Tiny Fujairah has ambitious plans

THE EMIRATE WANTS TO SURPASS SINGAPORE AS OIL STORAGE HUB

MAHIN KHALID SIDDIQUI, GULF INTELLIGENCE, DUBAI

EDITOR'S NOTE: The Emirate of Fujairah sits at the mouth of an ancient trade route, the Wadi Ham on the Arabian Peninsula. With an area of just 1,166 square kilometers (450 square miles) and a population estimated at 152,000, Fujairah's importance lies mainly in its strategic position outside the Strait of Hormuz, the narrow waterway connecting the Indian Ocean to the Persian Gulf (or Arabian Gulf, depending on one's perspective). The strait also separates Iran and the Arabian Peninsula. Fujairah joined the United Arab Emirates in 1971 and is the only emirate located on the Indian Ocean.

RANKING THIRD among the world's oil trading hubs, Fujairah has ambitious plans to climb to second place - but with little will to go through the necessary evils of evolution and change.

The small UAE emirate has come a long way from being a Bedouin beach to a regional oil trading destination by increasing storage capacity from 2 million cubic feet to 8.7 million cubic feet in the past decade alone. Last year, Salem Abdo Khalil, advisor to the government of Fujairah, confirmed projects to increase capacity to 13 million cubic feet to be well underway - an impressive feat for the Indian Ocean port city which was previously employed to refuel ships after the first Gulf War in the 1990s. In present day, the emirate may well be on way to dethrone Singapore as the second largest storage hub.

By default, Fujairah is blessed with what Singapore is not. Geographically a desert, the emirate has ample space to mushroom storage tanks, whereas Singapore has had to invest into reclaiming land. Within the UAE family, Fujairah has an oil-rich big brother, Abu Dhabi, that allows the flow of 1.5 million barrels a day through Habshan - Fujairah Pipeline to bypass the traffic through the Strait of Hormuz. Furthermore, Qatari gas flows uninterrupted via the Dolphin Energy pipeline from Taweelah. But by design Singapore has strategized ahead.

High in operational excellence and armed with a liberal and transparent market, Singapore is second only to Rotterdam in oil trading. The small city-state has learned from Fujairah and added its own unique selling propositions. Now while Fujairah looks to increase its storage facilities, diversify and add refining capacity through the Petriox biofuels project, and has plans to establish LNG degasification facilities, its success story to attract international businesses will not bank on infrastructure.

In an era of increased competition, Fujairah's world-class infrastructure will not follow the "build it and they will come" strategy unless a more liberal approach is taken to markets. Balanced trading will be required for the market to flourish, especially when it comes to Abu Dhabi companies that supply the domestic market under subsidies. Not bogged down by the responsibility to champion regional players, Singapore allows investors to buy into a distribution system and deploy competitive participation in the market.

Another important factor for Fujairah will be to address transparency. While the government continues to make strides in this area, there is ample room for improvement. Singapore offers a mechanism wherein investors can download trading and storage figures. Fujairah remains somewhat elusive in that matter. Blurred lines between official figures and rumored figures lead to confusion that impacts businesses, and ultimately impacts the economy of Fujairah. An ideal approach will be a model on the joint organization data initiative (JODI) to create a portal where up to date information on figures regarding storage, sea going vessels, and barges with arrival and departure should be made public.

Lastly, bureaucratic culture will need to be replaced with a more open policy. For Fujairah, this means cutting down on red tape, and fostering a culture of more openness where stakeholders can bring concerns to the table.

Fujairah is at a critical position where there are opportunities to create hubs that Singapore can currently only strategize and plan. For example, there are several suggestions of creating a chemical hub and a strategy of looking at the emirate as a regional pricing hub. However, Fujairah needs more international players and traders to actively participate in the market sans blurred lines.

In order to position Fujairah as a leader in the storage business, the emirate must strive for excellence through transparency, liberalization, and by cutting through bureaucratic red tape. Should Fujairah succeed in aligning its domestic strategies with international business requirements, the right mix of cultural openness and efficient capabilities, there is no stopping it in the race to the top.

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