Business | Oil & Gas
Asian appetite could inspire new role
Refinery will also generate local employment
- By Himendra Mohan Kumar, Staff Reporter
- Published: 00:00 June 12, 2011
Abu Dhabi: A proposed 200,000 barrels per day (bpd) refinery at Fujairah would likely meet burgeoning Asian economies' ravenous appetite for oil products and enable Abu Dhabi move up the value chain from being a net crude oil exporter to also being a prominent regional marketer of refined goods, say experts.
Being strategically located at the mouth of the Indian Ocean, the refiner may become a preferred choice of buyers of oil products as tankers will comfortably be able to bypass the critical and extremely busy shipping channel — Strait of Hormuz — that will cut down on their transportation time.
With a 1.5-million bpd crude oil pipeline from Habshan to Fujairah commissioned by the time the refinery comes on stream in mid-2016, Fujairah will become a major regional export hub for oil and petroleum product exports.
"The Fujairah refinery may be used to refine Abu Dhabi's offshore crude. The products from the refinery may go to Asia, mainly China, India and Southeast Asia," a well-placed oil industry source in Abu Dhabi told Gulf News.
"I am personally convinced that plans are already in the works to increase the size of the proposed refinery expansion to at least 300,000 bpd of refined products. That is because of the economies of scale which exist for larger, rather than smaller, refineries.
After achieving around 200,000 bpd, each additional 100,000 bpd costs only an additional $1 billion (Dh3.67 billion).
As there seems to be no slowdown in Asian demand for crude and crude products, it is rational and logical that the Fujairah refinery plant will be expanded, said Dalton Garis, Associate Professor of Economics and Petroleum Market Behaviour at Abu Dhabi's Petroleum Institute.
Strategic initiative
In April, Abu Dhabi's International Petroleum Investment Company (Ipic) said it is proceeding with the refinery project at Fujairah to be built at an estimated cost of $3 billion. The project is currently in its pre-front end engineering and design phase (Pre-Feed). The refinery will have the capability to meet its own power requirements.
"The Fujairah refinery project is a strategic initiative of the government. The Fujairah refinery will be located near the new Abu Dhabi crude oil pipeline main oil terminal and the UAE deep water export terminals in Fujairah, and will be designed to process UAE crudes such as Murban, Upper Zakum and Dubai. A number of financing options, including, but not limited to, project financing are under consideration," an Ipic statement said at the time. It also said there will be 400 job opportunities available for UAE nationals at the new refinery. "The refinery project in addition to being of strategic importance will create social and economic benefits for Fujairah and other nearby emirates as well as create employment opportunities during the operational phase in the UAE," said Ipic's Managing Director Khadem Al Qubaisi.
"No matter what happens to world crude oil prices, China is now wealthy enough to be indifferent to such changes with respect to its own planned oil demand from international markets [income-inelastic in demand]. Its energy demand will only increase, as will Africa's in future. No doubt, the port of Fujairah will experience dramatic growth," Garis said..
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