By Rania El Gamal
DUBAI, Oct 31 (Reuters) - Royal Dutch Shell and tradinghouse Vitol are stepping up their operations in the port ofFujairah to store Iraqi crude as production from the OPEC memberrises, industry sources said.
Iraq is OPEC's second largest producer after Saudi Arabiaand its output has almost doubled since the start of the decadeat 4.7 million barrels per day (bpd).
With a target of 5.5-6 million bpd by 2020, Iraq wants to beexempt from the cartel's bid to boost oil prices with productioncuts to reduce a global surplus.
Located on the east coast of the United Arab Emirates at theentrance to the Strait of Hormuz, Fujairah is one of two majorports in the region along with Oman's Sohar and is a busyrefuelling point for tankers taking crude on long voyages out ofthe Gulf.
The emirate is keen to boost its status as a global tradinghub by increasing its port storage capacity from 10 millioncubic metres to 14 million cubic meters by 2020. Traditionally,it focussed on fuel to power tankers and refined oil products.
Shell leased five large crude storage tanks at the port lastyear to take advantage of low oil prices for the play, industryand trading sources said. Shell is an equity partner in Iraq'sMajnoon oilfield.
"The storage tanks were built specifically according toShell's requirements," a trading source in Fujairah said.
"Shell wanted to avoid any fluctuations in production out ofIraq. So far they are the only ones who have a contract with(storage company) Vopak to bring crude using the new jetty,"another trading source said.
Vitol has also started to store crude sold by the northernKurdish government in Fujairah, several trading sources said,that is being used in its 82,000 barrel per day (bpd) Fujairahrefinery.
Vitol and Shell declined to comment.
The storage tanks leased by Shell have a total capacity of478,000 cubic metres and were built by Vopak, theworld's largest independent storage tank operator. They are partof an expansion plan to take the total storage capacity ofVopak's joint venture in Fujairah to 2.6 million cubic metres.
The expansion also included the construction of a Very LargeCrude Carrier (VLCC) jetty, the first on the Indian OceanCoastline of the Arabian Peninsula, which was launched lastmonth. (Additional reporting By Julia Payne in London, editing byWilliam Hardy)
