Trading up: Fujairah’s plan for growth

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Despite the heightened security risks around the Persian Gulf, stakeholders in Fujairah port and free zone appear undaunted. The emirate wants to develop port facilities and new industrial projects, to attract trade across oil and energy products. By Dania EL Saadi

The Middle East bunkering hub of Fujairah may have been rattled by the recent tanker attacks in the Gulf of Oman, but officials are adamant that it will be business as usual, as the port and accompanying free zone forge ahead with diversification plans.

Fujairah is trying to compete with other bunkering and oil storage hubs like Singapore, the world’s biggest, and Amsterdam-Rotterdam-Antwerp, the huge oil refining and distillate storage complex spanning the Netherlands and Belgium.

Officials and operators hope to capitalize on Fujairah’s strategic position outside the Strait of Hormuz, a chokepoint where daily oil flow accounts for 21% of global petroleum liquids consumption, according to the US Energy Information Administration.

But the port and adjacent free zone in Fujairah, where two refineries and 17 oil terminals are located, are exposed to the rising tensions between Iran and the US, and have suffered a dip in bunkering activity as higher insurance premiums dissuade vessels from refueling in Fujairah, according to traders.

Iran has threatened to close the strait after the US re-imposed sanctions on Iranian crude oil exports last year, and this year did not renew waivers to eight countries to continue to import oil from Tehran.

Choppy waters

The positioning of Fujairah, one of the seven emirates that make up the UAE federation, is vital to the UAE, OPEC’s third largest oil producer, which pumps about 3 million b/d, mostly from state-owned Abu Dhabi National Oil Company. The Habshan oil pipeline carrying Murban crude for export from Fujairah is the country’s only oil pipeline that lies outside the Strait of Hormuz. Murban is a key oil grade for the UAE.

Officials argue that the port and zone will not be hindered by the regional tensions, while analysts believe that, although Fujairah will see continued growth in oil storage, it is likely to lose some bunkering business.

The port does not reveal bunkering data, but officials say overall throughput at the Fujairah Oil Tanker Terminals grew in May and June on the year. The throughput at FOTT excludes volumes from the Vopak jetty and ADNOC’s single-point mooring facilities, which export Murban crude.

“We have seen a big upturn this year, May 2019 was our second-highest throughput [for oil products] since September 2016, when it was a boom time for the oil industry,” said William List, manager of Fujairah Oil Tanker Terminals.

“It is business as usual within the Port of Fujairah, the additional safety and security measures taken mean we haven’t been significantly hindered by what’s been happening to the vessels [in the Gulf of Oman],” List added.

Six vessels have been attacked in the Gulf of Oman since May. US officials blamed Iran for the last two vessel attacks in June, which was also marked by Tehran shooting down a US drone.

“While the knock-on effect on the bunkering demand in Fujairah is fairly visible, the port seems to continue seeing similar flows of products [including fuel oil] in and out, i.e. trade is not impacted as much as bunker demand is,” said Iman Nasseri, managing director for the Middle East at consultancy Facts Global Energy.

Neighboring Oman, whose ports lie outside the Strait of Hormuz, could potentially attract some bunkering activity in the future, especially the up-and- coming development of Duqm on the Arabian Sea, according to analysts.

Oman, the biggest Middle East oil producer outside OPEC, has its own ambitions to develop bunkering and oil storage hubs. Oman Tank Terminal Co and Occidental Petroleum signed a memorandum of understanding in 2017 to potentially store up to 2 million barrels of Oxy’s crude, which could include US crude grades, at Ras Markaz.

“If you think of [a] potential alternative you can think of Duqm, which could emerge as a competitor. If they are not bunkering in Fujairah they are likely to bunker in the Mediterranean or Singapore,” said Alan Gelder, a vice- president for refining at consultancy Wood Mackenzie. “Bunkering is a global, competitive business.”

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