UAE pipeline will boost both security and economy

In THE next few weeks, the United Arab Emirates will begin pumping oil through a new pipeline that feeds directly to its Indian Ocean port of Fujairah, enabling one of the world’s largest exporters to avoid the Straits of Hormuz.

Iran has repeatedly threatened to close the strategically sensitive waterway, which is patrolled by Iranian and United States warships, in retaliation for Western sanctions over Tehran’s nuclear ambitions.

The threat has raised worries among Gulf countries that conflicts could block the route to market for their most lucrative resource. But only the UAE and Oman have coastlines on the Indian Ocean side of the strait that would enable them to go around the narrow chokepoint by land. Saudi Arabia could avoid Hormuz by shipping all its Gulf fields’ oil production out of its Red Sea ports, but it would have to increase the capacity of those ports and its pipelines to do so.

With the UAE’s new pipeline, oil from fields deep in the Abu Dhabi desert would travel 236 miles overland and across the barren Hajar mountains to the fast-growing port of Fujairah on edge of the Indian Ocean.

At the moment, Emirati oil exports are loaded in the Gulf and must pass through the Straits of Hormuz. Once it is running at full volume, the pipeline will let the UAE get two-thirds of its peak oil production to market even if the Straits are shut – about 10 per cent of the total 17 million barrels of oil a day that currently goes through it.

The director-general of Fujairah municipality, Mohammed Saif al-Afkham, yesterday said he expects the pipeline to be commissioned this month.

“This will add a lot to the shipment of oil, and it will make it faster and easier instead of going to the Gulf,” he said.

Officials have not announced a firm starting date. But Mr Afkham’s comments and those of other Emirati officials suggest exports could begin soon.

Energy minister Mohammed bin Dhaen al-Hamli said last month the four-foot-wide pipeline is finished and is being tested. It is designed to handle 1.5 million barrels of crude a day. Mr Hamli has said that figure could rise to 1.8 million barrels.

The project is immensely important for the UAE. The seven-state federation is Opec’s third largest exporter of oil, after Saudi Arabia and Iran.

Robin Mills, head of consulting at Manaar Energy Consulting & Project Management in Dubai, said: “If there are effective bypass routes, it makes it less likely that Iran would try to block it.”

The UAE’s Sunni leadership is wary of Tehran’s regional influence, especially in Shiite-led countries such as Iraq and Syria and Shiite-majority Bahrain.

With tensions high, Emirati officials are careful not to link the pipeline directly to threats from their neighbour across the Gulf. Yet there is little doubt the pipeline is an insurance policy against any threat to the strait.

“It gives a sense of security just in case there are any issues,” UAE minister of economy Sultan bin Saeed al-Mansouri said this week when asked about the economic benefits of the project. Only later did he add that the pipeline would also offer additional export capacity if oil production increases.