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The Great Fuel Debate: ENOC Loses U.S. Military Contract
The U.S. Defense Department has decided that it will not renew its contract to buy fuel from Emirates National Oil Company (ENOC) and has instead opted to sign a deal with Chevron. The fuel supplied by ENOC has been used at the Al Minhad Air Base situated just outside Dubai for the past two years and has been used to refuel American aircraft in the Middle East. The American Department of Defense announced recently that despite ENOC offering to renew their contract, they had elected not to take the offer as other companies had made cheaper bids for the contract. The Dubai government-owned ENOC has held the contract with the U.S. military to supply jet fuel to the Al Minhad Air Base near Dubai for the past two years and were keen to renew the contract. Competition for the contract, however, was fierce because of the strategic value of the Al Minhad Air Base near Dubai. Many consider it to be a hub for U.S.-Allied forces in the Middle East. The Concerns over Iranian Oil There were some concerns that ENOC had not had their contract renewed because of the fact that they were using Iranian oil. This, however, was swiftly denied by a U.S. Department of Defense spokesperson who stated that "ENOC was not awarded a contract because ENOC was not the lowest price offerer." The concerns over the use of Iranian oil were sparked recently when the U.S. began urging other companies to slash their imports of Iranian oil as they attempted to starve Tehran of funds for its nuclear activities; a plan which has proved to be contentious over the past 12 months, straining U.S.-Iranian relations further. ENOC’s Use of Iranian Oil Explained Such a ’starving’ plan, however, has proved problematic and has only experienced limited success due to a number of factors. Despite the U.S. Defense Department’s efforts, ENOC have been unable to reduce the quantity of light Iranian oil because its refinery is designed to run on it. This poses a significant conundrum for the U.S. as they still consider Dubai to be a significant ally and, as a result, they are unwilling to apply significant pressure for them to reduce their oil imports from Iran. In addition, when looking at financial reports, we can see that ENOC actually loses hundreds of millions of dollars a year because it is forced by UAE rules to sell gasoline at a fraction of international market rates. Due to this, light Iranian oil appears to be an excellent source for ENOC as it is available in a plentiful supply and is only a short voyage across the Gulf; thus offsetting losses. When approached by Reuters, Chevron, whose offices are housed within ENOC’s Dubai complex declined to comment on any aspects of the deal and refused to discuss its relationship with ENOC. The current situation in Syria has recently seen oil prices steady slightly and we have seen markets stabilise as a result. However, events such as these can also have a significant impact on forex trading markets as well as on the stock exchange. For more information about how the markets are reacting to news stories such as this, try visiting Alpari and their newsroom feature for in depth trading analysis.|
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