Subsidy blues hurt Enoc's operations

When told of the 72-hour deadline imposed by the Sharjah Government, an Emirati energy expert told Gulf News that the Enoc Group may only be able to start partial operations in the northern emirates by the end of the deadline. "A shutdown of pumps in Sharjah would probably be the best thing for the Enoc Group as the pumps are negatively contributing to the company balance sheet. The group has already lost Dh850 million in petrol subsidies from January-May this year and by the end of June, their subsidy bill is going to exceed Dh1 billion," he said. The four UAE oil retailers Adnoc Distribution, Enoc, Eppco and Emarat are paid subsidies by the government to cover the cost of buying petrol at international rates. Adnoc Distribution's subsidies are directly borne by the Abu Dhabi National Oil Company, while Emarat's operating budget is approved by the Ministry of Finance with additional subsidies borne by the Abu Dhabi government. The cost of Enoc's and Eppco's subsidies is borne by the Dubai government. While the government allowed petrol prices to be revised twice last year, this year there has been no revision despite sharp rises in international crude and oil product prices. While Abu Dhabi produces and refines its own crude, Dubai oil retailers buy petrol at market prices from multiple sources. The state oil firms cannot unilaterally revise pump prices without the federal government's approval. "A solution to the problem lies in the Abu Dhabi government agreeing to bear the entire subsidy bill of Enoc Group," the expert, who asked to remain nameless, said. "The other solution is the federal government frees the pump prices of petrol, links them directly to the international prices but, at the same time, subsidises Emiratis in the form of free petrol for cars — I think 100 gallons per person per month should be sufficient." It was in the first week of June, that the petrol stations belonging to Emarat, Enoc and Eppco in the northern emirates began to show shortages which, their officials said, were due to some ‘upgradation works'. Later Enoc and Eppco were forced to shut down most of their petrol stations in some parts of the northern emirates including Sharjah. The fuel shortages at the Enoc Group's facilities have led to the closure of 82 stations in Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairah. Adnoc, meanwhile stepped up its operations in the northern emirates and has been trying to meet the shortfall caused by the shutdown of Enoc and Eppco petrol pumps. Emarat has floated tenders for a large quantity of refined oil to continue supplies to meet the additional demand created due to the shortage. Although global crude prices fell to a more comfortable level near $100 per barrel, petrol retailers are still counting losses. Sharjah hosts a large number of people employed by companies in Dubai and their daily commuting between Sharjah and Dubai especially to Jebel Ali requires a large quantity of gasoline every day. As the situation went from bad to worse, the Sharjah Government sought an explanation from Enoc. "The Sharjah Executive Council has stressed the importance of bringing to an immediate end the crisis at petrol stations in the emirate. "This comes after an official reply from the Enoc Group which includes petrol retailers Epco and Enoc in response to a letter from the Council requesting the real reasons behind the closure of petrol stations, which has caused problems for thousands of motorists in the emirate," the Sharjah Government said. In the regular meeting of the Executive Council, chaired by Shaikh Abdullah Bin Salim Bin Sultan Al Qasimi, Deputy Ruler of Sharjah, the reply from the Enoc Group in which they clarified the reasons behind the closure of petrol stations in the emirate of Sharjah, was discussed, it said. Finally, the Sharjah Ececutive Council on Tuesday gave the Enoc Group a 72-hour ultimatum to open the gas stations or face closures. "The Executive Council has ordered the Sharjah Economic Development Department (SEDD) to grant Enoc 72 hours starting on Tuesday, 21 June to allow the group time to again start operating its petrol stations across the emirate. "Failure to adhere to this deadline will see the SEDD taking the necessary actions, which could result in the closure of the group's stations and facilities in Sharjah," it said. An official letter, in which the Enoc Group was informed of the instructions issued by the Executive Council, was sent by the SEDD on Tuesday with the aim of putting an immediate end to this crisis. "With fuel being an essential component of daily life, the instructions were issued by the Executive Council under the chairmanship of Shaikh Sultan Bin Mohammad Bin Sultan Al Qasimi, Crown Prince and Deputy Ruler of Sharjah, as part of its role to ensure that the needs of Sharjah's nationals and residents are successfully met," the statement said. From / Gulf News