The UAE currently produces around 2.5 million barrels of oil per day
A general view for an Oil refinery at Sajaa area in Abu Dhabi desert 12 September 2000. High oil prices have provoked turmoil in several European countries, which widespread protests over high fuel costs spreading from France to Britain this week. © Rabih Moghrabi - AFP/File
The UAE currently produces around 2.5 million barrels of oil per day
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AFP
Last updated: January 9, 2012

UAE pipeline skirting Hormuz ready by June

A pipeline being built by the United Arab Emirates to export oil from east coast terminals, avoiding the Iran-threatened Strait of Hormuz, will be operational by June, its energy minister said Monday.

"The pipeline is almost complete. It will be operational within six months ... by May or June," Mohammad bin Dhaen al-Hameli told reporters.

Iran has threatened to close the strategic waterway at the entrance to the Gulf if the West presses ahead with a threatened embargo on its oil exports.

The Habshan-Fujairah pipeline will have the capacity to pump 1.5 million barrels per day of oil from fields in Abu Dhabi on the Gulf to Fujairah on the Gulf of Oman, Hameli said.

The UAE currently produces around 2.5 million bpd. Construction of the 360-kilometre (225-mile) pipeline began back in 2008.

Hameli brushed aside questions on any other measures to secure oil supplies in the event that Iran carries out its threat to close the Strait of Hormuz, asking: "Who says Hormuz is going to close?"

Tension has escalated as the West continues to squeeze Tehran over its controversial nuclear programme, with the EU threatening a total ban on oil purchases from Iran.

Tehran has threatened to close the Strait of Hormuz -- through which 20 percent of the world's tanker-carried oil flows -- if its crude exports are blocked.

The Emirati pipeline falls short, however, of solving the "chronic problem" of the Gulf region’s dependence on the narrow strait for their oil exports, according to Kuwaiti oil expert Mousa Marafi.

"The pipeline only solves one piece of the problem... because it can only be used by the UAE," said Marafi.

"What is needed is a strategic pipeline from Kuwait through eastern Saudi Arabia all the way to the Gulf of Oman" to cater for all Gulf Cooperation Council oil-exporting countries.

Otherwise, Gulf oil producers remain "at the mercy" of the strait where "anything can happen," he said.

But although Marafi cautioned that the strait "could close tomorrow," he said it was "highly unlikely" that Iran would carry out its threat to block the strategic waterway.

"It would bring about war... It’s just not in their interest," he added.

In addition to the exports of the UAE and Iran itself, all oil exports of Bahrain, Kuwait and Qatar are shipped through the Hormuz. Iraq also pumps the bulk of its exports through ports on the Gulf.

Saudi Arabia, the world's largest oil exporter, pumps most of its crude from its terminals on the Gulf but it can divert large supplies to terminals on the Red Sea.

"It’s very significant that Abu Dhabi is building this pipeline ... It will somehow reduce tensions," said oil expert Kamel al-Harami, although the $3.3 billion project will only transport part of Abu Dhabi’s total oil output.

Harami described Iran’s threat as a "bluff" which had driven up oil prices to the benefit of all exporters, including its rivals in the Sunni-ruled monarchies of the Gulf.

A closure of the strait would be a "disaster," he said. "I don’t think they’ll risk it."

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