BPGIC lets contract for Fujairah refinery, storage expansion projects

Brooge Energy Ltd. (formerly Brooge Holdings Ltd.) subsidiary Brooge Petroleum & Gas Investment Co. FZE (BPGIC) has let a contract to MUC Oil & Gas Engineering Consultancy LLC (MUC) to complete technical studies for the proposed Phase 3 refinery and storage expansion at BPGIC’s existing terminal operations in Fujairah, UAE, outside the Strait of Hormuz, adjacent to the East coast port of Fujairah on the Gulf of Oman (OGJ Online, May 13, 2019).

As part of the contract, MUC will complete basic design for a potential 180,000-b/d refinery as well as front-end engineering design (FEED) studies for the Phase 3 oil storage terminals, which could add up to three and a half times more storage capacity—or between 2.1-3.5 million cu m—for crude oil, fuel oil, and clean products than the projected 1.0 million-cu m storage capacity to be added following completion of the Phase 2 expansion currently under way, Brooge Energy said on Apr. 22.

FEED studies—which will develop all necessary technical definition, cost, and schedule estimates for the proposed Phase III storage expansion—are scheduled to be completed within 3 months, after which time Brooge Energy said it expects to finalize layouts and capacity of the proposed refinery.

“This is a major milestone in the development of the project,” said Nicolaas L. Paardenkooper, chief executive officer of Brooge Energy and BPGIC. “We believe this [Phase 3] expansion would, upon completion, make us the largest independent oil storage and service provider in Fujairah.”

While Brooge Energy did not reveal a value of its contract award to MUC, the operator did confirm that MUC previously served as technical advisor and designer of storage installations for BPGIC’s Phase 1 and Phase 2 terminals. The Phase 3 expansion would include the same technology, technical features, and tank diversification MUC employed in the first two phases, according to Paardenkooper.

The new contract with MUC follows a land lease agreement BPGIC signed in February with Fujairah Oil Industrial Zone (FOIZ) for an additional 450,000 sq m of land on which BPGIC could carry out the Phase 3 storage and refining expansion (OGJ Online, Feb. 11, 2020).

Additional refining plans

BPGIC’s more definitive plan for the Phase 3 development’s 180,000-b/d refinery at the Fujairah site follows its late February announcement that it had discontinued an earlier joint development project with Sahara Energy Resources DMCC under which Sahara would have installed a 250,000-b/d modular refinery in phases at BPGIC’s terminal (OGJ Online, Feb. 25, 2020).

Immediately after dissolving the deal with Sahara, however, BPGIC confirmed it 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 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 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 expects the [25,000-b/d] 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,” Paardenkooper said at the time of the BIA deal.

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

BPGIC, however, has yet to issue an update on the proposed refinery for the Phase 1 and Phase 2 development.