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Fri 27 Jan 2012 01:51 PM

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New UAE oil pipeline could face fresh delays

Sources say differences with Chinese construction firm could hold up pipeline plan

New UAE oil pipeline could face fresh delays
Photo for illustrative purposes only

A strategic pipeline for the UAE's oil exports to bypass the Strait of Hormuz could face more delay due to differences with the Chinese construction company, industry sources have told Reuters.

The pipeline will have a capacity of around 1.5 million barrels per day (bpd) and give the UAE an alternative route to exporting oil via the strait, which Iran has threatened to block over western sanctions on its oil exports.

The 370km Abu Dhabi Crude Oil Pipeline has undergone numerous delays, with UAE oil minister Mohammed bin Dhaen al-Hamli this month pushing back the start of operations to May or June.

"The project might face more delays because there is a debate over the quality of the pipeline between Abu Dhabi's National Oil Company and the Chinese construction group," said an industry source close to the project.

Tehran's rhetoric has put planners under increased pressure to open the pipeline, industry sources told Reuters, but added that a row over how the work has been done threatens even the latest target date.

"There is political pressure to start this pipeline because of what's happening with Iran," a second industry source said, adding that UAE leaders have been involved in overseeing the project.

The same industry source, who has direct knowledge of the project, explained: "The Chinese (construction) company is ready to commission the pipeline but ADCO (ADNOC's onshore unit) has to make sure first it suits its standards. So now they're working to do that."

"(The project) was initially done without the involvement of ADCO. That's why now they have a problem. The Chinese company has different standards."

Involved along with ADCO are International Petroleum Investment Company, owned by the Abu Dhabi government, and China Petroleum Engineering & Construction Corporation.

Officials from the two were not available for immediate comment.

The pipeline will link the Habshan oilfields to the port of Fujairah, one of the top three bunkering hubs and a major oil storage terminal outside the Strait of Hormuz on the Gulf of Oman.

"Our impression is that the crude pipeline to Fujairah should be operational by August or September and crude sales will start then," said a Dubai-based analyst who declined to be named.

Iran remained defiant after the European Union this week agreed to impose an embargo on Iran's crude oil sales, a crucial source of revenue for the Islamic Republic.

Along with the EU, Washington hopes the sanctions will force Iran to suspend the nuclear activities it believes are aimed at making a atomic bombs, a charge Tehran denies.

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