Executive Focus: Hussain Sultan man behind Enoc success story
www.gulf-news.com Dubai |By C. L. Jose | 15-03-2003
Hussain SultanEnoc is synonymous with Hussain Sultan, or vice versa. Hussain Sultan is the group chief executive and board member of Enoc and Eppco, and a director of nine subsidiary or associated companies of the Enoc Group.
He is also the executive chairman and CEO of Dragon. He is the man behind the growth story of Enoc — the energy behemoth which has now expanded to more than 26 subsidiaries and a couple of other associate companies. The number doesn't stop here. Hussain Sultan has drawn out plans for the diversification of the group, though confining itself into the energy sector itself.
All look at Hussain Sultan to see what he has got up his sleeves to combat the 'Catch 22 situation', where he is forced to sell fuel at a fixed price, irrespective of the soaring crude price. His answer is diversification. No wonder Enoc is looking at newer countries and newer businesses every other day. The group has already gone into more than 23 countries with its lubricants. It plans to expand in a couple of other countries with its storage business as well.
As everyone knows, the group now holds 70 per cent stake in Dragon — which runs upstream oil business in the CIS. With expanding international activities across East Africa, Central and South Asia, the Levant and the GCC, the Enoc Group is targeting the wider region to tap potential business opportunities. Hussain Sultan is not a person who believes in making noise and doing less — rather, the other way round. Here are excerpts from an interview Gulf News had with him recently.
How was the year 2002 for the Enoc Group? It was a challenging year. However, it was not a bad year for the whole group, although certain divisions of the group had problems, especially the retail business of Eppco. In fact, Eppco is itself a group with retail as its primary arm, but it also has diverse business interests, from storage to aviation, for example.
Can you please compare the year 2002 with 2001? The year 2002 was worse than the previous year. However, I cannot reveal the figures. Since 1983, Eppco has been operating under the 'fixed price policy'. You have to view Eppco differently from the other two national oil companies. They have other resources and businesses that will help them offset problems at the retail end. We are a professional entity and we are not subsidised in any way, unlike other two companies in this field, so we are perhaps suffering more.
The issue of fixed pricing in the fuel retailing sector has always been a problem. Have you made any representation to the government on this long-pending issue? All retail fuel companies are suffering. The government has decreed that the fuel retailers follow a fixed price policy. We are a commercial organisation and, in effect, it is we who are subsidising the market on the fuel. In other GCC countries, virtually all the fuel service stations are selling fuel at fixed price but they in turn get a fixed margin on sales. Here, we sell fuel at a fixed price irrespective of the price of the crude.
At what crude price can you break-even? At a rough estimate, when the crude is at $20 a barrel, this translates into approximately $230 for a metric tonne of gasoline. Today, crude is around $35 a barrel (on the day of the interview). However, this is a very sensitive subject. Fuel is the only commodity that is price controlled in this country as of now.
Is there any indication from the government that this issue can be sorted out? From January 1, 2003, only unleaded fuel was available in the UAE. Now we have two fuel grades — 95 and 98 — sold at Dh4 and Dh5 respectively. We hoped the new pricing structure would give us some relief. But surprisingly, 91 per cent of the petrol sales are currently the cheaper fuel (95), and the '98 unleaded' is used by a very thin customer group — those who own expensive cars.
How do you propose to address this precarious situation? We propose to shore up the bottom-line by moving into other businesses, especially non-fuel businesses. We have opened up Tasjeel, the vehicle testing and registration centres in co-operation with Dubai Police. We continuously look to other areas to diversify the business away from total reliance on retail fuel sales.
Are there any diversification plans? Of course yes, but only in the oil and gas business. We are basically an energy company and whatever projects we visualise, they will be confined to the oil and gas sector.
You have previously hinted at restructuring plans for the group and trimming the size of the company. Can you shed a little more light on this? Restructuring is a continuous process at Enoc. Oil is a commodity and the market is very volatile. A lot of things affect the price of oil, such as the geopolitical situation in the region and the problems in Venezuela, for example. All have affected the price of oil in the past few months. Speculation also affects the price. Energy companies have to remain lean to ride through lean times.
How far has this been possible for you? We have cut down costs in all our group companies. We do have a nationalisation programme, but this does not mean we will go on employing people unnecessarily. We are growing with more and more retail outlets, with an Enoc brand identity.
What about Eppco? Our expansion plan is for Enoc brand service stations. Eppco is a 60:40 joint venture between Enoc and Caltex. We have big investment plans for Enoc this year.
Any plans to buy out or sell off the stake in Eppco? This has to be decided by Caltex. This has been a successful joint venture since the 1980s and I don't see any reason why it should break up. We are happy with the joint venture.
What is the paid-up capital of Enoc? The paid up capital of Enoc is Dh500 million.
How do you propose to finance future investment plans? Any plans for bonds? These are the issues that have to be worked out by our finance and treasury departments after weighing our fund positions. As for bank loans, as in the past, we will look at both Islamic as well as mainstream financial routes in the future.
How do your retail fuel sales grow, and what is your present market share? We grow at an annual rate of 8 to 9 per cent. Our market share in Dubai and the Northern Emirates currently stands at 50 per cent.
Is there any deal that prevents you from opening service stations in Abu Dhabi? There is no agreement or contract that says that we should not open service stations in Abu Dhabi.
Can you explain the current status of Dragon Oil? This is a very good asset that Enoc acquired which is 69.4 per cent share four years ago. Major investments are planned for Dragon during the current year that might help raise the output from the present 15,000 bpd upwards. In terms of performance, the year 2002 had been a much better year.
What happened to the $50 million loan from Enoc to Dragon? That is due in the next two to three months. The board will decide whether it can be re-negotiated, because Dragon is a public listed company.
Which areas will Enoc focus on in future? We have major assets within the group. One is the 120,000 tonnes a day condensate refinery in Jebel Ali.
We also have the subsidiary Dugas, which has two gas processing plants. Dugas is responsible for processing natural gas produced in Dubai's offshore oil fields as well as gas piped from Sharjah.
We have substantial storage facilities for petroleum products. Most historically profitable group companies have gone through hard times during the last year. But things are changing. We are optimistic that this year will be good for us.
We are looking at new businesses overseas. Oil storage will be a strategic business for the group in future. We are planning to substantially increase our oil trading business. Fresh investments in other local and international energy companies are also planned. We are looking at selected downstream projects, refuelling operations overseas, including India. We are marketing lubricants in 23 countries and this is constantly expanding.