Fujairah's fortune rises with petrochemicals

Fujairah has established itself as the world's second largest ship refuelling hub. Nicole Hill / The National

Fujairah's economic development could be boosted by a petrochemical industry feeding on a refinery being built by an Abu Dhabi investor.

The emirate has established itself as the world's second-largest ship refuelling hub and is steadily expanding its bunkering capacity. A pipeline connecting it to Abu Dhabi's onshore oil wells was completed last year.

Fujairah's location on the Indian Ocean leaves it less vulnerable to a closure of the Strait of Hormuz, the Achilles' heel of oil trade out of the GCC. Fujairah's growing stature as a hydrocarbon transit hub and the guaranteed supply of Abu Dhabi crude convinced the government-owned International Petroleum Investment Company (Ipic) to go ahead with a 200,000 barrel per day refinery near the emirate's port.

The project is currently in the preliminary engineering phase, and will be completed by 2016 at a cost of about US$3 billion (Dh11.01bn).

The refinery will also produce about 1.9 million tonnes of naphtha per year, said Saleem Khalil, a key adviser to the Fujairah Government.

Naphtha is one of the main feedstocks used for petrochemicals, and the refinery's output could provide the basis for a local industry.

"This naphtha could be used for petrochemicals. And we have some land available to be complemented to the refinery and other projects," said Mr Khalil. "This is an area we want to diversity towards."

In Abu Dhabi and most of the GCC, petrochemical industries are already being nurtured to diversify economies away from oil production. Chemical storage facilities will soon add to Fujairah's growing capacity. Storage capacity is predicted to grow at a rapid pace - from 7 million cubic metres (cbm) by the end of the year to an eventual 10 million cbm, according to government figures.

The storage facilities of the Abu Dhabi Crude Oil Pipeline - also owned by Ipic - alone added 1 million cbm of capacity last year.

Together with Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, Ipic is also building a floating liquefied natural gas terminal in Fujairah. The terminal will become operational next year.

Some of the imported gas could end up being stored in Fujairah, further adding to the emirate's storage capacity, said Mr Khalil.

Oil tankers refuelling in Fujairah are increasingly heading east, according to Ali Al Yabhouni, the chief executive of Adnatco & NGSCO, Abu Dhabi's tanker arm.