Ecomar Energy Solutions has agreed to expand its refinery and build new storage capacity at Fujairah, with the introduction of the Murban futures in the week starting March 28 seen boosting already strong demand for crude oil and products at the UAE's east coast port.
Refinery capacity will be increased to 62,000 b/d from 22,000 b/d currently, and inland storage capacity will be increased more than fivefold to 1 million cubic meters in the phase 3 expansion that should be completed by the end of 2024, Leigh Shaddick, Ecomar's trading director, told S&P Global Platts on March 22.
Ecomar has signed an agreement with the Fujairah government for the increased storage capacity which should be about 190,000 cu m in the next few months as phase 2 is completed, he said. Ecomar has also agreed to report its oil products inventories to the Fujairah Oil Industry Zone, he said.
"This is a big jump for Ecomar but we have always done what we say we are going to do, so we're in a really good position now to build on the improved margins and profitability we see in the business in the future," Shaddick said. "Hedge funds and investment professionals are getting more involved. With Murban possibly becoming a benchmark for the region, we want to part of that growth. There is still plenty of time for our industry."
Abu Dhabi National Oil Co.'s flagship crude Murban will start trading March 29 as a futures contract on the newly established ICE Futures Abu Dhabi, or IFAD, set up by ADNOC, Intercontinental Exchange and nine oil majors including BP, Total and Shell. The contract includes delivery of Murban at Fujairah.
Ecomar's refinery will add an additional crude distillation unit, bringing it to 2 CDUs, to process crude oil into naphtha, kerosene, gasoil and fuel oils. Ecomar is looking for a long-term contract for supply of crude from regional producers of sour crude, including Iraq, UAE, Oman and Saudi Arabia, Shaddick said.
The refinery is currently selling everything it produces, with demand on the upswing including for high sulfur fuel oil used by shippers that have scrubbers onboard to meet IMO low-sulfur rules, Shaddick said. Ecomar has no plans to produce low sulfur fuel oil as that market is well served by current suppliers including Uniper Energy and Vitol, he said. The refinery and storage capacity expansion will cost an estimated $350 million, he said.
Fujairah has two other refineries, operated by VTTI and Uniper Energy.
Ecomar was set up in Fujairah in 2015 and the refinery started in April 2020 when WTI crude prices turned negative. The Fujairah Oil Industry Zone has provided weekly oil product inventories exclusively to Platts since January 2017. There are now 12 terminals reporting to FOIZ.
