A spike in oil prices and the persistence of heavy fuel subsidies will increase losses at Dubai-owned Emirates National Oil Company (Enoc) in 2011.
The company will record a loss of $735m this year, the company has said in a statement, up from a loss of roughly $400m in 2010.
Dubai’s oil production is insufficient to meet domestic demand, and state-owned Enoc is forced to buy fuel on the international markets, exposing it to a price spike that saw crude sell for as much as $128 a barrel this year.
The strain of fuel subsidies had led Enoc and subsidiary Emirates Petroleum Products Company (Eppco) to close its petrol stations in the neighbouring emirates in June. “The substantial rise in the price of fuel in the international markets – the highest ever recorded since 2008 – has put a severe burden on Enoc and Eppco, which for many years have distributed and continue to distribute fuel to end-users at a highly subsidised rate,” the company said in a statement.
Enoc has raised retail prices twice in recent years, hoping to reduce the loss margin. But the civil unrest that has swept through the Middle East during the Arab Spring has deterred UAE’s rulers from cutting any of the generous subsidies granted to Emiratis.
Abu Dhabi National Oil Company (Adnoc) has instead committed itself to supplying the poorer northern emirates, which include Sharjah and Fujairah, with petrol, and has announced it is expanding its retail network in the north.