Oil storage projects are set to rapidly expand the Port of Fujairah’s capacity despite uncertainty in the global oil markets, according to data released by the port authority.

The global oil tank storage sector has benefited since the price of crude began to drop in the summer of 2014, with traders seeking out storage in order to sell at a profit after an anticipated rebound in price.

Fujairah enjoys a unique strategic position in the UAE’s oil and gas sector as it is located outside the Strait of Hormuz bottleneck for the Gulf. This has helped drive its growth as a bunkering and storage hub and in the coming years, it will also have a new refinery and a liquefied natural gas (LNG) import terminal.

Total oil storage capacity in Fujairah more than tripled in the two years to 2014, growing from 1.8 million cubic metres in 2012 to 6.9 million cubic metres last year.

It is now expected to double in the next four years. As many as 12 companies are expected to add oil storage capacity in the UAE emirate to push the capacity to 13.7 million cubic metres by 2018.

Companies expected to add significant capacity during this period include local/Singaporean joint venture FOT Concord, local/Dutch Vopak Horizon Fujairah, Dutch group VTTI and Abu Dhabi’s Brooge Petroleum & Gas Investment Company (BPGIC).

Oil storage groups in the region are generally positive about the outlook for capacity demand.

“To some extent, [the oil storage industry] of course faces the effects of these [oil price] developments, with some new projects being postponed or cancelled,” says Hendrik Schaake, business development manager at Switzerland’s Endress+Hauser, speaking ahead of the Tank World Expo in Dubai.

“However, many projects are still ongoing since the price drop is not a result of a decrease in demand. Furthermore, we see a strong increase in interest for optimisation solutions for existing installations to streamline product and business information flows, reduce losses and assure safety.”

Edwin Lammers, executive commercial manager at Oman’s Sohar Port and Freezone, sees a growing trend towards storage in offshore super-tankers.

“In terms of storing oil on the high seas, there are an equal number of benefits as there are risks,” he says. “For example, towards the end of last year, the spot price for oil was lower than in the futures market.

“This is one of the reasons why crude is being stored at sea, as companies currently see a greater benefit in buying up physical oil stocks and immediately selling futures. The challenge, of course, is that if interest rates or storage costs increase, the cost of storing oil out at sea would eclipse any future profits.”