Abu Dhabi Thursday started exporting crude oil, Murban blend, through Habshan-Fujairah pipeline to bypass the Strait of Hormuz.
The Habshan-Fujairah pipeline, owned by the International Petroleum Investment Company (IPIC), an investment arm of the government of Abu Dhabi, to secure flow of crude oil from the Emirate of Abu Dhabi to the world, Dr. Numan Ashour, A UAE-based economist, told Gulf News.
Ashour added: "Construction works had started in the project in 2008 and it aimed to avoid any threats to shut the Strait of Hormuz where most the GCC crude oil is passing through."
He explained: "The360 kilometre pipeline with a single 48 inch diameter also reduces shipping costs for the UAE's oil exports because shippers charge a insurance premiums based on war risk for entering the Gulf Waters."
Ashour highlighted: "The construction's design was laid out in 2006 by Worley Parsons and construction started in March 2008 by ILF Consulting Engineers and China Petroleum Engineering and Construction Corporation."
The pipeline's construction cost is estimated at Dh10 billion to connect Habshan to the Port of Fujairah on the east coast of the UAE.
"Today, it is expected that 30 per cent of UAE oil exports will be through this pipeline which is estimated to be 600-700 thousand barrels per day. However, as of July 1, 2012, the amount will be increased by 50 per cent to reach 1 million barrels per day," explained Ashour.
He added that the pipeline will enable Abu Dhabi Company for Onshore Oil Operations (ADCO) to export 50 per cent of its total production.
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.
Energy Minister Mohammad Bin Dhaen Al Hameli said earlier that the four-foot-wide pipeline is finished and is being tested.
Al Hameli also announced that oil pumping through the pipeline from the Habshan Fields would be in June, allowing the export of oil to the world without passing through the Strait of Hormuz.
He also stressed that construction of the pipeline was completed and "was subject to testing."
Al Hamili said: "The pipeline can transport up to 1.4 million barrels of oil a day and this number might be increased to 1.8 million barrels per day, which means that about 70 per cent of the UAE's oil production can be exported via Fujairah."
IPIC is also planning a Dh11 billion (US$3 billion), 200,000 barrel a day refinery at Fujairah. Mubadala Development Company and IPIC announced earlier in March 2012 they will develop a terminal at Fujairah to receive liquefied natural gas for domestic use.
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(Originally published June 21, 2012, in Gulf News.)