x Abu Dhabi, UAESunday 23 July 2017

Oil pipeline bypassing Hormuz is completed

The pipeline promises greater security in the event that the Strait of Hormuz is closed.

Construction of a pipeline from Abu Dhabi's largest oilfields to Fujairah, allowing crude to bypass the Strait of Hormuz, has been completed.

The pipeline to the Arabian Sea promises greater security in the event that the narrow waterway is closed, and promises to help cut the costs of exporting oil from the UAE.

About 40 per cent of the world's international oil trade, including all of Abu Dhabi's exports of about 2 million barrels daily, passes through the strait.

Testing for leaks and structural integrity, which must precede the 370km pipeline's entry into service, will begin next month, said Khadem al Qubaisi, the managing director of the International Petroleum Investment Company (IPIC), which owns the pipeline.

Last year, Dh257 billion (US$69.96bn) worth of Abu Dhabi's crude passed through the strait, which lies between Iran and Oman. Iran and Iraq attempted to close the waterway in the 1980s in the so-called tanker war during the Iran-Iraq War. In April the head of Iran's Islamic Coalition Party said that if the republic were attacked it would try to close the waterway again.

In July, a Japanese tanker carrying crude oil from Ruwais to Japan was struck by a small boat containing explosives, blowing glass out of portholes, injuring a crew member and leaving a crater in the hull. A group calling itself the Abdullah Azzam Brigades claimed responsibility in a message on its website. Last month, the UAE Armed Forces opened a naval base in Fujairah.

By routing crude overland from its Habshan oilfields to the Fujairah coast, Abu Dhabi will also save on the cost of insurance for shipments through the Strait of Hormuz and speed delivery of crude to the international market.

For now, the planned capacity of 1.5 million barrels per day (bpd) of the Abu Dhabi Crude Oil Pipeline (ADCOP) would be more than half of the emirate's daily crude output.

"This certainly shows that you can bypass the straits," said Robin Mills, an oil analyst at Emirates National Oil Company in Dubai and a business columnist for The National.

IPIC began construction of the pipeline in 2008 and hoped to finish last year, but completion was delayed by difficulties in procuring building materials. IPIC plans for the pipeline to reach a maximum capacity of 1.8 million bpd.

The pipeline is a boon for Fujairah, which will see significant investment. The emirate is already a major bunkering and refuelling centre, second in importance only to Singapore. But the new naval base, a new oil export terminal and a planned 500,000 bpd refinery to be built by IPIC and ConocoPhillips have all helped to boost Fujairah's economy.

The emirate's prominence as a world energy hub is also bolstered by the plans of national and foreign companies to double the number of fuel storage tanks on its coast in the next three years. About 10,000 vessels pass through its port each year.

* With additional reporting by Hashim al Mohammed

business@thenational.ae