UAE Pipeline Bypassing Strait of Hormuz Nears 50% Completion
79d ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
uaestrait-of-hormuz
Fazen Markets Editorial Desk
Collective editorial team · methodology
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The United Arab Emirates has announced on 20 May 2026 that a new pipeline designed to bypass the Strait of Hormuz is nearly 50% complete. The project will significantly enhance the security of the UAE's crude oil exports. Current exports are already being partially redirected through an existing pipeline to the port of Fujairah, which has a maximum capacity of 1.8 million barrels per day. This development directly addresses one of the most critical chokepoints for global energy flows.
The Strait of Hormuz is the world's most important oil transit corridor. An estimated 21 million barrels of oil per day, or about one-fifth of global petroleum consumption, passed through it in 2025. This narrow waterway between Oman and Iran has been a persistent flashpoint for geopolitical tensions. Attacks on tankers in 2019 and ongoing regional instability have long incentivized Gulf producers to find secure alternatives for export routes.
The current macro backdrop for oil is defined by elevated volatility. Brent crude has traded between $78 and $85 per barrel over the past month. OPEC+ supply management policies continue to counterbalance uncertain demand growth. The catalyst for accelerating this pipeline project is the sustained risk premium attached to oil shipments transiting the Strait. By securing an overland route, the UAE insulates its primary revenue stream from maritime disruptions.
The existing pipeline, the Abu Dhabi Crude Oil Pipeline (ADCOP), has been operational since 2012. It stretches 405 kilometers from the Habshan fields to Fujairah on the Gulf of Oman. The ADCOP's capacity of 1.8 million barrels per day represents approximately 60% of the UAE's total production capacity of 3 million barrels per day. The new pipeline project expands this infrastructure network significantly.
| Metric | Existing ADCOP (Fujairah) | New Pipeline (Projected) |
|---|---|---|
| Capacity | 1.8 million bpd | Undisclosed, likely larger |
| Status | Operational | ~50% Complete |
| Strategic Impact | Partial bypass | Enhanced full bypass |
The UAE's total proven oil reserves stand at 107 billion barrels. The country is the third-largest producer in OPEC, behind Saudi Arabia and Iraq. The 1.8 million bpd redirection capability provides a substantial buffer against supply shocks. This volume is equivalent to the entire oil output of a medium-sized producer like Nigeria.
The primary second-order effect is a potential reduction in the global oil risk premium. Insurance premiums for tankers transiting the Strait of Hormuz could face downward pressure as a major producer diversifies its export routes. This benefits global integrated oil majors like Shell (SHEL) and TotalEnergies (TTE) through lower operating costs for their shipping divisions. The Fujairah port and associated storage infrastructure see increased strategic importance and valuation upside.
Tanker companies that specialize in Hormuz transit, such as Frontline (FRO) and Euronav (EURN), may experience reduced volatility in their charter rates. Conversely, the shift strengthens the UAE's position as a reliable supplier, potentially boosting long-term contract preferences for its state-owned ADNOC. A key limitation to this analysis is that the new pipeline does not eliminate the strait's global significance. Other major exporters, including Saudi Arabia and Iraq, remain entirely dependent on the waterway.
Positioning data indicates institutional investors are increasing exposure to Middle East infrastructure funds. Flow is also moving into UAE equity ETFs as the project underscores the nation's long-term economic planning. Short interest in pure-play tanker stocks has modestly increased on the news.
The next major catalyst is the project's next completion milestone, expected in Q4 2026. Market participants will monitor ADNOC's official announcements for updated timelines. The OPEC+ meeting on 1 June 2026 will be scrutinized for any commentary on how increased export security influences the UAE's production policy.
Key levels to watch include the price spread between Dubai crude (loaded from Fujairah) and other regional benchmarks. A narrowing spread would signal the market is attributing a higher value to securely routed oil. The utilization rates of the existing ADCOP pipeline will serve as a leading indicator for demand for the new route. Any escalation of tensions in the Strait of Hormuz will immediately test the market's perception of this project's risk-mitigating value.
The pipeline's main impact is on the risk premium embedded in oil prices, not on immediate supply. By providing a secure alternative route, it reduces the likelihood of a severe price spike if the Strait of Hormuz were disrupted. Over the long term, this contributes to price stability. The direct effect on global supply and demand balances is minimal, as the oil is simply being rerouted, not added to the market.
The existing Abu Dhabi Crude Oil Pipeline (ADCOP) has a maximum capacity of 1.8 million barrels per day. This infrastructure has been in operation since 2012 and serves as the proof-of-concept for the expanded network. The capacity is sufficient to handle the majority of the UAE's onshore crude production, which originates from the Habshan and Bab fields.
Saudi Arabia has intermittently discussed reopening an Iraqi pipeline to the Mediterranean, but progress has been limited. Iran has also explored building pipelines to its coast on the Gulf of Oman, though international sanctions have hampered development. The UAE's project is the most advanced and concrete effort by any Gulf state to achieve meaningful export diversification away from the Strait of Hormuz.
The UAE is materially de-risking its oil exports from Middle Eastern geopolitical volatility.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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