Fujairah jetty enhances security of oil supply

Abu Dhabi: The Very Large Crude Carrier (VLCC) jetty, which was opened in Fujairah on Wednesday, is expected to help the UAE and other Gulf countries supply oil securely to the rest of the world without going through the Strait of Hormuz which can sometimes be affected due to tension in the region.

Iran has previously threatened to close the Strait of Hormuz, a narrow waterway carrying a fifth of the world’s traded oil, over sanctions on its controversial nuclear enrichment programme.

Though the sanctions have been removed earlier this year, the threat continues to remain due to tensions between the Gulf countries and Iran over political matters.

“The VLCC jetty has the potential to put Fujairah in the top bracket on crude trade front too. It will open up potential to export crude from the Middle East. Pipelines can be laid to bypass the Strait of Hormuz, which can sometimes be affected due to tension in the region,” said T. Srinivasulu, director of Gulf Petrochem which owns storage terminals in Fujairah and Sharjah.

He said pipelines can be built between Fujairah and other Gulf countries to directly transport oil to the world avoiding the Strait of Hormuz.

There is already a 370km pipeline between Habshan in Abu Dhabi and Fujairah with a capacity to transport 1.5 million barrels per day of crude oil. It was built in 2012 with a cost of $4.2 billion by International Petroleum Investment Company (IPIC).

Srinivasulu also expects heavy South American crude cargos coming into Fujairah by VLCCs and the bulk being broken to supply refineries in and around the Indian Subcontinent.

“It (Fujairah port) can become the ‘Make Bulk and Break Bulk’ location for crude in future,” he told Gulf News.

The UAE is one of the largest producers of oil in the world with output averaging about 2.8 million barrels per day, with most of the oil being exported to markets in Asia.

The country is intending to increase its production to 3.5 million barrels per day in the coming years to increase its market share across the globe.

Kyle Stelma, director of advisory services at Whispering Bell, a Dubai-based risk management consultancy, said the opening of the new jetty is important in two perspectives — geopolitical and economic.

“Geopolitically, it is a hedge against insecurity in the Arabian Gulf and economically, the new jetty builds the oil and gas infrastructure and positions the UAE as a key regional hub for oil and gas industry.

“Whether the threat from Iran is real or not, it creates a lot of uncertainty among international buyers, shipping companies and insurance companies (which forces them) to look for alternative pathways for transporting crude and the new VLCC pier is a strong pathway.”

The jetty was inaugurated on Wednesday by His Highness Shaikh Hamad Bin Mohammad Al Sharqi, Supreme Council Member and the Ruler of Fujaiarh. It will receive giant ships laden with crude oil — which range from a capacity of 260,000 tonnes, which is equivalent to a load of two million barrels a day, seven days a week, according to the Ministry of Energy. The total investment in the project is Dh650 million.