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Tue 11 Jan 2011 06:55 PM

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Emarat blames cut-price petrol for debt woes

State-backed fuel company to restructure, needs bank loans, says chairman Obaid Humaid Al Tayer

Emarat blames cut-price petrol for debt woes
The difference between the cost and selling price of petrol is about one dirham per litre, the chairman of Emarat said

Emirates General Petroleum Corp, a state-owned fuel retailer, is restructuring and needs bank loans because it must sell gasoline at below-market prices, the chairman of the United Arab Emirates’ company said today.

Emirates General, known as Emarat, had a debt of AED1.9bn ($517m) at the end of December 2009, according to a report that the State Audit Institution distributed to the Federal National Council, a government advisory body.

“We are currently restructuring Emarat and looking at all revenue streams as well as reviewing our cost base,” Obaid Humaid Al Tayer, who is also the UAE’s Minister of State for Financial Affairs, told the council in Abu Dhabi.

“Emarat cannot increase the selling price of gasoline products without prior approval of the cabinet, and currently the difference between the cost and selling price is about one dirham per litre.”

Emarat and Dubai government-owned retailer Emirates National Oil Co, also known as Enoc, have suffered from rising oil prices because they buy fuel at market prices and sell it at state-set rates. Enoc needs oil prices at about $40 to $45 a barrel for it to break even on gasoline sales, chief executive officer Saeed Khoory said last year.

Oil hasn’t dropped below $50 a barrel since mid-2009 and traded above $89 a barrel on Tuesday.

The UAE and other Gulf nations subsidise the prices of utilities and commodities such as gasoline as a way of distributing oil income to their populations.

Council members calling for Emarat’s liquidation “don’t understand the role of Emarat and its contribution to the economy as well as the service it provides,” Al Tayer said. “Emarat is going through a period of high oil prices, and its cost base is high.”

The council debated and approved a law that will let Emarat borrow up to 50 percent of its equity. The country’s president must sign the law for it to take effect.

 

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khdmohd 8 years ago

This issue part of ( Energy retailing ) need a quick resolution , it can not continue retailing products with losses , also the public are not sure if prices are going to be increased or not . Energy experts have looked at this issue relate to the strong UAE economy and they recommended to float the prices with international market .
I personally feel that prices should be increase at one go without any incremental factor as this can lead to public and prices over reactions . The UAE has made available good transportation infrastructure and is paying high salaries, better than many GCC countries . If added protection is needed then the government can increase the transportation allowance paid to employees and also can increase other UAE national allowances such as child allowance , this will compensate the nation while the prices floats with the international market .

Srivatsa Srinivasa 8 years ago

Emarat is one of the best service organisations. I love this company as its employees are always cheerful irrespective of the rush and the bad weather. Well maintained convienence store and no matter ur tensions, step into the store somehwere from one or two corners u are greeted - Good Morning... and u r made cheerful

Oscar 8 years ago

Second, UAE is one of the biggest oil producing countries in the world so how can the petrol prices be at such high levels?? Oman as and example doesn't produce as much as UAE but still, there petrol prices are lower? UAE is a fast developing country and an increase in the petrol prices leads to and increase in transportation prices which at the end affect all aspect of the daily life…..trying to attract more investments will not work with high petrol prices and if Emarat and Enco can't make it I truly advice that they hand over their petrol stations to Adnoc. Think of ways to make your mini mart work,see where you failed and fix it,make people spend more in them - don't squeeze your clients, think of better ways on how to make them spend more in your marts

Al 8 years ago

Why doesn't Emarat hedge against oil price rise ? A company should not allow commodity price shifts dictating it's profits and losses.

khdmohd energy expert 8 years ago

Dear Oscar , the UAE economy can sustain such petrol prices liberation , look at the great 5 countries they do not subsidize the petrol prices , in the contrary they heavily tax it . Thus the UAE economy will meet & challenge the biggest countries' economies . Also note that paying the public subsidies is considered a weakness in GDP or economy ; when subsidies are imposed on vital energy sector as petrol products such as Iran or Iraq or Afghanistan or means what ? you know what .
Very soon all the oil rich GCC countries will remove subsidies in petrol prices because they will be followers to this experience in the UAE as these countries look up to the UAE for success in vital diversities to enhance GDP & economy . The UAE wise decisions maker have shown us many success stories that has shocked the world to see and has put the UAE on the top of the world map in many place and more to come to be the best .

khdmohd 8 years ago

Another issue need to be looked at when reading about Emarat business in the UAE market , is diversity of activities . Emarat is a leader in Natural Gas transportation in the Emirates and a leader in services provider such as : oil change, food corner, supermarket retailing and many other related automotive services . The piont is all these services can be lumped under one incorporated compamy through an IPO making the rise of a new public share company with Emarat owening 50% . The intiation of such IPO could provide Emarat with intial cash flow in billions thus covering all its debts . It is will known world wide that the latter services , sepecially the gas transportation can yield huge IPO funds for the owenr that has fully depreciated the assets cost .

Kat 8 years ago

I believe tips handed to petrol attendants already go to the company coffers, while having visited their head office I was surprised by the number of people wandering around seeming to be doing nothing - perhaps a cull of employees would reduce their debt a bit. The business needs realigning - prices have already gone up significantly in the last year - why should customers pay for a top heavy management system.

Original Joe 8 years ago

This is ridiculous. If they are not making a profit it is because of paying inflated salaries. Pay "market rates" for jobs and they would be making a profit! We in the UAE pay the highest prices of any GCC country for petrol!

Ali 8 years ago

The fact that khdmohd has to add "energy expert" to his online name tells more about how qualified he is to talk about such issues than any of his posts, all of which support high petrol prices. Maybe he is just a plain Emarat employee and not the "energy expert" he claims to be?

Ed 8 years ago

I always found it strange that after so many years this issue is not resolved yet. Its fundamental to any business not to sell against loss. For whoever subsidizes the fuel to purchase at market levels is creating a bubble in a false economy. False economies are not sustainable, and hurts in the long term, on all levels. It appears to me a kind of protectionism that is happening, the same the UAE is fighting oversees currently. Although I personally would be affected with petrol increases, it only makes sense for the future of this country and its residence to ensure that petrol is sold at market level. This will drive a shift in general efficiency, consumption trends, environment protection etc, and that would extend to all the layers in the economy. Soon or later, UAE and other gulf states will not escape on this.