March 31, 2023 [Reuters] – Large inflows of Russian crude oil and refined products have boosted tank storage demand at the United Arab Emirates’ Fujairah, pushing storage fees at the transit and blending hub to all-time highs in the first quarter, industry sources said.
The European Union banned imports of Russian crude and oil products in December and February, respectively, forcing shipments to head elsewhere.
Restrictions on access to Western insurance and ships have made some traders blend Russian crude with other supplies at storage hubs like Fujairah before re-exporting it.
Fees for oil storage tanks at Fujairah jumped to as much as $12 per cubic metre in the first quarter, a record high, several people with knowledge of the matter said, though the levels vary depending on the type of cargo.
In comparison, the rates in Singapore are at about $7 per cubic metre, they added.
Storage capacity at terminals in Fujairah has been fully leased out, sources said. Robust storage demand is lifting revenues of operators such as Vopak VOPA.AS, Vitol’s VITOLV.UL VTTI, Emirates National Oil Company and Abu Dhabi National Oil Company.
“The hub of Fujairah has become key to Russia’s efforts to divert its oil product exports away from traditional U.S. and EU markets towards those in the Middle East and Asia,” said Roslan Khasawneh, a senior fuel oil analyst at Vortexa.
STORAGE ASSETS IN DEMAND
Demand for storage space is also attracting buyers for these assets.
One of these assets is the terminal owned by Mercuria Energy Group. Located in the Fujairah Oil Industry Zone adjacent to the port, the terminal can hold about 465,000 cubic metres of refined products including naphtha, gasoline and fuel oil.
The company is evaluating expressions of interest from potential buyers received in the fourth quarter last year, said Tyler Baron, the chief executive officer of Minerva Bunkering which operates the terminal.
“We’ve used the asset in part to support the Minerva business, but also to lease capacity out to third parties. So it’s not strategic or requirements for us to own the terminal to support the bunkering business locally in Fujairah,” he said.
GP Global’s terminal at Fujairah was recently sold for about $124 million, industry sources said.
Over the years, Fujairah has expanded as a popular transit point for storage, blending and ship-to-ship transfers, due to its convenient location near the entrance of the Strait of Hormuz.
Fujairah’s onshore refined product stocks were at 21.34 million barrels (3.36 million tonnes) in the week to March 20, based on data from the Fujairah Oil Industry Zone.
The port is also the world’s third largest bunkering hub, with 2022 bunker volumes at about 8 million tonnes.
Fujairah product inventories trend steady to higher.
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