By Jyotsna Ravishankar
OGME Exclusive : Group of investors in talks with government of Fujairah to form a new company and build refineries in the UAE and Iraq.
A consortium of regional & international investors and oil companies have drawn up plans to build two mega refineries, one in Fujairah and one in Basra, Oil&Gas Middle East has learned.
Speaking to OGME, Sheikh Fawzi Al Lami, a member of the consortium, and an Iraqi businessman, said the government of Fujairah was very supportive of the idea.
Sheikh Fawzi, chairman, Al Faw Petroleum, Iraq, also claimed that the Fujairah government has promised full co-operation to the extent of giving the land and the infrastructure needed for the 300,000 barrels per day (bpd) facility.
Al Faw Petroleum belongs to Al Emmar Holding Group of Iraq, a private holding company owned by Sheikh Fawzi. When OGME contacted the ministry of Fujairah to verify the project, a senior official, speaking on condition of anonymity, said that Sheikh Fawzi has met the ruler, and subsequently members of the technical committee in the ministry, and has discussed the project and details of the refinery.
However, no papers or financial background have yet been submitted, said the official. He also said the only refinery project in execution was the one proposed by Abu Dhabi Oil Refining Company (Takreer). He said a refinery of the capacity that Sheikh Fawzi has proposed would require at least $4 billion and he was not yet sure “if the consortium would be able to raise that large amount”.
Sheikh Fawzi, speaking about the intended project, said that the consortium will first establish a Fujairah-based company, Fujairah PetroGas, for the purpose.
The company, he said, will be listed on both regional and international exchanges and go public by the beginning of next year.
Fujairah PetroGas will then use the emirate as a trading hub for refined products from Fujairah and Basra. The group is still on the lookout for potential regional and international investors, who have sound technical knowledge. The investors, he said, will be involved in building both refineries.
“We are looking at investors who understand this need for superior technology. We are also in the process of short-listing contractors for the first phase of bidding. Siemens has shown some interest in providing complete turnkey solutions for both the refineries, and we are progressing quite rapidly with our planning,” said the investor, without attaching any value to the proposed refineries.
Sheikh Fawzi said Petronas of Malaysia is a member of the consortium, and that the idea had been discussed with Shell and British Petroleum, which were interested in booking products from the proposed refinery.
Fujairah PetroGas, when established, intends to complete both refineries on a fast-track basis, with completion scheduled for the end of 2006 or early 2007.
Though the group is still on the look out for “superior investors”, Sheikh Fawzi said that plans regarding the construction and execution of the refinery were ready. “The Fujairah refinery will be built in two phases,” said Sheikh Fawzi. “The first phase will construct the facility with a capacity of 150,000 bpd, which will later be expanded to 300,000 bpd,” he explained.
The plant in Basra will be built in the Basra Free Zone with a capacity of 300,000 bpd, said Sheikh Fawzi, while showing blueprints of the land where the refinery will be built. The crude for the refinery will be primarily from Basra, he said. But, the crude could come from Abu Dhabi and other GCC states, if needed.
“The region needs hundreds of refineries, and all our group companies felt Fujairah was the most strategic centre for the purpose,” he said.
Fujairah is one of the three main bunker fuel destinations in the world, with the other two being Rotterdam and Singapore. Fujairah has succeeded in capitalising on its strategic location on the Gulf of Oman by providing oil storage and bunkering services to shipping. It is precisely for this reason that the consortium chose the emirate, said Sheikh Fawzi.
Despite the quantity of refined product sales in the market, there is only one refinery, the 105,000 bpd facility owned by the Fujairah Refining Company.
Takreer (Abu Dhabi oil refining company) has announced the construction of a $4 billion refinery, last month. However, Sheikh Fawzi said he is not worried about competition from any other refineries, as he believes the region can accommodate many more, given the insatiable demand for refined products, especially bunker fuel.
When asked about the security concerns in Basra resulting in delays in refined product in the Fujairah market, Sheikh Fawzi said that Basra was one of the safest areas in Iraq.
Estimates of Iraq’s oil reserves and resources vary widely, however, given that only about 10% of the country has been explored.
A regional industry analyst, who refused to comment on the feasibility of this particular project said, “whether or not this project takes off, Fujairah is firmly on the map for a being favourable refinery destination and more such plans will definitely be in the pipeline.”