Can Middle Eastern oil transport bypass the Strait of Hormuz?

Can Gulf Oil Transportation Bypass the Strait of Hormuz?

Yuan Yuan

According to data from maritime analytics company “Fengfeng,” on the 14th, no ships passed through the Strait of Hormuz, marking the first time since the outbreak of the US-Israel-Iran conflict. Before the conflict, an average of 77 ships transited the strait daily. Due to ongoing geopolitical tensions, on the evening of the 15th, when international crude oil futures began trading for the new week, prices once again broke the $100 per barrel mark.

Whenever tensions or wars escalate, the Strait of Hormuz almost always experiences shipping disruptions or blockages, leading to a surge in global oil prices. With abundant oil resources, do Gulf countries attempt to find alternative routes to export oil? As a major maritime route for global oil transportation, is the Strait of Hormuz truly irreplaceable?

【Limited Oil Pipelines】

Oil pipelines are the main alternative for bypassing the Strait of Hormuz, but there are only a few in the region, mainly two pipelines from the UAE and Saudi Arabia.

The Abu Dhabi Oil Pipeline in the UAE starts from the country’s main oil-producing Habbshan field in the west and reaches the Fujeirah port in the east, officially operational since July 2012. This pipeline is 420 kilometers long, with about 405 kilometers on land and 13.6 kilometers underwater, connecting the Persian Gulf and the Gulf of Oman to bypass the Strait of Hormuz.

Saudi Arabia’s east-west oil pipelines were built during the Iran-Iraq War in the 1980s, running from the eastern Persian Gulf oil fields to the Red Sea coast at Yanbu, totaling over 1,200 kilometers. Saudi Aramco’s President and CEO Amin Nasser recently stated that the company’s maximum sustained daily capacity is 12 million barrels, and they are maximizing the use of these pipelines to maintain supply.

According to the International Energy Agency, since the outbreak of the US-Israel-Iran conflict, over a quarter of the crude oil and diesel transported through the Strait of Hormuz still exit the Gulf region, mainly via the two pipelines mentioned above.

The US Consumer News and Business Channel cited energy analysts saying that about 20 million barrels of oil are transported daily through the Strait of Hormuz. In comparison, Saudi Arabia’s east-west pipelines have a capacity of nearly 7 million barrels per day, with 2 million barrels used to supply western refineries, leaving only 5 million barrels for export. The Abu Dhabi Oil Pipeline’s rated capacity is 1.5 million barrels per day. However, due to the high risk of military strikes on oil infrastructure, energy analysts are conservative in their estimates of current actual throughput, believing it to be just over 70% of the rated capacity.

【The Irreplaceability of the Strait of Hormuz】

The New York Times reported on the 14th that bypassing the Strait of Hormuz would require many Gulf countries to lay cross-border oil pipelines. However, due to geographic, political, and economic factors, constructing transnational pipelines is costly and politically complex. For example, Qatar, the world’s largest exporter of liquefied natural gas, severed ties with its neighbor the UAE in 2017 and only restored relations in 2023.

Even if the Strait of Hormuz is bypassed, no pipeline is entirely risk-free. Former BP CEO John Browne said that because oil and natural gas facilities could become targets of attack, there is no “completely safe” solution. In May 2019, Saudi Arabia’s east-west pipeline was interrupted after an attack by Houthi rebels in Yemen.

Besides pipelines, establishing a unified rail system for passenger and freight transport is another option to bypass the Strait of Hormuz. Although this idea has been proposed for over a decade, its practical implementation remains uncertain. The New York Times notes that, compared to building pipelines, creating a multilateral oil export system is more complicated and hindered by economic and political constraints.

In response to US efforts to block oil exports, Iran launched a pipeline in July 2021 that bypasses the Strait of Hormuz via land routes. This pipeline is 1,000 kilometers long, running from Ghul in Iran’s Bushehr Province to Jask port in Oman Bay.

Nevertheless, the Strait of Hormuz remains an indispensable maritime route for global oil transportation. As the only passage from the Persian Gulf to the outside world, over a quarter of global maritime oil trade and about one-fifth of liquefied natural gas shipments pass through this strait.

According to the International Energy Agency, since the outbreak of the US-Israel-Iran conflict, oil shipments through the Strait of Hormuz have sharply declined, less than 10% of pre-conflict levels. Due to the lack of alternative routes, many oil-exporting countries have reduced production. Norway-based consulting firm Rystad Energy estimates that Iraq, Kuwait, the UAE, and Saudi Arabia collectively cut millions of barrels of oil in just over a week.

The International Energy Agency estimates that as of the 11th, oil-producing countries in the region have collectively reduced output by at least 10 million barrels per day, equivalent to 10% of global oil supply. As many refineries shut down or cut back, the production of gasoline, diesel, and jet fuel has also decreased. (End) (Xinhua News Agency Special Report)