ENOC, ENOC, knocking on Saudi’s door
Eva Fernandes thinks the recently announced ENOC-Aldrees partnership marks the beginning of many more such tie-ups for Dubai's troubled petrol pumps.
August 29, 2012 3:56 by Eva Fernandes
And so, almost 15 months after the epic ENOC debacle, the company has announced its next steps. Teaming up with Saudi retailer Aldrees, ENOC will build no less than 40 service stations in Saudi Arabia. ENOC’s choice of operations is interesting—but it has to be noted that though Saudi fuel stations charges its customers even lower rates than the UAE, the government also charges its retailers much less for its gasoline. ENOC is hopeful for its new partnership and given its rocky past couple of months, it is easy to see the dire need to turn a profit.
After all, it was just last May when ENOC sent customers away from some of its petrol station in the Northern Emirates under the guise of ‘technical upgrades’—despite observers failing to notice any physical type of upgrade. Frustration expressed by customers stuck in taxingly long lines at ENOC petrol pumps did little to garner a response from the company. When rumors of a potential take-over emerged the company denied them point blank.
Still it wasn’t too much of a surprise when ENOC announced plans to close 51 petrol stations in the Northern Emirates—some estimate the company to have suffered a loss of anywhere from $730 million to $1.5 billion last year. ADNOC came to the rescue and was ordered to take over ENOC’s stations around the country (except for the ones in Dubai) and that was that.
So is the company turning over a new leaf? Is moving into regional markets such a wise idea? After all, due to Dubai’s lack of oil, the issue facing the company was the challenge to buy oil on the international market but sell it at the government mandated price of Dh1.72 a liter. With prices rising as high as $110 a barrel last year, is there any surprise ENOC was suffering? Now of course, the price Saudi retailers charge their customers are even lower, with Aldrees selling at SAR0.45 (Dh 0.44) per liter.
A 50:50 partnership is surely the best way to way for ENOC to enter an international market and given Dubai’s lack of oil, the Aldrees tie-up may just signal the step forward for ENOC-both internationally and within the UAE; not just for ENOC but perhaps also Emarat.