Wednesday, July 06, 2011

Abu Dhabi takes control

From what I can tell Abu Dhabi has tired of a game of chicken with Dubai over fuel prices. Since it essentially has an ownership stake in Dubai since the financial crisis it can evidently act unilaterally, taking over Dubai-owned gas stations that have stopped selling petrol.

The Gulf News reports details concerning the fuel price rules that fit conjectures I (and others) have made in the past.
Abu Dhabi: National oil company Adnoc is poised to take over the running of [Dubai-owned] Eppco and Enoc petrol stations in the northern emirates, Gulf News has learnt. They added that Adnoc has shown a high degree of interest in the matter and it will manage and run all the stations previously run by both companies.

Sources in the oil sector said that the UAE Government is moving to cancel licences owned by Eppco and Enoc in the northern emirates and allow the Abu Dhabi National Oil Company (Adnoc) to take over the running of the service stations.

Meanwhile, Eppco and Enoc are pressing the government to allow them to raise fuel prices, sources said.
The two companies say that the cap on prices is leading to massive losses due to rising crude oil prices on world markets. Government sources said that both companies have released statements indicating their financial losses during the first half of 2011.

Emirates Petroleum Company (Emarat) was suffering similar losses until the UAE Cabinet increased the company's capital to about Dh9 billion at the end of last month.

They added that Eppco and Enoc have submitted reports to the Ministry of Finance and Industry recommending lifting the fuel price cap and letting the market decide what is a fair rate for fuel in the UAE.

The sentence, "Emirates Petroleum Company (Emarat) was suffering similar losses until the UAE Cabinet increased the company's capital to about Dh9 billion at the end of last month," makes no sense. You don't stop suffering losses by increasing capital. Presumably it's a bailout, a transfer from the UAE (read, Abu Dhabi) treasury to the Emarat (read, Dubai?).

Why Emarat is being treated differently from Enoc and Eppco is another question. I had assumed they were all Dubai-owned in one way or another.

I was always curious why Abu Dhabi/Adnoc allowed the second-movers (E-noc/ppco/marat) establish such a large market footprint across the country to begin with. Perhaps it was Dubai that made the error of believing that market share meant profit. It wouldn't be the only time Dubai made the bigger is better mistake.

Readers, any answers?



Anonymous Anonymous said...

Emirates' shareholders are the seven federal states making the Emirates. ENOC is a wholly owned DXB Gov company. EPPCO is owned by ENOC (+/- other investors)

8:08 PM  
Blogger Ali Asad Somjee said...

Perhaps it's a question of priorities:

Dubai desperately needs more revenue to deal with it's debts and large losses from the crashed real estate sector. On the other hand, Abu dhabi may look at the 'Arab spring' with concern and want to proactively guard against anything that could harm social stability. And I can't think of anything more unpopular than higher petrol prices.


8:13 PM  
Blogger Ali Asad Somjee said...


8:15 PM  
Blogger Seabee said...

It makes sense for AD, with its oil billions, to take on the losses that Dubai can't afford. But, GN followed up the original story with a categorical denial from ENOC that their outlets were being taken over.

We'll have to wait and see.

The denial is here.

2:13 PM  
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