Abu Dhabi set to avoid Hormuz with pipeline

A strategic pipeline that will allow Abu Dhabi oil to bypass the Strait of Hormuz is to become "operational" next month, says the ruler of Sharjah.

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Abu Dhabi oil will be able to bypass the Strait of Hormuz in a matter of weeks thanks to the completion of a pipeline leading to the port of Fujairah.

The 270-kilometre connection from Abu Dhabi's oilfields to the to Fujairah on the Indian Ocean is set to transport half of Abu Dhabi's oil, providing security for its core export amid fears of a western confrontation with Iran.

"The pipeline will be operational in June," Sheikh Hamad bin Mohammed, the ruler of Fujairah, told Agence France-Presse in an interview.

Twenty per cent of the world's oil, including all of Abu Dhabi's exports, travels by tanker through the Strait of Hormuz, a waterway that narrows to 39km at its narrowest.

Iran, under pressure from the West to halt its suspected nuclear-weapons programme, has repeatedly threatened to close the strait. Geopolitical fears have pushed oil prices as high as US$128 a barrel this year, and pirates from Africa's east coast have been venturing farther up the strait.

International Petroleum Investment Company (Ipic), a sovereign wealth fund owned by the Abu Dhabi Government, awarded a $3.3 billion contract in 2009 to China National Petroleum Corporation to build the pipeline to Fujairah.

In 2010, Khadem Al Qubaisi, the managing director of Ipic, said construction on the pipeline was complete and that commissioning would soon follow.

Once the pipeline comes online, Ipic plans to gradually raise its capacity from 1.5 million barrels per day to 1.8 million.

The pipeline will not only provide security for Abu Dhabi oil but also a kick-start to the economy of Fujairah, a sleepy hub that until recently had catered largely to container ships and bunkering services.

International oil traders are building rows of massive oil storage tanks along Fujairah's coast in anticipation of the new pipeline. Ipic is also planning a refinery and is collaborating with Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, on an liquefied natural gas import terminal.

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