Rearchitecting Global Oil Security: The UAE Inland Canal as a Systemic Redundancy Solution (A Real-Options and Capacity Reservation Approach to the Sharjah-Fujairah Corridor)
Year: 2026
Type: article
Abstract: This study addresses a core problem in infrastructure finance and public-goods provision: how to finance and govern a costly, non-excludable, crisis-contingent transit asset that markets systematically underprovide, using a proposed 116-kilometre Sharjah-Fujairah corridor as the empirical case. The paper combines a single-case analysis of the 2026 Strait of Hormuz closure, comparative analysis of canal, tunnel and pipeline analogues, and transparent financial modelling, capital-recovery, break-even-toll, capacity-reservation and real-options valuation, drawing on International Energy Agency, Energy Information Administration, maritime-intelligence, Brookings, OPEC, FATF and Central Bank of the UAE sources. The pipelines cannot structurally replace the chokepoint, leaving only 3.5-5.5 of roughly 20 million barrels per day redirectable. A canal-pipeline hybrid is the only buildable reference design, costing a reference $130-160 billion once documented megaproject-overrun rates are applied. A capacity-reservation fee of about 3 percent of importers' Hormuz-crude value covers the capital charge and, under real-options valuation, is recovered within roughly 16-27 crisis days. Governance must be anchored in enforceable AML/CFT and sanctions controls. The corridor is viable only as a global energy-insurance instrument aligning payment with benefit through reservation contracts, evidence-gated phasing, and engineered financial integrity. The framework generalises to other concentrated transport nodes.
DOI: 10.54878/cs70c498
Author: Vipul V. Tamhane
Language: English
Subfield: General Energy
Field: Energy
Domain: Physical Sciences
Open Access status: diamond
OpenAlex ID: W7224304792