Abu Dhabi Crude Oil Pipeline through the Al Hajar mountains in Fujairah is the largest export pipeline project currently in development in the UAE. Image Credit: Gulf News Archives

Abu Dhabi: An oil export pipeline from Habshan in Abu Dhabi to Fujairah that will bypass the strategic Strait of Hormuz will be ready by the middle of 2012, the UAE Minister for Energy Mohammad Bin Dha'en Al Hameli said yesterday.

"The pipeline is almost complete, hopefully it will be operational within six months, by May, June," Al Hameli told reporters on the sidelines of an energy conference in Abu Dhabi.

The commissioning of the $3.3 billion (Dh12.11 billion), 370 kilometre Habshan-Fujairah pipeline will take place within a month, a top-ranking oil industry source told Gulf News on Sunday.

"The pipeline will be ready to export crude oil a few months down the line, post-commissioning," said the source.

The commissioning of the 1.5 million-barrel-per day pipeline was scheduled to take place late last year. However, delays in material deliveries and construction-related issues pushed the deadline back, the source added.

"There is delay; it is a lot of work. It is not only construction of the project but it also has to be filled," said Al Hameli, adding that the capacity of the pipeline could go up to 1.8 million barrels per day.

The commissioning of the pipeline will be a game changer in crude oil transportation as it will give Abu Dhabi direct access to the Indian Ocean for its oil exports and the option of bypassing the critical Strait of Hormuz. Abu Dhabi would get access to an open sea — that's the strategic advantage the new pipeline provides.

Safe passage

The new pipeline will ensure safe flow of the UAE's crude oil exports in the event of any disturbance in the Strait of Hormuz, which Iran has been threatening to close due to mounting tensions with the West over its controversial nuclear programme.

The US and its allies in Europe have been saying Iran's nuclear programme is aimed at building nuclear weapons and have threatened to impose an embargo on Iran's oil exports.

Iran denies the charge, saying its nuclear programme is meant for peaceful purposes and if its oil exports are threatened, it will close the Strait of Hormuz.

According to experts, the new pipeline will also lower shipping costs for the UAE's oil exports, as shippers charge a premium due to the war risk for entering the Gulf. The conceptual design of the pipeline was completed in 2006 and the construction related contracts were awarded in 2007. Construction started on March 19, 2008.

The pipeline is designed by WorleyParsons. Construction is managed by ILF Consulting Engineers and carried out by China Petroleum Engineering and Construction Corporation.

During the first year of operation, the pipeline will enable the Abu Dhabi Company for Onshore Oil Operations (Adco) to export roughly half its total production.

The Habshan-Fujairah pipeline is owned by the International Petroleum Investment Company, an investment arm of the government of Abu Dhabi.

The crude, Murban blend, will be carried through a single 48-inch diameter pipe. The project comprises the pipeline, main oil terminal at Fujairah, offshore loading facilities and associated facilities.

Under the plan, a strategic crude reservoir will be set up in Fujairah. The pipeline will also serve a planned refinery to be built in Fujairah by IPIC.