DUBAI, FUJAIRAH & SHARJAH: The Refining Sector.

Dubai has an impressive downstream sector, with a major refinery turning condensates into premium fuels. Second-hand oil refineries have been relocated to Fujairah and Sharjah.

The leading centre for free trade in the region, Dubai is consolidating its role as "the Singapore of the Middle East". A big segment of the medium and small industries in the UAE are concentrated in Sharjah. Fujairah's oil storage and bunkering businesses have expanded (see OMT).

DUBAI: Dubai's refinery is a $320m condensate splitter consisting of two trains each with a capacity of 60,000 b/d. The first train began production in April 1999. The second started up in the following month. One train uses sweet condensate and the other takes sour condensate.

Built by Technip Italy, the refinery produces full range naphtha which accounts for 55% of its output, 0.2% sulphur gasoil, jet fuel, fuel oil and LPG. It is run by state-owned ENOC Condensate Processing Co. Caltex has provided ENOC with technical consultancy. The front-end engineering and designs for the splitter were done by MW Kellogg and the EPC tender preparations were done by Pathfinder.

Sour condensates are imported by ENOC from Qatar's North Field and Iran's Kangan field. The Kangan liquids are supplied under ENOC's term contract with NIOC's unit NaftIran InterTrade Co., with deliveries pre-financed by Credit Agricole Indosuez. Sweet condensate is also supplied from Dubai's Margham field. In April 2002 ENOC began taking sweet condensate from Phases 2&3 of Iran's South Pars field, operated by TotalFinaElf in partnership with Gazprom of Russia and Petronas of Malaysia.

A major part of the refinery's output is exported. Most of the naphtha is sold to Japan. A major part of the diesel output is exported to India. Some of the LPG is sold to Japan and South Korea. Most of the jet fuels go to the Dubai International Airport. Marketing outside Dubai is done by ENOC Supply & Trading, with the products carried by ENOC's Dubai Shipping tankers. The plant's throughputs fluctuate depending on market economics, according to ENOC's CEO Hussain Sultan who says: "How we run the splitters is a matter of margins". At times the refinery can only run on 40,000 b/d and at others on as much as 130,000 b/d.

This is one of four condensate refineries in the Gulf. In Abu Dhabi ADNOC's two 140,000 b/d splitters at Ruwais came on stream in May and July 2000. Qatar's two-train splitter at Umm Said with a 60,000 b/d capacity started up in early 2001. A splitter is being added to a small refinery in Sharjah.

The main companies involved in the downstream sector of Dubai include: Emirates General Petroleum Co (Emarat), a federal entity which used to have a monopoly in fuel distribution until 1988; Emirates Petroleum Products C (EPPCO), a partnership between ENOC (60%) and Caltex Al Khaleej (40%), which in 1988 entered the fuel distribution business and ended Emarat's monopoly; and ENOC, which has taken over the Dubai state's holdings in upstream and downstream businesses.

ENOC has entered the local petroleum retail market. It has invest Dh180m ($49m) in 30 service stations in Dubai and the northern emirates. The first station was built near Shaikh Zayed Road in Dubai. ENOC competes with EPPCO as well as with Emarat and Abu Dhabi's ADNOC-FOD.

ENOC was established in October 1993 with a capital of Dh100m ($27m). Its first step was to take over the government's 60% stake in EPPCO. In 1998, it bought a stake in Dragon Oil of Ireland and later raised this to 69.4%. Dragon has since moved its main base from Dublin to Dubai, although it has kept its offices in the Irish capital, and closed two offices in the UK. Dragon's main interests are in Turkmenistan, where it holds the offshore Cheleken II concession which includes two oilfields (see OMT 24).

A second-hand refinery which can produce 40,000 b/d of unleaded gasoline has been reassembled at Jebel Ali about 1 km from the ENOC splitters. On stream since July 2000, this is a private venture called ISO Octane. It takes naphtha feedstock from the splitter through a pipeline and crude oil from regional companies.

Investors in ISO Octane include Abu Dhabi-based Emirates Industrial Bank (EIB) and Emirates Holding Co. The company was set up in 1999 under a 25-year land lease.

The refining venture also has 12 storage tanks built with a total capacity of 1.2m barrels of unleaded gasoline, which is sold in the Gulf and the US.

A $40m plant producing gasoline additives and conditioning products is operated in Jebel Ali by Ducham, a unit of Abu Dhabi-based Star Energy Corp. Using the UOP/Shell process, the plant had an initial capacity of 20,000 b/d of unleaded gasoline, 360 t/day of aromatics and 240 t/day of raffinate. This was expanded to 60,000 t/y by end-1994. Star markets the products in the UAE and abroad.

Coke Plant: In 1998 Conoco and its affiliate Venco did a feasibility study for a $120m, 400,000 t/y, petroleum coke calcinating plant in Dubai for the joint stock company Dubai Investments (DI). It was said that calcined coke would initially be sold to Dubai Aluminium (Dubal) and other customers in the region whose imports of petroleum coke were expected to increase dramatically with a planned start-up of additional smelters. (Conoco is a world leader in high quality petroleum coke, used mainly by the steel and aluminium industries).

The Lubricants Sector: The lubricants business in Dubai has expanded over the past two decades. A 30,000 t/y plant came on stream in 1987 as the first downstream facility in the emirate. It was built at a cost of $12m by Middle East Lubricants Company (Melubco), a JV between BP Middle East (BPME) and Jebel Ali International Lubricants Co. (Jelubco). It produces 75 types of lube oil - mostly for engine, industrial and hydraulic applications. Its output is sold in the UAE and in other GCC states.

In February 1993 EMA Lubricants Co. bought 50% in Melubco under an agreement, which provided for the plant's capacity to be expanded to 50,000 t/y by end-1993 and for base oil storage capacity to be increased from 7,500 tons to 12,000 tons.

Another lubricants producer is Caltex Al Khaleej which has a fully-owned export plant at Port Rashid. It markets lubricants produced at the plant to 26 countries in the Middle East and East Asia.

A 25,000-ton/year lube oil recycling plant came on stream in April 1994, built by India's Gadgil Western Corp. at a cost of $5m. The plant's entire output is exported to India. In 1995, the company brought on stream a 2,500 b/d high-tech plant to convert low value fuel oils into gasoline, automotive and marine diesel, lube oil base stock and bunkers. The first phase of the plant, intended as a demonstration unit, uses a revolutionary technology known as Gadgil Interline.

Gadgil linked up with Interline of the US to develop the process, with Jebel Ali the first to use this, and the second phase expansion has boosted the capacity to 7,500 b/d. The combined cost of both phases has been estimated at $38m.

Oil products storage and distribution in Dubai is a growing business, with EPPCO being the main player (see also OMT). Star Energy Resources, the Bermuda-registered subsidiary of Abu Dhabi's Star Energy Corp., is another storage/distribution business developed in Dubai, and has an expanded blending complex at Jebel Ali. ENOC, Star and Emarat are also the main players in the oil products storage and bunkering business in Fujairah (see OMT). Caltex operates a 1.5m gallon storage depot in Jebel Ali for the US Defence Department, supplying fuels and other oil products to American forces in the region. Conoco has an underground salt cavern storage complex at Jebel Ali able to hold up to 840,000 t/y of LPG. It was completed in 1999.