Fujairah seeks to carve out energy niche

Sunday 23/10/2016
A tanker at the oil terminal of Fujairah during the inauguration ceremony of a dock for supertankers,
last September. (Reuters)

Washington - Usually eclipsed by oil-rich Abu Dhabi and glit­tering Dubai, Fujairah is one of the smaller and poorer of the United Arab Emirates, but has started to carve out a niche of its own in the energy world.
The start-up of a very large crude carrier (VLCC) berth at Fujairah port marks a further step the UAE has taken to promote the northern emirate as a regional oil trading and storage hub. Over the past decade, Fujairah port has tripled its berths to nine and boosted its shipping traf­fic of refined products more than eight-fold, with more than 2,200 ships loading or unloading crude products in 2015. The new VLCC berth opens the port to a new clien­tele: Crude-laden vessels.
The VLCC jetty, built at a cost of $177 million, allows Fujairah port customers to load or unload up to 2 million barrels per day (bpd) of crude via supertankers. There are plans for the port to add a second berth that also would handle super­tankers. At 26 metres, the new dock is reported to be the deepest in the Middle East.
The Fujairah port has estab­lished itself as a regional refined oil products hub, handling 56 million tonnes of products in 2015. To meet growing demand, the port is plan­ning to expand its storage capacity for refined products from about 10 million cubic metres to 14 million cubic metres by the end of the dec­ade.
The Fujairah port is the second largest — behind Singapore — bun­kering port in the world. That ena­bles companies to store and supply the various fuels that tankers re­quire in refuelling operations. The Fujairah port built up its storage capacity from eight tanks in 1994 to around 340 tanks today. In ad­dition, large international energy firms such as Royal Dutch Shell and Chinese state oil firm Sinopec built crude storage tanks at Fujairah two years ago for their own use or leas­ing.
The strategic significance of the Fujairah port is that it is the only one of the UAE’s oil export facili­ties fully outside of the Strait of Hormuz, the shipping chokepoint at the entrance of the Arabian Gulf. It is estimated that one-third of the world’s tanker-borne crude trav­erses through the Strait of Hormuz, which neighbouring Iran has peri­odically threatened to close off.
The Fujairah port, on the Gulf of Oman, provides tankers direct ac­cess to Asian and African markets by way of the Indian Ocean, which represents a savings in transpor­tation costs because of shortened travel time to those key markets in addition to protecting the tankers from a potential quagmire in the Strait of Hormuz.
Emphasising the importance of the Fujairah port to the UAE’s crude export plans, Abu Dhabi’s state-owned Abu Dhabi National Oil Com­pany (ADNOC) completed the $3.3 billion, 400km Abu Dhabi Crude Oil Pipeline (ADCOP) in 2012, enabling Abu Dhabi to free a large portion of its oil exports from having to trav­erse the Strait of Hormuz.
The impetus for ADNOC to com­plete pipeline was rising political tensions between Iran and its Gulf neighbours over Tehran’s nuclear programme and its perceived grow­ing hegemonic interests vis-à-vis Yemen and Syria. The UAE was ea­ger to capitalise on its export loca­tion outside the strait should Iran one day make good on its perennial threat.
ADCOP has a carrying capacity of 1.5 million bpd — approximately half of the UAE’s total oil produc­tion — with the ability to rapidly boost that capacity by an additional 300,000 bpd. The pipeline connects from Abu Dhabi’s onshore oil facili­ties in the western desert at Hab­shan to Fujairah, where it accesses ADNOC’s own sizeable crude tanker farm and export terminal comprised of three single-point moorings.
The expectation is that ADNOC will eventually link ADCOP to Fu­jairah’s nearby crude storage tanks, which would give the state oil firm flexibility in loading or unload­ing vessels via its own single-point moorings or from the port’s VLCC berth.
Without oil reserves and produc­tion of their own, Fujairah and its neighbouring emirates in the north have been dependent on the lar­gesse of Abu Dhabi, which accounts for 94% of the UAE’s proven oil re­serves and the majority of its crude production.
Abu Dhabi and Dubai are clearly the power brokers within the UAE, with the political and economic clout to call the shots for the fed­eration but given Fujairah’s rising prominence as a regional crude and products trading hub, in addition to its already top ranking as a bunker­ing hub, the tiny emirate may one day be in a strong enough position to push for a more prominent seat at the UAE table.