A pipeline designed to carry the UAE's oil to an offshore terminal in Fujairah will begin testing in May. If the tests are successful, the pipeline will begin operation the following month. The pipeline is being constructed to bypass the Strait of Hormuz, thereby cutting the shipping time by two days and reducing the impact of a possible blockade by Iran.
The pipeline will carry oil from Habshan, Abu Dhabi's onshore oil collection point, to an offshore oil terminal in Fujairah, some 370 km away. When completed, it will carry 1.4 million bpd, but could increase capacity in the future to 1.8 bpd or over 70 percent of Abu Dhabi's output. Abu Dhabi contains 90 percent of the UAE's crude oil reserves. The $3.29 billion construction project is being run by the International Petroleum Investment Company (IPIC), the overseas oil investment arm of the government of Abu Dhabi.
Although construction of the pipeline has suffered repeated delays, originally being scheduled to open last April, UAE Oil Minister Mohamed bin Dhaen al-Hamli announced on Monday that it would soon be complete. He said, "The first tanker loaded will be in about six months' time, ready for export."
The stated purpose of the pipeline is ostensibly to shorten the trip for oil tankers carrying crude from the UAE. Bypassing the Gulf reduces shipping times by two days, thereby lowering production costs. However, it is widely understood that the larger purpose of the pipeline is to ensure the continued exportation of oil in the event thatIran blockades the Strait of Hormuz. The Islamic Republic has repeatedly threatened to do so in the event that sanctions against it are strengthened, and the military has even conducted a 10-day military exercise to practice closing down the narrow waterway. Nearly 35 percent of globally traded oil passes through the strait, and Saudi Arabia and Oman are the only Gulf countries with terminals outside of Hormuz.
