By Claire Valdini
Abu Dhabi oil firm will invest US$12m alongside Saudi partner in joint venture
Emirates National Oil Company (ENOC) will open 40 petrol stations and retail outlets in Saudi Arabia as part of a joint venture with the kingdom’s Aldrees Petroleum & Transport Services Company as it moves to stem losses in its home market.
The state-owned firm, which is struggling amid government subsidies in the UAE, will invest SAR45m (US$12m) as start-up capital together with Aldrees.
“We have to increase our source of income to the company,” Burhan Al Hashemi, managing director of ENOC Retail told reporters on Tuesday.
“[Petrol] prices in Saudi have a good margin… it is subsidised by the government but the additional services that we provide, that’s another source of income that we get from non-fuel industries like the car wash and car maintenance.”
The expansion plans in Saudi Arabia are unlikely to have a significant impact on ENOC’s overall revenues but could have a positive impact in the long-term, he added.
“We are going to start with 40 stations, which is not that big. It depends on the market needs, probably in the long term it will have some [positive] impact on the return,” he told Arabian Business.
UAE petrol retailers have been hit by significant losses due to the increasing gap between fuel prices and the heavily subsidised cost at the pump.
The combined losses of the four UAE state-owned retailers are estimated at AED8.5bn (US$2.31bn) in 2011, Reuters said in June.
The government increased fuel prices twice in 2010 as it moved to reduce the burden of subsidiaries, though current prices remain well below market prices. Plans to increase it for a third time were scrapped in the wake of the Arab Spring.
The Federal National Council, which has no legislative power, in June approved plans to cut petrol prices for everyone.
ENOC last year shut down several of its stations in Sharjah and Ras Al Khaimah, forcing drivers to queue for hours at rival petrol provider Emarat’s stations. The closures were because they buy fuel at market prices and sell it at government-set rates.
Abu Dhabi's National Oil Company in June signed a deal with Emarat to take over the management of 74 service stations in Sharjah, Ras Al Khaimah, Ajman, Umm Al Quwain and Fujairah.