Abu Dhabi sees demand for distribution services in wake of subsidy reforms

 

Rising demand for cleaner, greener modes of transport is driving the expansion and modernisation of filling stations across Abu Dhabi that increasingly cater to cars, buses and taxis powered by electricity, compressed gas, petrol or diesel. The Abu Dhabi National Oil Company (ADNOC) subsidiary responsible for meeting this demand, ADNOC Distribution, is also generating healthier revenues following the UAE government’s decision to remove subsidies and set monthly charges aligned to international prices.

Broad Scope

Founded in 1973 to retail petroleum products in the UAE, ADNOC Distribution’s scope has since broadened considerably. The company’s aviation services division caters to cargo and passenger flights operated by civilian airlines as well as the military, while its maritime division includes bunkering facilities at Zayed Port in Abu Dhabi to refuel ships.

The company distributes compressed natural gas (CNG) for use in vehicles through its Natural Gas for Vehicles (NGV) project, and supplies households in the UAE with liquefied petroleum gas cylinders it manufactures at plants in Musaffah and Al Ain. Its service stations – Oasis stores, Autoserv car repair depots and Salama vehicle inspection centres – provide a range of retail services for road users, while its lubricant and packaging business, which operates under the ADNOC Voyager brand, has a growing export footprint in the Middle East, Africa, Europe and East Asia. The company had more than 13,600 employees in 2015.

Subsidy Reform

In its “2015 Sustainability Report”, published in November 2016, ADNOC revealed the UAE’s change in fuel subsidy policy, which came into effect in August 2015, enabled the government-owned company to make its first profits in a decade, even though diesel came down in price. The reforms saw diesel fall from Dh2.90 ($0.79) per litre to Dh2.05 ($0.56), while unleaded 91 grade petrol increased from Dh1.72 ($0.47) per litre to Dh2.07 ($0.56), with the 95 and 98 grades increasing to Dh2.14 ($0.58) and Dh2.25 ($1.38), respectively. In the 18 months that followed the reforms, the price of fuel products fluctuated and was guided by the federal Ministry of Energy. In January 2017 the price of 91 Octane unleaded petrol had fallen to Dh1.73 ($0.47) per litre, with 95 and 98 costing Dh1.80 ($0.49) and Dh1.91 ($0.52), respectively, while diesel had decreased by a third from the July 2015 price to Dh1.94 ($0.53) a litre.

However, in spite of monthly changes in market prices, the change in subsidy policy has had a substantial impact across the business. “The deregulation of prices on retail products has brought about a significant transition in how we conduct business, enabling major expansion drives across all parts of the supply chain, including terminals, fleet, pipelines and petrol stations,” Saeed Mubarak Al Rashdi, acting CEO of ADNOC Distribution, told OBG.

Expanding Network

Among the most visible signs of the company’s growth is the expansion of its network of filling stations, many of which have ADNOC Oasis 365 convenience stores, restaurants and carwash facilities. The company opened 16 new petrol stations across the UAE at the end of 2016, taking its total in Abu Dhabi to 166. The firm is working towards expanding its network to 450 outlets across the country by the end of 2017, a year in which it plans to provide a further 34 filling stations.

The company has identified a number of sites in Abu Dhabi, including 12 planned developments on arterial roads that will cater exclusively to refuelling and help to reduce queues at other stations in the network. “Based on figures, the number of petrol stations in the emirate still lags behind demand, and expansion here is a key part of our strategy,” Al Rashdi told OBG. With each new station, the company provides opportunities for third-party providers of car repair and maintenance services, and many of its facilities are built to include food and beverage outlets, with restaurants and drive-through facilities occupied by well-known international brands. In 2017 the company is looking to set up seven electrical charge stations across its network.

Smart Solutions

ADNOC Distribution is also investing in smart solutions designed to improve the operational efficiency of retail sales, while at the same time meet customer expectations by providing the latest payment methods, such as radio frequency identification (or RFID) Emirates ID and, in the near future, mobile-enabled payments using near-field communication and quick response technologies. All payment tokens are linked to a Wallet, which can be managed online. The Wallet solution enables the company to gather data on consumer behaviour and preferences to help it tailor its services in the future.

Alternative Fuels

ADNOC Distribution is also adapting the mixture of fuels it sells to meet the changing needs of both corporate and consumer clients, and respond to government drives to increase fuel economy while reducing the harmful effects of pollution. In 2015 it installed a CNG filling station for a fleet of 61 NGV buses run by another of ADNOC businesses – the refining company Takreer in Ruwais. Takreer subsequently purchased another 31 NGV buses. Demand for CNG pumps at filling stations has been rising, driven in part by Emirates Transport, which has converted 5400 taxis and buses to CNG, according to media reports.

According to ADNOC’s “Sustainability Report 2015”, the company plans to have a network of 50 CNG refuelling centres across the country, estimating that if petrol prices were to stay above Dh2.00 ($0.47) per litre for any length of time, more individual drivers might consider converting their cars to CNG to save on fuel bills as well as emissions. It is also gearing up to cater to anticipated growth in demand for recharging stations for electric vehicles. It plans to establish recharging points at seven of its facilities in 2017 and is assessing how it might work with partners to provide this service.

Green Initiatives

In addition to assisting its customers in reducing emissions by providing alternative fuels, ADNOC Distribution is taking steps to monitor and reduce its own carbon footprint. The company has reported its greenhouse gas emissions were 162,440 of CO equivalent in 2015, including 2496 tonnes of volatile organic compounds, 154 tonnes of sulphur oxide and 16 tonnes of nitrogen oxide. The company aims to reduce these levels and has committed to publishing performance reports on these indicators in future years. It is also working to reduce the impact of fuel leaks and spills on the environment and is using passive soil gas surveys to assess the state of the soil beneath 25 of its newly acquired service stations in the UAE. ADNOC Distribution has also used vapour recovery technology for several years to capture and recover fumes from its fleet of petrol road tankers.

Aviation Sector

The aviation sector is an increasingly important segment in the Abu Dhabi economy, and ADNOC Distribution plays a vital role in keeping military and civilian planes in the air. The company has served more than 200 national and international airlines. Its aviation operations began at Abu Dhabi International Airport in 1982, and its five aviation depots refuel 70 different airlines at international airports in Sharjah, Fujairah, Ras Al Khaimah and at Al Maktoum International Airport in Dubai, as well as at Al Bateen Executive Airport in Abu Dhabi. The company also has a dedicated Joint Inspection Group-accredited training facility at Abu Dhabi International Airport that has been running workshops in refuelling and airport safety since 2014. The facility’s courses are also accredited by the International Air Transport Association.

Kizad

In May 2016 ADNOC Distribution announced a new expansion of its facilities at Khalifa Industrial Zone Abu Dhabi (KIZAD). The firm is planning to build strategic warehouses to support its distribution network across the UAE. From its new KIZAD facility ADNOC distribution will supply Jet-A1 fuel to Al Maktoum International Airport in Dubai and Abu Dhabi International Airport, as well as gas oil to the Al Taweelah Power and Desalination plant. The new site will allow ADNOC Distribution to store 545,000 cu metres of fuels, including 180,000 cu metres of capacity for Jet-A1 fuel, 105,000 cu metres for Special 95 petrol and 75,000 cu metres for fuels such as E Plus 91.

Sea Services

ADNOC Distribution’s maritime facilities include two service stations for fishing and pleasure craft, the second of which opened at Al Marfaa in September 2016. The marine service station, which offers a round-the-clock service, has a floating dock equipped with floodlights for night-time operations and fire fighting equipment. Larger maritime vessels are served by its facilities at Zayed Port, which caters for the maritime needs of oil companies, construction firms and international ships operating in Abu Dhabi waters. ADNOC Distribution’s bunkering facility offers fuel by pipe, road transport or ship-to-ship. Its products include maritime gas oil and heavy fuel oil, which is supplied directly from the Ruwais refinery. Across its services to land, sea and air customers, ADNOC Distribution is expanding to meet demand, while also striving to reduce the carbon footprint of its operations.

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Abu Dhabi 2017

Energy chapter from The Report: Abu Dhabi 2017

Cover of The Report: Abu Dhabi 2017

The Report

This article is from the Energy chapter of The Report: Abu Dhabi 2017. Explore other chapters from this report.