Bypassing the Strait of Hormuz! Gulf countries are "not hesitating to spend big": considering building new oil pipelines

Industry insiders say Iran’s threat to exercise indefinite control over the Strait of Hormuz is prompting many Gulf countries to reexamine costly oil pipeline plans, in order to bypass this crucial maritime chokepoint and thereby ensure they can continue exporting oil and natural gas.

Officials and industry executives say building new pipelines may have become the only way to reduce Gulf countries’ vulnerability to ongoing disruptions of the Strait of Hormuz—despite the high costs of such projects, the complex political factors involved, and the fact that it will take years to complete…

The current conflict highlights the strategic value of Saudi Arabia’s 1,200-kilometer “east-west pipeline.” The pipeline was built in the 1980s, when it was feared that the Iran–Iraq war would lead to the strait being locked down. Now, it has become a critical lifeline for Saudi oil exports—today the country can send 7 million barrels of oil per day through this pipeline to the Red Sea ports of Yanbu, fully bypassing the Strait of Hormuz.

Saudi Aramco’s Chief Executive Officer Amin Nasser said last month that the pipeline is “the main route we are using at the moment.”

“Looking back, the Saudi east-west pipeline is nothing short of a stroke of genius,” a senior energy executive from a Gulf country said.

Saudi’s success story has made Middle East oil-producing countries start spending whatever it takes

Saudi’s success story has undoubtedly left Middle East oil-producing countries envying it right now. In fact, pipeline plans in the Middle East had repeatedly stalled in the past due to high costs and complexity. But Maisoon Kafafy, a senior adviser for Middle East projects at the Atlantic Council, said that attitudes toward this in the Gulf region have changed now.

“I feel the shift is happening—from assumptions to operating reality,” she said, “and everyone is looking at the same map and reaching the same conclusion.”

Kafafy said that the most resilient option “is not a single alternative pipeline, but a network—a corridor network,” although she added that this will also be the hardest to achieve.

In the long run, any new pipeline could become part of a larger trade route, through which a wider range of goods—beyond oil and natural gas—could also flow.

A Gulf official said one option is to restart the India–Middle East–Europe Economic Corridor (IMEC) plan, which had previously been led by the United States. The corridor starts in India, passes through the Gulf region, and then heads to Europe, although the initial portion of the project includes a pipeline to Israel’s Haifa port, which is politically more complicated.

Yossi Abu, CEO of Israel’s NewMed Energy, said he is confident that the pipeline to the Mediterranean will be built, whether its endpoint is in Israeli or Egyptian ports. “People need to control their own destiny with their allies,” he said. “You need onshore oil pipeline and rail connectivity across the entire region, so that others don’t control the bottlenecks that can choke us.”

Christopher Bush, CEO of the Lebanese private company Cat Group, which had been one of the main builders of the Saudi east-west pipeline, said that even before the war began there was already strong interest in new projects. “We received consultations on various different pipelines,” he said. “There are multiple different presentation materials on my desk.”

But he added that the obstacles remain huge. Bush estimates that today, the cost of replicating an east-west pipeline is at least $5 billion. The project involves blasting hard basalt in the Hijaz mountain range along Saudi Arabia’s Red Sea coast. And for more complex multi-country route proposals running from Iraq through Jordan, Syria, or Turkey, the cost would reach $15 billion to $20 billion.

What viable options are there in the short term?

Industry insiders said that in the short term, the most feasible options may be expanding the Saudi east-west pipeline and the Abu Dhabi route to the port of Fujairah. This will increase capacity without adding complexity to cross-border infrastructure.

(Oil pipeline projects in operation and under planning in the Middle East)

Saudi Arabia can also develop additional export terminals along its Red Sea coastline, including a deep-water port being built for the Neom project. “I’m sure they’re viewing it as a possibility,” Bush said. “Right now, there are a lot of smart people looking at all of this. This is a big issue.”

A senior energy executive said that Abu Dhabi has “a B plan for a second pipeline to Fujairah.” However, they added that it is unlikely any decision will be made before the long-term status of the Strait of Hormuz is clarified.

In addition, Iraq could become a key link for transporting oil pipelines across Eurasia and Africa. On Tuesday, Adnan al-Kubaisi, a member of Iraq’s Anbar Provincial Council, announced that, given the strategic importance of the Haditha–Aqaba pipeline project in diversifying oil export routes, Iraq’s parliament in the near term may take action to urge the government to reopen the project.

The project had previously been approved, but it faced heavy resistance. However, given the economic benefits it brings, there is pressure to restart the project. The pipeline would extend from Haditha, in southern Iraq near Basra, to Haditha in the western Anbar province, and then extend to Jordan’s Aqaba port, providing a direct route to the Red Sea and European markets.

Reports also say that Iraq is now close to restoring a previously idle onshore oil pipeline to Turkey. Iraq’s State Oil Project Company (SCOP) has begun pressure testing on the final segment of the Baiji–Fishkhabour pipeline. This line connects to the Kirkuk–Ceyhan oil pipeline, and its endpoint is Turkey’s Yumurtalık port on the Mediterranean.

Of course, many pipeline projects still face real-world difficulties. Security risks include “large” numbers of unexploded ordnance within Iraq, as well as the continued presence of “Islamic State” or other armed groups. Bush warned that pipelines extending south to Oman’s ports would also face difficulties crossing deserts and hard mountain ranges.

Political challenges also include who will operate the pipelines and control the flow. Bush added that a pipeline network would require Gulf countries to give up their separate and self-serving policies and come together. Previously, people always thought that chartering vessels, loading, and shipping were cheaper and safer.

(Source: Caixin Finance and Business Network)