The UAE media reported recently the long awaited operation of the Habshan-Fujairah crude oil pipeline thereby enabling the UAE to export a large portion of its oil without passing through the traditional sea route of the Strait of Hormuz.

The pipeline is 48 inches in diameter and 350 kilometres in length and it will deliver 1.5 million barrels a day (mbd) to the loading terminal at the port of Fujairah. It was constructed at a cost of over $2.7 billion (Dh10 billion). Official statements indicated that the capacity can be increased to 1.8 mbd at a later stage.

The media and most analysts have concentrated on the strategic importance of the pipeline and its operation with the heightened tension in the region as the confrontation between the West and Iran intensifies. Iran has threatened many times to close the Strait of Hormuz in case of war or the stoppage of its exports through sanctions.

Therefore such threats are always viewed as the reason for the UAE to undergo this project. If so, the Iranian threats have backfired not only by allowing the UAE to bypass the Strait of Hormuz for almost two thirds of its exports but also to incite other countries to look at ways and means to reduce the threat.

Saudi Arabia must be working hard to put its East-West pipeline to its maximum operating capacity of 3 mbd and Iraq is seriously considering the revitalisation of its Turkish exports route to its original 1.6 mbd and possibly expedite a new pipeline project to Syrian ports to deliver an additional 1.5 mbd of oil as production of Iraq expands. Unfortunately, Iraq may not be able to use its 1.65 mbd pipeline to the port of Muajjiz, south of Yanbu on the Red Sea in Saudi Arabia.

The pipeline has been closed since 1990 and may have been seized by Saudi Arabia and no attempt has been made to improve relations between the two countries to make the pipeline operational again. It is not known how much the Saudi section of this pipeline system can increase Saudi deliveries to the Red Sea.

Thus the threats by Iran and the non-cooperative policy with the countries of the region has forced them to seek alternatives to secure their vital oil exports. But let us be realistic, the majority of oil exports from the Gulf countries is still possible only through the Strait of Hormuz and this includes more than half of Saudi exports, all of Kuwait and Qatar exports and about three quarters of Iraq exports which may add up to more than 13 mbd if all other routes are exhausted.

The new pipeline in the UAE and others may dilute the threat to crude oil exports but the petroleum products exports especially from Saudi Arabia, Kuwait, Qatar and Bahrain and the import requirements of Iraq will remain at risk.

At the same time one must remember the 77 million tonnes a year of liquefied natural gas from Qatar and about 7 million tonnes a year of the same from the UAE in addition to few more million tonnes of liquid petroleum gases and condensates that are equally at risk by any tampering with the sea lanes through the Arabian Gulf and the Strait of Hormuz.

On the local level, the UAE is destined to realise a set of advantages by the operation of the pipeline and its likely expansion. Fujairah, the second largest bunkering port in the world after Singapore will increase in importance as many storage facilities there are undergoing expansions and IPIC, the UAE investment arm who financed the pipeline is well under way to build a 200 thousand barrels a day sophisticated refinery, costing close to $3 billion, close to the pipeline terminal.

There are also reports of a possible LNG terminal to import gas through Fujairah to cater for maximum demand during summer and any shortage of pipeline gas. The new pipeline will reduce overall transportation cost of UAE crude by reducing round trip times of tankers and more importantly by reducing insurance premiums.

Given the importance of the Arab Gulf oil and gas supplies to the well-being of the world economy, the security of the Strait is an international responsibility and must not be left to the limited means of individual countries. Iran is well advised to mend its relations with the countries of the region and to abandon any notion of hegemony and replace it with one of cooperation.

Saadallah Al Fathi is the former head of Energy Studies Department in OPEC Secretariat in Vienna.