U.A.E. oil pipeline opens

July 16, 2012 at 9:34 AM
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ABU DHABI, United Arab Emirates, July 16 (UPI) -- An oil pipeline in Abu Dhabi that bypasses conventional transit lanes through the Strait of Hormuz was built for strategic reasons, a consultant said.

The 263-mile oil pipeline from Abu Dhabi to a port on the Gulf of Oman loaded 500,000 barrels of oil from a refinery in Pakistan last weekend.

Construction costs were 27 percent more than the $3.3 billion budget and the project was delayed by 11 months.

Robin Mills, an analyst at Manaar Energy Consulting and Project Management in Dubai, told Bloomberg News the primary purpose of the pipeline was to bypass the Strait of Hormuz, which carries about 20 percent of the world's maritime oil shipments.

"It means that Abu Dhabi is just swallowing the cost of the pipeline, as it has been built for strategic reasons," said Mills. "If this was a commercial venture, they would have built it years ago."

The pipeline has the capacity of around 1.5 million barrels of oil per day. Emirati Oil Minister Mohamed al-Hamli, told Bloomberg "the pipeline is going to be beneficial because our clients will be able to lift bigger cargoes."

The U.S. military recently sent more assets to the Persian Gulf to monitor regional shipping lanes. Iran has threatened to close the Strait of Hormuz in response to sanctions from the United States and European Union.

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