Tuesday, Aug 28, 2012
DUBAI (Zawya Dow Jones)--Dubai's Emirates National Oil Co., or Enoc, said it plans to expand into Saudi Arabia by early 2013, and is eyeing other regional markets as the state-owned fuel retailer explores ways to boost revenue.
"We've signed a joint venture with Aldrees Petroleum & Transport Services Company, one of Saudi Arabia's largest petroleum retailers and commodity hauling companies to set up service stations in different locations across the Kingdom," Burhan Al Hashemi, managing director of Enoc retail told reporters in Dubai on Tuesday.
The first phase of the partnership will see 40 stations set up in the eastern province of the Kingdom. This is expected to be finished by the first quarter of 2013 with an initial capital investment of 40 million to 45 million Saudi riyals ($11 million). The overall investment value of the project is SAR400 million, Mr. Al Hashemi said.
"This will help us boost our revenues as the profit margin in Saudi Arabia is good, and it is better than that in the United Arab Emirates, where we sell at 50% of the cost," Mr. Al Hashemi later told Zawya Dow Jones on the sidelines of the conference.
Abdulelah Aldrees, the chief executive of Aldrees Petroleum, said margins in Saudi were better simply because there's a fixed cost from Aramco.
"We buy the 95 octane at 51 hellala and we sell at 60 hellala, which is an 18% margin. We get the 91 octane fuel for 36 hellala and we sell it for 45 hellala, and that is over 25% (margin)," Mr. Aldrees told Zawya Dow Jones.
Enoc has repeatedly complained in the past of the continuing burden of providing subsidized fuel to customers in Dubai, and has seen some of its stations close in the northern emirates outside Dubai. It said last year that the cost of fuel subsidies had a serious impact on it's ability to expand its retail network and that subsidies aren't "sustainable or viable for the company."
-By Leila Hatoum, Dow Jones Newswires; +971-4-446-1686; firstname.lastname@example.org; Twitter: @ZDJnews
Copyright (c) 2012 Dow Jones & Co.
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