UAE's Hormuz Bypass Pipeline Halfway Done as Strait Losses Pass One Billion Barrels

ADNOC CEO Sultan Al Jaber said Wednesday the UAE's second crude export pipeline bypassing the Strait of Hormuz is roughly 50% complete and on track to begin operations in 2027, which would double Abu Dhabi's capacity to ship oil out of Fujairah on the Gulf of Oman coast. The new West-East Pipeline will lift ADNOC's Fujairah throughput from 1.8 million barrels per day — the current limit of the Abu Dhabi Crude Oil Pipeline linking Habshan's inland fields to the coast — to around 3.6 million bpd. Speaking at a live-streamed Atlantic Council event, Al Jaber said Crown Prince Sheikh Khaled bin Mohamed bin Zayed Al Nahyan directed the company last week to accelerate construction. The push comes as Abu Dhabi navigates its first weeks outside OPEC after quitting the group on May 1, ending nearly 60 years of membership. Free of production quotas, the country had been targeting 5 million bpd of capacity — a goal repeatedly deferred under OPEC allocation ceilings. Al Jaber called the ongoing Hormuz closure "the most severe supply disruption on record." More than 1 billion barrels have been lost since the conflict began, he said, with losses running at around 100 million barrels per week. Before the closure, roughly 20 million barrels per day — close to one-fifth of global supply — transited the strait. Traffic has not stopped entirely. Three VLCCs carrying a combined 6 million barrels exited the waterway Wednesday, according to LSEG and Kpler data: the Universal Winner with 2 million barrels of Kuwaiti crude bound for South Korea, the Yuan Gui Yang with 2 million barrels of Iraqi Basrah crude heading to China, and the Ocean Lily with 2 million barrels of Qatari and Iraqi crude also destined for China. More than 100 tankers remain stranded in the Gulf. Before the conflict, 125 to 140 vessels transited daily. Even with the fragile ceasefire holding, Al Jaber said global flows would need at least four months to recover to 80% of pre-conflict levels, with full normalization not expected until the first or second quarter of 2027. The UAE itself absorbed more than 3,000 missiles and drone strikes during the conflict, and damage assessments at ADNOC facilities are still underway. The supply shock has exposed gaps in global oil markets that predate the conflict. Upstream investment runs at roughly $400 billion per year — barely enough to offset natural field decline. Global spare capacity stands at about 3 million bpd against the 5 million bpd buffer Al Jaber said markets require. Strategic petroleum reserves were drawn down by approximately 250 million barrels over two months, leaving around 30 to 35 days of effective cover against a recommended minimum of 60. Brent was trading at $110.95 on Tuesday, up from around $82 before the conflict. WTI stood at $103.89. The 2027 pipeline target assumes uninterrupted construction — not a safe assumption. Iran has expanded territorial claims to include the UAE's Gulf of Oman coastline, putting Fujairah itself in the crosshairs. If the pipeline completes on schedule and OPEC no longer constrains Abu Dhabi's output, additional UAE barrels could weigh on prices once Hormuz traffic normalizes. How quickly that happens is the number traders are watching most closely.