BPGIC scraps 250,000-b/d Fujairah refinery for smaller project

Brooge Holdings Ltd. subsidiary Brooge Petroleum & Gas Investment Co. FZE (BPGIC) and Sahara Energy Resources DMCC have mutually agreed to discontinue a joint development project under which Sahara would have installed a 250,000-b/d modular refinery in phases at BPGIC’s terminal in Fujairah, UAE, near the East coast port of Fujairah on the Gulf of Oman (OGJ Online, May 13, 2019).

After conducting several technical studies over the past few months, BPGIC and Sahara decided to discontinue the joint development project due to their differing perspectives and visions for the refinery, BPGIC said on Feb. 24.

In a separate Feb. 24 release, however, BPGIC said it has entered into a new agreement with Al Brooge International Advisory LLC (BIA)—the current offtake customer for BPGIC’s Phase 1 oil storage and terminal development at Fujairah—under which BIA will build a 25,000-b/d refinery designed to produce low-sulfur fuel oil that complies with the International Marine Organization’s (IMO) new regulations requiring ships to use marine fuels with a sulfur content below 0.5%.

As part of the new deal, BPGIC and BIA have agreed to move forward with finalizing technical and design feasibility studies for the newly proposed refinery—which would be operated by BPGIC—on the Phase 1 and Phase 2 land at BPGIC’s Fujairah site.

The companies also have agreed to negotiate a sublease agreement and a joint venture agreement to govern terms of BPGIC’s sublease of land to BIA for the project as well as BPGIC’s operatorship of the refinery, BPGIC said.

“BPGIC expects the refinery to become operational at the end of 2020 and believes the economic terms of its new arrangement with BIA will be similar to, or better than, the economic terms of its prior arrangement,” said Nicolaas Paardenkooper, chief executive officer of both Brooge Holdings and BPGIC.

While the parties intend to enter a sublease agreement and a definitive JV agreement for the refinery within 30 business days, BPGIC said there can be no assurance that it will be able to negotiate commercially reasonable terms for such sublease or JV agreements, or that it will be able to enter sublease and JV agreements with BIA at all.

Cancelled refinery project

While BPGIC did not formally announce in May 2019 that the previously proposed 250,000-b/d Fujairah refinery was to be a modular refining project with Sahara Energy, the company did confirm in a Sept. 16, 2019, post to its official Facebook account that the partners awarded a contract to a consortium of SENER Group, Barcelona, and Singapore-based Audex Pte. Ltd. for construction of the refinery.

The first 25,000-b/d phase of the jointly developed refinery—which was to become the first plant of its kind in the Middle East and North Africa to comply with IMO’s new regulations—was scheduled to be completed by first-quarter 2020.

BPGIC did not respond to an inquiry from OGJ regarding the current status of SENER and Audex’s previously awarded contract for the earlier iteration of the refinery, or whether the service providers would remain involved in the newly announced project with BIA.

Additional BIA plans

The proposed JV for the new refinery follows a Feb. 18 announcement from BPGIC that BIA had accepted and was accommodating a number of attractive oil storage and product handling requests from new international end users as a result of strong demand for oil storage and product handling in the port of Fujairah. BIA also told BPGIC that it expected to continue adding additional end users in the future, reconfirming a commitment to maintain its performance under its current  contract with BPGIC.

Additionally, BIA informed BPGIC that—amid strong interest from its end users in BPGIC’s recently announced proposed Phase 3 expansion at Fujairah—the company was interested in entering an initial agreement with BPGIC to negotiate an offtake contract for the planned Phase 3 facilities similar to the parties’ existing offtake contracts for Phases 1 and 2.

BPGIC, however, disclosed no further details regarding either the proposed Phase 3 offtake contract or its existing contracts with BIA for Phases 1 and 2.

BPGIC said in mid-February that it entered a land lease agreement with Fujairah Oil Industrial Zone (FOIZ) for additional land on which to expand its crude oil storage and refining operations in Fujairah by leasing a strategically located and prime plot of land with a total area of about 450,000 sq m for its proposed Phase 3 expansion that, if completed, would make BPGIC the Fujairah’s largest oil storage and service provider (OGJ Online, Feb. 11, 2020).

The plot of land secured under the new lease for the Phase 3 expansion can accommodate additional capacity of over three and a half times BPGIC’s facilities currently operating and under construction, said BPGIC. The company said it plans to use the additional land to expand its storage and refining capacity to complement installations built at part of the Phase 1 and Phase 2 developments at the site, which following Phase 2’s completion, will total 1 million cu m of storage.

BPGIC’s initial studies indicate that the newly leased land could accommodate up to about 3.5 million cu m of storage tanks, as well as a potential refinery with a capacity of up to 180,000 b/d.