UAE Delays Launch of Oil Pipeline That Would Bypass Threatened Strait of Hormuz

The United Arab Emirates has delayed the launch of a crucial oil pipeline that would bypass the Strait of Hormuz, through which Iran has threatened to block access if Europe and the United States follow through on proposed sanctions meant to deter Iran from pursuing a nuclear weapons program.

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Analysts say the decision to halt construction on the nearly complete pipeline until mid-2012 is cause for concern, as Iran has the power to follow through on its threat and block the strait through which almost one-fifth of the world’s oil supply must travel.

The strait is the world’s most important oil shipping lane, connecting the biggest Gulf producers — including Saudi Arabia, Iran, Iraq, and the UAE — with world markets.

Between 15 million and 17 million barrels of oil are estimated to flow through the strait on any given day. The UAE’s new pipeline would bypass the strait to carry most of the UAE’s oil — 1.5 million barrels per day — to global markets.

The previous deadline for the Abu Dhabi Crude Oil Pipeline, or ADCOP, project was set for April, but today the UAE’s oil minister told reporters that it will “hopefully” be operational by May or June, though it could face further delays.

The UAE’s pipeline delay is only “adding to supply concerns,” said David Wech from JBC Energy consultancy, putting further pressure on already elevated oil prices.

When complete, the pipeline will link state oil firm Abu Dhabi National Oil Company’s Habshan oil fields to the port of Fujairah on the Gulf of Oman. The Abu Dhabi government-owned International Petroleum Investment Company is undertaking the project, with China Petroleum Engineering & Construction Corporation acting as engineering, procurement, and construction contractor.

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To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

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