Adnoc joins the fray by cutting diesel oil prices

An Adnoc gas station in Sharjah industrial area. After the cut in prices on Saturday, Adnoc will distribute diesel at Dh2.90 a litre. Photo by M. Sajjad/ Khaleej Times

Abu Dhabi — Adnoc Distribution, Abu Dhabi’s oil marketing and distribution company, has reduced diesel price by 15 fils to Dh2.90 a litre with immediate effect.

The new price was announced on Saturday as Dubai’s Enoc cut fuel oil prices by 6.4 per cent to Dh2.90 a litre.

The prices of diesel prices started reducing since November last year as a consequence of plunging oil prices in international markets.

Adnoc Distribution sells 250 million litres of oil in Northern emirates while Enoc and Emarat each have a share of 100 million litres a month. In Abu Dhabi, Adnoc Distribution sells 150 million litres a month.

Khalid Al Awadhi, an expert at Dubai-based consultancy Hawk Energy, blamed the oil marketing and distribution companies for making profits on selling diesel. He said they were still making Dh1 a litre on an international Brent price of $55.

In the UAE, petrol prices are subsidised as a government policy since the past 10 years; however, diesel is sold as per international prices because of its wide-scale commercial use by construction, transport and other industries.

The prices have been revised at a time when Abu Dhabi’s oil refinery Takreer went into commercial production of the expansion phase under which it would refine 417,000 barrels a day. The project was commissioned in December and is now running on 100 per cent capacity.

However, Al Awadhi said the cut in diesel prices was not due to the new production coming online. The new supply will provide energy security because crude oil is sold to Takreer on international prices as the oil-producing companies are 40 per cent owned by foreign companies.

Diesel is purchased from Saudi Arabia, Kuwait and other suppliers on prevailing international prices, which is sometimes cheaper than the local refiners, he said.

Al Awadhi said that UAE oil companies are subsidising gasoline prices and incurring huge losses. For example, in a period from July 2008 to November 2014, they lost Dh38 billion to subsidies.

Syed Abrar Ali, general manager of Bilal Group, a Dubai-based conglomerate involved in transportation and construction projects in Dubai and Abu Dhabi, said diesel is a major component in construction projects, where heavy machinery like cranes and earth-moving equipment are extensively used.

On a typical oil and gas construction project, diesel prices could accont for 15-18 per cent of the total project cost, Ali said. “So, any cut in the price means a lot,” he said, “because we bid for the projects with the higher fuel cost.”

— haseeb@khaleejtimes.com