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Fujairah fuels up to expand oil hub

posted on 04/04/2010: 1649 views

The world's second-largest pit-stop venue for international shipping will more than double in size in three years as Fujairah undergoes a transformation into an oil hub to rival Singapore and Rotterdam.

The business of supplying and trading fuel is the quieter side of an oil industry that dominates Middle Eastern economies. Gulf states are big exporters of crude oil but many also import fuel oil, a viscous product of the refining process used in shipping and power stations. Much of that fuel oil is stored, blended and re-exported from Fujairah.

Fuel oil is the fuel of choice of the global shipping industry, and Fujairah has historically been a strategic refuelling stop for ships travelling between the western hemisphere and the Orient. But the new capacity will also cater to rising demand for the same fuel from power stations in the Gulf and Indian subcontinent, said Walter Moone, the general manager of Vopak Horizon Fujairah, one of the largest fuel suppliers based in the emirate.

"Today, Fujairah is a regional hub, but it will change into more of a global hub,” Mr Moone said. "We're seeing big demographic growth in the region, including Pakistan, Iraq, Saudi and Oman – they all import fuels and petroleum products.”

Salem Khalil, the technical adviser to the Government of Fujairah, said foreign companies would build an additional 4.2 million cubic metres of fuel storage facilities, up from 3.1 million cu metres today, along the Fujairah coast by the end of 2012, representing hundreds of millions of dollars in investment. This would add 140 new fuel tanks to the 120 clustered on the shore today.

A looming shortage of fuel oil in the region is expected to push Fujairah companies to buy these products from further afield, including Europe and the Caribbean, elevating the emirate's global presence.

Fujairah has become a global balancing point for suppliers and consumers, said Siavash Alishahpour, the general manager of the Fujairah Refining Company, a joint-venture between the government and Vitol, the Swiss oil trading company.

"The oil terminals and storage growth during the last five years in Fujairah is showing the importance of it as a trans-shipment and balancing hub,” he said. "Traders need a location which is properly positioned between supplying and consuming markets, need a place with flexibility and easiness in all businesses supporting all trading aspects and need strong infrastructure.”

The storage expansion coincides with another oil-related development in the emirate: the 370km Abu Dhabi Crude Oil Pipeline (ADCOP) is set to open by the beginning of next year with new export facilities for crude oil. It will not directly overlap with Fujairah's traditional trade in oil products, but help put the emirate on the map of the global oil trade, Dr Khalil said.

Eventually, the oil terminal could create a local trade in crude oil as well as fuel, Mr Alishahpour said.

The crude oil terminal and many of the fuel storage tanks will be located on reclaimed land lying between the Port of Fujairah and a Navy base that Fujairah, which borders the sea and the Hajjar Mountains, is building to overcome a shortage of available space. The Dh900 million (US$245m) Northern Land Reclamation Project will push 3.5km of the coastline out by 500 metres and in the process create an additional 212 hectares of land.

While most of the existing tank capacity has been built by local companies, the new investments are largely being undertaken by foreign firms.

State-owned energy companies such as Emirates National Oil Company (ENOC) and Emarat were among the first investors, while other tanks are currently operated by Fujairah Refining Company, GPS-Chemoil, a joint venture between Singapore and Fujairah, and Vopak Horizon Fujairah, a joint venture of ENOC, Koninklijke Vopak of the Netherlands, the Fujairah Government and Kuwait's Independent Petroleum Group.

In the next few years, new tanks will be opened by the Greek-based Aegean Marine Petroleum, Aurora, a Swiss-based commodity trading house, and Concord Energy, based in Singapore, as well as ADCOP for crude oil storage. In addition, the Port of Fujairah is also building new berths that will help with the export of oil products, including its new Oil Terminal 2, which will open in the first quarter of 2012. – The National


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