March 12, 2013 [Business Day] - Royal Dutch Shell is in talks to secure as much as 1-million cubic metres of crude-oil storage at the United Arab Emirates (UAE) port of Fujairah, in what would be the region’s first such crude-tank 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 recent interview.
The company is in talks with Vopak Horizon Fujairah, a terminal owned partly by Fujairah, Rotterdam-based Royal Vopak and Emirates National Oil, which has headquarters in Dubai.
Fujairah lies outside the Strait of Hormuz, a choke point for oil tankers at the mouth of the Persian Gulf. Most of Fujairah’s storage tanks are used to hold refined oil products such as petrol, 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 on Thursday.
Mr Khalil said Fujairah planned to add two shipping berths dedicated to handling very large crude carriers 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 petrol and other products that can then be traded. Storage operators typically lease space to oil companies or traders.
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 states in the Persian Gulf nationalised their energy production, according to three analysts.
The trading unit of Saudi Arabian Oil Company will lease space for refined fuel at Vopak Horizon’s tank farm, the state-owned crude producer known as Saudi Aramco said on Sunday.
Saudi Aramco Products Trading Company will use the storage to facilitate purchases of petrol, 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.
