Abu Dhabi will start pumping first crude oil by mid-year through a new giant pipeline that will enable it to bypass the strategic Strait of Hormuz waterway by exporting as much as 1.8 million barrels a day of crude via the neighboring emirate of Fujairah, where plans for a grassroots refinery are also regaining momentum, a person close to the situation said.

Initial crude exports from Fujairah, located outside the Persian Gulf on the Gulf of Oman, are due to start in the second half and will reach full capacity in early 2012 once the pipeline is fully operational, the person told Zawya Dow Jones this week.

The $3.29 billion, 400-kilometer pipeline will enable Abu Dhabi, the largest U.A.E. sheikdom, to export as much as 70% of its crude from Fujairah, where tankers will be able to pick up the oil instead of sailing an extra day into the Persian Gulf via the Strait of Hormuz, the narrow waterway watched over by Iran.

The Strait is one of the world's busiest tanker routes through which Persian Gulf oil producers ship their crude exports. About 18 million barrels of crude oil, or 20% of global consumption, are being shipped through the route every day.

Oil prices have risen in the past partly on fears Iran could block exports from the region through Hormuz if tensions with the U.S. over the Islamic republic's nuclear program escalate.

Crude oil exported from Fujairah will come from the onshore Habshan field in Abu Dhabi . The emirate pumps about 95% of the crude in the U.A.E., a member of the Organization of Petroleum Exporting Countries.

The new pipeline, known as Abu Dhabi Crude Oil Pipeline, or Adcop, is being built by China Petroleum Engineering and Construction Corp., or CPECC, a subsidiary of China National Petroleum Corp. The project client is Abu Dhabi government investment firm International Petroleum Investment Co., or IPIC.

Abu Dhabi 's crude will be stored in eight tanks with a capacity of 1 million barrels each in Fujairah , which is already the world's second-largest bunkering terminal after Singapore .

Plans for a new export refinery in Fujairah are also being revived as the pipeline project is nearing completion, the person said. The contract to provide project management consultancy, or PMC, services on the refinery is close to being awarded, the person added.

IPIC is "pressing ahead" with the project but has not yet appointed an international partner to help implement the grassroots refinery, the person said.

The refinery was first mulled in 2006 as a joint venture between IPIC and ConocoPhillips (COP) but the project was put on the backburner after the U.S. oil major pulled out of the project a year later amid concerns over rising cost.

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