Oil storage capacity in the United Arab Emirates port of Fujairah is expected to rise six million cubic metres (mcm) by 2020 to around 14 mcm, a senior port official told Reuters on Thursday.
The port, which lies outside the Strait of Hormuz, a vital Gulf oil export route, has seen a boom in storage facility building since late 2009.
But the pace of construction has slowed in the past couple of years, with the threat of overcapacity and lower forward prices for oil making storage unattractive.
However, with the roughly 50 per cent fall in crude oil spot prices since last June, traders are now able to make money by storing oil for delivery months down the line, when prices are expected to be higher – what is known as a contango market.
”The low oil prices are now a good opportunity for storage business,” said Mousa Murad, general manager of the port of Fujairah.
“Now the total storage capacity in Fujairah is 8 mcm. We are talking about by 2018-2020, that could reach 14 mcm. Why? Because there are new tanks being built, new companies coming in.”
Executives of Vopak, which is building five crude oil storage tanks with total capacity of 478,000 cubic metres at Fujairah, said on Thursday that they might eventually expand that number.
Fujairah has become a major bunkering hub for ship refuelling. A pipeline which brings Abu Dhabi’s crude to Fujairah and a new refinery that is planned at the port will give it further importance, said Murad.