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First oil flows through UAE’s Hormuz bypass

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One million barrels of Gulf oil is expected to flow through a new pipeline crossing the United Arab Emirates to the Gulf of Oman on Thursday as the UAE moves to complete the Strait of Hormuz bypass next month.

The pipeline ends the OPEC producer’s total dependence on the vital Gulf shipping artery which Iran has threatened to block as Western sanctions on its oil exports have tightened.

Escalating tensions in the Gulf region over the last year have spurred the UAE to speed up work on the long-delayed pipeline while other Gulf OPEC producers Kuwait and Qatar will continue to rely on shipping through the Strait to export fuel.

“This is a great solution for the UAE but it’s not a 100 percent solution for the whole problem,” said Theodore Karasik, research director at Dubai-based security consultancy INEGMA Group.

The new pipeline has a stated capacity of around 1.5 million barrels per day (bpd) while UAE exports total around 2.4 million bpd. Some sources say the pipeline could carry around 2 million bpd of the UAE’s biggest export at a push.

The 370-km (231-mile) Abu Dhabi Crude Oil Pipeline carries oil from fields in the UAE’s western desert to the east coast port of Fujairah, a major oil storage and fuel bunkering hub.

“Today oil has been received at the main oil terminal in Fujairah and 1 million barrels is coming in,” a source directly involved in the project said.

“The plan is to load the first oil tanker around July 1... We will slowly increase it to 1.5 million bpd.”

A source at the Abu Dhabi National Oil Company (ADNOC) said the first oil pumped over the desert to the terminal outside the Strait is likely to be loaded in the first week of July but that the first test cargo would not be exported.

A European Union ban on Iranian crude imports is due to come into effect on July 1. Iranian threats over Hormuz shipping have intensified since December as EU lawmakers have prepared for the ban.

Flows through the Strait last year accounted for about 35 percent of all seaborne traded oil, or almost 20 percent of oil traded worldwide.

Almost 17 million barrels of oil were shipped between the northern tip of Oman and the southern coast of Iran in 2011, according to the U.S. Energy Information Administration.