Dubai: Adnoc Distribution, an arm of the Abu Dhabi National Oil Company (Adnoc), is expected to see its first year of profitability in a decade next year on the back of fuel deregulation, according to Abdullah Al Daheri, chief executive officer of Adnoc Distribution. The company is expected to break even in 2015.

During peak oil prices, Adnoc Distribution’s revenues reached Dh29 billion. The company is set to see Dh24 billion in revenues in 2015, however. Around Dh40 billion had been paid by the government for fuel subsidies between 2005 to mid-2015, Al Daheri said at a press briefing at the Dubai Airshow.

“We will definitely have better financials and performance, if you look from August 1, 2015. We will see profit generation, that’s for sure. It will not really cover the losses for the last 10 years in a short while, because the losses were huge and the subsidies were great.

The company will now be able to diversify its investments and make sure the cash flow is in the plus,” he said.

Al Daheri said that fuel deregulation will enable Adnoc Distribution to expand further and improve its services, with plans to launch a loyalty programme for consumers soon.

“What I can confirm is that we are no longer at loss, and we are generating a decent profit margin,” he said, without disclosing details on the profit margin following the deregulation.

Expansion plans

Supported by higher margins, Adnoc Distribution will invest Dh1.5 billion in 2016 to support an expansion in the number of service stations and fuel depots.

The investment is part of the company’s plans to increase the total number of service stations it operates to between 507 and 510 by 2017 — up from the current figure of 385 stations currently operated. Al Daheri noted that demand for service stations in the UAE was higher than supply, prompting the company to expand.

“There are a few stations we are about to open in December, so we’re talking about 14 stations. Now, we have around 385 stations that include Phase One and Phase Two of the acquisition of Emarat Petroleum, as well as 25 stations of Enoc [Emirates National Oil Company] in Sharjah,” the Adnoc Distribution CEO said. “We are not stopping there. We are looking at valuable areas that can generate better revenues and provide services to high-density areas where we are not well-positioned.”

While Adnoc Distribution’s operations are mainly in Abu Dhabi, the company plans to service Dubai through 10 stand-alone stations under the Adnoc flagship — three of which are already under design, while the other seven are still being evaluated.

Adnoc Distribution is also currently working on Phase Two of its acquisition of Emarat Petrol.

“We are supplying full volumes to those stations, so in a sense, if you [have been going] to Emarat stations in Dubai since the beginning of this year, you [have been] fuelled by Adnoc,” Daheri said.

“We expect to sign an agreement for the transfer of assets by December. There are a few last hurdles that we have to consider and agree upon with Emarat’s management ... so hopefully by early 2016, you will see us moving towards rebranding those stations in Dubai.”

Additionally, the company is targeting expansion beyond the UAE’s borders, with discussions already in place with Saudi Arabia about establishing a franchise agreement.

Talks are yet to conclude, but the CEO said they involved 60-65 stations, with progress on the agreement expected to be seen in 2016.

Away from its consumer business, Adnoc Distribution is expanding at Abu Dhabi’s Midfield Terminal, with a Dh750 million investment plan to build a new fuel depot that is expected to be ready by the second half of 2016.

The depot will have a capacity of 100 million litres of fuel.