UAE Speeds Up Pipeline Project to Help Bypass Hormuz

The United Arab Emirates will accelerate construction of a new oil pipeline to double its export capacity via the port of Fujairah by 2027, the government's Abu Dhabi Media Office said on Friday, vastly expanding its ability to bypass the Strait of Hormuz.

Abu Dhabi Crown Prince Sheikh Khaled bin Mohamed bin Zayed directed the Abu Dhabi National Oil Company (ADNOC) to fast-track the West-East Pipeline project during an executive committee meeting, ADMO said, adding the pipeline is under construction and expected to start operating next year.

Since the outbreak of the Iran war, Tehran has significantly expanded its definition of the strait and, consequently, the maritime area it claims control over.

The Islamic Revolutionary Guard Corps (IRGC) Navy published a map on May 4 showing a new zone of control encompassing much of the UAE's Gulf of Oman coastline. That move coincided with a drone attack on an ADNOC tanker and a barrage on Fujairah's oil zone, which the UAE’s foreign ministry called an "unacceptable transgression" and "economic blackmail."

On Tuesday, the IRGC announced a further expansion, redefining the strait as a "vast operational area" stretching up to 300 miles (482.8 km) wide.

BYPASSING THE STRAIT

Tehran has effectively shut the maritime chokepoint since the U.S. and Israel attacked Iran on February 28, disrupting about a fifth of global oil supplies. Energy prices have surged due to the disruption, prompting fuel rationing in some countries and fears of an economic downturn as inflation builds.

ADMO did not disclose the original timeline for the project.

The existing Abu Dhabi Crude Oil Pipeline (ADCOP), also known as the Habshan-Fujairah pipeline, can carry up to 1.8 million barrels per day and has proved crucial as the UAE seeks to maximise exports from the Gulf of Oman coast, just outside the strait.

The UAE and Saudi Arabia are the only Gulf producers with pipelines that export crude outside the strait. Oman has a long coastline on the Gulf of Oman, while Kuwait, Iraq, Qatar and Bahrain are almost wholly reliant on the waterway for shipments.

The new UAE pipeline is not to be confused with Saudi Arabia's East-West pipeline, which state oil giant Aramco's Chief Executive Amin Nasser has called a "critical lifeline".

Aramco ramped up the pipeline's capacity to 7 million bpd in eight days, he said, keeping about 60% of the kingdom’s pre-war exports flowing.

FREE FROM QUOTAS

Two weeks ago, the UAE exited the Organization of the Petroleum Exporting Countries, which is de facto led by Saudi Arabia, freeing it of oil output quotas. It could boost output capacity to 6 million bpd if necessary, its energy minister told Reuters last year.

ADNOC is targeting 5 million bpd of capacity by next year, a goal brought forward by three years. It said in May 2024 that capacity had reached 4.85 million bpd and has not provided an update since.

ADNOC Drilling, one of the group's six listed subsidiaries, is ready to deliver whatever capacity expansion ADNOC needs, its finance chief told Reuters this week.

The UAE produced just under 3.4 million bpd in January before the war, but output more than halved after the effective closure of the Strait of Hormuz forced ADNOC to shut in some production, Reuters reported in March.

Fujairah and the nearby port of Khor Fakkan have emerged as lifelines, including for non-oil trade as the UAE relies heavily on food imports. Fujairah has been the target of several attacks, which the UAE has blamed on Iran, that forced temporary halts to oil loadings in April. Saudi Arabia's Red Sea port of Yanbu, where the East-West pipeline terminates, was also attacked.

The UAE and its oil buyers recently sailed several tankers through the strait with location trackers switched off to avoid Iranian attacks, in a bid to move oil trapped in the Gulf, Reuters reported.

UAE oil pipeline bypassing the Strait of Hormuz https://www.reuters.com/graphics/EMIRATES-ENERGY/PIPELINE/zdpxgemwzvx/chart.png

(Reuters - Reporting by Yousef Saba, Ahmed Elimam and Jana Choukeir. Editing by David Goodman- and Mark Potter)

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