Saudi Arabia mulls big new plan, eyes post-war oil route reset to bypass volatile Hormuz

DUBAI/LONDON: Saudi Arabia is considering expanding the capacity of its crude oil pipeline to the western Red Sea coast, which would allow the kingdom and possibly its neighbors to carry more oil without crossing the Strait of Hormuz, five sources familiar with the matter said. The East-West pipeline was built in the early 1980s and has been vital since the start of the Iran war in February and the resulting halt to shipping through the Strait of Hormuz.

It can transport up to 7 million barrels per day (bpd) of crude oil to the Red Sea port of Yanbu. The CEO of state-backed oil company Aramco said in May that about 2 million barrels per day of feed refineries on the west coast and about 5 million barrels per day are for export.

IN MEETINGS WITH NEIGHBORING COUNTRIES

The kingdom is in preliminary talks with some of its neighbors about the potential to increase the pipeline’s capacity by up to 2 million barrels per day, the sources said.

It was unclear whether Aramco’s planned capacity increase would involve improving existing infrastructure or building a new pipeline. One of the sources said the increase would include a smaller second pipe for oil products.

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Kuwait, Bahrain and Qatar all lack routes that could bypass Hormuz, while Iraq’s pipeline to Türkiye is operating well below capacity due to disputes and repeated closures.
“We are meeting with our brothers in Saudi Arabia and the emirates to look at how we can expand the pipeline system to accommodate Kuwaiti barrels,” Kuwait Oil Company CEO Sheikh Nawaf al-Sabah told the Atlantic Council Global Energy Forum last month. he said.
Expansion could be 1 million to 2 million barrels per day, taking into account refined products, two of the sources said. Another source said it would take years, cost billions of dollars and require changes to the pricing mechanism for Saudi crude.

Iran’s blockade of the strait forced Gulf producers to shut down up to 12 million barrels per day, causing prices to rise. Flows have partially resumed following the US-Iran preliminary agreement last month, but remain below pre-war levels.

Iraq’s production fell from 4.3 million barrels per day to less than 1.5 million barrels per day in May, Kuwait declared force majeure in March, and Bahrain’s Sitra refinery was hit several times by Iranian missiles.

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“Recent talks about new pipeline corridors involving Saudi Arabia, Kuwait and Qatar reflect a broader strategic reality. The conflict has focused regional minds on the dangers of relying solely on Hormuz,” said Zaid Belbagi, managing partner of London-based Hardcastle Advisory.

Aramco declined to comment, while the Saudi and Bahraini government communications offices, the Iraqi oil ministry and QatarEnergy did not immediately respond to requests for comment.

Qatar, which mainly exports LNG, faces greater technical hurdles and is considering several potential alternatives, including Saudi Arabia, three sources said.

The UAE, the only other Gulf country with meaningful Hormuz bypass capacity, has completed half of its new West-East pipeline that will double its crude oil capacity to Fujairah when it becomes operational next year. The current Abu Dhabi pipeline carries 1.8 million barrels per day.

Saudi Arabia’s expansion “suggests that the next phase of the Saudi-UAE rivalry after the war could be a race to the top in oil production, and therefore a race to the bottom in prices,” an industry insider said.