Fujairah quietly carving its niche

Energy firms are doubling the number of fuel storage tanks on the coast of Fujairah to store, blend and re-export their products.

FUJAIRAH // Fujairah's rise as an export and trading hub for oil is a watershed moment for an economy whose abiding theme has been to make do with less. When international companies were scouring the Trucial States for oil 50 years ago, Fujairah came up short, and the emirate's leaders turned to two simple resources they did have: mountainous terrain, and deep, still coastal waters near the world's main East-West shipping lanes.

Unusually strong rock mined from mountainsides in the south of the emirate is used across the Gulf, in projects including Dubai's Palm islands and airport runways in Qatar and Kuwait, while the northern beachfront hosts a number of famous tourist hotels. But it is on the southern coastline, where hundreds of oil storage tanks crowd the narrow strip of land between the mountains and the sea, that the emirate's economy is experiencing its biggest boom through supplying, trading and storing a significant portion of the product involved in the regional oil trade.

"What we're having now is going to change the face of Fujairah," said Mohammed al Afkham, the head of the Fujairah Municipality. "The coming five years will be very critical and will give Fujairah a boost forward - economically and socially." Fujairah's anchorage is already the second-largest ship-refuelling - or "bunkering" - point in the world after Singapore, servicing tankers at an anchorage that lies strategically outside of the Strait of Hormuz.

On a typical day, more than 100 of the world's largest ships are anchored offshore, taking on fuel and getting repairs and fresh supplies from the port's support boats. The emirate's ideal location has also attracted Abu Dhabi, which plans to export half of its crude oil out of Fujairah to ships bound for customers in Asia. The Abu Dhabi Crude Oil Pipeline (ADCOP), due to be finished early next year, will transport 1.5 million barrels per day (bpd) to Fujairah from the Habshan oil facilities 370km away.

Local and foreign energy firms are separately doubling the number of fuel storage tanks on the Fujairah coast over the next three years. On top of that, a new federal motorway being built between the emirate and Dubai will shave 45 minutes off the journey and bring more business to Fujairah. Throughout Fujairah's development, the emirate's relationship with Abu Dhabi and the Federal Government has loomed large.

Abu Dhabi is financing the pipeline project and has been funding the emirate's basic needs, including transport, infrastructure, schools and health clinics, from the early 1980s, when Sheikh Zayed, the founding President of the UAE, built the port. Abu Dhabi's next major investment in Fujairah was in building power stations to supply electricity for Abu Dhabi and Al Ain, said Salem Khalil, a technical adviser to the Government of Fujairah who has played an important role in the emirate's strategic planning.

"We use our location to attract economical projects," he said. "One of the strategic projects above ADCOP is Fujairah becoming a strategic provider of electricity and [desalinated] water. " The International Petroleum Investment Company (IPIC), an Abu Dhabi Government fund that is ADCOP's owner, did not respond to a request for comment on the status of the Habshan-to-Fujairah project, but government officials have outlined the strategic importance of the pipeline.

By exporting its oil at a point outside the Strait of Hormuz, Abu Dhabi will shave time off the journey of its oil to markets, avoid the hefty insurance premiums that come with shipping cargo through the strait and reduce the risk that its main source of income could be disrupted by any conflict in the region. The ADCOP project will also draw more marine traffic to Fujairah, bolstering its status as a major energy hub.

"What we are selling is a service, and with the new pipeline will come more jobs, more ships, more services," said Capt Mousa Murad, the general manager of the Port of Fujairah. Yet the global downturn and other factors have also seen the Fujairah economy come under pressure. Exports of ground rock - known as aggregate - have been hit hard by the downturn in the property market. Aggregate volumes handled by the port fell to 10 million tonnes last year from 14 million tonnes the year before, Capt Murad said.

Other industries have been held back by the emirate's limited supply of land and a shortage of electricity. A Federal National Council study last year concluded that 900 buildings and houses were without access to electricity across the Northern Emirates, including in Fujairah. There have been concerns that energy-intensive industries in Fujairah's industrial zones have been constrained by power shortages.

The start-up of the Fujairah F2 power station by the end of the year should provide enough supply to cover this shortage, but Dr Khalil, the technical adviser, said distribution would remain a challenge. Fujairah's leaders also want to maintain the emirate's quiet, laid-back atmosphere, Mr al Afkham said. "I read an article some time ago saying Fujairah was the new economic tiger of the Arab world," he said with a laugh. "We're not a tiger, but I think you can say Fujairah is the new corner of development in the UAE."

[e-mail] [e-mail]