Oman in talks with Asian partners for oil storage
Oman is in discussions with partner nations in Asia to establish a new strategic petroleum reserve with capacity to eventually hold 200 million barrels of crude at its proposed Ras Markaz storage terminal on the Indian Ocean, a senior Oman Oil Company (OOC) executive told S&P Global Platts Monday.
The first phase of the Ras Markaz terminal, which is due to be completed by 2020, sits outside the Hormuz Strait. The facility will also be connected via a 70 km pipeline to the Duqm Refinery and to Oman’s Main Oil Pipeline.
“Two or three Asian countries are already interested [and] visited the location a couple of times,” Hilal al-Kharusi, active executive managing director of Oman Oil Duqm Development Company, a subsidiary of (OOC), said in an interview in Tokyo. “We would like to see Asian countries utilize this terminal because I know some countries like Japan do not store [crude oil] outside but some other national oil companies can utilize the terminal to complement their country strategy.”
Strategic oil and product storage is likely to become increasingly important for Asian consumers to help smooth out price volatility and provide a security of supply in case of disruptions from Middle East producers. Iran has threatened to block supplies shipped through the Strait of Hormuz if it is prevented from exporting its own oil from the region, which is Asia’s largest provider of crude.
“From the Gulf [there] will be different discussions,” Kharusi said. “[It is] too early as serious discussions with some Gulf countries. Actually we would like to use it for the strategic reserves to ensure their customers are supplied during interruptions,” he said.
The initial phase of the Ras Markaz crude storage terminal will store up to 10 million barrels of oil. The facility has already secured Oman’s Duqm refinery as its first customer to store around 7 million barrels, Kharusi said.
However, the 230,000 b/d Duqm refinery isn’t expected to begin final commissioning until the end of 2021, with full output targeted a year later.
“I know there are other clients in discussion with the [Ras Markaz] project team to utilize [storage tanks],” Kharusi said.
Last September, OTTCO and Occidental Petroleum signed a memorandum of understanding to potentially store up to 2 million barrels of Oxy’s crude, which could include US crude grades, at Ras Markaz.
“As you know the location is important… [it] has a natural [water] depth of 33 meters that can accommodate ultra-VLCCs”, he said.
Ras Markaz will compete with Fujairah and Sohar for bunkering and oil storage in the region, which has been disrupted by the Saudi-led economic boycott of Qatar, which has forced Doha’s shipping fleet to refuel outside the Gulf.
“It would add a lot of value not only to Oman but to the region. We see an opportunity for other producers in the Gulf to utilize it. You know our storage terminals are like hotels, build it and people will come,” he added.
Kharusi said Duqm – the sultanate’s latest refinery – would be configured form Omani and Kuwaiti crude.
The official said Oman could also blend new grades if new oil were to come on stream. “If we see more discoveries in towards the sour, the Oman government may consider actually producing heavy-light sours,” he said.
Oman’s export blend is a medium sour grade, which has an API gravity of 31.3 degrees with a sulfur content of 1.41%.