Mideast Oil Producers Accelerate Plans to Bypass Strait of Hormuz

Mideast oil producers are intensifying efforts to construct and expand pipelines that would bypass the Strait of Hormuz, a critical chokepoint for global energy supplies. This strategic shift comes as regional tensions persist and the cost of oil continues to fluctuate.

At least seven major pipeline projects are reportedly in various stages of development, from planning to construction. These initiatives represent a multi-billion dollar investment aimed at redirecting millions of barrels of oil daily away from the narrow waterway that hugs Iran's coast. Before recent conflicts, approximately 15 million barrels of Persian Gulf oil were transported daily through the Strait of Hormuz.

The urgency for these alternative routes has been amplified by recent events, including actions by Houthi rebels in Yemen who have declared a blockade on vessels transiting the Red Sea. While alternative routes may present their own vulnerabilities and potentially increase transportation costs, analysts suggest that continued heavy reliance on the Strait of Hormuz is no longer a sustainable long-term strategy.

Existing Infrastructure and Expansion

Saudi Arabia's East-West pipeline, built in the 1980s, remains a key alternative. This pipeline transports oil from the Abqaiq processing facility to the port of Yanbu on the Red Sea. The United Arab Emirates is also bolstering its capacity by expanding oil shipments to the port of Fujairah, located on the Gulf of Oman, south of the Strait of Hormuz. Abu Dhabi's state-owned oil company is accelerating a $3 billion, 300-kilometer pipeline project to Fujairah, which aims to increase oil supply by over 1.2 million barrels per day. This project, initially planned before the recent conflicts, is reportedly about halfway complete and is targeted for completion by mid-2027.

New Pipeline Projects

Iraq is also advancing plans for alternative export routes for its southern oil fields around Basra. One proposed pipeline would connect Basra to the Mediterranean port of Ceyhan in Turkey, with a potential branch extending to Baniyas in Syria. Officials have also engaged in discussions with Jordan regarding a pipeline from Basra to Aqaba, facilitating exports via the Red Sea or the Suez Canal.

Analysts project that these new projects, collectively, could accommodate an additional 3.8 million barrels of oil per day by the end of next year and 7.3 million barrels per day by the end of 2028. This would effectively insulate a significant portion of the Gulf's pre-war exports from potential disruptions at Hormuz.

Challenges and Vulnerabilities

Despite the development of these alternative routes, challenges remain. Pipelines directed towards the Mediterranean Sea would require oil to be shipped around the southern tip of Africa to reach Asian markets, a longer and more expensive journey. Furthermore, oil rerouted to the Red Sea could still be vulnerable to attacks, as demonstrated by past disruptions at the Bab el-Mandeb Strait. The Suez Canal itself has limitations, unable to accommodate the largest oil tankers. Even pipelines situated farther from Iran are not immune to potential attacks, as evidenced by a Houthi drone strike on Saudi Arabia's East-West pipeline in 2019.

Beyond crude oil, the diversion of liquefied natural gas, a significant portion of which originates from Qatar and also transited the Strait of Hormuz, presents another complex challenge for the region's energy producers.