Khaberni - Five informed sources said that Saudi Arabia is studying the increase of the crude oil pipeline capacity to the western coast of the kingdom on the Red Sea, which would allow it and possibly its neighbors to transport larger quantities of oil without the need to cross the Strait of Hormuz.
The pipeline (East-West) was established in the early 1980s and has been important since the outbreak of the Iran war in February and the subsequent disruption of shipping through the Hormuz Strait, according to Reuters.
The line can transport up to seven million barrels per day of crude to the Yanbu port on the Red Sea. The CEO of state-backed Saudi Aramco said in May that about two million barrels per day fuel the refineries on the west coast, while about five million barrels per day are allocated for export.
Conversations with neighboring countries
The sources mentioned that the Kingdom is conducting preliminary talks with some of its neighbors about the potential expansion of the pipeline capacity by up to two million barrels per day.
It was not clear whether the pipeline capacity increase that Aramco intends to implement would involve upgrades to the existing infrastructure or the construction of a new pipeline. One source mentioned that the increase would include a smaller second pipeline for transporting petroleum products.
Kuwait, Bahrain, and Qatar lack routes that can bypass the Strait of Hormuz, while Iraq's pipeline to Turkey, beset by disputes and suffering frequent shutdowns, operates well below its capacity.
Sheikh Nawaf Al-Sabah, CEO of Kuwait Petroleum Corporation, said at the Atlantic Council Global Energy Forum last month that Kuwait is in talks with Saudi Arabia and the UAE to discuss how to expand the pipeline networks of the two countries to accommodate Kuwaiti oil.
Two of the sources said the expansion might range from one to two million barrels per day, also considering refined products. Another source mentioned that the matter would take years, cost billions of dollars, and require changes in the pricing mechanism of Saudi crude oil.
Iran's closure of the strait forced Gulf producing countries to halt production of up to 12 million barrels per day, causing a significant spike in prices. Flows partially resumed after a preliminary agreement between the United States and Iran was reached last month, but they are still below pre-war levels.
Iraq's production declined from 4.3 million barrels per day to less than 1.5 million barrels per day in May, and Kuwait declared force majeure in March, while Bahrain's Sitra refinery suffered several Iranian missile strikes.
Zaid Balbaid, managing partner at the consultancy Hardcastle Advisory based in London, said, "The recent conversations around new pipeline routes, including Saudi Arabia, Kuwait, and Qatar, reflect a broader strategic reality. This conflict has increased regional awareness of the risks of full dependence on the Strait of Hormuz."
Aramco declined to comment, while the Saudi government communication center, Bahrain's national communication center, Iraq’s Ministry of Oil, and Qatar Energy have not yet responded to requests for comment.
Three sources said that Qatar, which primarily exports liquefied natural gas, faces greater technical challenges and is considering several alternatives, including passing through Saudi Arabia.
As for the UAE, the only other Gulf state with substantial capacity to bypass the Strait of Hormuz, it has completed half of a new pipeline called (West-East), which will double the crude transport capacity to Fujairah when operational next year. Abu Dhabi's existing pipeline can transport up to 1.8 million barrels per day.
One industry source said that Saudi Arabia's expansion "indicates that the next phase of the Saudi-Emirati competition after the war might be a race to the top in oil production, and consequently, a race to the bottom in prices."
