Oman steps up plan for biggest oil-tank farm in Middle East

Facility could provide an alternative for energy exporters to avoid Strait of Hormuz

Oman’s ambitious goal of building the biggest oilstorage facility in the Middle East is finally progressing, more than seven years after the Gulf sultanate announced the plan.

Oman Tank Terminal Co. has almost finished constructing eight tanks to store crude for a new refinery near the town of Duqm on the Arabian Sea. It’s now pushing ahead with others that could be used by oil companies and traders, according to sources. That would eventually increase Duqm’s capacity to at least 25 million barrels, according to OTTCO’s website.

The Ras Markaz Crude Oil Park could provide an alternative for energy traders and exporters eager to avoid the Strait of Hormuz. The Omani facility lies roughly 966km from the waterway.

Attractions

“Crude storage that anybody can use outside the Strait of Hormuz, that can go either east or west, is probably a good thing,” said Alan Gelder, vice president for refining, chemicals and oil markets at consultant Wood Mackenzie Ltd. Iraq and Kuwait, a co-investor in the refinery, might see Duqm as an attractive place to park their crude outside the Gulf, he said.

Oil storage shot to prominence in March and April when coronavirus lockdowns caused demand for energy to collapse. Traders and producers struggled to find enough space for their unwanted crude, with many turning tankers into makeshift, floating warehouses to absorb the unprecedented glut. Terminal operators at Fujairah had to turn down requests for storage in April because they’d run out.

Duqm missed an opportunity as its schedule for Ras Markaz slipped, said Robin Mills, founder of Dubai-based consulting firm Qamar Energy.

“Storage economics were very good this year,” he said.