Oman chases bigger slice of oil trade with port project

Bloomberg

Oman, the biggest Arab oil producer outside of OPEC, is turning up the heat in a regional battle for business from ships in need of fuel with a $600 million deal to build storage tanks at the port of Sohar.
Sohar Port and Freezone signed a contract with Singapore-based trader Trescorp Alliance Pte to build an initial fuel-storage capacity of 600,000 cubic meters that will start operating by 2020, the Omani company’s chief executive officer, Mark Geilenkirchen, said in an interview. Trescorp plans to triple the facility’s capacity to 1.8 million cubic meters within a year, he said on Monday in Dubai.
The Indian Ocean port of Sohar is taking aim at some of the business that the oil trading hub of Fujairah, located on the same coastline in the neighboring UAE, has had pretty much to itself. Fujairah is the Middle East’s biggest hub for ship fueling, or bunkering, and will provide more than four times the oil-storage capacity that Sohar expects to have by 2020.
Both ports are located outside the Strait of Hormuz, a shipping bottleneck vulnerable to potential disruptions amid political tensions in the area. About 20 percent the world’s oil supply passes through the strait, according to the U.S. Energy Information Administration.
‘Huge for Us’
“This is going to be huge for us,” Geilenkirchen said. “What we were seeing was vessels coming to Sohar and then going to Fujairah for bunkering. We want to stop that.”
The first phase of the project will include tanks to store and blend crude, jet fuel and diesel, while the second phase will add blending of products like gasoline and jet fuel, according to a statement from Sohar Port and Freezone. Trescorp expects the growth in regional demand to be “far greater” than the storage capacity currently available, the Singapore trader’s chairman, Hamood Al Hashmi, said in the statement. The expanded facility will have six deep-water berths, one of which will be capable of handling very large crude carriers, or VLCCs.
By 2020, Sohar will have total storage of about 3.2 million cubic meters, including the Trescorp project. Fajairah aims to expand its oil storage to about 14 million cubic meters by that time.
Ship traffic at Sohar has increased for three consecutive months since June, after starting cargo services to Qatar because of the political crisis that cut that Gulf nation’s transport links to the region’s largest port, Jebel Ali in the U.A.E., Geilenkirchen said. Sohar Port expects to serve about 3,000 vessels this year, up from about 2,600 in 2016, and it estimates maritime traffic to grow 30 percent next year as more projects including chemical production start there, he said.