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28 March 2024

Losses caused fuel crisis in Northern Emirates

Published
A severe petrol supply crisis in the northern emirates was caused by massive losses by suppliers due to selling at relatively low prices although fuel prices in the UAE are already among the highest in the Arab region.
 
Petrol pumps run by the Dubai-based Enoc reeled under a loss of Dh300million in 2010 alone while it continued to suffer through the first half of this year because of the widening price differential between purchase and sale.
 
Quoting what it described as informed sources in the oil industry in the UAE, the Dubai-based Arab language daily Emirat Alyoum said maintenance and updating of petrol stations operated by Enoc and Eppco were not the real reason for the supply crisis and the closure of many pumps in Sharjah.
 
It expected the problem to be tackled through a deal between the two suppliers and the government-owned Abu Dhabi National Oil Company (Adnoc), one of the world’s largest oil producers which control just under 10 per cent of the total global recoverable crude deposits.
 
“The sources revealed that the accumulation of losses at pumps in the northern emirates because of selling petrol at relatively low prices was one of the main reasons for the petrol supply crisis in those emirates,” the paper said.
 
“The sources estimated Enoc’s losses at Dh300m in 2010 alone, adding that maintenance and upgrading of pumps were not among the main factors in the severe supply shortage at pumps run by Enoc and Eppco.”
 
The paper quoted the sources as saying the losses were caused by a widening gap between the purchase and sale of petrol by suppliers, adding that such a gap has reached Dheight per gallon over the past weeks because of the surge in global oil prices to above $100 a barrel.
 
“Retails shops, auto wash facilities and lubricants business by Enoc and Eppco could only cover 20 per cent of those losses,” it said.
 
“Another main factor in the crisis is that banks have become tight in providing loans to fuel supplying firms while they have also imposing difficult conditions in funding in terms of fees and interest rates.”
 
The paper quoted the sources as saying that one likely solution to the crisis is through a “framework of cooperation” between those two suppliers and Adnoc, adding such an agreement could include sufficient fuel supplies from Adnoc to the petrol stations owned by Enoc and Eppco.
 
In press comments last week, an Adnoc official said the company intends to increase petrol supply to the northern emirate to help tackle the problem, one of the worst fuel supply crises to hit the northern emirates.
 
Abdullah Al Dahiri, director-general of the government-owned Abu Dhabi National Oil Company for Distribution (Adnoc-Fod), one of the largest refiners in the Middle East, said the closure of some petrol pumps in the Northern Emirates for maintenance and upgrading boosted demand at its 59 pumps in those areas by nearly 45 per cent over the past few weeks.
 
Besides increasing oil shipments by sea, Adnoc-Fod is also sending more tankers by land and pumping additional petrol quantities through pipelines from its refineries to the eastern town of Al Ain, where tankers are transporting more fuel to the petrol pumps in Sharjah and other Northern Emirates.
 
 “Adnoc-Fod is on the verge of sending additional petrol vessels to Saqr port in Ras Al Khaimah…these vessels have a large capacity and the increase is intended to ease pressure on our pumps and meet rising demand for petrol, estimated at nearly 45 per cent,” Dahiri said.
 
 “We have already pumped additional quantities of petrol into the Northern Emirates ranging between 35 and 45 per cent to meet demand…we will continue sending additional supplies to the northern emirates until the situation there stabilises and the problem is completely tackled.”
 
 Adnoc-Fod, the refining arm of Adnoc, operates nearly 194 petrol stations, including 135 in Abu Dhabi. The company is planning to set up 234 new petrol stations through the UAE by the end-2012.
 
 Abu Dhabi is the main oil producer in the UAE, controlling more than 90 per cent of its crude and gas resources and pumping most of its oil output of nearly 2.5 million barrels per day. The emirate has a refining capacity at its Umm Nar and Ruwais of around 400,000 bpd, more than half the UAE’s total refinery output capacity of around 798,000 bpd.
 
On Tuesday, Enoc denied reports that Adnoc is taking over its filling stations in the Northern Emirates following their closure in Sharjah, the third largest emirate in the Arab world’s second economy.
 
 ““Enoc categorically denies the report that appeared today in a newspaper about the future course of running the Enoc and Eppco retail outlets in the Northern Emirates. It is extremely disappointing that the newspaper has seen it fit to publish a report, which is totally baseless, speculative and unverified.
 
Enoc reiterates that there has been no expression of interest by any organisation on taking over the operations of the company’s retail outlets.”