The United Arab Emirates is set to bolster its oil export capabilities by completing a new pipeline by next year, designed to circumvent the Strait of Hormuz. This strategic move aims to protect the nation’s crude exports from potential disruptions. Currently, a blockade of this critical maritime passage, which previously facilitated the flow of 20% of global oil and seaborne gas, has been in effect for nearly 11 weeks. The blockade has contributed to soaring energy prices worldwide and has significantly impacted Gulf economies.
Abu Dhabi’s Crown Prince, Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, has instructed the UAE’s state oil company to expedite this previously undisclosed project. The pipeline, which will transport oil from the emirates to the port of Fujairah, is expected to be operational by 2027. It is anticipated to double the current export capacity of the existing Habshan-Fujairah pipeline, which already carries up to 1.8 million barrels per day to the Gulf of Oman port. This infrastructure has been vital for the UAE to maintain its oil exports since Iran began blocking tankers in the Strait of Hormuz following US and Israeli military actions on February 28.
In the Gulf region, only the UAE and Saudi Arabia currently have pipelines that allow crude exports to bypass the narrow passage between Iranian and Omani territories. The UAE’s decision to fast-track a second pipeline follows its recent withdrawal from OPEC after 60 years, signaling a notable divergence from Saudi Arabia, which typically champions strict production quotas to sustain oil prices and support its economic strategies.
The UAE’s exit from the oil cartel positions it to potentially increase oil production beyond future OPEC quotas once the conflict ends and trade through the Strait of Hormuz normalizes. However, the development of a new pipeline means the UAE can continue expanding its oil exports even if the current conflict persists or if a peace agreement does not fully restore pre-crisis shipping levels through the strait.
The capacity of the new pipeline remains undisclosed, but if it matches the existing pipeline’s output, the UAE’s export capacity could increase to 3.6 million barrels per day. This would significantly enhance its export capabilities, approaching those of Saudi Arabia, which can move approximately 7 million barrels per day from its eastern oilfields to the Red Sea port of Yanbu, with 5 million barrels available for export.