[John Defterios:] It's an often overlooked emirate compared to the UAE's growing mega cities of Dubai and Abu Dhabi, but Fujairah is looking to boost its place on the map and become a strategic location for energy exports. This week, MARKETPLACE MIDDLE EAST heads to the tiny emirate with lofty ambitions. Plus, pipeline politics.
[Natig Aliyev, Azerbaijan Minister Of Industry And Energy:] And it is not only Azerbaijan in the focus of the Europe's interests. It is the Caspian region.
[Defterios:] Azerbaijan's industry and energy minister tells us why ongoing political instability is a cause for concern. Welcome to the program. We're in Fujairah, one of seven emirates making up the UAE. This largely mountainous area covers only 2 percent of the country. In the past, it did not benefit from Abu Dhabi's oil wealth or Dubai's trade and tourism traffic. But large-scale investment is rapidly changing the landscape here. Sandwiched between the Hajar Mountains and sandy beaches, the tiny northern emirate of Fujairah has always been the more laid-back sister city of Dubai and Abu Dhabi. Until recently, it is the minerals lying under Fujairah's famous mountains that has helped boost the emirate's economy. Sitting on vast resources of limestone and hard rock, Fujairah has been exploited for years by quarry companies producing construction materials like cement and stone wool. With various activities, like diving, fishing, and even mountain-climbing on offer, Fujairah is now positioning itself as the UAE's up and coming tourist destination. More recently, however, this traditionally backwater emirate has turned itself into a major shipping port for trade to and from the Gulf and has become a key strategic export hub for the UAE's oil. It is no surprise that Fujairah's investing in its port and free zone activities. It is the only emirate that has a coastline on the Indian Ocean south of the Strait of Hormuz. As a result, the UAE is now investing billions of dollars to make it an oil and gas distribution point. The Port of Fujairah is putting new meaning into the phrase build it and they will come. Sitting south of the world's busiest oil shipping lane, the Strait of Hormuz, it wants to become a global energy hub. The initial idea came during the first Gulf War in 1991, when there was a traffic jam triggered by concerns of bomb attacks.
[Mousa Murad, General Manager, Port Of Fujairah:] More than 200 ships just waiting here. From that, we say, yes, I think we should think about how we consider this shipping as a maritime services.
[Defterios:] Today, the once sleepy port is going well beyond loading fuel for ships. After Iran threatened to shut down the strait in 2008, the emirate of neighboring Abu Dhabi decided to leverage Fujairah's strategic location. This is a control room at an energy storage terminal here in Fujairah. The UAE government built a pipeline worth more than $3 billion to take crude from Abu Dhabi to the port on the Indian Ocean. It has a capacity of 1.5 million barrels a day. Opened two years ago, the pipeline can take in about half of the UAE's daily production.
[Thangapandian Srinivasalu, Executive Director, Gulf Petrochem:] The Strait of Hormuz always is a problem. And the Abu Dhabi pipeline came in here, and I don't see a reason why other producers will not be bringing the pipelines here shortly.
[Defterios:] The 30-year veteran of the business says Fujairah has something the top energy hubs in Asia and Europe don't have. It sits in a neighborhood with 60 percent of proven oil reserves.
[Srinivasalu:] Unlike Singapore and Rotterdam, which are the leading ports, you are surrounded by crude producers, surrounded by the foundries. So, this is what interested us the most. I'm very pleased.
[Defterios:] And the UAE is upping the ante, adding a big refinery and the ability to handle so-called VLCCs, very large crude carriers that ship up to 2 million barrels.
[Malek Azizeh, Commercial Director, Fujairah Oil Terminal:] We can save about 90 percent.
[Defterios:] Malek Azizeh of Fujairah Oil Terminal says those investments are game changers. He's involved in a joint venture with backing from Sinopec of China and Concord Energy of Singapore. That opens in December.
[Azizeh:] All these things, add them up and they give you the perfect scenario for somebody to take a step forward and get out of the usual thing and do something different.
[Defterios:] And if talks go well with Tehran over its nuclear program, this expanding hub could also welcome Iranian crude if sanctions are lifted. Securing energy supplies, of course, is crucial. Tensions remain high, of course, in Iraq and Syria, and also with Russia and Ukraine. We'll get into pipeline politics and the rising powers in the natural gas industry when MARKETPLACE MIDDLE EAST continues.