x Abu Dhabi, UAESaturday 22 July 2017

Shell in talks to secure crude oil storage in Fujairah

Royal Dutch Shell is in talks to secure as much as 1 million cubic metres of crude oil storage in Fujairah, in what would be the region's first such crude-tank deal with foreign companies.

Fujairah plans to add two shipping berths dedicated to handling very large crude carriers. Kamran Jebreili / AP Photo
Fujairah plans to add two shipping berths dedicated to handling very large crude carriers. Kamran Jebreili / AP Photo

Royal Dutch Shell is in talks to secure as much as 1 million cubic meters of crude oil storage at the United Arab Emirates port of Fujairah, in what would be the region's first such deal with foreign companies.

Shell may lease the space from tank operators that are expanding their storage, Salem Khalil, technical adviser for Fujairah's government, said in a February 28 interview. The company is in talks with Vopak Horizon Fujairah, a terminal owned partly by Fujairah, Rotterdam-based Royal Vopak and Emirates National Oil Co based in Dubai.

Fujairah, one of the three biggest ship-refuelling ports along with Singapore and Rotterdam, lies outside the Strait of Hormuz, a chokepoint for oil tankers at the mouth of the Arabian Gulf. Iran threatened last year to close the strait after the US and Europe took steps to tighten economic sanctions against it. Most of Fujairah's storage tanks are used to hold refined oil products such as gasoline, diesel and fuel oil, not crude. Precise rankings of the biggest ship-refueling ports are unclear because the data are not public.

Crude storage in the Gulf region is generally operated by state-run oil companies, while tanks for refined products are operated by private companies and serve as depots for traders. Construction of storage capacity specifically for crude "would add trading optionality for the oil majors," Jamie Webster, the head of energy analyst PFC Group's office in Singapore, said.

Mr Khalil said Fujairah plans to add two shipping berths dedicated to handling very large crude carriers, or VLCCs, in the expectation that storage facilities for crude will be ready by the time the berths open. Storage tanks for crude differ from those used for refined products, which often need to be heated, blended or put under pressure.

Fujairah, on the Gulf of Oman, has encouraged companies to build storage tanks for gasoline and other products that can then be traded. Storage operators typically lease space to oil companies or traders.

The trading unit of Saudi Arabian Oil Co will lease space for refined fuel at Vopak Horizon's tank farm, the state-owned crude producer known as Saudi Aramco said yesterday. Saudi Aramco Products Trading will use the storage to facilitate purchases of gasoline, diesel and other products for Saudi domestic needs. Saudi Aramco, its parent, sells crude oil mainly under long-term contracts and does not trade refined products.

If Shell were to lease crude-storage space at Fujairah, it would be the first private oil company to do so in the region since at least the 1970s, when many nations in the Persian Gulf nationalized their energy production, according to three analysts surveyed by Bloomberg.

"Shell has had storage tanks in Fujairah for various products over the years and continues to do so," Nureddin Wefati, a Dubai-based spokesman for the company, said. "We always look for new opportunities but we will not comment on specific projects."

 

* Reuters