Expansion Projects

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Fujairah is continuing to generate a great deal of interest from both international and local investors. Interest and building activity has been focused on transport and energy infrastructure, aiming to capitalise on the emirate's location along the Gulf of Oman.

On the transport front, Fujairah International Airport is gearing up for business with the new Kang Pacific Airlines to be based in Fujairah. Paul Kang, a leader in the Indian aviation industry, announced that he will be financing the launch of the airline with an initial capital of $10m. Scheduled to start operations in October, Kang Pacific Airlines will be the United Arab Emirates' fifth airline. It will be a commercial airline with routes, as a first step, to the Philippines, Sri Lanka, Bangladesh, the United Kingdom and India.

On the energy front, SulphCo, a US-based firm involved in the upgrading of crude oil, recently announced the commissioning of the first phase of its 180,000-barrel-per-day (bpd) oil processing plant in Fujairah. Sulphco has patented a process using ultrasound technology to desulfurize and hydrogenate crude oil and related products. The technology is designed to produce more gallons of usable oil per barrel by upgrading heavy crude oils into lighter crudes.

Crude oil upgrading is of major economic importance. Heavy crude oils exist in large quantities in the western hemisphere, but are difficult to produce and transport because of their high viscosity. Some crude oils contain compounds such as sulfur and/or heavy metals causing additional refining problems and costs. In situ upgrading could be a very beneficial process for leaving the unwanted elements in the reservoir and increasing API gravity - a measure of how heavy or light a petroleum liquid is compared to water.

In addition, German firm ILF was awarded a contract in April to build a 360km pipeline from the Habshan oilfield, in Abu Dhabi, to the port of Fujairah. Expected to be completed in 2009, the pipeline will have a capacity of up to 1.5m bpd - just over half of the UAE's output. The pipeline could be used to reduce dependence on the highly trafficked Strait of Hormuz, sparing shippers the travel time and expensive insurance rates charged for transport through the Gulf.

In preparation for the pipeline, Fujairah is involved in a number of other projects, including expanding the size of its port and adding 16 tanker berths. It also is preparing for a series of new oil and refined-product storage capacity, with a capacity of about 25m barrels, planned by producers and trading companies.

Fujairah has also alloted 5.5 km along the coast near its port for land reclamation to accommodate new industrial projects, extending about one-third of a mile into the Gulf of Oman.

Fujairah is one of the sites being considered for Dubai's planned $2bn liquefied natural gas storage (LNG) facility. The Dubai Multi Commodities Centre (DMCC) said the facility, with a capacity to store up to 3m cubic metres of LNG, would be used as a launchpad for an LNG derivatives market.

"DMCC and LNG Impel are looking at some alternative sites. Fujairah is one of them," reported Tilak Doshi, DMCC executive director for energy.

Locating the facility outside the Gulf in Fujairah, one of the world's biggest ship refuelling ports, would enable transport and shipping cost efficiencies.

Another reason behind the sudden increase of infrastructure investment in Fujairah could be a security measure. Iran, which is experiencing political instability following the resignation of three key economic figures this month and escalating tensions with the West, said if it were to be attacked, it would respond by disrupting trade through the Strait of Hormuz, the narrow gateway that tankers use to bring oil from the Gulf to the rest of the world. About two-fifths of the world's seaborne oil passes through the Strait so the infrastructure projects in Fujairah would clearly help in the event that Iran attempts any disruption.

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