Fujairah urged caution on refinery expansions
The Middle East's main oil and products storage hub of Fujairah, UAE, should be wary of adding too much refining capacity and focus instead on renewable energy projects, participants at the Fujairah IP Week workshop said.
Refining activity in Fujairah is mostly focused on very low-sulphur fuel oil (VLSFO) for the bunker market with local supply covering local demand, German energy firm Uniper's managing director Lars Liebig said.
"I do not see a need for extra capacity," he said. "If the more capacity emerges aimed at the same market, then Fujairah may turn into an export hub for VLSFO, making pricing and margins not sustainable for refiners."
Uniper and trading firm Vitol operate 67,000 b/d and 80,000 b/d refineries, respectively, that produce a combined 550,000 t/month of VLSFO. Fujairah-based Ecomar Energy Solutions plans to double capacity at its 15,000 b/d modular refinery by 2022, and UAE firm BPGIC plans to launch the first 25,000 b/d phase of a 180,000 b/d modular refinery at the port in the second half of this year.
Too much refining capacity can create a bottleneck problem, according to bulk-liquid advisory group Tankbank International's chief executive Tony Quinn.
"We have to be careful not to overdo this. New refineries should have something novel and different about them, not just refining crude and producing fuel oil", he said. The Fujairah refineries are mostly topping units.
Fujairah could become more involved in projects linked to global carbon-emission targets in order to capitalise on new developments.
"We need to be more active in alternative new energy projects and be one step in front like we have been in the last decade because other regional ports, for example Duqm in Oman, can all look to take a market share from Fujairah," said storage operator Fujairah Oil Tanker Terminal's deputy manager Ali al-Abdouli.
Products like ammonia and methanol, produced from renewable energy sources, "will gain momentum quickly over the next few years," Uniper's Liebig said.
"Given that the Middle East has plenty of solar energy source, Fujairah should be ready to store and handle those products," he said. "The main challenge will be to secure these products from upcoming hydrogen projects in the region otherwise new hubs will emerge elsewhere."
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