Report: Saudi Arabia is considering expanding an oil pipeline that will bypass Hormuz

• Saudi Arabia is considering expanding its ability to bypass the Strait of Hormuz by expanding the capacity of an oil pipeline that reaches the shores of the Red Sea.
• The project is expected to take years and cost billions, and was first reported by Reuters.
• The expansion of the pipeline is designed to allow Saudi Arabia to transfer an additional 2 million barrels of oil per day to the Red Sea.
• The move is expected to allow Saudi Arabia to better deal with Iran’s blockade of the Strait of Hormuz.

Saudi Arabia is considering expanding its oil pipeline capacity to the western coast of the Red Sea, Reuters reported. The move will allow the kingdom, and perhaps also neighboring countries, to transfer larger quantities of oil without passing through the Strait of Hormuz – which is under Iranian control.

The East-West pipeline is currently capable of transporting up to 7 million barrels of oil per day to the port of Yanbu on the shores of the Red Sea, with 2 million barrels per day flowing to Saudi refineries and 5 million destined for export. According to the Reuters report, the kingdom is holding initial talks with some of the neighboring countries regarding the expansion of the pipeline’s capacity by up to 2 million additional barrels per day.

The pipeline was built in the early 1980s and became a critical asset during the war with Iran, since it allows Saudi Arabia to export oil without passing through the Strait of Hormuz, whose trade was disrupted by Iran. The project to increase the output of the pipeline is expected to take years, cost billions and change the Saudi oil pricing mechanism, according to the report.

It is still unclear whether the planned capacity increase will be carried out through upgrading the existing infrastructure or through the construction of a new pipeline. One of the sources told the news agency that the plan also includes the construction of a smaller secondary pipeline that will carry refined petroleum products.

Kuwait, Bahrain, and Qatar currently have no alternative export routes bypassing the Strait of Hormuz, so their oil industry was silent during the war. Iraq’s oil pipeline to Turkey has suffered numerous breakdowns and is operating well below its maximum capacity.

In light of this, the United Arab Emirates is the only country besides Saudi Arabia that has a significant ability to bypass the Strait of Hormuz. The country has completed about half of the construction of a new west-east pipeline, which will double the oil transport capacity to the port of Fujairah when it becomes operational next year. The existing pipeline from Abu Dhabi is currently capable of transporting up to 1.8 million barrels per day.

One of the sources who spoke to the news agency clarified that the growing rivalry between the United Arab Emirates and Saudi Arabia is expected to spill over into the oil industry as well. “The next stage in the rivalry between Saudi Arabia and the United Arab Emirates may be a race to increase oil production – and later also a race to lower prices,” said the source.

The blockade imposed by Iran on the Strait of Hormuz forced the oil producers in the Gulf to reduce output to the extent of up to 12 million barrels per day, which led to a jump in oil prices. After the initial agreement between the United States and Iran last month, oil flows have partially resumed, but are still below pre-war levels.