New crude oil storage facility and developments at existing terminals to raise Oman's energy trade profile

As part of Oman’s broader strategy for economic diversification, efforts to position the sultanate as an international centre for the storage of crude oil and its derivatives are well under way. At the heart of the country’s appeal is its strategic location, which offers easy access to a range of markets in South Asia, the East and Africa, as well as land and sea access to producers in the Middle East.

Regional oil producers benefit from being able to store oil more than 1000 km outside the vulnerable Straits of Hormuz at a location in the Indian Ocean. The supply can then be refined nearby or shipped to destinations in the East or West. The country’s crude oil exports are currently processed at export terminals in Mina Al Fahal and Musandam. There is also a third terminal under construction at Ras Markaz – located 70 km south of Duqm – which will help to enhance Oman’s maritime oil trade profile and position the country as an international centre for the storage of crude oil and its derivatives.

Musandam Export Terminal

In May 2016 state-owned Oman Oil Company Exploration and Production (OOCEP) completed loading the first shipment of 300,000 barrels of crude oil from the single point mooring at Musandam Gas Plant (MGP), located on the west coast of the northernmost Governorate of Musandam. The event launched the MGP terminal, now the second Omani crude export terminal that lies on major international crude oil trade routes. The plant is expected to become a key contributor to the refining and exporting of crude oil and gas, having the capacity to process up to 20,000 barrels of crude per day from nearby offshore fields, as well as 45m cu feet of gas and 75 tonnes of liquefied petroleum gas, according to MGP.

UAE-based Marsol International was selected by Oman in July 2017 to provide and manage marine and offshore activities related to tanker loading via the single point mooring offshore marine terminal at MGP. Under the two-year contract Marsol International will also oversee maintenance work, vessels, equipment and staffing at the terminal.

OOCEP’s other oil export terminal at Mina Al Fahal, located close to Muscat, has functioned as the country’s central export terminal since the 1970s. Crude and oil products from the nearby 85,000-barrel-perday Mina Al Fahal refinery are loaded onto tankers at the port by subsea pipeline.

Duqm Storage Expansion

The Ras Markaz crude oil storage terminal is set to be the third export terminal for crude oil in Oman. In July 2017 the Duqm Special Economic Zone Authority (SEZAD) granted Oman Tank Terminal Company (OTTCO) rights to develop the facility. Some 1253 ha have been allocated for Ras Markaz Crude Oil Park, which is planned to see up to 200m barrels of crude storage above ground and a similar amount below ground. The offshore terminal at Ras Markaz will be connected by two pipelines to inland tank farms as well as the new refinery, and it is expected to include two single-point moorings that will accommodate large carriers 50 km offshore. A second phase of development will see three more single-point moorings, one of them capable of serving ultra-large crude carriers. The 2017 agreement signed with OTTCO grants the Oman Oil Company subsidiary exclusive rights for the storage of crude oil and its derivatives in the Ras Markaz area for a period of 20 years, and for five years in SEZAD as a whole. Under a five-year development plan, OTTCO will be responsible for constructing storage tanks, establishing floating platforms and piers for the import and export of crude oil and its derivatives, and setting up a plant for the pumping of oil to the tanks.

SEZAD forecast investment for the development of phase one of the Ras Markaz terminal to total $1.7bn, comprising $815m to cover the costs of crude oil storage tanks with a capacity of 26m barrels, and $941m covering construction costs for crude oil import and export marine facilities as well as basic internal infrastructure. In late September 2017 OTTCO was finalising the engineering, procurement and construction for phase one, scheduled to come on-line by the end of 2019. The volume of investments for phase two tanks was projected at $700m, of which $225m will be spent on basic infrastructure facilities. OTTCO and Occidental Petroleum, Oman’s second-largest oil producer, signed a memorandum of understanding in late 2017 to store up to 2m barrels of crude at the oil terminal.

Construction of the new terminal dovetails with Oman’s planned expansion of refinery capacity at Duqm. In April 2017 state-owned Oman Shipping Company (OSC) signed a deal with the Kuwait Oil Tanker Company to build a new plant near the port by 2021. The two have since been in discussions over the supply of extra tankers, which will be needed to handle volumes from the new refinery. However, a procurement decision on extra tankers will require additional clarity around destinations and quantity of cargoes that will be forthcoming in mid-2018.

Storage & Bunkering At Sohar

The government has invested in Oman’s ship-fuelling potential, with landmark deals signed in 2017 for the development of oil storage and bunker services at the northern port of Sohar, some 750 km north of Duqm. The deepsea port and free zone is strategically positioned in the Gulf of Oman, just outside the Strait of Hormuz, and offers a potential challenge to the bunkering monopoly of neighbouring oil trading hub Fujairah, located 150 km north of Sohar in the UAE.

Sohar Industrial Port Company manages the port, while Oiltanking Odfjell Terminals (OOT) exclusively provides liquid storage facilities. The OOT has experience in this area, having operated a 1.36m-cu-metre oil tank terminal facility for storing and handling petroleum products, chemicals and gases in Sohar since 2008. Towards the end of 2016 German energy supply, trading and logistics group Marquard and Bahls acquired a 51.7% controlling stake of the indirect ownership in OOT, thereby making them the majority owner of the oil tank terminal at Sohar Port.

Almost a year later in September 2017 Sohar Port and Freezone signed a $600m deal with Singapore-based trader Trescorp Alliance to launch oil storage and bunker services at Sohar Port South in 2020. The first phase of the project will equip the terminal with tanks to receive, store and blend crude oil, fuel oil and diesel. Construction is scheduled to commence in 2018, which will initially install a fuel-storage capacity of 600,000 cu metres, with future expansion planned to eventually take the total storage capacity up to 1.8m cu metres. The expanded facility will have six deepwater berths with 25-metre drafts, one of which will be capable of handling very large crude carriers of up to 320,000 deadweight tonnage. Expansion plans for phase two will add blended products like gasoline and jet fuel, in addition to Lubrication Park, which will blend lubricating oil products of varying grades, such as marine grade lubricants.

Regional Competition

With the added 1.8m cu metres of storage provided by the Trescorp project, Sohar is on track to reach total storage capacity of 3.2m cu metres by 2020. Neighbouring Fujairah, the largest hub for bunkering in the Middle East, aims to expand its oil storage to about 14m cu metres over the same period. Nevertheless, Sohar Port and Freezone authorities see significant potential in bunkering, noting the potential to capture oil storage and bunkering business from vessels that have historically called at Sohar before moving to Fujairah for bunkering. Ship traffic spiked at Sohar in 2017 with the launch of cargo services to Qatar, following the regional blockade against the country, which saw its transportation links cut to the region’s largest port, Jebel Ali in the UAE. Sohar Port authorities expected to serve 3000 vessels in 2017, up from 2600 in 2016. Maritime traffic is forecast to grow by 30% in 2018 as new projects come on-line.