Rashid H. Al Shamsi
, General Manager, Emarat

Accelerated growth in Dubai

General Manager Rashid Al Shamsi points out the record speed at which growth is taking place in Dubai. He highlights a recent report by The Guardian newspaper, naming Dubai probably the fastest growing city in the world. “Phenomenal activity in the construction sector, and huge investments in facilities like roads, power and medical facilities all bear testimony to the fact that growth is a way of life in Dubai,” he explains. “But what is critical is that this growth is happening at breakneck speed. What other countries may be content to achieve in a ten-year horizon, Dubai has been able to achieve in a three to five-year timeline. With the Dubai government committed to placing the country on the world map, I expect the growth to be sustained at the current pace for the next three to five years.”

Increase in crude prices problematic

The increase in crude prices is not benefiting petroleum distribution companies, however. In western countries price increases are passed onto customers at the pump because there is no cap on selling prices, and in some Asian economies a hybrid arrangement exists where part of the loss is borne by the government and part by consumers. Yet in the UAE there is a government-imposed price cap on gas at retail outlets, and Emarat is suffering as a consequence. “It has been particularly hard on companies like Emarat to sustain these losses, especially with the cap on pump prices. For more than 18 months we have been selling gasoline products at our service stations below cost, and as a result we have accumulated huge losses.”

Government subsidies a possibility

The question to address, according to Mr. Al Shamsi, is whether petroleum distribution companies should bear the difference between market prices and the capped pump prices. “We have no control over the procurement prices as this is determined by international market forces,” he points out. “Like any other business activity, unless we can sell the product above cost price, we will continue to incur losses which have been affecting us.” Mr. Al Shamsi feels that the UAE government should form a policy on how the difference between procurement and selling prices is to be bridged, otherwise the existence of companies like Emarat is threatened. “It is encouraging to note that the UAE government has realized the need to address this issue in the wider economic and social context,” he comments. “The Cabinet has now appointed a Ministerial Committee to identify a suitable solution, which will hopefully be equitable to all concerned parties.”

Environmentally aware

One positive consequence of high oil prices is the realization that oil resources will not last forever. This is prompting the conservation of energy resources and also interest in renewable sources like solar and wind power. Emarat already has a long track record in environmental issues. It was the first company in the Middle East to sell unleaded petroleum products and all its service stations are ISO 14001 certified. Natural gas will be available to the UAE domestic market by 2007, and there is also a move towards using compressed natural gas (CNG) for public transport and commercial fleets. According to Mr. Al Shamsi, “Around the world, CNG has proved to be an environmentally friendly fuel as it controls emissions, leading to an improvement in air quality.”

UAE attractive for foreign investors

Mr. Al Shamsi believes that the upstream oil and gas sectors in the UAE continue to remain attractive to foreign investors. With per capita energy and oil consumption in the UAE among the highest in the world, there are opportunities in sectors including power generation, efficient utilization and conservation of resources. He points out that the UAE presents a wealth of opportunities in solar power, where there is scope to manufacture silicon chips, for example. “The energy sector can be further strengthened with exploitation of other energy forms like wind, geo-thermal and wave energies,” he says. “Wastelands can be used to cultivate vegetation for bio-diesel. The availability of natural gas can be translated into cheap production of interesting products such as hydrogen, mono ethylene glycol and methanol.”

Right conditions for investment

Mr. Al Shamsi believes that the potential to develop the energy sector in these different areas – combining innovation with backward integration – will be extremely attractive to a foreign investor. He says, “The easy availability of capital, scientific manpower, infrastructure, friendly investment policies, easy money transfer methods and a liberal outlook can certainly help in the set up of technology-driven sectors like lube and fuel additive industries and crude flow improvers. “These can not only meet local demand, but also can efficiently serve foreign markets. It is my considered opinion that Dubai and the UAE may well be the dream destination for a foreign investor.”

Looking to the future

For Emarat, high oil prices continue to remain a significant cause for concern, especially when pump prices are fixed and there are no government subsidies. Mr. Al Shamsi points out that the awareness of the scarcity of petroleum products makes low oil prices unfeasible for the future. He says, “I believe this current challenging scenario will eventually lead the government to adopt a more market-related pricing policy in combination with a form of phased-out subsidy, eventually leading to full liberalization in the long term. Such liberalization may also become necessary with the arrival of the WTO norms.”

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Established in 1981, Emirates General Petroleum Corporation “Emarat” assumed responsibility for the marketing and distribution of petroleum products and related services in the UAE In a relatively short time, the Corporation began playing a significant role in strengthening the economic stability and domestic industry in the United Arab Emirates. The year 1996 witnessed comprehensive changes in the Corporation’s overall business operations changing its identity to Emarat. While petroleum related products has remained its core business Emarat has expanded its activities to other sectors. 1998 saw the introduction of “Lube Express Centers” providing motorist with a fast, efficient oil change facility at selected service stations. In 1992, Emarat introduced a range of top quality international standard lubricants and specialty products. Emarat also acquired 20 percent equity in a lubricant blending plant with BP and Exxon Mobil, exporting its range of lubricants to the subcontinent, Middle East and African markets. The Corporation’s first move into the regional aviation market was in 1992 through the formation of “Emojet”, a joint venture with Exxon Mobil to serve Dubai International Airport. Emarat also operates in Sharjah and Fujeirah International Airports. Emarat’s client base is wide and varied ranging from motorists to government organizations, major companies and leading international airlines. Emarat is a leader in the retail petroleum sector, with a 51 percent market share. Besides, Emarat is a major supplier of dry gas to power stations and industrial customers in the UAE. Its LPG bottling plant also caters to domestic requirements.

Commitment to excellence and constant quest for quality products and services earned Emarat ISO9001 certification and the prestigious Dubai Quality Award. In 2005 Emarat has been certified for ISO 9001:2000, ISO 14001:2004, and OHSAS 18001:1999 for its service station operations. Emarat launched in July. 2004, Bakeria, a first of its kind concept across the Middle East. Offering a variety of Interesting coffees, beverages, gourmet sandwiches and freshly baked breads. Emarat launched “Fast Track” in partnership with the World Automotive Group. A facility that offers a range of efficient, quick, quality repair and maintenance for automobiles in its service station across Dubai and the Northern Emirates. As a corporate social responsibility, Emarat undertakes contributions and participations in community programs. Emarat has also introduced recycling collection centers called RVMs at its service stations across Dubai.