The United Arab Emirates is set to complete a strategic oil pipeline by next year, bypassing the Strait of Hormuz to safeguard its crude exports from potential disruptions. This development, spearheaded by Abu Dhabi’s Crown Prince Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, involves the UAE state oil company fast-tracking the project so that oil can be transported from the emirates to the port of Fujairah by 2027. The move comes amid a blockade of this vital waterway, now nearing 11 weeks, which has sent global energy prices soaring and impacted Gulf economies significantly.
The planned pipeline aims to double the UAE’s export capacity from the current Habshan-Fujairah pipeline, which handles up to 1.8 million barrels per day to the Gulf of Oman. This infrastructure has been essential for the UAE in maintaining oil exports after Iran’s blockade of tankers through the Strait of Hormuz, following US and Israeli attacks on February 28. Alongside Saudi Arabia, the UAE is one of the only Gulf nations with pipelines that export crude beyond this narrow channel between Iranian and Omani territories.
This decision to expedite a second pipeline follows the UAE’s recent departure from OPEC, after 60 years of membership, highlighting a rift with Saudi Arabia, the cartel’s de facto leader. Exiting OPEC allows the UAE, the third-largest oil producer in the group, to potentially increase its oil production beyond future quotas once the conflict ends and normal trade resumes through the strait. However, a new pipeline provides the UAE with an opportunity to increase its oil exports regardless of the conflict’s duration or the terms of any peace agreement that might not fully reopen the waterway to pre-crisis levels.
The UAE’s decision to leave OPEC has exposed underlying tensions with Riyadh, which typically advocates for strict production quotas to maintain oil prices conducive to its economic goals. While the exact capacity of the new pipeline hasn’t been disclosed, doubling its capacity to 3.6 million barrels per day would bring the UAE’s pipeline exports closer to Saudi Arabia’s capabilities. Saudi Arabia currently transports approximately 7 million barrels per day from its eastern oilfields to the Red Sea port of Yanbu, exporting 5 million barrels of this capacity. This development marks a significant step in the UAE’s strategy to enhance its energy export resilience amidst ongoing regional tensions.