Abu Dhabi: Effective June, petroleum products retailer Adnoc Distribution, a unit of Abu Dhabi National Oil Company (Adnoc) will take over the running of 74 petrol stations operated by Emarat in Sharjah, Ras Al Khaimah, Ajman, Umm Al Quwain and Fujairah, with the Abu Dhabi-based company assuming full management control of the pumps from January next year, a top-ranking oil industry source told Gulf News yesterday.
Adnoc and Emarat yesterday announced the signing of a memorandum of understanding (MoU) through which Adnoc will acquire the 74 Emarat petrol stations.
"Initially, Emarat will assist Adnoc in running of the stations. Emarat will continue to honour its ongoing contracts with contractors and suppliers of gasoline, most of which will end by end-2012. By January, Emarat will be out and Adnoc will take full control of supply and distribution at the pumps," said the source, adding in this deal no financial transaction is involved and that the Emarat retail section employees at the pumps will be absorbed by the Adnoc unit under its expansion plan.
He said the takeover by the Adnoc unit will enable Emarat to cut losses incurred due to high petrol subsidies.
"It's an early Eid gift to Emarat by Adnoc. Emarat is losing Dh80 million in the Northern Emirates section of its gasoline sales business every month due to petrol subsidies. This deal means Emarat will save at least Dh900 million every year," the oil industry source added.
He said that the Abu Dhabi government is subsidising gasoline sales of Emarat. "This deal will enable Adnoc have a greater control over Emarat's subsidies and its operating costs. For the Abu Dhabi government, the cost of gasoline subsidies will come down," the source added.
Earlier, in a statement issued through the official news agency WAM, Adnoc said the MoU "aims to develop and consolidate cooperation and exchange of expertise between the two companies, and providing the best quality of services for petrol station customs and road-users".
The memorandum was signed by Abdullah Salem Al Daheri, general Manager of Adnoc, and Adel Khalifa Al Shaer, acting general manager of Emarat in the presence of Obaid Humaid Al Tayer, minister of state for financial affairs and chairman of Emarat, and Abdullah Nasser Al Suwaidi, director general of Adnoc.
Customer service
In the statement Adnoc said that the signing of the memorandum ensures complete coordination and joint work to meet the needs of customers, and keeping abreast with providing a variety of services of the highest international standards.
"In light of global competitiveness to provide the highest level and quality of services to customers, the signing of the memorandum represents a step towards achieving both companies' strategic plans to expand, especially to enhance the position of the retail sector in the local market," Al Daheri said.
"The memorandum is a distinguished step in strengthening cooperation and exchange of expertise between Emarat and Adnoc, and gives us the opportunity to offer better products and services to achieve mutual benefit for both companies, which is to provide the highest quality of services to a developed and prosperous society," Al Daheri added.
Al Shaer described the signing of the memorandum as an important initiative that supports the strategic goals of both parties. "We hope that the cooperation between both companies will contribute to enhancing the role of Emarat and Adnoc in providing excellent service that is characterised by the best standards in operations and services across the UAE," said Al Shaer.
Commenting on the MoU, Said Hirsh, an oil analyst at London-based Capital Economics told Gulf News: "I am not sure that this has a major impact on the oil retail sector, given that the government decides pricing. Instead, this may be a move to ensure that there are no problems similar to last year's shortages, given Emarat's troubled finances."
Last year, billions of dirhams were pumped into Emarat, its capital increased by 50 per cent to Dh9 billion. This allowed the banks lending to Emarat to increase their ceiling on loans to Emarat.
The UAE state oil marketing companies incur heavy daily losses on petrol sales as the difference between state-set prices and the cost of imports increases. Emarat had debts of around Dh1.9 billion, the Federal National Council (FNC) said in January 2011. The four UAE oil retailers — Adnoc Distribution, Enoc, Eppco and Emarat — are paid by the government to cover the cost of subsidies.
Adnoc Distribution's subsidies are directly borne by the Abu Dhabi National Oil Company, while Emarat's operating budget is approved by the Ministry of Finance with additional subsidies borne by the Abu Dhabi government. The cost of Enoc and Eppco's subsidies is borne by the Dubai Government, the owner of Enoc Group of Companies.
No'man Ashour, a UAE-based economist, told the Gulf News, "The prices of fuel will be dropped and the government will partially subsidise fuel prices. "The reduction of the prices comes as reaction to the recent calls by some Federal National Council members who urged the government to bring petrol prices in line with those of the other GCC nations."
Earlier, FNC member Ahmad Al Za'abi asked Mohammad Bin Dha'en Al Hameli, Minister of Energy, the reasons for high prices of oil derivatives in the country compared to other GCC nations.
The minister said the government suffered nearly Dh8.5 billion of losses last year by supporting the four distribution companies and fears the losses would hit Dh12 billion if the world oil prices increase further.
