Middle East conflict continues to obstruct the Strait of Hormuz, and oil storage capacity outside this critical global energy chokepoint is becoming a hard currency.

Oman, guarding the entrance to the Arabian Sea, is playing a big game using its natural strategic position outside the strait. Oman plans to more than double the oil storage capacity of a port outside the Strait of Hormuz, hoping to leverage its strategic location as energy producers in the region seek ways to bypass the highly contested waterway.

Ashraf Al Mamari, CEO of state energy company OQ SAOC, said in an interview that the company is evaluating the purchase of two Very Large Crude Carriers (VLCCs) to lease as floating storage facilities at Duqm Port — each capable of storing 2 million barrels, totaling 4 million barrels for the two vessels; after purchase, installation would take approximately six months, with a final decision expected within the year. According to Al Mamari, OQ needs to first weigh the high cost of purchasing the ships against the potential returns from the storage business before making a final call.

The onshore line is expanding in parallel: crude oil tank capacity at Duqm is planned to increase from the current approximately 5 million barrels to 10 million barrels within three years, with a long-term target of approximately 40 million barrels. Duqm faces the Arabian Sea, and customers can pick up cargo here while completely bypassing the risk zone, without relying on the high-risk voyage through Hormuz — oil stored inside the strait cannot be shipped out, which is as good as having none; oil stored outside the strait can be loaded and delivered at any time.

The Gulf Producers' Bypass Puzzle

Duqm's strategic value is being repriced across the entire Gulf region. According to reports, oil-producing countries such as the UAE and Saudi Arabia have already been having tankers quietly and riskily transit the strait with their Automatic Identification System (AIS) transponders turned off — once the transponder is off, the ship's position is no longer broadcast externally, reducing exposure risk in the event of an attack.

At the same time, countries are looking for alternative pipeline routes: Saudi Aramco CEO Amin Nasser said the company is seeking alternatives to traditional Red Sea and Persian Gulf export routes; the UAE is planning new pipelines leading to Fujairah, an oil hub outside the strait — this oil port on the UAE's east coast facing the Gulf of Oman is currently the Gulf region's most mature "outside-the-strait export" point.

Duqm itself carries an even bigger vision: this port has long been seen as a potential terminus for a trans-Arabian pipeline, which in theory could send crude from oil fields in Saudi Arabia, Kuwait and other countries directly by pipeline to be loaded and shipped out from here — although such projects have never materialized. After the blockade of Hormuz, both Saudi Arabia and Kuwait said they are exploring pipeline alternatives but did not disclose specific plans. Asked about the matter, Al Mamari's response was open yet cautious: "On the pipeline front, Oman's message is that we are of course open to it, but these are still at a very early stage of intergovernmental discussions." He said he does not have the details. Duqm also has a refinery built as a joint venture with Kuwait National Petroleum Company, effectively securing its position in advance.

Timing also works in its favor. The conflict has driven up shipping risks and forced vessels to detour around flashpoints, and VLCC daily charter rates on the key Persian Gulf-to-China route have soared to more than $1 million. VLCCs (Very Large Crude Carriers) are the largest oil tanker type in service today, each capable of carrying approximately 2 million barrels of crude — in other words, each floating storage unit planned at Duqm would have a capacity equivalent to an entire shipload of the main cargo volume shipped from the Middle East to Asia. Tankers have thus become one of the most expensive assets in these waters: buying two as floating warehouses is both oil storage and an asset.

According to earlier reports, demand for tankers from Middle Eastern oil producers has pushed the prices of both newbuild and secondhand VLCCs past $130 million, a record high; Abu Dhabi National Oil Company (ADNOC) went further by acquiring 6 supertankers and 5 large gas carriers in one move for a total of $1.3 billion, putting them into service immediately upon delivery; ADNOC and Kuwait Petroleum Corporation have also begun using shuttle tankers to transfer crude to tankers waiting outside the Gulf of Oman.

With "rushing shipments inside the strait and stockpiling oil outside the strait" becoming the prevailing trend in parallel, Oman's storage expansion is stepping to the same beat. For the oil market, inventories outside the strait carry another layer of significance: with cargo stored at Duqm, buyers can take delivery by ship at any time without having to pay a higher risk premium for a voyage that could be interrupted at any moment. This is precisely the demand that Oman's storage expansion aims to capture.

Another Game: African Upstream and a 2027 Refining Listing

Beyond storage, Al Mamari also revealed OQ's expansion roadmap. In Africa, the company is seeking oil and gas exploration and even potential production interests in countries including Angola, Algeria and Libya: in Angola, OQ is negotiating a natural gas exploration agreement for offshore Block 24, hoping to finalize it next year before evaluating other areas; the company is participating in Algeria's exploration rights tender and is in discussions on similar projects in Libya. Al Mamari said OQ wants to expand its presence across Africa in upstream, downstream, trading and renewable energy.

On the capital markets side, the company is evaluating options to sell shares in its refining and petrochemical business, which could potentially be brought to market as early as 2027; Al Mamari made clear that the company has no IPO plans for next year.

Putting the threads together: the two VLCC floating storage units are the fast game, doubling tank capacity in three years is the slow game, the pipeline terminus is the long game, and African equity interests plus a refining listing represent the second growth curve this state energy company is laying beyond its core business. While others take risks rushing crude inside the strait, Oman quietly expands its warehouses outside the strait — from 5 million barrels to 40 million barrels, from tanks to tankers, from refineries to pipelines not yet built, every step Duqm takes is about positioning itself for the "post-Hormuz era."