It is designed to bypass the problems that would arise if Iran lives up to its threat to shut down a strait.
The new pipeline in the United Arab Emirates is making insurance news as it was inaugurated on Sunday to create an important and long awaited bypass of the Strait of Hormuz.
This provides the UAE with greater protection against Iran.
Tehran has been threatening to block this vital waterway, which would cause a serious stoppage to Dubai’s ability to ship its oil internationally. This threat has become even more intense now that the latest oil insurance news regarding the sanctions from the European Union and the United States are well underway.
At the moment, the E.U. is not permitting any of the insurers or reinsurers to provide coverage for tankers carrying Iranian crude. As the vast majority of coverage comes from those companies, it has taken a serious chunk out of Iran’s ability to ship oil.
In response, the country has made insurance news by making several efforts to overcome the sanctions.
For example, it is providing its own coverage for tankers traveling to China, one of its largest importers. Equally, it increases the concern of the United Arab Emirates regarding the threat from Iran that the strait will be blocked.
This new pipeline will span 236 miles, and will be called the Abu Dhabi Crude Oil Pipeline. It will extend to the Indian Ocean coast of the UAE, in the city of Fujairah, which is south of the strait, after having travelled over the Hajar mountains and the western desert.
Until this pipeline is complete, every Emirati expert has begun in the Gulf and has used the strait of Hormuz to sail out into the ocean. When the pipeline opens and is able to run at full capacity, it will make the UAE – the third largest OPEC exporter – to ship up to two thirds of its peak production through Fujairah.
This pipeline is important insurance news, as it is designed to be able to transport at least 1.5 million daily barrels of crude, though it is expected that the typical capacity will increase to 1.8 million daily barrels.