Fujairah in search for fresh oil reserves

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The UAE emirate of Fujairah carrying out exploration tests for onshore and offshore oil deposits and has so far carried out three drills that have so far been unsuccessful, a government official revealed.

Salem Kelil, technical adviser to Fujairah government told a conference in Dubai on Monday the emirate was carrying out seismic surveys to find potentially lucrative new oil deposits, the Bloomberg news agency reported.

The emirate is looking to boost its energy output and in March is was announced Abu Dhabi plans to build a terminal in Fujairah for importing liquefied natural gas (LNG), in a bid to bypass the need for vessels to pass through the Strait of Hormuz, which has recently been threatened with closure by Iran.

“Mubadala Oil & Gas (Mubadala) can confirm it is working on a project with the aim of securing additional gas supplies to meet energy demand from the UAE’s growing economy through the development of an LNG receiving facility located in the Emirate of Fujairah,” a spokesperson from Mubadala, Abu Dhabi’s investment and development company said in a statement emailed to Arabian Business.

“The project will be undertaken incorporating the latest, proven floating LNG storage and regasification unit (FSRU) technology. The project feasibility study was completed last year and the project engineering phase has now commenced with the aim of delivering first supplies in the next two to three years,” the statement added.

Iran threatened earlier this year to close the Strait, at the mouth of the Gulf, in response to sanctions that the US and Europe are imposing because of the Islamic republic’s nuclear programme. Fujairah’s coastline is on the Gulf of Oman, which empties into the Indian Ocean.

Middle Eastern oil producers such as Saudi Arabia, the world’s largest crude exporter, and the UAE, the fifth- biggest oil producer in OPEC, want additional gas supplies to make electricity and petrochemicals and as fuel for energy-intensive industries such as smelters. Aside from Qatar and Iran, these nations have limited gas reserves of their own.

The move is a positive step for the port of Fujairah after analysts at Barclays said it will face higher costs as sanctions against Iran curb supplies of fuel oil for the Middle East’s biggest ship-refuelling centre.

Fujairah depends on Iran for nearly a third of the 1m metric tonnes of fuel oil it buys and sells each month, Barclays analysts Miswin Mahesh and Amrita Sen wrote in a research report.

As sanctions tighten, Iranian supply will probably flow to the competing maritime hub of Singapore, which trades four times as much fuel oil as Fujairah, Barclays said. Fuel oil is the residue from refining crude and is used as bunker fuel in ship engines and to fire power stations.

International Maritime Organisation standards for ship fuel that took effect this year have boosted demand for Iranian product because of its comparatively low sulfur content.

Refuelling costs at Fujairah may grow as traders there must find alternative sources of low-sulfur fuel to blend with more polluting varieties and meet the IMO’s requirement that ships’ global sulfur emissions not exceed 3.5 percent, Barclays said.

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