GCC urged to set up oil terminals outside Hormuz

Expert says project is needed to avert risks of Hormuz closure

Gulf hydrocarbon producers need to set up a common port in Oman or Yemen to export their crude away from Hormuz Strait, which Iran has threatened many times to shut, according to a well-known Gulf economist.

Mohammed Al Asumi, a former economic adviser at the Dubai’s government executive office, said the UAE took the right step by constructing a pipeline across its territory to transport crude from its Habshan field to the eastern port of Fujeirah outside the strategic narrow waterway.

But he noted that other key Gulf oil producers still rely almost entirely on Hormuz to export their oil to global markets in the absence of alternative routes.

“The Habshan-Fujairah pipeline shall have a long term strategic importance in the Gulf and stress the need for greater coordination between GCC countries in order to benefit from the unique location of both the UAE and Oman,” he said in an article published by the Abu Dhabi-based Emirates Centre for Strategic Studies and Research, a prominent regional think-tank.

“This could also lead to building of more pipelines transporting Gulf oil to the ports on the Gulf of Oman. By adopting this method, they will avoid the threats on the Strait of Hormuz and invest in the many advantages that can be derived from a Gulf integrated network of oil and gas pipelines.”

Asumi, who also served in the state-controlled Emirates Industrial Bank and the Ministry of Planning, noted that with the exception of Saudi Arabia, which has oil pipelines extending from the Gulf to the Red Sea and beyond the Strait of Hormuz, three other GCC countries – Kuwait, Qatar and Bahrain – rely entirely on the passage of their oil exports through the Strait.

A large part of Saudi oil exports also pass through the Straits, which carries with it a lot of risk and instability, he said.

“It is therefore recommended that Gulf countries develop alternative means for the export of oil and to explore this option….in this regard, all the GCC states can create a maritime port on the Gulf of Oman or the Arabian Sea through the territory of Yemen or Oman, or establish a maritime port on the Gulf of Oman through the UAE territory,” he said.

“It is also recommended to increase the capacity of the existing pipelines that go beyond the Strait of Hormuz, such as the pipeline of the north-east of the Arabian Peninsula/the Red Sea, which links the eastern region of Saudi Arabia with the port of Yanbu on the Red Sea; and the Habshan-Fujairah pipeline itself. For the latter, the UAE should increase its capacity quickly to reach 1.8 mbpd, representing about 70 percent of its oil production, and perhaps create a second oil pipeline to export the remaining quantity.”

Asumi said he believes the GCC countries, which control over 40 per cent of the world’s proven oil wealth, would acknowledge the strategic and economic importance of this UAE achievement, which may encourage them to adopt this know-how and lead to other pipelines projects in these countries.

“This will mark a major move not only for the Gulf oil industry but also for integration and stability of Gulf economies, which have been the focus of world’s attention due to their enormous energy resources.”

According to Asumi, the Habshan pipeline, which was commissioned last week is of great significance not only for the UAE’s economy but also for the stability of energy supplies in the world, which is essential for global growth.

Furthermore, he added, the new export center will grant the UAE semi-independence from the Strait, thereby adding greater flexibility to its oil exports; a very important development for the UAE’s oil industry.

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