Oman's Duqm port expansion plan revealed: oil storage capacity may double, targeting the Hormuz alternative route.

Oman's National Energy Company is planning to significantly expand the oil storage capacity of the port of Duqm, transforming it into a key energy hub amid the obstruction of the Strait of Hormuz. This plan reflects the urgent need of Gulf oil-producing countries to bypass the Strait of Hormuz, which is accelerating the restructuring of regional energy infrastructure.

According to Bloomberg, Oman's national energy company OQ SAOC CEO Ashraf Al Mamari revealed in an interview that the company is evaluating the acquisition of two supertankers for use as floating storage in Duqm port, while also planning to double its onshore crude oil storage capacity from the current approximately 5 million barrels to 10 million barrels within three years.

The Strait of Hormuz has been disrupted by the ongoing conflict in the Middle East, and the security risks to this most important global energy choke point have prompted major oil-producing countries such as the UAE and Saudi Arabia to actively seek alternative export routes.

Located on the Arabian Sea coast, outside the Strait of Hormuz, the port of Duqm's strategic location makes it a key node in the regional energy bypass strategy, and the advancement of related expansion plans will have a profound impact on crude oil trade flows and the tanker freight market.

Floating oil storage solution: Decision to be finalized within the year, installation period approximately six months.

OQ is evaluating a floating oil storage solution involving the acquisition of two supertankers, each with a storage capacity of approximately 2 million barrels, for a total additional 4 million barrels of floating oil storage capacity.

Al Mamari stated that a decision will be made later this year, at which time the company will weigh the high cost of acquiring the vessel against the potential benefits of oil storage. Once the purchase is decided, converting the supertanker into a floating storage facility will take approximately six months.

Regarding onshore oil storage, OQ plans to increase the crude oil storage capacity at the Port of Duqm from approximately 5 million barrels to 10 million barrels within three years, with a longer-term goal of ultimately expanding onshore oil storage to approximately 40 million barrels. If this long-term vision is realized, it will establish the Port of Duqm as one of the world's most important strategic oil storage centers.

For customers, storing crude oil in Dukum means bypassing the risky shipping through the Strait of Hormuz, making it easier to access the required crude oil, and thus reducing the risk of supply chain disruptions.

Pipeline alternative routes: Intergovernmental consultations in the early stages

Duqm Port has long been considered a potential terminus for pipelines across the Arabian Peninsula, capable of handling crude oil exports from oil fields in countries such as Saudi Arabia and Kuwait, but no concrete projects have been finalized to date.

Following the obstruction at Hormuz, both Saudi Arabia and Kuwait stated they are exploring alternative pipeline options, but did not disclose specific plans. Saudi Aramco CEO Amin Nasser said the company is seeking alternatives beyond traditional export routes through the Red Sea and the Persian Gulf; the UAE plans to add a new pipeline at its Fujairah oil hub outside of Hormuz.

Al Mamari was cautious in his assessment. "Regarding the pipeline, Oman's message is that we are certainly open, but the discussions are still in a very early stage," he said. He added that the consultations are currently taking place at the intergovernmental level, and he himself does not yet have specific details.

The Port of Duqm also houses a refinery jointly operated with Kuwait National Oil Company, and this existing cooperative foundation provides certain industrial synergy conditions for the future advancement of pipeline projects.

Soaring freight rates highlight the Hormuz risk premium

The ongoing conflict in the Middle East has increased the risks of oil tanker operations, and the shipping market has seen significant price fluctuations.

According to Bloomberg, charter rates for Very Large Crude Carriers (VLCCs), the largest oil tankers on the Persian Gulf-China route, once surged to over $1 million per day. Meanwhile, some oil-producing nations have opted to force their way through the Strait of Hormuz with their Automatic Identification System (AIS) transponders switched off to circumvent potential risks.

High freight costs and increasingly prominent shipping safety risks are the core driving forces behind OQ's accelerated expansion of the Dukum oil storage capacity. For crude oil buyers, holding reserves in ports other than Hormuz means the ability to flexibly allocate cargo without relying on high-risk, high-cost strait transit, a value that is becoming increasingly prominent in the current geopolitical environment.

OQ is simultaneously advancing its African expansion and asset listing plans.

In addition to the Dukum expansion, Al Mamari also disclosed several strategic deployments for OQ.

In upstream exploration, OQ is seeking oil and gas exploration and production rights in African countries such as Angola, Algeria, and Libya. Specifically, the company is negotiating a gas exploration agreement for Block 24 offshore Angola, hoping to finalize the agreement next year and use it as a starting point for further expansion of its African business, covering upstream, downstream, trading, and renewable energy sectors.

In terms of capital operations, OQ is evaluating a plan to sell equity stakes in its refining and petrochemical businesses, which could begin as early as 2027. Al Mamari stated that the company has no plans for an initial public offering next year.

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