The Dubai Multi Commodities Centre may build a $2bn liquefied natural gas storage plant in Fujairah, a UAE East coast port, in preference to Dubai in the Gulf in order to avoid the Strait of Hormuz, officials said yesterday.

The project depends on the government of Fujairah providing DMCC with reclaimed land, Salem Abdo Khalil, the Fujairah government’s technical advisor, told Dow Jones Newswires.
“We are hoping we will be ready to impart on the project in about a year,” Khalil said. Fujairah has an in-principal agreement with DMCC for the project, he said.
DMCC, which is also considering a storage site in Dubai for the project, prefers the Fujairah option because of the port’s location outside the Gulf, a person familiar with the project said.

Having storage tanks on the East coast of the UAE would be valuable if shipping through Hormuz, the narrow entrance to the Gulf that’s dominated by Iran is disrupted.

Oil prices have risen over the past two years partly on fears Iran could block exports from the region through Hormuz if tensions with the US over the Islamic republic’s nuclear programme escalate.

Abu Dhabi plans to build an oil export pipeline to transport up to 1.6mn barrels a day of crude to Fujairah that will bypass the existing tanker route through the Strait, minimising its exposure to the 50km-wide channel.

DMCC would prefer to abandon its $2bn plan to build the liquefied natural gas, or LNG, storage hub in Dubai, in favour of the Fujairah project because of its strategic location, the person familiar said.

The Dubai storage facility is planned as a joint-venture with LNG Impel, a subsidiary of the closely-held Canadian firm Galveston LNG.



Fujairah, which is surrounded by the Hajar mountain range, has ring fenced an area near its port for reclamation, extending out into the Arabian Sea about 500 metres and running up the coast for 4km, for the project and industrial use, Khalil said.

Reclamation of the land will only go ahead if Fujairah is able to secure extra Qatari gas to provide power for users of the site, Khalil said. The Fujairah storage facility would be capable of holding 1.8mn cubic meters of LNG.

LNG storage offers customers the ability to store, trade and plan supplies, DMCC said in August. The Dubai hub will also provide other services such as LNG loans and LNG quality blending.
In the future, the storage is expected to offer financial derivatives around LNG and shipping, according to DMCC.

The Dubai Mercantile Exchange, which is owned by the Dubai and Oman governments and US energy exchange Nymex Holdings, has recently said it is looking at listing LNG futures.

DMCC’s head of energy wasn’t immediately available to confirm the agreement has been signed. The DMCC, created by the Dubai government to establish a commodity market place in Dubai provides industry-specific market infrastructure and other services. – Dow Jones Newswires.