Abu Dhabi started exporting its first crude from a pipeline that bypasses the Strait of Hormuz, shipping the fuel to a refinery in Pakistan. The pipeline, stretching from Abu Dhabi to the neighboring sheikhdom of Fujairah on the Gulf of Oman, was loading the first shipment of 500,000 barrels to the Pakistani plant, Mohamed Bin Dhaen Al-Hamli, oil minister for the United Arab Emirates, said yesterday at a ceremony to inaugurate the network. International Petroleum Investment Co. spent $4.2 billion building the 423- kilometer (263-mile) link, Khadem Al-Qubaisi, managing director of the Abu Dhabi-run fund known as IPIC, said at the ceremony in Fujairah. Abu Dhabi, the U.A.E.’s capital and holder of more than 90 percent of its oil, built the link as an export route for crude that avoids Hormuz at the mouth of the Persian Gulf. Iran has threatened to block the strait, a chokepoint for tankers carrying a fifth of the world’s traded oil, in retaliation for sanctions targeting the country’s nuclear program. The U.A.E., the fifth-biggest oil producer in OPEC, pumped 2.61 million barrels a day in June, according to data compiled by Bloomberg. Fujairah is one of the U.A.E.’s seven sheikhdoms. An Iranian lawmaker, Mohammad-Hassan Asferi, said yesterday the pipeline’s limited capacity would keep it from obviating the need of regional suppliers to export most of their oil through the strait. He dismissed the project as “propaganda and political maneuvering guided by the Western countries, especially the United States, which aims to reduce the strategic importance of the Strait of Hormuz,� according to state-run Press TV. Asferi serves on the national security and foreign policy committee of Iran’s parliament. Iran Abu Dhabi’s first export cargo from Fujairah is destined for Pak Arab Refinery Ltd., a joint venture between Pakistan’s government and IPIC, Al-Qubaisi said. IPIC owns a 40 percent stake in the plant, which regularly uses about 40,000 barrels a day of Abu Dhabi crude, of the 100,000 barrels it consumes daily, he said. Abu Dhabi earlier shipped a test cargo from Fujairah to its own refinery at Ruwais, inside the Persian Gulf, said Abdul Munim Al-Kindi, general manager of Abu Dhabi Co. for Onshore Oil Operations. As the main oil producer at the emirate’s onshore fields, the company, known as ADCO, will operate the pipeline and gradually expand its capacity by year-end, he said. The network is designed to load tankers at three offshore buoys, Al- Kindi said. Fujairah’s Expansion IPIC’s Al-Qubaisi said his company plans to spend as much as $5 billion to build a refinery in Fujairah with a capacity of about 250,000 barrels a day to produce for local sale and export, further enhancing the port’s importance as a hub for the processing, storage and shipment of fuels. The company is working with another state-owned investment fund, Mubadala Development Co., on a project for a terminal at the port for imports of liquefied natural gas. Fujairah is already among the world’s three biggest refuelling ports for commercial ships, along with Singapore and Rotterdam. Al-Hamli, the oil minister, said the pipeline gives buyers an alternative location from which to receive crude. It will allow them to fill very large crude carriers, or VLCCs, the largest class of tanker capable of carrying 2 million barrels of oil. Filling such vessels in the Gulf of Oman will reduce shipping traffic in Hormuz, he said. Shipping Flexibility “The pipeline is going to be beneficial because our clients will be able to lift bigger cargoes,� he said. “Currently you can only lift 1 million barrels a day from Ruwais. From Fujairah now our clients now can bring in VLCCs and lift more.� The pipeline can transport 1.5 million barrels a day of Murban crude from Habshan, a collection point for Abu Dhabi’s onshore oil fields, across a desert and mountains to Fujairah. The system is able to pump as much as 1.8 million barrels a day at periodic intervals, officials said at the inauguration. IPIC will likely charge ADCO “a few cents per barrel� for use of the pipeline, Al-Qubaisi said. The first oil exported from Fujairah is priced the same as Murban crude loaded inside the Gulf, three people with knowledge of the matter said this month. Abu Dhabi may later devise a separate formula including a premium to account for the cost of using the pipeline, said the people, who asked not to be identified because the matter is confidential. Abu Dhabi officials yesterday did not comment on pricing. To contact the reporters on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net; Ayesha Daya in Dubai at adaya1@bloomberg.net To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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