In a strategic move to safeguard its oil exports, the United Arab Emirates has revealed plans to finalize a new oil pipeline bypassing the Strait of Hormuz by next year. This development comes amid the ongoing blockade of the critical maritime passage, which before the conflict with Iran, facilitated the transit of 20% of the world’s oil and seaborne gas. The blockade, now nearing its 11th week, has significantly impacted global energy prices and the economies within the Gulf region.
Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, the crown prince of Abu Dhabi, has instructed the UAE’s state oil company to expedite this previously undisclosed pipeline project. Once completed, the new pipeline will transport oil from the emirates to Fujairah’s port by 2027. This initiative aims to enhance the UAE’s export capabilities by doubling the capacity of the existing Habshan-Fujairah pipeline, which currently handles up to 1.8 million barrels per day to the Gulf of Oman port.
Since Iran’s blockade of the Strait of Hormuz, following the US and Israeli attacks on February 28, the UAE has depended heavily on its current pipeline to sustain oil exports. The UAE and Saudi Arabia stand as the sole Gulf oil producers with pipelines circumventing the narrow waterway that separates Iranian and Omani territories.
This decision to accelerate the construction of a second pipeline comes shortly after the UAE made the significant decision to exit OPEC after 60 years, signaling a rift with Saudi Arabia, the organization’s leading member. The UAE’s withdrawal is anticipated to provide it with the flexibility to increase its oil output beyond the production constraints that might be imposed by OPEC once the conflict subsides and regular trade resumes through the Strait of Hormuz.
However, the new pipeline could enable the UAE to increase its oil exports even if the current conflict extends longer than anticipated or if a peace agreement does not fully restore tanker flow through the strait to pre-crisis levels. The UAE’s departure from OPEC has underscored ongoing tensions with Saudi Arabia, which typically advocates for strict production limits to maintain oil prices that align with its economic objectives. Although the capacity of the new pipeline has not been disclosed, doubling its current capacity to potentially 3.6 million barrels per day would bring the UAE’s exports closer to Saudi Arabia’s, which can transport approximately 7 million barrels daily to the Red Sea port of Yanbu.