China, Iran focus on massive new Oman oil storage project
Oman occupies a strategically vital position in the geography of the Middle East, possessing long coasts along the Gulf of Oman and along the Arabian Sea, far from the extremely politically sensitive Strait of Hormuz.
These offer largely unlimited access to the markets of South Asia, West Asia and Africa, as well as those of its neighbors in the Middle East. A key project in Oman’s attempts to monetize this favorable geographic position is the Ras Markaz oil storage farm and the government announced last week that it is in the very final stages of the project, which will eventually be able to store over 200 million barrels of crude oil at Ras Markaz for easy transportation to anywhere in the world sellers and buyers want.
Given this advantageous strategic position for such an asset, and the fact that it is also part of Oman’s three-pronged strategy to create a world-class petrochemical sector, China has taken care to position itself to control the Ras Markaz site, with Oman a key cog in its “One Belt, One Road” multigenerational empowerment program.
According to remarks last week by Salim Al Hashmi, general manager of the Ras Markaz project for its main developer, the Oman Tank Terminal Company, the park will have an initial capacity of 25 million barrels from the first quarter of 2022, before a rapid series of gradual increases in its storage capacity to the level of 200 million barrels and beyond.
The oil farm will receive its oil by sea through vessels of various sizes which will be able to pump oil to the facility through pipelines stretching 7 kilometers at sea and 3.5 kilometers on land. There are also plans to link the facility to Oman’s oil fields, Oman Tank Terminal Company managing director Ard Van Hoof said last week. Oman currently exports its crude through the Mina Al Fahal terminal in the Persian Gulf, but having a second export facility in Ras Markaz will help the country cope with excess production, he added.
However, the outlook for Oman’s indigenous oil resources looks bleak. Currently, the Sultanate has just under five billion barrels of estimated proven oil reserves, barely ranking 22nd in the world. Although his government has talked about increasing oil production to 1.1 million barrels per day after the current OPEC + deal ends, as the fourth quarter of 2020 approaches, the supply of sovereign bonds of US $ 2 billion per Oman, the Sultanate has made clear in its global issuance prospectus that it faces a long-term slowdown in oil production, with limited future growth in reserves. It is true that Oman managed to maintain oil production of just over one million barrels per day (bpd) for two consecutive months last year (March and April), but after that the figure is fell back to the usual level of around 900,000 bpd and then to significantly less than that, notably around 720,000 bpd in December.
This lack of primary hydrocarbon resources makes it all the more imperative that the Ras Markaz oil park be operational as quickly as possible. Indeed, not only will the Raz Markaz storage site be a vital source of revenue for the government in the future, it is also one of the three key elements of Oman’s great economic hope – the multilayer refinery project. and Duqm’s petrochemicals – with the other element being the 290 kilometer long Muscat Sohar Product Pipeline (MSPP) for the transportation of refined products. The $ 336 million pipeline was finally inaugurated in March 2018 and currently connects the refineries at Mina Al Fahal and Sohar with an intermediate distribution and storage facility in Al Jifnain. Divided into three sections – 45 kilometers between Mina Al Fahal and Al Jifnain terminals, 220 kilometers between Sohar and Al Jifnain terminals and 25 kilometers between Al Jifnain terminal and Muscat International Airport – the project is an integral part of the delivery more than 70% of Oman’s fuel through the state-of-the-art Al Jifnain storage facility.
The final part of the plan for the Ras Markaz oil tank farm is that it will also function as an oil storage facility for the 230,000 b / d Duqm refinery and petrochemicals project – a 50-50 joint venture. 50 owned by OQ of Oman and Kuwait Petroleum International – which is connected to it by a pipeline 80 kilometers long. Long planned and prone to many setbacks along the way, the Duqm refinery portion of the overall Duqm refinery and petrochemicals project is expected to start in 2022. Once operational, it is expected to receive 65% of its crude oil volumes. from Kuwait and the remaining 35% from indigenous Omani sources.
Part of this global push is to bring the US $ 6.7 billion Liwa Plastics Industries Complex (LPIC) project fully online. Located in Sohar as part of an integrated complex that houses the Sohar Refinery, Aromatics Plant, Polypropylene and LPIC Steam Cracking Unit, the Complex is intended to be one of the refinery operations and The world’s most integrated petrochemicals, with a single plant alone is expected to contribute 2% of national GDP. Once production is in full swing, the plant is expected to produce 1.4 million tonnes of polymers – around 400 containers per day – the critical end point of this strategy being to dramatically increase exports of polyethylene and polypropylene to Asian markets. , especially China. Industry estimates before the global COVID-19 outbreak predicted that global demand for the two combined polymers would increase by about five percent per year to total at least 180 million metric tonnes by 2023, the majority going to China.
It’s not just this or China’s OBOR considerations that have been behind Beijing’s growing efforts in recent years to pave the way for adding Oman to its growing list of Middle Eastern assets that the United States is leaving behind in its increasingly isolationist foreign policy. Talks recently resumed between Tehran and Muscat for Iran to use 25% of Oman’s liquefied natural gas (LNG) production facilities as part of its plan to become a LNG superpower based on its massive South Pars unassociated gas field. 25% of Oman’s total LNG production capacity of 1.5 million tonnes per year at the Qalhat plant.
This could be done as part of a larger plan to build a 192-kilometer section of 36-inch pipeline along the Arabian Sea bed to depths of up to 1,340 meters from Mount Mobarak in the from the province of Ormuzgan in southern Iran to the port of Sohar in Oman for gas exports. The Oman-based LNG supply would also serve as a starting point for the game-changing Iran-Pakistan-China gas pipeline link on the OBOR overland route. Another extremely beneficial synergy for the Iran-China axis of this direct Iran-Oman route would be that it coincides with the recent completion of the Goreh-Jask pipeline that breaks sanctions which should eventually transport at least 1 million barrels per day of oil from its main oil fields via Goreh in the rural district of Shoaybiyeh-ye Gharbi of Khuzestan province 1,100 kilometers from the port of Jask in Hormozgan province on the Gulf of Oman.
Beijing invested money early on in various strategic projects related to the Duqm refinery and petrochemical project. Already accounting for around 90 percent of Oman’s oil exports and the vast majority of its oil exports, China leveraged this to sign a $ 10 billion investment in the Duqm oil refinery – just after the launch. implementation of nuclear deal with Iran in early 2016 This initially focuses on completing the Duqm refinery, but the set also includes a product export terminal in Duqm port and tanks storage facility dedicated to the Duqm refinery of the Ras Markaz oil storage farm.
Chinese money is also funneled into the construction and construction of an 11.72 square kilometer industrial park in Duqm in three areas – heavy industry, light industry and mixed use. According to the plans, which will all be ready in the next 10 years, according to Beijing, in the light industrial zone there will be 12 projects, including the production of 1 gigawatt (GW) of solar power units, and oil and gas tools, pipelines and drilling equipment. The mixed-use sector will focus on projects to improve infrastructure for Omanis, including building a $ 100 million hospital and $ 15 million for a school. The heavy industry sector will also see 12 projects, involving the production of methanol and other chemicals.
By Simon Watkins for Oil chauffage
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