ENOC: Expansion through diversification
Saif Humaid Al Falasi, group CEO at the Dubai Government-owned ENOC, says he realises that the current period of downturn in the global oil and gas market requires the development of policies and strategies capable of handling these market fluctuations
The Emirates National Oil Company (ENOC) is present in 60 international markets and has strong partnerships with several companies in the Middle East, South East Asia and Africa, which support its presence and influence in these markets. However, it is the urge to meet the growing demand for energy in all industrial sectors in Dubai, and the UAE as a whole, that is driving the ENOC group to focus on the next phase of studying new opportunities for expansion and acquisition within the country and abroad.
In addition to this, by virtue of the acquisition of international company Dragon Oil in 2015, the scope of the ENOC group’s operations has expanded into Iraq, Turkmenistan, Algeria, Egypt, Afghanistan, Tunisia, and the Philippines.
The group’s CEO, Saif Humaid Al Falasi, told Arabian Business Arabic in an interview that the integration and acquisition strategy adopted by the organisation – through which all avenues of available growth in the regional and international market, including potential acquisitions, are studied – contributes significantly to fulfilling ENOC’s commitment towards Dubai.
ENOC’s business is segregated into five distinct verticals. Could you elaborate on those?
ENOC’s operations fall under five areas: exploration and production (E&P), terminals (storage), supply, trading and processing, marketing and retail. In addition, ENOC Marketing manages a group of oil and gas products, including industrial products and aviation fuel, and gas and lubricants products. This vertical also engages with a wide range of customers across the Middle East, the Indian sub-continent, South and Central Asia, and Africa. The marketing unit covers commercial supply requirements in the Middle East, Asia, Africa and the Commonwealth of Independent States (CIS) countries, and local markets.
The ENOC Lubricants Marketing unit works in over 50 countries in the Middle East, Africa, South East Asia, the Indian sub-continent, and the CIS region. The group owns Emirates Gas LLC, which is considered the biggest network for the distribution of gas and its derivatives in the UAE.
Could you elaborate on ENOC’s midstream and storage capabilities, and give details about its retail division?
ENOC maintains a considerable network of storage facilities and has a strong geographic presence around the world. The group’s combined storage capacity and large number of tankers contribute to different operations in boosting oil trading and marketing activities. The group manages 11 storage complexes in Morocco, Djibouti, Saudi Arabia, South Korea, Singapore and in the UAE, through its subsidiary, Horizon Storage Sheds.
As part of the group’s strategy, focussing on investing in modern technology to enhance customer satisfaction across all business verticals, earlier this year we launched a number of leading initiatives and projects – the ‘green stations’ project and campaign to install solar panels in service stations, for instance.
Moreover, we have launched a project named VIP (Vehicle Identification Pass) – a system powered by radio waves. The mechanism leads to systematic sale of retail fuel and allows all ENOC or EPPCO customers the convenience of fuelling at the stations through a technology that enables time-efficiency and security, and removes the need to pay by cash or cards.
The group also owns and manages a network of 112 service stations in Dubai and the Northern Emirates, and three service stations in the Kingdom of Saudi Arabia, and plans to add 11 new stations in the kingdom during 2016. We have recently expanded our service stores network and service stations chain in Saudi Arabia through acquiring privileges in those markets.
Currently, we are making huge investments to establish 54 additional service stations in Dubai during the next five years, which would contribute to meeting the growing demand for fuel in the emirate.
How has the oil price slump affected ENOC?
Everyone has been affected by the oil prices decline in the region and the world. The products and merchandise sales returns, linked to the US dollar, have also been impacted by the oil price decline.
As for the ENOC group, we have witnessed a decline in the rate of consolidated revenue over the year. However, despite the challenges posed by the hostile economic situation, we witnessed a 16% rise in the sales volume of crude oil and petroleum products over 2015 that exceeded 220,000 barrels per day, compared to the previous year. This rise in crude sales helped ENOC register a 45% jump in returns – the biggest spike in the last five years. That reflects the strength of operations and sales performance of the company.
Do you have a strategic plan to diversify your scope of business?
Our strategy is based on diversification of the group’s income sources via investing in operations that support sustainable growth plans; we will work on achieving that through the group’s integrated strategic plans and business portfolio, in addition to attracting the proper talents and retaining them.
In the meantime, we are seeing that the oil price decline has led a lot of our customers across different categories to boost spending on non-oil products and services provided by the group.
What strategic geographic expansion plans does ENOC have?
The company is present in 60 international markets, and it also has several special partnerships with organisations and companies across the regions of the Middle East, Africa and South East Asia, which support its presence and influence in these markets.
Adding to that, by virtue of the completion of the acquisition of the international company Dragon Oil in 2015, the scope of the group’s operations has expanded its reach into Iraq, Turkmenistan, Algeria, Egypt, Afghanistan, Tunisia and the Philippines.
At ENOC, we realise that the current period of downturn in the global oil and gas market requires the development of policies and strategies capable of handling these market fluctuations, supporting diversification of income and revenue sources, and boosting the operations of the organisation in the local, regional and international markets alike. Therefore, at ENOC, we have committed to provide Dubai with different energy sources with respect to the highest levels of availability, efficiency and reliability.
To meet the growing demand for energy in all business sectors in Dubai and the country, our group will focus in the next phase on studying new opportunities for expansion and acquisition in this country and abroad. The project for expanding the ENOC refinery for crude oil in Dubai’s Jebel Ali Industrial Area is part of this framework, since the group aims to increase the production to meet the growing demand for refined oil products.
ENOC has been looking to expand its Jebel Ali refinery complex for a while now. What sort of plans do you have in mind?
We now intend to commence expansion works in ENOC’s crude oil refinery in Jebel Ali Industrial Area to increase production and meet the growing demand for refined products, because of the overall development witnessed by business sectors in Dubai and the UAE. We will start expanding the refinery in 2019 to increase its capacity from the current 140,000 bpd to 210,000 bpd.
Our commitment extends towards development of the petrochemicals sector in the country. We intend to build a joint project in the UAE to manufacture maleic anhydride acid, a raw material used in industries such as automobiles, shipbuilding, paint, polish, construction, agricultural, and chemicals. The new project has been named ENOC – IG Petrochemicals, and this is part of our DUGAS project, and an endeavour to diversify our products portfolio.
What do ENOC’s strategic investment projects currently involve?
ENOC is currently working on the engineering and preliminary design works of the Falcon project, which entails laying the 19km-long pipeline from storage facilities in Jebel Ali to Al Maktoum International Airport. The project’s operation is expected to start during the fourth quarter of 2018, and it has been estimated that it will meet 60% of the airport’s needs by 2050.
In addition, the group’s investments in assets such Dragon Oil is adding another way to practice exploration and production activities. ENOC is now considered to be an integrated company in the oil and gas industry, holding important partnerships with the biggest international and local companies, and achieving stable growth.
The acquisition of Dragon Oil supports the group with major additional capabilities for exploration, which contribute to supporting the group’s presence in the Middle East, North Africa and East Asia.
What other potential acquisition plans does ENOC have at present?
The integration and acquisition strategy adopted by the ENOC group – through which we study all ways of available growth in the regional and international market, including the potential acquisitions – contributes significantly to fulfilling our commitment towards Dubai, by providing various energy sources for all growing business sectors.
This strategy cements our status as a key player in the oil and gas sector and contributes to enhancing our financial performance, including the interest of shareholders, partners and customers. At the same time, we are working on driving growth and expansion in the internal market in order to achieve more growth.
How has the UAE government’s decision to remove subsidies on fuel prices impacted the ENOC group?
The Ministry of Energy’s decision (implemented from August 1, 2015) to liberalise fuel prices in the country, was made as part of the government’s vision to support the sustainable development of the UAE, and in harmony with policies that aim to assure the continuity of sustainable development, rationalisation of fuel consumption, preserving natural resources, and lowering carbon dioxide emissions.
As a key Dubai Government entity, what role is ENOC playing in supporting the plans for the upcoming EXPO 2020?
Dubai is set to witness a rapid growth over the coming years, mainly through investment of approximately AED31bn ($8.43bn) in infrastructure required to host EXPO 2020. It is estimated that EXPO 2020 will help create over 277,000 jobs in Dubai, including about 100,000 jobs in the services sector. For its part, ENOC is managing a first-of-its-kind, comprehensive, professional training programme for the country’s citizens, focussed on developing the functional, behavioural, professional, managerial and leadership skills of the national workforce at ENOC through five different aspects: development, training, empowering, talent nurturing and excellence.
The UAE has embarked on a campaign of energy efficiency, and has been promoting its benefits in various ways. How is ENOC helping to achieve the government’s energy consumption goals?
Promoting energy efficiency and managing resources is considered to be one of the key areas that Dubai focusses on, especially with EXPO 2020 drawing near. That is to ensure a rational consumption and sustainability of resources in a way that supports the overall development of the city and the country.
For us, EXPO 2020 is a major opportunity to highlight the three sub-topics of the event: sustainability, transition, and opportunities. While the infrastructure development witnesses support and attention, our different businesses witness strong growth as well.
All our businesses and projects contribute significantly to Dubai’s hosting of the event – fuel sales trading, retail trading, aviation fuel, as well as the development of the production of bitumen (for paving roads and airport runways), among others. The period of hosting the EXPO is six months, and Dubai expects to welcome around 25 million visitors during that time. Surely, this will contribute significantly to promoting ENOC’s businesses.