Abu Dhabi National Oil Company is expanding its fuel retail network into Dubai, bringing relief to loss-making retailers in the emirate and offering businesses access to cheaper priced diesel.
Adnoc Distribution, the company's retail arm, announced it was scouting Dubai for locations for an initial 10 petrol stations. After an assessment of Dubai's fuel needs, a development strategy would be put together, and further stations were likely to follow, according to Abdullah Salem Al Dhaheri, director general at Adnoc Distribution.
"We have got plans to expand our services throughout the UAE."
Adnoc's entry into Dubai will immediately benefit consumers.
Although petrol prices are capped at Dh1.72 a litre throughout the country, the sale of diesel is not subject to the same restrictions, leading to a divergence in prices between emirates. Adnoc, which can draw on its own oil production, sells diesel at lower prices than its domestic counterparts.
Adnoc sells diesel for Dh3.25 a litre in Abu Dhabi and Dh3.30 a litre in the Northern Emirates. By contrast, Dubai's Emirates National Oil Company (Enoc) distributes diesel for Dh3.70 a litre at its stations. That represents a saving of about Dh30 for a fill-up for a typical Toyota single-cab Hilux pickup truck with a 3 litre Turbo Diesel engine.
The company's latest plans follow its aggressive expansion into the Northern Emirates, where it took over the bulk of the stations previously run by the Emirates General Petroleum Cooperation (Emarat), the fuel retailer owned by the federal Government.
Dubai's Supreme Council of Energy has welcomed Adnoc's plans to expand into the emirate. The company's retail ambitions are in line with the council's energy strategy, said Saeed Al Tayer, the deputy chairman of the council and the chief executive of the Dubai Electricty and Water Authority (Dewa), WAM reported.
Adnoc said the deal would enhance the strategic partnership with the council and support its efforts to boost its Emirati work force, by recruiting qualified technical and administrative staff.
The move will relieve the pressure on the struggling Dubai-ownedEnoc and its subsidiary Emirates Petroleum Products Company (Eppco), which make heavy losses on fuel subsidies.
With Dubai's oil production only estimated at about 20,000 barrels per day (bpd), the emirate is forced to buy crude on the international markets to meet domestic demand, a cost not covered by fuel sales.
Dubai's Government is partially maintaining Enoc's operations, and in a bond prospectus earlier this year revealed that it had injected a total of Dh5.59 billion (US$1.52bn) into its two retailers by the end of last year. Enoc needs the international oil price to be no higher than $45 a barrel to break even, its chief executive Saeed Khoory said in 2010. Brent sold for more than $108 a barrel yesterday.
In an attempt to narrow its losses, Enoc pulled out of the Northern Emirates last year and now restricts its operations to Dubai.