x Abu Dhabi, UAEMonday 18 December 2017

Fujairah pipeline eases pressure on the Strait

The UAE's new pipeline shows the country is working quietly to maintain regional stability

Snaking through, under and over sabkha, dunes and mountains before finally running 14 kilometres out into the Gulf of Oman, the UAE's newest crude oil pipeline is a model of modern engineering. It is also strategically vital, not only to the UAE's energy-export economy, but also to regional security.

Abu Dhabi's International Petroleum Investment Company (IPIC) employed firms from Europe, Japan and China to achieve the $4.2 billion (Dh15.4 billion) project, which began regular operation this week with a shipment destined for a refinery, partly owned by IPIC, in Pakistan. Five years in the making and 403 kilometres long, the line runs from the Habshan field, in Al Gharbia region of Abu Dhabi, to offshore docking stations in Fujairah.

A glance at the map could make someone question the purpose of the technically challenging pipeline: Habshan is, after all, quite close to the Arabian Gulf. A glance at the headlines, however, answers the question: Iran keeps threatening to close the Strait of Hormuz in retaliation for the US and EU sanctions and the continuing argument over its suspect nuclear programme.

The new pipeline, when it is at full capacity, will allow the UAE to move as much as 1.8 million barrels of oil per day - two-thirds of current exports - on to the Gulf of Oman and so to world markets while bypassing the Strait altogether.

To be sure, there is very little logic behind the recurring Iranian threat. Its own oil, which is still the mainstay of its economy despite the international sanctions, must also move through the Strait. A conflict in such close proximity would harm everyone involved.

Further, any gesture aimed at closing off the waterway would prompt a sharp reaction from the United States, which now normally maintains two aircraft carrier groups in the region as part of its military build up. The gunboat diplomacy is meant to influence Iran's decisions and allay fears of a closure of the Strait.

Despite Tehran's sometimes seemingly erratic behaviour, open hostility should be a very distant prospect. But even the perception of instability can affect the world's oil markets.

The headlines about the danger of the Strait being closed may be overwrought. This pipeline, however, will add to the accurate perception that the UAE is quietly working to maintain regional stability and safeguard energy security in any event.

NOTE: As first published, this editorial said the US “has a fourth aircraft carrier en route to the region”. In fact, since December the US has generally maintained two carrier groups in this region; as of mid-July one group is in the area and a second is to arrive by late summer. The text above has been corrected.