Enoc: selling petrol at a loss cannot continue
Selling petrol at a loss because of the federal cap on prices is unsustainable, and is hampering its ability to open new outlets in Dubai, Emirates National Oil Company said yesterday.
Enoc has struggled to supply fuel to drivers in the Northern Emirates, and says the cap is now threatening its ability to do its job on its own home turf.
The company, which is owned by the Dubai Government, said it was on track to record a Dh2.7 billion loss from selling fuel at artificially low rates."This also has a serious impact on our ability to expand our retail network to meet the growing demand," the company said.
"The current scenario, where Enoc has to bear the burden of higher international fuel prices while at the same time distributing fuel at subsidised rates, is clearly not sustainable or viable."
Enoc's statement was the latest plea for help from fuel retailers caught between high oil prices and the UAE's effort to keep the cost of living in check.
Retailers such as Enoc and its competitor Emarat, which is owned by the federal Government, are required to sell petrol at a federally capped retail price of Dh1.61 a litre for the lowest fuel grade. The price went up twice last year, by a total of 28 per cent, but they still sell at a loss.
Saeed Khoory, the chief executive of Enoc, has said they lose money on petrol sales when global crude oil prices rise above US$45 a barrel. Brent crude reached $126 in April amid regional unrest and the shutdown of supplies from Libya.
Prices have relaxed only slightly in spite of the prospect of renewed pumping, closing on Friday at $115.50.
Drivers were turned away from petrol stations in the Northern Emirates for the first time this year in May, as retailers let supplies run down.
At the time, Enoc said its dispensing pumps were undergoing technical upgrades. Stations there have been closed since the local authorities ordered them to stock up or shut down.
Solutions to the petrol shortage so far have addressed the cash losses rather than the underlying policy.
In June, Sheikh Mohammed bin Zayed, the Crown Prince of Abu Dhabi, ordered Abu Dhabi National Oil Company to alleviate the shortage in Sharjah.
Also in June, the federal Government gave Emarat a Dh9bn cash injection to help to keep it going.
"If they sell even one litre of gasoline they are making a loss. Just because of their existence, they are making a loss," Thaddeus Malesa, a Gulf energy analyst, said at the time. "The only alternative that they have is if the subsidies are lowered."
Enoc said last month it was branching into other businesses to hedge against the loss-making petrol sales, including a regional chain of food outlets and a special clean fuel.
"Enoc looks forward to the support of the concerned authorities in addressing the concern," the company said yesterday.
Updated: October 16, 2011 04:00 AM