ENOC, Aldrees team up to build 40 service stations in Kingdom

DUBAI: Emirates National Oil Co. (ENOC) has teamed up with Saudi fuel retailer Aldrees Petroleum & Transport Services Company (Aldrees), to build at least 40 service stations in the Kingdom, the companies said yesterday, in a deal the Dubai-government owned retailer hopes can recover some of its losses at home.
Convenience stores and car washes at ENOC forecourts in the United Arab Emirates (UAE) go some way to alleviating the financial burden of selling fuel at the petrol pumps at well below the price ENOC pays for it on international markets, Reuters said.
But the UAE market is not big enough to offset fuel sales losses which ENOC has said would exceed $730 million in 2011. So ENOC has formed a 50:50 joint venture with Aldrees Petroleum, which enjoys healthy sales margins thanks to plentiful cheap supplies from Saudi Aramco, to increase its revenues abroad.
“We make good returns on the non-fuel business but it doesn't compensate for the losses that we have,” Burhan Al-Hashemi, managing director of ENOC Retail, told reporters at a signing ceremony in Dubai.
“So that's why for the whole organization is to go outside and explore new markets.”
ENOC shut fuel pumps at its petrol stations in the northern emirate of Sharjah last year to limit losses from selling fuel at federally set prices well below its acquisition cost. The profitable Sharjah forecourt shops remained open, but the pump closures caused fuel shortages and long queues at remaining forecourts in Dubai's poorer neighboring emirate.
Abdulelah Saad Aldrees, CEO, Aldrees, said: “With a network of more than 450 service stations in the Kingdom, Aldrees is an industry leader in petroleum retailing in Saudi Arabia. In line with our commitment to add value to our stakeholders, we are continuously exploring expansion opportunities that bring clear differentials to the market.
Unlike Saudi Arabia, the world's largest oil exporter, and major UAE oil producer Abu Dhabi National Oil Company, Dubai does not have enough oil to meet its own fuel needs, forcing ENOC to buy it on the international market.
Aldrees operates more than 450 filling stations in Saudi Arabia, and the partners plan to build at least 40 more in the first phase the 400 million-dirham investment plan. The first is expected to open next year, Reuters said.