A new pipeline connecting Abu Dhabi oil facilities to Fujairah port on Gulf of Oman should be able to export nearly half of UAE’s crude for the first time from early July, three industry sources said on Thursday.
The strategic Hormuz bypass pipeline allows the UAE to pump oil and helps end the OPEC producer’s total dependence on a narrow shipping route out of the Gulf which Iran has threatened to block as US/EU sanctions on its oil exports tighten.
The 480-km pipeline with a capacity of up to 2.5 million barrels per day runs through the mountainous emirate and will reroute bulk of the country’s oil exports around the Strait of Hormuz at the mouth of the Gulf, the waterway for a fifth of the world’s oil supply. The UAE’s total oil exports are 2.4 million bpd.
“From 0930 today (Thursday) oil has been received at the main oil terminal in Fujairah and 1 million barrels is coming in,” a source directly involved in the project told Reuters on Thursday.
“The plan is to load the first oil tanker around 1 July… We will slowly increase it to 1.5 million bpd,” it added.
Two other industry sources linked to the project, including one from Abu Dhabi National Oil Company (ADNOC), confirmed that oil started flowing into the terminal on Thursday and that they expected it to be loaded onto the first tanker around the first week of July.
Gulf countries have taken very seriously the threat of a conflict that could block the route to market for their most lucrative resource. However, it is only the UAE and Oman that have coastlines on Indian Ocean side of the strait which enables them to go around the choke point by land. Saudi Arabia also can avoid Hormuz by switching its Gulf fields’ oil production to its Red Sea ports, but that would require an increase in the capacity of those ports and of pipelines running across the breadth of the country to handle its total output.
Once the new Habshan-Fujairah pipeline is up and running at full volume it will allow the world’s fifth largest producer to get two-thirds of its peak oil production, about 10% of the total 17 million barrels of oil a day that currently goes through Hormuz, to market even if the strait is shut.