Key Takeaways
Persistent threats to the Strait of Hormuz are forcing Gulf oil producers to seriously evaluate building new pipelines to circumvent the critical energy chokepoint, a costly but increasingly urgent option as regional conflicts escalate.
"I feel a shift from hypothetical discussions to practical implementation," said Maisoon Kafafy, a senior adviser to the Atlantic Council's Middle East program. "Everyone is looking at the same map and drawing the same conclusion."
The renewed focus on alternative routes comes as tensions surrounding the Strait of Hormuz heighten concerns over the security of energy exports. Saudi Arabia is assessing an expansion of its existing East-West pipeline or developing new routes, while Abu Dhabi is reported to have a "backup plan" for a second pipeline to its port of Fujairah. A new pipeline mirroring Saudi Arabia's existing East-West route could cost at least $5 billion, with more complex, multi-country routes potentially reaching $20 billion.
This strategic recalculation underscores the immense challenge of securing the flow of oil from a region that remains the bedrock of global energy supply. While new pipelines offer a long-term solution to de-risk a vital artery of the world economy, they present formidable financial, security, and political obstacles that have previously kept such projects on the drawing board.
At the center of the discussion is Saudi Arabia's 1,200-kilometer East-West pipeline, built during the "tanker war" phase of the Iran-Iraq war in the 1980s. The pipeline, which can move up to 7 million barrels of crude per day to the Red Sea port of Yanbu, is now seen as a prescient piece of strategic infrastructure. Amin Nasser, chief executive of Saudi Aramco, recently described the pipeline as a "major route that the company is currently making full use of."
With Saudi Arabia's daily production around 10.2 million barrels, the kingdom is actively studying how to export a greater share of its oil overland. This includes evaluating a further expansion of the East-West pipeline's capacity or charting entirely new courses that avoid Iranian-controlled waters.
Despite the clear strategic incentive, the path to building new pipelines is fraught with difficulty. Christopher Bush, chief executive of Cat Group, estimates that replicating the East-West pipeline alone would cost at least $5 billion today. A more ambitious network crossing multiple countries like Iraq, Jordan, or Turkey could see costs soar to between $15 billion and $20 billion.
Security presents another major challenge. Bush noted the presence of unexploded ordnance in Iraq and the persistent threat from armed groups. A southern route to Omani ports would require traversing difficult desert and mountain terrain, and the ports themselves are not immune to attack, as evidenced by a recent drone strike that briefly closed the Port of Salalah.
The most resilient solution, according to Kafafy, is not a single alternative but "a network of corridors." However, she acknowledges this is also the most difficult to achieve, requiring a level of political unity among Gulf states that has historically been elusive.
This article is for informational purposes only and does not constitute investment advice.
