Pipelines around Hormuz won’t end threat Iran poses to Middle East oil
Middle East oil producers are planning to build new pipelines to reduce their dependence on the Strait of Hormuz, as Iran disrupts Gulf countries’ seaborne crude oil exports with almost daily attacks on tankers.
However, analysts said the new pipelines would not end the threat to the region’s energy exports. It was stated that this infrastructure is equally vulnerable to low-cost, asymmetric attacks targeting ships in Hormuz.
The United States supports efforts to rebuild a crude oil pipeline running from Iraq’s northern city of Kirkuk through Syria to the Mediterranean, a State Department official told CNBC on Thursday. U.S. companies are expected to play a role in building the pipeline, the official said.
The disruption in Hormuz has had a particularly negative impact on Iraq, OPEC’s second-largest producer, as it exports mostly through the southern port city of Basra, with limited alternatives. Its production rose more than 50% to 1.9 million barrels per day in June, compared to the 4.2 million barrels per day it was pumping in February before the United States and Israel launched a war against Iran.
Meanwhile, the United Arab Emirates plans to double its export capacity outside Hormuz with the completion of the second pipeline to the Port of Fujairah in the Gulf of Oman. According to sources familiar with the matter, Saudi Arabia is considering expanding the pipeline to the Red Sea by up to 2 million barrels per day. Reuters last week.
These projects are just three of seven pipelines under construction or planning in the Middle East, Goldman Sachs analysts said in a note Sunday. Analysts said pipeline capacity in the region could rise to more than 14 million barrels per day by the end of 2028. This was more than 60% of the seven Gulf countries’ pre-war export volume of 23 million barrels per day, they said.
But Jennifer Li, a geopolitical analyst at energy consultancy Rystad, said the pipelines serve as a geopolitical hedge against disruptions in Hormuz rather than replacing the strait.
The UAE’s existing West-East pipeline to the Gulf of Oman and Saudi Arabia’s East-West pipeline to the Red Sea served as vital relief valves for the oil market during the Iran war. Abu Dhabi and Riyadh have increased exports through these pipelines, resulting in millions of barrels per day being diverted around Hormuz.
Li said Gulf countries should diversify their export routes as much as possible, but pipelines are vulnerable. Iran struck a pump station on Saudi Arabia’s pipeline to the Red Sea in April, reducing production by 700,000 barrels per day.
“The waterway is not the problem,” Bob McNally, founder of Rapidan Energy, said on CNBC’s “Power Lunch” on Monday. “Iran may use weapons to attack loading facilities, pump stations, terminal stations, these terminals and storage units of these pipelines.”
Iran and its Houthi allies in Yemen are now threatening to disrupt oil exports via the Red Sea. A senior Houthi political official, Mohammed al-Farah, said earlier this week that the militant group was preparing to close the Bab al-Mandeb Strait in coordination with Iran. state media.
According to sources, Tehran has asked the Houthis to close the strait if the US bombs Iran’s energy infrastructure. Reuters Thursday. Bab al-Mandeb connects the Red Sea to the Gulf of Aden and world markets.
Closing the strait would block millions of barrels of oil a day, which the Saudis divert via pipelines to the Yanbu export terminal on the Red Sea.
“Yanbu’s importance to both Saudi Arabia and the global oil market cannot be underestimated,” said Michelle Wiese Bockmann, Windward’s senior naval intelligence analyst.
