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The UAE announced that the first oil has passed through an oil-pipeline that bypasses the Straits of Hormuz. Up to one million barrels of oil is expected to flow through a new pipeline crossing the United Arab Emirates to the Gulf of Oman as the UAE moves to complete the Strait of Hormuz bypass next month. The 370-km Abu Dhabi Crude Oil Pipeline carries oil from fields in the UAE’s western desert to the east coast port of Fujairah, a major oil storage and fuel bunkering hub.

 

(Source: IPIC)

 

The new pipeline has a stated capacity of around 1.5 million barrels per day (bpd) out of the UAE’s total production of around 2.4 million bpd, most of which is exported via the Straits of Hormuz.

 

June 22, 2012

 

 

Analysis and Forecast: Decreasing Risk


 

The opening of the so-called Hormuz by-pass is a significant step for the UAE. Iran has threatened to shut down the Straits of Hormuz in the event of a confrontation with the West. The bypass therefore ensures that over 40 percent of UAE oil production will be unaffected by such closure.

 

Whilst this does not cover all of the oil that passes through Hormuz, not indeed all of that UAE oil exports, it ensures that UAE oil income will not be as severely impacted in the event of the closure of the Hormuz Straits, thereby reducing the overall economic risk.