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 startup 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 of crude via supertankers. There are plans for the port to add a second berth that also would handle supertankers. At 26 meters, 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 tons 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 meter to 14 million by the end of the decade.
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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 refueling 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 neighboring 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.
Emphasizing the importance of the Fujairah port to the UAE's crude export plans, Abu Dhabi's state-owned Abu Dhabi National Oil Co. completed the $3.3 billion, 400 kilometer Abu Dhabi Crude Oil Pipeline 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 the pipeline was rising political tensions between Iran and its Gulf neighbors over Tehran's nuclear program and its perceived growing hegemonic interests vis-à-vis Yemen and Syria. The UAE was eager to capitalize 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 neighboring emirates in the north have been dependent on the largesse of Abu Dhabi, which accounts for 94 percent 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.
Jareer Elass is a Washington-based energy analyst, with 25 years of industry experience and a particular focus on the Arabian Gulf producers and OPEC. This article originally appeared at The Arab Weekly.
