UAE Will Double Oil Export Capacity Bypassing Hormuz by 2027

The United Arab Emirates will double its capacity to export crude oil bypassing the Strait of Hormuz by next year, as it seeks to reduce reliance on the shipping chokepoint.

Abu Dhabi National Oil Co. is accelerating the construction of a pipeline that will enable the United Arab Emirates to double its capacity to export crude oil bypassing the Strait of Hormuz by 2027. The pipeline, which is expected to cost billions of dollars, will have a capacity of 1.8 million barrels per day. This project is part of the UAE's efforts to reduce its reliance on the shipping chokepoint, which is a critical waterway for global oil trade. The pipeline's construction is being led by Abu Dhabi National Oil Co.'s CEO, Sultan Al Jaber.

The increased oil export capacity will likely lead to a decrease in gas prices, as more oil will be available in the global market, putting downward pressure on prices. This could result in savings for consumers, particularly those who rely heavily on gasoline for their daily commute. The exact impact on gas prices will depend on various factors, including global demand and the overall supply of oil. A decrease in gas prices could have a significant impact on household budgets.

The UAE's decision to bypass the Strait of Hormuz is part of a larger trend of countries seeking to reduce their reliance on critical waterways that are vulnerable to disruption. The Strait of Hormuz has been a source of tension in recent years, with several incidents of ships being seized or attacked. Insiders know that the strait's closure would have a significant impact on global oil trade, and the UAE's move is seen as a strategic effort to mitigate this risk. The UAE's pipeline project is also part of its broader efforts to increase its oil production capacity.

The UAE is expected to announce the completion of the pipeline's construction by the end of 2027, with oil exports expected to increase significantly thereafter. The International Energy Agency will release a report on the impact of the UAE's pipeline project on global oil trade in the coming months. A surprising detail is that the pipeline's construction is being funded in part by China, which is seeking to increase its access to Middle Eastern oil reserves, highlighting the complex geopolitics at play in the region.