Dubai: Adnoc's planned acquisition of Emarat stations in the northern emirates still does not address the main cause of petrol retailers struggling with subsidised fuel prices — but tackles Emarat's financial problems, according to an energy analyst.
Adnoc and Emarat yesterday signed a memorandum of understanding in which Adnoc will acquire 74 Emarat petrol stations in Sharjah, Ras Al Khaimah, Ajman, Umm Al Quwain and Fujairah.
"It comes as part of a move to resolve the subsidies issue and financial problems of petrol retailers. Emarat is a federal company and it is natural for them to make a deal with Adnoc," said Robin Mills, head of consulting at Manaar Energy. "Adnoc has no financial problems, it produces oil and there are high oil prices. Emarat is struggling and had to have a cash injection from the government."
Retail dilemma
The step by Adnoc does not resolve the petrol retailers' main problem: selling fuel at subsidised prices below the international market price, he said.
"It does not address the root cause of the issue but it addresses the financial issues. Adnoc will take on the burden of supplying fuel at below international prices to the northern emirates," Mills said.
The move is a more direct way to help the financially struggling Emarat.
"It is natural for Adnoc to bring Emarat fully under its own control and have a system that's more financially straightforward than subsidies and injections through the back door," he added.
The main questions now are what will happen to the Enoc petrol stations in the northern emirates and whether Emarat will expand its network there, he said.
"Adnoc has stations in lots of emirates, but not in Dubai. Would they take over Emarat stations in Dubai? That is one thing to watch," Mills said.
Effect on prices
When contacted for details on the deal with Adnoc, Emarat said there were no further comments to add.
Asked how the move will affect fuel prices, Mills said it would be difficult to reduce prices in these circumstances.
"That's hard to say. We have seen the FNC [request reduced fuel prices], but the government policy in 2010 was to increase prices and there's still the issue of Enoc. They also incurred big losses to subsidise fuel. It's difficult to reduce fuel prices further," he said.
Sharjah government officials welcomed the move by Adnoc.
"This is a strategic choice since Emarat is owned by the federal government," said Hussain Al Mahmoodi, director-general of the Sharjah Chamber of Commerce and Industry (SCCI).
He said better services will help boost businesses in the emirate and will make life easier for customers.
