The total storage capacity at Fujairah is expected to reach about 9mn cubic metres by the end of 2015 from around 6.6mn cubic metres two years earlier, a top government official has said.
Speaking at Tank World Expo in Dubai, Ahmad Mohammad Al Kaabi, director of petroleum economics at the Ministry of Energy, said Fujairah’s key location has attracted major investment into the storage facilities.
He also unveiled plans to turn the port city into one of the world’s biggest oil trading hubs.
“A 380 kilometres pipeline connecting oil production from Habshan to Fujairah city allows UAE’s crude to move very smoothly to global market,” Al Kaabi said.
“In addition to the crude pipeline, there are onshore crude facilities with eight tanks of 1mn capacity for each with a potential to be expandable to 12 tanks.”
The construction of storage capacity specifically for crude in Fujairah would add trading optionality for the oil majors, he said.
“Fujairah plans to add more shipping berths dedicated to handling very large crude carriers, or VLCCs (Very Large Crude Carrier), in the expectation that storage facilities for crude will be ready by the time the berths open.”
The news comes at a time of increased demand for storage facilities due to the drop in the oil price since June last year.
“Towards the end of last year, the spot price for oil was lower than in the futures market. This is one of the reasons why crude oil is being stored at sea, as companies currently see a greater benefit in buying up physical oil stocks and immediately selling futures.
“The challenge, of course, is that if interest rates or storage costs increase, the cost of storing oil out at sea would eclipse any future profits,” said Edwin Lammers, executive commercial manager of Sohar Port and Freezone.
