The Corner

Oil Pipeline Bypasses the Strait of Hormuz

 Abu Dhabi, one of the United Arab Emirates’ seven member states, has prepared for the possibility of an Iranian closure of the Strait of Hormuz, the critical waterway through which about 17 percent of the world’s energy passes; June 21 marked the opening of the Habshan-Fujairah oil pipeline that carries its crude to another UAE state.

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Started in 2008, the 225-mile-long pipeline is four-feet in diameter, it cost about US$2.7 billion and it carries 600-700 thousand barrels per day with the goal of increasing that to 1.4 million or even 1.8 million barrels per day. Along with the pipeline, Abu Dhabi’s government is building a US$3 billion, 200,000-barrel-a-day refinery at the pipeline’s termination, Fujairah in the Gulf of Oman.

Comment: Not only does the pipeline insure the export of Abu Dhabi’s Murban blend crude, but it also protects it from hiked up insurance premiums in case of hostilities. This little-noticed news item is fraught with implications for the future of the energy market and for Gulf Cooperation Council relations with Iran. (June 21, 2012)

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