Tuesday, Mar 16, 2010
By Oliver Klaus
Of ZAYWA DOW JONES
FUJAIRAH (Zawya Dow Jones)--Contractors are working flat out in the United Arab Emirates to build a giant oil pipeline that will divert up to 1.8 million barrels a day of crude exports away from the Strait of Hormuz, a narrow shipping channel watched over by Iran.
Completion of the pipeline could transform the sleepy port of Fujairah on the East coast of the country where tankers will eventually dock to pick up oil instead of sailing an extra day into the Persian Gulf to the existing loading terminal.
Shifting about 78% of the U.A.E.'s current oil exports away from the existing route out of the Persian Gulf comes as the U.S. tries to turn up the heat on Iran with tougher sanctions to halt its nuclear program.
The Islamic republic has threatened shipping in the Gulf previously and could in theory close of the 33-mile-wide Hormuz channel between Iran and Oman at the entrance of the Persian Gulf if challenged.
"Occasionally there have been threats by Iranian officials to close the Straits in case of a military escalation over the ongoing nuclear standoff," said Eckart Woertz, chief economist at the Dubai-based Gulf Research Center.
According to port officials in Fujairah the port will be ready to handle exports from the pipeline by the end of this year. The facilities and pipeline will be exporting crude early next year, Captain Mousa Murad, general manager of Port of Fujairah, told Zawya Dow Jones in an interview.
"Abu Dhabi is taking advantage of Fujairah's geographical location," he said. "But the big advantage is not only geography. We can also bring bigger ships here." Tankers could save time and money by loading crude in Fujairah as they avoid at least 24 hours of sailing into the Persian Gulf, he added.
Fujairah is already the world's second-largest bunkering terminal after Singapore.
Crude oil exported from Fujairah will come from the onshore Habshan field in Abu Dhabi. The emirate pumps about 95% of the crude in the U.A.E., a member of the Organization of Petroleum Exporting Countries.
"From the port's point of view, the last tug will be ready by September," said Murad. The four new jetties being built at the port, known as Oil Terminal 2, will be completed by April and bring to eight the total number of piers handling crude tankers. The new jetties can handle Very-Large Crude Carriers, or VLCCs, with capacity of 180,000 deadweight tons, he said.
Key to the project is the completion of the $3.29 billion, 400-kilometer pipeline is being built by China Petroleum Engineering and Construction Corp., or CPECC, a subsidiary of China National Petroleum Corp. Abu Dhabi government investment firm International Petroleum Investment Co. is the project developer. The company didn't respond to emailed questions about the status of the pipeline construction.
Fujairah port is also in the process of studying a masterplan that could see more jetties for oil exports added, Murad said. He added that "another masterplan for an open-sea terminal" was being looked into and could be implemented, "if we still need more terminals."
Turning Fujairah into an oil export hub is expected to boost traffic at the port, which saw a 15% increase in ships in 2009 despite the global economic slowdown.
Copyright (c) 2010 Dow Jones & Co.