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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