Fujairah oil terminal ships first UAE oil amid Iranian threats of Strait closure

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Fujairah is strategically located outside the Strait of Hormuz, 105 kilometres from the Strait of Hormuz. The region is highly safe in the time of war crisis or threats of war. Photo – gulfpetrochem.com

The United Arab Emirates loaded its first cargo on Sunday from its multi-million dollar new oil export terminal on the Gulf of Oman, amid threats made by some Iranian MPs to close down the Strait of Hormuz.

Top UAE officials and executives from oil majors such as ExxonMobil, Shell and Total were present at the opening ceremony on the eastern coast of the country. The alternative route will make up to 75% of UAE’s exports.

A European Union ban on Iranian crude imports came into effect on 1 July and Iranian lawmakers have promised retaliation. Reuters said two Iranian military officials warned over the weekend that Iran could stop oil from sailing through the vital shipping lane.

Alarmed by the prospects of a US/Israeli attack on Iranian nuclear installations, the UAE completed its long-delayed project to pump up to 1.8 million barrels a day (bpd) to an export terminal on the eastern port of Fujairah.

The fifth biggest OPEC member says it will increase exports from the new facility to around 1.5 million bpd, nearly two-thirds of the 2.4 million it typically exports each day, over the next few months. The new pipeline has the capacity to carry around three-quarters of the UAE’s oil exports.

“This is a very strategic project, it gives the options to our clients to transport larger quantities (of oil),” UAE’s oil minister Mohammed bin Dhaen al-Hamli said. “I consider this project to be complementary, so we have an alternative…to give us choice to have more than one trade route.”

The 370 km Abu Dhabi Crude Oil Pipeline carries oil from fields in the UAE’s western desert to Fujairah, a major oil storage and fuel bunkering hub on the east coast. The new terminal also has eight crude oil storage tanks each with a capacity of one million barrel.

The first cargo loaded on Sunday with oil pumped from western fields in Abu Dhabi across the mountainous north-east tip of the Arabian peninsula is to be shipped to Pakistan. The bulk of UAE’s oil is exported to Asia.

“It will make other projects viable in this area, and will also avoid more insurance and also will give access to the open sea,” Abdulla Nasser Al Suwaidi, the head of state-run Abu Dhabi National Oil Co. (ADNOC) said after the opening ceremony.

He added that exports from the new facility would start at a few hundred thousand barrels a day and rise gradually over the next few months.

Flows through the Strait last year accounted for about 35% of all sea-borne traded oil, or almost 20% of oil traded worldwide.

According to the US Energy Information Administration, almost 17 million barrels of oil were shipped between the northern tip of Oman and the southern coast of Iran in 2011,

“By the end of the year this 1.5 mln bpd will be fully operational which is almost 70 pct of the UAE’s crude,” IPIC’s managing director Khadem Abdulla Al Qubaisi said.

Abu Dhabi government-owned International Petroleum Investment Company (IPIC) undertook the pipeline project and ADNOC’s onshore unit ADCO will be the operator.

IPIC is also planning to build a $3 billion refinery in Fujiarah with a capacity of 200,000 bpd, due to be completed in mid-2016. Qubaisi said the project was at its front end engineering design (FEED) and construction was yet to start.

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