Building a state-of-the-art oil terminal in a tough new landscape
After Singapore, the largest bunkering hub in the world is a little port called Fujairah. One of the UAE’s smallest emirates, it is not much more than a narrow strip of mountains and rock. Occupying less than two percent of the country’s area, with neither the oil reserves of Abu Dhabi nor the dazzle of Dubai, it hardly shakes up the map.
But zoom out, and you see what makes Fujairah unique — it is the only emirate to have a coastline solely on the Gulf of Oman and none on the politically charged Persian Gulf.
On one side Fujairah is flanked by the world’s most important oil shipping choke point, while on the other, the Indian Ocean offers direct access to the markets of Asia and Africa
Fujairah also lies next to the Strait of Hormuz, which connects the two gulfs. 18 million barrels of oil make their perilous passage through this strait each day — that is one third of the world’s tanker-borne crude. The port of Fujairah is thus flanked on one side by the world’s most important oil shipping choke point, while on the other, the expanse of the Indian Ocean offers direct access to the markets of Asia and Africa.
It is no surprise then that it is the third largest petroleum storage and trading centre in the world. When IL&FS Maritime was looking to extend its pioneering standards internationally, the strategic significance of the port of Fujairah was obvious.
Bold vision, new territory
The year was 2013. As Iran’s blockage threats loomed over the Hormuz strait, Fujairah, lying completely outside the strait, offered safe bypass. Abu Dhabi — UAE’s largest oil producer — had just completed a $3.3 billion, 400 km long pipeline to Fujairah to avoid its oil export having to traverse the strait.
Several tank terminals existed here already but most of them were privately owned by individual traders, making new traders understandably hesitant to store their product there. IL&FS saw the opportunity here to provide high quality tank terminal services as a non-aligned merchant facility.
With IL&FS Prime Terminals FZC (IPTF), the company was entering new territory, a project of unprecedented magnitude on foreign soil. IL&FS had no prior experience of working in the region, nor in the sector. Getting a foothold in a completely new environment and making a place in the ecosystem of Fujairah was never going to be easy. However, a compelling analysis of the opportunity backed by the Group’s implementation capabilities gave it the confidence to undertake the project.
Hard rock and soft ground: Challenges before construction
Seeking permissions and obtaining approvals were only the first hurdles: perfectly positioned though it is on the globe, Fujairah is uniquely challenged by its topography. The highest range in the eastern Arabian peninsula — deriving its name from the hard rock of its mountains — the Hajjar range occupies most of Fujairah’s land mass. There is little land available for construction, and IL&FS didn’t have a clear site until clearances were received, including for the blasting of some slopes.
Winters in Fujairah bring unpredictable rain as the easterly winds from across the Indian Ocean hit the mountains. The construction team had to combat waterlogging on the site and manage the ‘wadis’ and waterfalls before they could begin work. Without treatment, the ground would have been unstable and extremely dangerous for people to work on, let alone building huge petrochemical terminals. Appropriate soil stabilization therefore had to be done before any construction could start.
The oil pipeline from Abu Dhabi has two outlets in the terminal area. With all connectivity exhausted on the southern outlet, IPTF was to be the first to plug into the northern one. But while the terminal construction was already underway, this northern manifold was still being designed and developed.
Even during construction, everything from safety valves to site size was subject to change if the port authorities changed plans
The crew at IPTF held their breath as the port authorities discussed various decisions. Any change on their part would have massive bearing on the construction of the terminal — it could impact anything and everything, from the safety valves to the site’s size.
It takes a highly charged team, close-knit and invested in the project, to navigate difficulties like these and still build the terminal in under two years. The IL&FS crew at Fujairah achieved not only this but built a terminal that set pioneering standards.
Anchoring vision with cross-disciplinary expertise
The IL&FS Group’s personnel make up its secret sauce. Having implemented several complex infrastructure projects leveraging strengths from various parts of the Group, they have developed valuable cross-disciplinary expertise.
For this ambitious project, inter alia, IL&FS Financial Services secured the financing, IL&FS Environment assessed the environmental and social impacts and developed robust mitigation plans, IL&FS Transport assessed and implemented the logistic chain required to support the terminal operation, whilst IL&FS Maritime anchored the project and masterminded the whole effort to ensure flawless implementation to global benchmarks. Despite the numerous challenges along the way, the project kept to costs, timelines and the highest standards.
The new kid in town: Setting new terminal standards
Unlike other terminals in the region, IPTF harnessed solar power for internal use to become the first and only green terminal in Fujairah. It was also the first terminal to afforest the slopes of the barren hills around.
With the lifting of the Iran sanctions, huge volumes of crude oil are foreseen to make their way through Fujairah. From a business point of view, IPTF is not just a storage terminal. It offers possibilities for circulating, blending and heating the crude, and thus allows customers to bring in small cargo and take out bigger processed cargo for export to Asia or Europe.
In Fujairah, companies make payments on complete tanks rather than on volume — consequently several of them end up paying for capacities they do not use. In this context, IPTF’s smaller tanks are perfectly sized for quick turnarounds. With the strictest standards put in place at the start, and a highly qualified team to run the terminal, the first customers climbed aboard. Passing all audits, checks and certifications with flying colours, IPTF then invited bigger companies on board.
Exceptional security, total efficiency
The terminal offers complete security for the stored cargo with a zero-loss facility. A state-of-the-art software system allows customers to monitor details of their stored cargo. With 70% occupancy from day one, the terminal sold its full capacity two months into commissioning. Today the terminal stands fully occupied, with a complete turnaround every month. Within five months of operation, it was moving 1.5 million cubits of cargo.
Though one of the smallest in Fujairah, its quality of infrastructure and the exceptional standards of safety and service set IPTF apart. Today it ranks among Fujairah’s top terminals as the fastest, safest and best equipped. At the end of the day, IPTF re-affirms the IL&FS philosophy that dedicated project teams empowered by institutional support, and backed by comprehensive and integrated planning, will consistently deliver superior outcomes to set world class standards.