Iran has threatened to close the Straits of Hormuz on more than one occasion in response to the sanctions being imposed upon its economy by the US and EU. Over a third of all sea-borne oil is shipped through the Straits, and any disruption to that flow could seriously affect oil prices.
As insurance against this event, and the potential disruption to supply that it could create, the UAE has already built a bypass pipeline across the desert to the Gulf of Oman, and Saudi Arabia has increased the capacity of its Red Sea ports so that it can export more oil from there. Now Oman is devising its own strategy; building the world’s largest crude oil storage facility.
The facility will be built well outside the Straits of Hormuz near to Duqm, and have a capacity of nearly 200 million barrels of oil, far larger than any other facility of its kind in the world. The storage capacity at Cushing in the US has a capacity of just 62 million barrels.
A government source explained that, “Duqm is away from the Strait of Hormuz and if a conflict occurs there the storage will have enough oil to last a while to keep supplies going.”
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Before they make any decisions Oman wants to check that there is still enough global demand to deserve such a storage complex.
Nasser Al Jashmi, the chairman of the Oman Oil Company (OOC), told Reuters that the “We have appointed an advisor to carry out a marketing study for the project.”
Abu Dhabi’s International Petroleum Investment Company (IPIC) also announced earlier this year that it had plans to develop a 230,000 barrel a day oil refinery in Duqm.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com