Dubai — The port of Fujairah, the world's second-largest bunkering hub, expects crude oil storage to more than double by 2022 as companies expand their facilities and amid plans to link the port to a rail network that could potentially transport crude, an official told S&P Global Platts Tuesday.
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Fujairah, located outside the Strait of Hormuz, also expects its total 10.5 million cu m storage capacity -- including oil products -- to rise by around 75% by 2022 as state-run Abu Dhabi National Oil Company and other independent oil storage companies expand their facilities, according to Martijn Heijboer, the head of business development at the port.
The port aims to boost crude storage as part of plans to develop new industries and activities, including storing LNG and LPG, as well as petrochemicals production, he said.
"Availability of crude oil in the market will support further downstream investments, those using crude oil and derivatives as feedstock," said Heijboer.
Fujairah is seeking to capitalize on its location outside the Strait of Hormuz, which is attractive to energy industry players seeking to bypass the choke point, especially amid previous threats by Iran to block sea traffic through the strait in the Gulf.
ADNOC, which pumps most of the UAE's 3 million b/d of crude, awarded a Dirham 4.4 billion ($1.2 billion) contract earlier this year to South Korea's SK Engineering & Construction to build three underground storage caverns in Fujairah, each with a capacity of 14 million barrels.
Currently, crude oil storage is around 20% of the total storage capacity at Fujairah and is forecast to rise to 50% by 2022, Heijboer said.
Brooge Petroleum & Gas Investment Co, an oil storage company that is merging with NASDAQ-listed Twelve Seas Investment Co in a $1 billion deal, has plans to build a 600,000 cu m terminal in Fujairah, while other players may have other plans, he added.
The port is also expected to be connected to the Etihad Rail network that will link the industrial city of Ruwais in the western region of the UAE to the Saudi border city of Ghuweifat then to Fujairah in the east. The rail in Fujairah will be used initially to carry bulk and containers.
"It will link the UAE's principal centers of industry, production, population and import/export points, forming an integral part of the GCC-wide railway network," he said. "Works are expected to complete in 2022 and potentially can be used for oil transportation as well."
As part of expanding its remit, the port is currently in talks with several players to set up LPG and LNG storage facilities at the hub. The port is currently conducting a feasibility study on the LPG project, Heijboer said, adding that it is too early to discuss storage capacity.
"We want to create a sustainable and diversified ecosystem, including local processing and production and not just import and export," he said. "We are keen to also add LNG bunkering to our portfolio to complete the wide range of available and compliant bunker fuels in Fujairah."
Heijboer also said that the port is ready for the International Maritime Organization's new regulations for 0.5% sulfur fuel oil, which will kick in next year.
The port has two refineries that can together produce 500,000 mt/month of low sulfur fuel oil, which is about half of the port's bunkering needs. LSFO will likely be the predominant product to be used in bunkering at the port, next to marine gasoil, with limited demand also for high sulfur fuel oil for vessels using scrubbers.
"Furthermore we have 13 oil terminals in FOIZ [Fujairah oil industry zone] all equipped with proper blending equipment, allowing the traders to blend as per market requirement," Heijboer said.
-- Dania Saadi, dania.el.saadi@spglobal
-- Edited by James Leech, firstname.lastname@example.org