New UAE oil pipeline aims to double export capacity…

The United Arab Emirates will accelerate construction of a new pipeline to double its export capacity through the port of Fujairah by 2027, the Abu Dhabi government’s press office said on Friday, significantly expanding its ability to bypass the Strait of Hormuz.

Abu Dhabi Crown Prince Sheikh Khaled bin Mohamed bin Zayed has ordered Abu Dhabi National Oil Company (ADNOC) to accelerate the west-east pipeline project during an executive committee meeting, the ADMO said, adding that the pipeline is under construction and is expected to start operating next year.

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

The Islamic Revolutionary Guard Corps (IRGC) Navy released a map on May 4 showing a new control zone encompassing much of the United Arab Emirates’ Gulf of Oman coast. This move coincided with a drone attack on an ADNOC oil tanker ⁠ and a barrage on the Fujairah oil patch, which the UAE 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” extending up to 300 miles (482.8 km) wide.

CROSSING THE STRAIT

Tehran has effectively closed the maritime chokepoint since the United States and Israel attacked Iran on February 28, cutting off about a fifth of the world’s oil supplies. Energy prices have risen due to the outage, prompting fuel rationing in some countries and fears of an economic recession as inflation rises.

ADMO did not disclose the project’s original timeline.

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 maximize exports from the Gulf of Oman coast, just outside the strait.

The United Arab Emirates and Saudi Arabia are the only Gulf producers with pipelines exporting crude out of the strait. Oman has a long coastline on the Gulf of Oman, while Kuwait, Iraq, Qatar and Bahrain depend almost entirely on waterways for shipping.

The UAE’s ‌new gas pipeline⁠ is not to be confused with Saudi Arabia’s East-West pipeline, which state oil giant Aramco’s chief executive, Amin Nasser, called a “critical lifeline.”
Aramco (2222.SE), increased pipeline capacity to 7 million barrels a day in eight days, it said, keeping about 60% of the kingdom’s pre-war exports flowing.

EXEMPT FROM QUOTAS

Two weeks ago, the United Arab Emirates left the Organization of the Petroleum Exporting Countries, which is effectively led by Saudi Arabia, freeing it from oil production quotas. If necessary, it could increase production capacity to 6 million barrels a day, the energy minister told Reuters last year.

ADNOC is aiming for 5 million barrels per day of capacity ⁠by next year, a three-year early target. In May 2024 it said capacity had reached 4.85 million bpd and has not provided updates since then.

ADNOC Drilling (ADNOCDRILL.AD), one of the group’s six publicly traded subsidiaries, is ready to provide any capacity expansion ADNOC needs, its finance chief told Reuters this week.

The United Arab Emirates produced just under 3.4 million barrels a day in January ​before the war, but production more than halved after the effective closure of the Strait of Hormuz forced ADNOC to shut some production, Reuters reported in March.

Fujairah and the nearby port of Khor Fakkan have emerged as a lifeline, including for non-oil trade, as the UAE is heavily dependent on food imports. Fujairah has been the target of several attacks, which the United Arab Emirates blamed on Iran, which forced a temporary halt to oil shipments in April. The Red Sea port of Yanbu in Saudi Arabia, where the East-West gas pipeline ends, was also attacked.

The United Arab Emirates and its oil buyers recently sailed several tankers through the strait with their position trackers turned off to avoid Iranian attacks, in an effort to move oil trapped in the Gulf, Reuters reported.

[Reuters]

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