ADNOC Buys Out Emarat Network - Finally

(Photo credit: SimonQ錫濛譙)

So it seems that the northern emirates' green gas stations are finally to go blue - ADNOC has announced it has signed an agreement to acquire Emarat's 75 service stations and its Sharjah distribution terminal. The service stations will 'gradually' be rebranded, according to Gulf News today.

This agreement is presumably different in some way to the memorandum of understanding the two signed in May of last year. That was reported at the time to relate to "74 of Emarat's 100 stations in the northern emirates".

I posted about it at the time and thought no more of it, but sure enough there appears to have been a year-long process turning an MoU into an actual deal. Which is not the niftiest piece of M&A work I've seen, I must say. One does wonder what the stumbling blocks were to cause such a hiatus between intent and action.

Just as a reminder, the story's all about the cost of subsidising petrol, because Dubai doesn't have a refinery, its petrol distribution companies have to buy at market rates and then meet a Federally mandated subsidised price point, which loses them significant amounts of money. So both ENOC/EPPCO and Emarat wanted out of the Northern Emirates pronto. Emarat may have negotiated the transition more elegantly. The end result was that most amusing of situations, a petrol shortage in an oil-producing country.

Try as I might, I can't find the story on Gulf News' website. It's not in business, not in oil and gas and doesn't come up in a search of the site. And yet it's front page business in the print edition. I wonder why?

The whole shebang won't really change much for drivers in the north, particularly in Sharjah where queues at the ADNOC stations can get really quite long. The red EPPCO stations have been partly or totally dismantled or just stand idle, as do the light green ENOC ones - unloved, rubbish-strewn and dusty they stand, useless pieces of seemingly unwanted real estate...

Will ENOC/EPPCO Stations Reopen In The Northern Emirates?

(Photo credit: Gerry Balding)

The news broke a few days ago. with news outlets all reporting ENOC was seeking 'alternative sources' for condensate to feed its 120,000 barrel-a-day refinery in Jebel Ali. Yesterday, late in the afternoon (too late, for instance, to give pesky local reporters a chance to ask questions) it issued a press release announcing it had closed a deal with Qatar's Tasweeq to secure a supply of 20,000 barrels per day of condensate.

This, according to ENOC, avoids having to import Iranian condensate. To quote the release:

ENOC diligently adheres to all prevailing laws and regulations to ensure that its business is conducted in line with applicable sanctions, and has been continually studying the sourcing of alternative economically viable condensate feedstocks for its refinery in Jebel Ali.  

As a result of various steps implemented by the management, ENOC has imported 20% less Iranian condensate in the second half of 2012 compared with the first six months of the year. One of the challenges in managing the crude imports was the availability of alternate grades in required volumes and prices. 

By exploring partnerships with new suppliers, ENOC is highlighting its commitment to continually optimise its refinery operations, adherence to the highest ethical standards in all operational aspects and creation of long-term value.

Some commentators have inferred this may lead to the shuttered ENOC/EPPCO petrol pumps in the Northern Emirates re-opening, but there's no evidence in here at all of that. ENOC's under pressure to reduce its loss-making refining operations - hence buying crude from Iran in the first place - but has now come under pressure to find alternative sources.

That's not about to make things any better 'oop North' and mean they can start selling profitable petrol from their forecourts. It's more likely to be a 'like for like' pricing deal - and it would have been interested to be a fly on the wall of some of those meetings to see quite who was pulling the strings around here.

Perhaps an answer to that comes in the shape of those recent ENOC comments about alternative sources of supply, which coincided with a visit to the U.A.E. from David Cohen, the U.S. Treasury Department's undersecretary for terrorism and financial intelligence...

Anyway, it doesn't really matter that much. Everyone's got used to there being no EPPCO stations and although the ADNOC stations are busy, the long and ironic queues from the original 'petrol shortage in oil producing country' glee are a thing of the past.

ADNOC To The Rescue!

English: Emarat gas station, Masfut just west of Hatta city, UAE (Photo credit: Wikipedia)

Remember PetrolGate, the amazing story of how an oil-producing nation ran out of petrol? And the embarrassing silence of ENOC/EPPCO regarding the closure of its petrol stations in the Northern Emirates?


It's linked here for your viewing pleasure.

Now there's a new and fascinating twist to the tale. The Abu Dhabi National Oil Company, ADNOC, has signed an MoU with major retailer Emarat to acquire 74 of its 100 petrol stations across the Northern Emirates (Sharjah, Ajman, Umm Al Qawain, Ras Al Khaimah and Fujeirah).

ADNOC is the only fuel company in the UAE to refine its own petroleum, so it can sell petrol profitably at the UAE's subsidised prices, while the others have to buy their petrol on the international market. This means they were actually losing money for every litre of fuel they pumped.

Just in case readers living elsewhere in the world are interested, we currently pay Dhs 1.72 per litre or $0.47 or, if you prefer, £0.30. It's why I like chatting to London cabbies about how much it costs me to fill a Shogun (the Pajero is called a Shogun in Europe, one suspects because of a little Spanish accident). They're always cheery souls and it does them good to hear me chat about filling a 4WD for under twenty quid.

ENOC found it preferable to close its 51 petrol stations in the Northern Emirates rather than go on selling motion lotion at a loss. That loss cost the Government of Dubai (which owns ENOC) a cool $1.5 billion up to the end of last year.

ENOC's handling of the whole thing eventually led to the Government of Sharjah taking the unusual step of closing down all of ENOC/EPPCOs retail operations in the Emirate.

Amusingly, The National reports the news on the front page of its business section today, adding the detail,

"Like Emarat, Enoc has responded to losses by cutting its exposure in the Northern Emirates. It handed over its petrol stations outside Dubai to Adnoc last July."

This news was actually 'categorically denied' by ENOC last year when Gulf News originally ran the story of ENOC's Northern Emirates stations being taken over by ADNOC. The categorical denial was unusual, coming from a company that had maintained a policy of mendacity followed by radio silence.

Meanwhile, ADNOC will now operate a total of 224 petrol stations throughout the UAE. Profitably.

ADNOC - The Winner Takes It All?

Image via WikipediaGulf News certainly has the bit between its teeth on the ENOC Group story. Today's paper asserts that 'sources in the oil sector' have said the UAE government is 'moving to cancel licenses owned by ENOC and EPPCO in the northern emirates and allow ADNOC to take over the running of the service stations.'

That this move is being discussed seriously is hardly a surprise after the past few weeks' shenanigans, but the discussions (at least, those Gulf News reports) are remarkably wide-ranging. Apparently, the ENOC Group has been arguing that the fuel price should rise to realistic market rates - that would treble the price of petrol in the UAE. Although such a rise in fuel prices would be felt at the pumps, the issue is much wider than that. As a component in economic cost, petrol is an insidious little critter. If the cost of transportation of goods went up commensurately, we'd see some serious rises in commodity prices here, something that nobody really wants right now. Even the suggestion that UAE Nationals receive a petrol subsidy was apparently rejected - and quite, right too - they wouldn't be immune to the rise in the price of basic foodstuffs and other daily needs that would be triggered by unleashing a 300% increase in petrol cost.

Besides, if Abu Dhabi's ADNOC can profitably refine fuel at the current capped prices, why buy the stuff on international markets at all?

However, worryingly, for the last three days my local ADNOC hasn't had any Masafi, just Al Ain water. Please don't tell me this whole scenario is about to be repeated in the bottled water sector - I only drink Masafi...

Of Genies And Bottles

Apart from a vague and popularly considered mendacious statement about pump upgrades, the petrol station operators responsible for the fuel shortages in the UAE have remained silent. Both Gulf News and The National report today with sidenotes to the effect that no spokesperson could be reached from Enoc/Eppco or Emarat. And, in fact, The National notes that officials from Jebel Ali Port were also unavailable or not commenting.

Gulf News today played catch-up with The National, which sent reporters to Enoc/Eppco petrol stations to determine that no pump upgrade work was going on, as it reported yesterday. GN today files on 'sceptical motorists' who point out, as I have indeed found, that stations 'closed for upgrading' miraculously open after the supply truck has swung by. The National has, once again, done a sterling job.

The lack of transparency is so stunning, it's amusing. This is, indeed, humour of the incongruous. And, of course, by failing to tackle the very proper concern of the general public, the operators are making it all a great deal worse. The papers are rubbishing the statements and talking to petrol pump attendants, motorists, analysts - in fact, anyone who'll talk to them. The result is a rising tide of reporting and growing public alarm which is leading to panic buying. This, of course, is putting more pressure on those stations that do have fuel and now even Adnoc stations are running dry despite the fact that they don't actually have an underlying supply problem.

So by staying silent, the operators are creating an ever-larger rod for their own backs. Tell people what the problem is, how you're solving it and how long it'll take. It's not actually very difficult.

What's the solution? Well, even the most hide-bound of morons would have worked out by now that the genie is out of the bottle. Social media, that Internetty thing, allows people to share opinions and views - so we all know what the papers are trying to prove - the stations aren't closing for upgrades. They haven't got any fuel to sell us because deliveries aren't coming through. There is a very real and basic problem here and it's not logistics or maintenance. As Gulf News quotes Kate Dourian, Middle East editor at Platts:

"Emarat, like the other two main gasoline suppliers, Enoc and Eppco, has for years been operating at a loss because it buys product at international prices and sells at government-regulated prices below market value."

This GN story goes into some depth regarding the subsidies issue.

That's not an 'issue at Jebel Ali' or a 'pump upgrade'. That's a very real systemic problem that could well have medium to long term effects - the issue has been bubbling under for months, with incidents of shortages going back to last year. So this is hardly a new situation - there has been plenty of time to plan a better, smarter communications strategy than dumb silence and unsustainable assertions.

The irony is, of course, that if irate consumers withdraw their custom, these companies will breathe a sigh of relief! So why not just clam up and wait for it to all blow over? Once supplies are restarted, people will forget all about it and life will go back to normal. They're not answerable to any consumer association or ombudsman, so a strategy of silence won't do them any harm, right?

Wrong. It's yet more bad publicity for the country as a whole (the oil producer that ran out of fuel - wait for the internationals to pick that one up) driven by old-fashioned contempt for the media and public that has resulted in considerable concern and inconvenience for a large chunk of the population.

We can all see the genie. Perhaps it's time for the operators to tell us what they're planning to do about it. When they do, they can console themselves with this: there's no shame in telling the truth.

UAE Petrol Crisis. The Mystery Deepens

I retain my sense of wide-eyed amazement that this situation could be possible: a fuel shortage in an oil producing country. Today's newspapers are full of the story and a remarkable pattern is emerging of silence and mind-boggling mendacity on the part of the distribution companies being hit by the shortages.

In fact, The National (James Bond's favourite Middle Eastern newspaper, dontcha know) leads with 'Empty filling stations and the great fuel mystery', gleefully reporting that retailers Enoc and Eppco (two brands of the same company, in fact) have cited pump upgrades to their 167 stations across the country as being the cause of their empty forecourts. The newspaper's reporters visited a number of the stations and confirm what you already possibly suspect: there is no sign of any work going on to upgrade anything in any way whatsoever. I have personally seen closed stations opening again once a tanker has visited, so there must obviously be some degree of indecision regarding which stations to upgrade.

Gulf News contents itself with unquestioningly repeating the statements made by Enoc/Eppco regarding upgradation to the petrol pumping network facility terminal equipment. By the way, you can just juggle up the words from the last sentence as you see fit because whichever way you place them, they mean the same thing. Emarat has maintained a dignified silence throughout.


Meanwhile Dubai Eye Radio's The Business Breakfast interviewed an 'expert' who spent his time on air speculating that this could be some sort of pipeline issue.

Inside The National, we see mention of the issue of subsidies, regulated prices and supply that many are speculating is actually the issue behind the shortages - at current government-set prices and with oil prices hovering around the $100 mark, it's hard to retailers to do anything other than make massive losses - The National quotes Enoc's CEO as saying that selling fuel at the regulated price cost it Dhs1.5 billion last year - despite two very unpopular price rises taking place over the year. Adnoc, of course, refines its own fuel and so has been unaffected by the need to upgrade its pumps.

This remains speculation, however, as the retailers who have run out of fuel (sorry, who are upgrading their pumping infrastructure) have for weeks now either maintained a stoical silence or thrown out chaff in the shape of vague and arguably mendacious statements. That policy, so popular here but increasingly unrealistic in the age of online and social media resources, has led to a risible situation - everybody knows that something is very, very wrong but nobody is allowed to talk about it officially. It does rather remind me of the burrow in Watership Down where the society of well-fed, sleek rabbits who are being snared by the farmer who's feeding them are prohibited from using the words death or snare.

Where's Ze Betrol?

Queues during the last 'fuel crisis' here in  2008, when ADNOC was selling fuel for 

Dhs10 a gallon less than Dubai's filling stations. Story here.

It was a funny weekend. After being turned away by EPPCO and ENOC stations, we finally joined the snaking queues at ADNOC and bustled our way through the jostling and aggressive throng of cars competing to get to the ranks of pumps.

'Why no petrol?' I asked the EPPCO guy.
'Government issue, maybe.' He grinned.

Gulf News ran a report on the situation the other day, but has obviously continued to receive nothing but the traditional filibustering, half-truths and downright dis-ingenuousness from spokespeople. For instance, this little classic from ENOC, reproduced by Gulf News:

"Enoc is managing its fuel supplies to meet the current demand. This involves a two-pronged approach of regulating the distribution of fuel through our network, as well as upgrading selected stations."

Luckily, GN has got hold of some third party analysts who confirm that the issue is actually that of subsidies, with petrol distributors in the country losing money for every litre they sell. This has led to problems underwriting the ongoing loss and so we find ourselves in the odd position of living in an oil-producing nation where the petrol pumps have run dry. The assertion is one made by commenters to this here post on the issue back in April - we must have reached some sort of crisis point last week.

You'd think ADNOC would be pleased at the increased business, but looking at the economics, they're just losing more money faster than anyone else.

I can feel a petrol price hike coming up. Now, given I fill my Pajero for a sum of Dirhams that fills a small hire car in the UK in pounds (we pay per gallon what you pay per litre, people), you'd be forgiven for whipping out the world's smallest violin and playing us all a lament. But an increase in fuel would have a huge knock-on effect on things like food prices here.

Even Pepsi and Coke have put up their prices recently. Grief.