Post its high-profile exit from OPEC and the OPEC+, the UAE is now accelerating its efforts to diversify its energy export routes, with new crude pipeline bypassing the Strait of Hormuz is about 50% complete.
While Tehran has kept the strategically important maritime chokehold under its firm control, as per Sultan Al Jaber, the head of state-owned oil giant ADNOC, the global oil flows may take at least four months to recover to 80% of pre-Iran war levels if the conflict ends today. Due to the stalemate at Hormuz, global oil and gas supplies have been disrupted since February 28, sending energy prices and inflation surging, fanning fears of an economic downturn.
Understanding the gravity of the situation, Crown Prince Sheikh Khaled bin Mohamed bin Zayed has now directed the faster completion of the new West-East Pipeline project, with the goal of doubling the UAE’s energy export capacity via the port of Fujairah by 2027.
“Today, it’s already almost 50% complete, and we are accelerating its delivery toward 2027. Right now, too much of the world’s energy still moves through too few choke points. That is exactly why the UAE made the decision more than a decade ago to invest in infrastructure that bypasses the Strait of Hormuz,” Sultan Al Jaber said during a live-streamed Atlantic Council event.
The existing Abu Dhabi Crude Oil Pipeline (ADCOP), which has the capacity of carrying up to 1.8 million barrels per day, has proved to be a crucial asset as the UAE seeks to maximise exports from the Gulf of Oman coast just outside the Strait. This further comes handy, given the fact that Iran, which has reportedly attacked vessels to assert control over the Strait, has expanded its definition of the waterway to include the UAE’s Gulf of Oman coastline. The United States, on the other hand, has imposed its own blockade on Iranian ports after an aborted attempt at reopening the chokepoint.
Gulf countries, which host American military bases, have come under repeated attacks during the conflict, despite the ceasefire kicking in from April 8.
“The UAE was targeted by more than 3,000 missiles and drones aimed at civilian infrastructure, including ADNOC’s, where damage assessment is ongoing and full operational capacity could take weeks to months in some cases. The UAE was attacked for its model of development,” Al Jaber said.
“Once you accept that a single country can hold the world’s most important waterway hostage, freedom of navigation as we know it is just finished. If we don’t defend this principle today, we will spend the next decade defending against the consequences,” the ADNOC boss said, while warning that it will take until Q2 2027 for the Gulf’s energy exports (through the Strait) to hit the pre-conflict levels.
Terming the UAE’s exit from OPEC and OPEC+ a “sovereign, strategic decision” driven by a global need for more energy, Al Jaber said that the move was not aimed at anyone and not intended to rupture any relationship. The statement assumes significance as reports blamed the output quotas placed by the Saudi Arabia-led energy cartel for Abu Dhabi quitting the group.
“The global sector remains dangerously under-invested, noting current upstream investment of around USD 400 billion a year barely offsets natural decline rates. Global spare crude capacity, currently around 3 million bpd, needs to be closer to 5 million bpd. Looking forward, AI will strain global grids, and the world is underestimating how energy-intensive the revolution will be,” Al Jaber added.
As per the ADNOC boss, his company has remained committed to its USD 150 billion (AED551 billion) five-year capital expenditure (CAPEX) programme to enhance its operations, drive growth and meet global energy demand.