Oil giant Total to help ease UAE fuel shortage

Company wins Emarat's tender to buy extra 100,000 tonnes of gasoline from June to Sept
Oil giant Total to help ease UAE fuel shortage
Emarat petrol station
By Staff writer
Tue 14 Jun 2011 08:29 AM

Oiil major Total has won a tender issued by the UAE's fuel
retailer Emarat to buy an extra 100,000 tonnes of gasoline from June to
September, traders said.

Petrol stations in the oil producer have experienced fuel
shortages this month and traders said this has likely increased demand and
prompted the tender.

OPEC member UAE relies on imports of gasoline to meet
domestic demand.

Total will be paid a $9 premium to the average monthly Brent
price, a trader said.

The world’s third largest exporter of crude oil saw at least
six days of fuel shortages this month after supply woes saw petrol pumps at
ENOC and EPPCO stations across the country run dry.

The shortfall, which the company blamed on filling station
upgrades, was likely a reflection of the gap between fuel prices and the
heavily subsidised cost at the pump, analysts said.

Enoc and rival retailer Emarat have suffered from rising oil
prices because they buy fuel at market prices and sell it at government-set
rates. The UAE has long subsidised fuel prices in an effort to cut living costs
for residents, at a cost of millions of dollars each year

“It is more likely due to a shortage of funds,” said Samuel
Ciszuk, energy analyst at IHS Global Insight. “This is quite a common problem
in a system where the retail price is fixed and where the main entity is an
importer of fuel or feedstock.”

In January, Emarat chairman Obaid Humaid Al Tayer said the
company was restructuring and needed bank loans because it must sell gasoline at
below-market prices.

ENOC said in April it expected to spend AED2.7bn ($735m)
this year on providing fuel subsidies. The figure represents a 44 percent rise
from the AED1.5bn it spent in 2010.

John Sfakianakis, chief economist at Banque Saudi Fransi,
said fuel retailers may find it untenable to continue selling fuel if the price
shortfall is not addressed.

“It appears that the retailers don’t find it commercially
viable to keep running, despite the fact that we have seen price increases by
around 30 percent in the last year at the retail level.”

*With agencies

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