UAE’s Hormuz Bypass Opens

The UAE should be able to export nearly half of its crude without using the Strait of Hormuz for the first time from early July, with a new pipeline expected to pump a million barrels to the Gulf of Oman on Thursday, three industry sources said.

The strategic bypass pipeline allows the UAE to pump oil from fields in the west of the country to its eastern port of Fujairah, ending the OPEC producer’s total dependence on a narrow shipping route out of the Gulf which Iran has threatened to block as western sanctions on its oil exports tighten.

The new pipeline has a nameplate capacity of around 1.5 million barrels per day (bpd), compared to total UAE exports of around 2.4 million bpd, but sources say it can carry over two million bpd.

“From 0930 today oil has been received at the main oil terminal in Fujairah and 1 million barrels is coming in,” a source directly involved in the project said on Thursday.

“The plan is to load the first oil tanker around July 1… We will slowly increase it to 1.5 million bpd,” the source said.

Two other industry sources linked to the project, including one from Abu Dhabi National Oil Company (ADNOC), confirmed that oil started flowing into the terminal on Thursday and that they expected it to be loaded onto the first tanker around the first week of July.

A European Union ban on Iranian crude imports is also due to come into effect on July 1. Iranian threats to block Hormuz, which the UAE has until now depended on to ship all its oil exports and Kuwait still relies on, intensified at the start of the year as EU lawmakers prepared the ban.

Hormuz had a daily oil flow of almost 17 million barrels in 2011, up from 15.5-16.0 million bpd in 2009-2010, according to the US Energy Information Administration.

Flows through the Strait in 2011 were about 35 per cent of all seaborne traded oil, or almost 20 per cent of oil traded worldwide.

The 370-km (231-mile) Abu Dhabi Crude Oil Pipeline links the Habshan oilfields to Fujairah and ADNOC has built eight tanks with capacity of one million barrels each nearby.