The rise, and rise, of the tiny UAE energy power

UAE invests in Fujairah distribution
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UAE invests in Fujairah distribution 05:41

Story highlights

  • Fujairah, one of seven emirates which make up the UAE, is emerging as a global energy hub
  • By 2016, the port is expected to be able to manage huge crude carriers, which handle two million barrels per load
Fujairah, one of seven emirates which make up the UAE, is putting new meaning into the saying "build it and they will come."
As members of OPEC tussle with a 20% drop in oil prices since June -- and question if they should trim production at their November meeting -- the UAE is forging ahead with a crucial piece of its energy strategy.
Sitting south of the world's busiest oil shipping lane, the Strait of Hormuz, the tiny emirate of Fujairah is emerging as a global energy hub.
Mousa Murad, general manager of the Port of Fujairah, saw the area's potential in 1991, during the first Gulf War. A traffic jam of more than 200 tankers, triggered by concerns of bomb attacks, was lined up at the mouth of the Strait.
Murad told CNN this was a "light bulb moment" for his team. "We thought we should be thinking about how we can serve shipping as maritime services," he said, referencing the bunkering service initially offered.
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Today, the once sleepy emirate is doing far more than just loading fuel for ships.
After Iran threatened to shut down the Strait in 2008, oil-rich Abu Dhabi decided to leverage Fujairah's strategic location on the Indian Ocean with unimpeded access to the seas to reach clients in Asia. China, Japan and South Korea are Abu Dhabi's top three importers of UAE crude.
The game changer was a decision by the UAE government to build a $3 billion, 240-mile oil pipeline from Abu Dhabi's Habshan field into Fujairah, with a capacity of 1.5 million barrels a day. The pipeline, opened two years ago, can handle about half of the UAE's daily production.
Thangapandian Srinivasalu, a 30-year veteran of the business and executive director of Gulf Petrochem, laid out the energy hub's potential while taking me through a map of the facility.
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Srinivasalu said Fujairah has something those in Asia and Europe don't: plenty of oil in its neighborhood.
"Unlike Singapore or Rotterdam, which are the leading ports, you are surrounded by crude producers, surrounded by refineries," said Srinivasalu. "This is what interested us the most, and it's very peaceful."
Indeed, it is almost eerily peaceful. On a clear day, looking east from the balcony, one can see Iran.
With rising demand from Asia, and two thirds of proven reserves sitting in the region, the UAE will continue to up the ante with more spending.
By June 2016, the port is expected to be able to manage huge crude carriers known in the business as "VLCCs," which handle two million barrels per load. Future plans include building a LNG import terminal to use natural gas to fuel power plants, saving the oil for export.
Malek Azizeh, commercial director of Fujairah Oil Terminal, told me those investments are ensuring the expanding terminal is catching the attention of the energy industry. He points to, for example, the joint venture he is helping launch in December with China's Sinopec and Singapore's Concord Energy.
"All these things, add them up and it gives you a perfect scenario for somebody to take a step forward and get out of the usual thing and do something different," Azizeh told me as we toured the construction of the site's massive holding tanks.
In an irony not lost on the executives, it was threats by Iran in 2008 which triggered this investment. If talks with Tehran over its nuclear program go well and sanctions are lifted, this expanding hub could eventually welcome Iranian crude.