Abu Dhabi: The total storage capacity at Fujairah is expected to increase to about 9 million cubic metres by the end of 2015 from around 6.6 million cubic metres in 2013, a top government official said on Monday.
Ahmad Mohammad Al Kaabi, director of petroleum economics at the Ministry of Energy said Fujairah’s location south of the Strait of Hormuz has attracted a lot of investments into its port storage facilities aimed at turning the port city into one of the world’s great 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,” said Al Kaabi while speaking at Tank World Expo in Dubai.
The main objectives of this strategic project, according to Al Kaabi, is to provide security of supplies to the global market, open the door for investment, strengthen balanced development in the country and add value to international customers from cutting insurance and operating costs.
“In addition to the crude pipeline, there are onshore crude facilities with eight tanks of one million 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 announcement comes at a time when oil prices plunge due to over production and demand for storage facilities increase all across the globe.
From a peak of $115 in June last year, oil prices fell to less than $60.
The key relationship between the price of oil and the capacity to store it, is a key topic that is being discussed at Tank World Expo that got underway in Dubai on Monday. More than 100 solution providers are participating in it.
Storing oil on the high seas provides both benefits as well as challenges, Edwin Lammers, Executive Commercial Manager of the Sohar Port and Freezone said.
“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.”