As the Iran war exposed the geopolitical vulnerability of the Strait of Hormuz, through which 20% of the world's oil shipments pass, Gulf corporations are accelerating the construction of alternate oil routes.
On the 12th, the New York Times (NYT) said, "Gulf countries are building or expanding pipelines and other infrastructure that can bypass the Strait of Hormuz," adding, "It will cost billions of dollars in expense and take years to complete, but corporations and governments see it as an essential hedging tool amid increasingly unstable regional conditions."
In fact, in Fujairah, a port city in the United Arab Emirates (UAE) on the Gulf of Oman, a second oil pipeline is being built alongside the existing pipeline that transports crude from Abu Dhabi's inland oil fields. Through this project, the UAE aims to double its bypass capacity around the Strait of Hormuz to 3.6 million barrels per day. Once completed, nearly all crude produced inland in Abu Dhabi can be loaded onto international tankers without passing through the Strait of Hormuz.
Abu Dhabi National Oil Company (ADNOC), the Abu Dhabi state-owned energy corporation, recently said it is investing $8.2 billion (about 12 trillion won) to expand its gas business, while reviewing a plan to avoid the Strait of Hormuz by establishing a liquefied natural gas (LNG) export facility on the east coast.
Saudi Arabia's state oil company Aramco is also speeding up a multibillion-dollar expansion of the "East-West Pipeline." Built during the Iran-Iraq war in the 1980s, this 1,201-kilometer (746-mile) pipeline runs across the Arabian Peninsula to the Red Sea port city of Yanbu. Even during wartime, Saudi Arabia used this pipeline to bypass ship about 7 million barrels of crude per day.
In addition, Saudi authorities are working to secure an extra 1 million to 2 million barrels per day of transport capacity. Amin Nasser, Saudi Aramco's chief executive officer (CEO), said last week, "Regarding crude exports, we are actively considering increasing the number of optional routes."
Ben Cahill, an energy analyst at the University of Texas at Austin, said, "Many people think the share of crude exports through the Strait of Hormuz will not return to prewar levels," adding, "No country in the world wants to be that heavily dependent on this shipping chokepoint again." He added that Gulf countries are beginning to place greater value on the stability and security of infrastructure, even if it involves higher expense and lower efficiency.
As uncertainty around the Strait of Hormuz grows, cooperative projects among Gulf countries are also becoming more active. Kuwait is discussing with Saudi Arabia and other Arab countries the construction of a pipeline connecting to the Red Sea. According to Jordan's state broadcaster, Iraq and Jordan are reviving plans to build a pipeline capable of transporting up to 1 million barrels of crude per day to Aqaba, a port on the Red Sea. The plan had long been delayed, but the Iran war has given it momentum. Iraq is also accelerating a plan to rebuild a damaged pipeline to transport crude produced from the Kirkuk oil field to Syria's Mediterranean coast.
Gulf countries are also putting in place a kind of "safety device" by expanding oil storage facilities in Asian regions such as Korea, Japan and India. Even if the Strait of Hormuz is closed, if crude is already stored on the opposite side of the strait, closer to consumer markets, supplies can continue. Aramco CEO Nasser said, "Everyone is trying to secure additional storage capacity," adding, "Energy security is now becoming the top priority."
However, there are many hurdles for the Gulf countries' plans to build bypass routes around Hormuz to succeed. In the Red Sea and the Bab el-Mandeb Strait, through which each country's bypass routes would run, Yemen's Iran-aligned Houthi rebels are attacking merchant ships. In fact, on the 11th, Houthi rebels attacked a Saudi vessel in the Red Sea, killing six people, further heightening tensions in the area.
Some say it is impossible to completely bypass the Strait of Hormuz. Carole Nakhle, CEO of the energy consultancy Crystol Energy, said, "They clearly need the Strait of Hormuz. The benefits it provides are so many and the related infrastructure is already in place."