No more strait bottlenecks! UAE finalizes refined product pipeline to enable overland oil exports

Influenced by the continuous obstruction of navigation in the Strait of Hormuz for three consecutive months, Gulf oil-producing countries are accelerating their efforts to reduce dependence on single maritime transport. UAE officials have disclosed that the country is implementing its first planned refined product pipeline, relying on onshore pipelines to export gasoline, diesel, and aviation kerosene, thoroughly breaking the shackles on refined product exports caused by restricted navigation in the Strait. Relying on the newly built pipeline, even in the event of a sudden closure of the Strait, the UAE can still ensure the stable external sales of main refined products, solidifying a fallback channel for oil exports.

Philippe Khoury, Executive Vice President and Chief Trading Officer of the Abu Dhabi National Oil Company (ADNOC), stated in an interview on Tuesday that the company is currently increasing investment in multi-channel supply chain construction and optimizing operation and maintenance systems. Assessing that the long-term continuation of the geopolitical crisis in the Strait is a realistic possibility, pipeline expansion and the implementation of new projects are core measures to guarantee long-term, stable, and affordable oil supply.

Shortcomings of existing crude oil pipelines become prominent: limited capacity and frequent disturbances

The UAE's existing mature onshore crude oil pipeline is the Habshan-Fujairah pipeline. The line connects the core domestic oil and gas production areas with the West Coast export terminal, similar to the layout logic of Saudi Arabia's bypass pipeline. However, the pipeline's rated daily capacity is only 1.8 million barrels. Coupled with frequent disturbances from attacks along the route, the stability of actual transportation is difficult to guarantee, and it cannot meet the needs of refined product export, which is a key incentive for the UAE to urgently build a dedicated refined product pipeline.

Previously, the UAE announced its withdrawal from OPEC, obtaining autonomous control over crude oil production. ADNOC plans to increase daily crude oil production to 5 million barrels next year, and capacity can be expanded to 6 million barrels/day in extreme scenarios; a supporting second crude oil pipeline is under construction and is expected to be commissioned early next year. At that time, the capacity of the Habshan-Fujairah crude oil pipeline will directly double, consolidating the foundation for onshore crude oil export.

This proposed refined product pipeline is modeled after the U.S. Colonial Pipeline, supporting the flexible switching and transportation of multiple types of refined products. In addition, the UAE is simultaneously planning a new east-west cross-border pipeline, opening usage rights to undertake the transit oil transportation needs of neighboring Gulf oil-producing countries, assisting multiple regional countries in bypassing the Strait of Hormuz for export.

Iraq accelerates self-built bypass pipelines; financial constraints drag down project implementation progress

Not only the UAE, but Iraq, which was also severely damaged in this round of Strait blockage, is simultaneously accelerating the implementation of pipelines bypassing the Strait of Hormuz. The country's new Basra to Haditha crude oil pipeline has a designed daily transport capacity of 2.5 million barrels, while promoting the technical renovation of the pipeline from the northern Kirkuk oilfield to the Turkish port of Ceyhan. The existing capacity of 200,000 barrels/day is planned to be expanded to 500,000 barrels/day.

However, Iraq's financial pressure has become the biggest variable for the project. The country has applied for financial assistance from the International Monetary Fund, and the uncertainty of the pipeline's completion on schedule is high. Previously, impacted by the dual shock of a lack of supporting onshore storage and the sea route blockade, Iraq's crude oil production capacity plummeted, and current production has only recovered to 30% of pre-war levels, which is also a core motivation for its urgent implementation of onshore pipelines.

Industry Trend Summary: Geopolitical risks reshape the pattern of Gulf oil exports

The three-month blockade of the Strait has thoroughly exposed the structural hidden dangers of Middle Eastern oil-producing countries' over-reliance on Hormuz maritime transport. Gulf oil-producing countries, represented by the UAE and Iraq, are collectively shifting towards a diversified layout of onshore pipelines. From the expansion of single crude oil pipelines to the multi-point commencement of multi-functional refined product dedicated lines and cross-border transit pipelines, the Middle East oil storage and transportation system is accelerating its transformation from "maritime dominance" to the parallel operation of sea and land routes, continuously weakening the impact of geopolitical fluctuations in the Strait of Hormuz on the global oil product supply chain.