After the US military conducted airstrikes on Iran, Iran responded by blocking the Strait of Hormuz, threatening global oil and gas transportation and supply. This has forced Gulf countries to reconsider building a new oil and gas pipeline to bypass the strategic chokepoint of the Strait of Hormuz in order to continue exporting oil and natural gas.
According to a report by the Financial Times, officials and industry executives from Gulf countries have expressed that while constructing a new pipeline is costly, politically complex, and time-consuming, it is the only way to reduce the long-term vulnerability of Gulf countries to disruptions in the Strait of Hormuz.
In the current US-Iran conflict, Saudi Arabia’s 1,200-kilometer east-west oil pipeline has become a crucial lifeline. Concerned about potential disruptions to the strait due to the Iran-Iraq “tanker war” in the 1980s, Saudi Arabia invested heavily in the construction of this pipeline. Following the blockade of the Strait of Hormuz, this pipeline now transports 7 million barrels of oil per day to Red Sea ports, completely bypassing the strait.
Amin Nasser, the CEO of the Saudi state-owned oil giant Aramco, stated that the east-west oil pipeline has proven to be a strategic move, becoming a primary channel for Saudi oil exports.
With Saudi Arabia producing 10.2 million barrels of oil per day and considering increasing exports, options being explored include expanding the existing east-west pipeline or constructing new ones to bypass Iranian-controlled waters. However, similar pipeline construction projects have faced challenges in the past due to high costs and project complexity.
Maisoon Kafafy, a senior advisor at the Atlantic Council’s Middle East project, noted that the atmosphere in the Gulf region has shifted from theoretical considerations to practical implementation. There is a consensus among stakeholders to view the development of a network or corridor as the most resilient solution instead of focusing on individual projects. While building such a network presents challenges, in the long run, any new pipeline could become a part of trade routes, facilitating the transportation of various goods beyond oil and gas.
An official from a Gulf country mentioned another alternative, which involves reviving the US-led IMEC corridor project that extends from India through the Gulf to Europe, with one pipeline leading to the Israeli port of Haifa. However, this option presents political complications.
Yossi Abu, CEO of the Israeli energy company New Mediterranean Energy, believes that pipelines leading to the Mediterranean Sea – whether to Israeli or Egyptian ports – will eventually be constructed. Cooperation among countries in the region is needed to overcome political obstacles and ensure the connectivity of oil pipelines and railways throughout the Middle East and Gulf region, free from constraints imposed by any single nation.
Christopher Bush, CEO of the Cat Group, one of the main contractors for the Saudi east-west oil pipeline, revealed that the replication of the pipeline would require tunneling through hard basalt rocks along the Saudi Red Sea coast, costing at least $5 billion. Constructing a multi-country route from Iraq through Jordan, Syria, or Turkey is even more complex, with costs ranging from $15 to $20 billion. The company has completed preliminary engineering studies for such projects.
Despite the potential benefits, these projects face numerous security risks, including unexploded bombs in Iraq, the presence of groups like ISIS, traversing deserts, rugged mountains, and security threats at Omani ports from Iran, along with operational and control challenges.
Bush emphasized that Gulf countries must set aside their individual policies and work together to establish a stable oil pipeline network. In the short term, the most viable solutions include expanding the east-west oil pipeline and the Fujairah oil pipeline in Abu Dhabi, which would increase oil transportation capacity without necessitating new cross-border infrastructure. Saudi Arabia may also consider developing additional export terminals along the Red Sea coast.
The Saudi Ministry of Energy did not respond to these discussions. An energy industry executive revealed that Abu Dhabi has a second option for an oil pipeline to Fujairah, but decisions are unlikely before the situation in the Strait of Hormuz is clearer.
Currently, the UK is leading negotiations with 35 countries to form an alliance aimed at reopening the Strait of Hormuz. Although it will take time for Gulf countries to assess the situation in the strait, the scale of the current energy crisis has compelled them to explore new approaches, and some progress has already been made in dialogues.