensure the survival of Dubai-based transport companies a uniform diesel price should be introduced throughout the country," said Mezina.

"Transport companies from Abu Dhabi are able to offer discounted rates because of the high diesel price in Dubai. A transport company in Dubai moving a container to Abu Dhabi charges Dh1,500.

"An Abu Dhabi-based company charges Dh1,300 moving the same container from Abu Dhabi to Dubai because the company gets diesel at Dh8.6 per gallon compared with the Dh19.25 paid by the Dubai company."

Dubai-registered vehicles travelling to Abu Dhabi cannot obtain diesel from Adnoc petrol stations.

Many Dubai transport companies are shifting their fleets to Ajman, Khorfakkan and Fujairah where they can buy cheap diesel from Adnoc, Emirates Business has learnt.

Vehicle yard rent and labour accommodation are also cheaper in the Northern Emirates.

There are no Adnoc outlets in Dubai and in Sharjah heavy vehicles are not allowed to buy diesel from petrol stations in residential areas. Transport companies are now adding a clause to their invoices that says transport charges will be reviewed if the price crosses the Dh20 per barrel mark.

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