Enoc moving to become top name in oil industry
Emirates National Oil Company (Enoc) is a Dubai-based petrochemical group with interests in refining, distribution, terminals, lubricants, storage and a range of other activities. It is primarily a downstream oil company and serves a variety of business sectors.
The Dubai Government-owned group operates in 22 countries and has established joint ventures with a variety of partners.
The number of Enoc petrol stations in Dubai and the Northern
Emirates has increased from 160 in 2005 to 170 today. This includes stations that carry the name of the group’s Eppco subsidiary.
What was Enoc’s performance in 2007?
—It was a good year in terms of volume and delivery of products, operations and services. The rate of year-on-year growth was 27 per cent compared with 51 per cent in 2006 and the growth in asset value was 33 per cent compared with 32 per cent in 2006.
Which area saw the biggest growth last year and how do you see the group developing in 2008?
—Our terminal business witnessed the biggest growth. We received the go-ahead a few days ago to build a new international petroleum storage terminal in Tangier, Morocco. We will operate the terminal and have a financial stake in it. Once it is completed in 2009, it will open up an interesting market in a strategic location. As a newcomer to Enoc, I have not finalised the alignment of our team or established what our priorities are in terms of focus. It is less than two months since I took the post, but I have a bold vision to place Enoc firmly on the map. There is a lot of room for improvement in terms of volume and profits.
Who are your partners in Morocco and what is the cost of the project there?
—The partners are Enoc subsidiary Horizon Terminals of Dubai, Afriquia SMDC of Morocco and the Independent Petroleum Group of Kuwait. It has taken a year to finalise the agreement and the cost is Dh368 million.
How many other joint venture terminals are you engaged in and are you considering further expansion in the sector?
—We currently operate and have a stake in terminals in South Korea, Singapore and Djibouti. And we operate one in Mozambique, which we do not jointly own. In the United Kingdom, we have a representative office but no terminal interests. China and Egypt are good areas for expansion.
The average person may wonder why Enoc chose to invest in such countries as Djibouti and Mozambique.
Because of their strategic locations at crossroads of international trade, Djibouti is at the entrance to the Red Sea and Mozambique links west and southern Africa to the Indian Ocean and hence south Asia.
Is an initial public offering an option for Enoc?
—No, not for Enoc – but maybe for some of the subsidiaries.
Does the high oil prices help Enoc?
—On the contrary, it hurts Enoc. Crude oil prices are quite high and if you have an oil production portfolio then that would help a lot. But Enoc does not have a strong position in the upstream business and that is why any increase in oil prices is a burden on us.
There has been a lot of talk about the retail arms of UAE companies, such as Emarat, Eppco and Enoc, suffering losses on sale of petrol. How true are those talks?
—We are making profits but not enough. It is a competitive market and the margins are low. Pump prices are putting a lot of constraints on us because we have to sell at below the international market price. It is a subsidised market. Distribution is a major part of Enoc’s operations. However, Adnoc has a substantial amount of upstream volume, which Enoc does not. So we buy from the market, which could be Aramco, Adnoc or others, then add processing and handling fees. Then the product is sold to the customer. The operators – Enoc, Adnoc, Eppco and Emarat – are under a mandate to sell at a certain price. This has to be addressed and resolved somehow between the companies and the federal government. Increasing the price of petrol is an option but a political decision is needed as it is not part of our mandate to fix our prices ourselves.
What is the situation regarding diesel?
—Diesel is different as its price is not fixed. Operators have been given more room to adjust the prices according to the market. The petrol price is fixed at Dh6.25 for a gallon of 95 octane, while the diesel price fluctuates with the market.
What has shielded Enoc from losses?
—Our other activities and operations are generating income, both inside the UAE and outside.
Enoc has long had a dream of being benchmarked with the leading international names such as Shell and BP. After 10 years of operations how close is the group to achieving this dream?
—If you look at a specific business stream such as distribution and you benchmark us against other operators, then Enoc comes very high. If you go to any Enoc petrol station you will see it is one of the top quality stations in the world. But if you consider refining and upstream operations we cannot compare since we are very small. We are not there yet but we are moving in the right direction by expanding our operations internationally. In the terminals, trading, petrochemicals and lubricant businesses we are well-known players.
Is Enoc planning to enter into any new product supply agreements?
—Yes, we have plans for joint agreements with different players, whether government entities or parties from the private sector. But I prefer not to disclose details as negotiations are in progress.
Proposals to supply compressed natural gas (CNG) to Dubai’s Roads and Transport Authority (RTA) in place of diesel – which is less environment friendly – are an example. We have converted three abras as an experiment and if this is successful we will convert the rest. This decision will be made within six months.
Enoc, along with Dubai Municipality and the RTA, has been considering introducing alternatives to petrol and diesel for public buses and taxis. Wouldn’t it cost a lot to convert all those vehicles?
—Yes, it will initially, but in the long term the benefits will outweigh the cost on all levels – fuel price, health and convenience.
What are your current major projects?
—We are building a Dh88 million petrochemical lubricant blending plant in Fujairah. We want to be pioneers in the petrochemical lubricant business and this plan has just been approved by our board. We aim to complete the building by the first quarter of 2009.
The plant will produce lubricants for the aviation, auto and marine sectors and will be 100 per cent owned by Enoc. Fujairah was selected because of its strategic position at the entrance of the Gulf. Enoc exports lubricants to around 22 countries, including Middle East, China and former Soviet Union states. The new plant should enable us to expand our current market to meet higher demand and explore new markets. It will produce 30,000 tonnes of lubricants and 3,000 tonnes of grease per year. And we are building an extension to our refinery at Jebel Ali to produce low-sulphur naptha, which is used in the production of lubricants, petrochemical products and paints. This plant is due to be commissioned next year.
What other expansion opportunities are you considering?
—Besides terminals and lubricants, the upstream business is an area that we are seriously looking at since it is the most rewarding business in the oil industry. We have a very small business arm named Dragon in Turkmenistan and through that company – without disclosing details now – we are eager to find ways to grow our upstream business. Our refining business is very profitable and there are opportunities to expand it further.
Is the Eppco brand going to disappear this year? Reports in 2005 said it would be phased out after Enoc purchased the 40 per cent that Caltex – which is owned by Texas-based Chevron – used to own.
—The mother company is Enoc and we are developing the Enoc brand and all developments have been taking place in the Enoc part, not Eppco. The Eppco name will disappear but the plan has been put back to five years from that announcement in 2005. So, in the long run, it will be one name – Enoc. The rise in the oil price places a lot of constraints on the company and limits your expenditure on other things.
Enoc/Eppco conducted a brand survey in the UAE in the late 1990s and only five per cent of those questioned recognised the name. What were the results of your latest survey?
—A survey conducted in June 2006 produced one firm conclusion: People expect more services from our stations. Because they have received good service they expect and demand more. They want to see services such as laundries and coffee shops. We plan to offer these in the near future. We intend to conduct more such surveys to help make the Enoc brand better and stronger.
Saeed Khoory became Chief Executive Officer on December 1, 2007. He graduated in petroleum engineering from the University of Tulsa in Oklahoma and joined Enoc from the Abu Dhabi National Oil Company (Adnoc), where he was assistant general manager, technical. He also served as board member at a number of oil and gas service companies. He played a major role in the development of a high-tech system that uses the latest technology to enable all the facilities of an oil field to be managed remotely. Asked what he hoped to bring to Enoc, he said: “I decided to accept this post in the hope that I could add value to the company.”
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