Gulf News reported that exporting oil through the new Habshan Fujairah pipeline will secure safe transportation of the UAE’s oil exports cut insurance costs and reduce its dependence on the Straits of Hormuz. The investment is an economically and politically strategic move for the UAE.
Mr Said Hirsh analyst at London based Capital Economics said that “From the UAE’s perspective, this will help it to secure its most strategic economic asset against political tensions with Iran. The pipeline is very good from the perspective of the international community as at least one step to help ease rising supply concerns from the dependence on the Strait of Hormuz.”
Dr Mohammad Al Asoomi UAE based economist said that the UAE will be able to transport its oil exports safely in the face of Iranian threats to close the Straits of Hormuz or in case of war. The exports will not stop and therefore they can guarantee continued oil revenues. The pipeline could help reduce transport costs as insurance premiums within the GCC can fall by up to 25%. Insurance, which is factored in transport costs may drop as the risk premium falls.
Dr Al Asoomi said that given the massive investment in Fujairah, the project is one way to balance economic development in different emirates and generate employment opportunities. The pipeline will support the spread of economic development in different parts of the country, not just exclusive to certain emirates and this is very important for sustainable development in the UAE.
Analysts said that politically, the new pipeline means that the UAE is no longer dependent on the troubled Straits of Hormuz, where regional tensions have been churning amid Iranian threats to close the strategic passageway.
Mr Saadallah Al Fathi former head of the Energy Studies Department in Opec Secretariat in Vienna said that “It will show Iran that the countries of the region will not take its threats lightly and that they have the means to reduce the damage if ever it occurs. It is also an invitation to Iran to follow a cooperative policy rather than force other countries into expensive means to deny Iran the possibility of threatening their exports.”
Mr Samuel Ciszuk an oil supply consultant at KBC Energy Economics said that “It de risks the whole fall-out quite a bit. It’s not like a shut down of the straits would not be a problem but this helps. It weakens Iran’s hold on the use of that threat and devalues it somewhat. Iran is one of the few remaining countries that’s entirely dependent on transporting crude oil through the Straits, so that leaves Iran, Kuwait and Qatar to be exposed to the shut down of the straits.”
Source - Gulf News
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