The United Arab Emirates has announced plans to complete a new oil pipeline bypassing the Strait of Hormuz by 2027, aiming to secure its crude exports against potential disruptions. The project, previously undisclosed, has been fast-tracked by Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, Abu Dhabi's crown prince, directing the state oil company to expedite construction.
Doubling Export Capacity
The new pipeline is expected to double the UAE's export capacity via the existing Habshan-Fujairah pipeline, which currently carries up to 1.8 million barrels per day to the port of Fujairah on the Gulf of Oman. This existing pipeline has been crucial for the UAE to continue oil exports since Iran blocked tankers passing through the Strait of Hormuz shortly after US and Israeli attacks on 28 February.
Regional Context and OPEC Exit
The decision comes weeks after the UAE quit OPEC after 60 years of membership, signaling a schism with Saudi Arabia, the group's de facto leader. Leaving the cartel allows the UAE, OPEC's third-largest oil producer, to potentially pump more oil than future quotas may permit once the conflict ends and normal trade resumes. However, the new pipeline enables the UAE to ramp up exports even if the conflict persists or if a peace plan fails to restore free tanker passage through the Strait.
The blockade of the waterway, through which 20% of oil and seaborne gas flowed before the Iran war, is approaching 11 weeks, driving energy prices higher and throttling Gulf economies. The UAE and Saudi Arabia are the only Gulf producers with pipelines exporting crude outside the narrow strait.
Capacity and Comparison
While the exact capacity of the new pipeline remains undisclosed, doubling existing capacity to 3.6 million barrels per day would bring UAE pipeline exports closer to Saudi Arabia's capacity of roughly 7 million barrels per day from its eastern oilfields to the Red Sea port of Yanbu, of which 5 million barrels are exported.
The UAE's departure from OPEC highlights long-running tensions between Abu Dhabi and Riyadh, with Saudi Arabia favoring strict production quotas to maintain high oil prices for its economic agenda.
