Saudi Arabia Plans to Expand Oil Pipeline to Bypass Strait of Hormuz Amid Iran Tensions

Saudi Arabia is considering expanding its oil pipeline capacity to bypass the Strait of Hormuz, a strategic move prompted by ongoing tensions with Iran and disruptions in global oil trade. The expansion would increase the pipeline's capacity by 2 million barrels per day to the Red Sea coast, allowing Saudi Arabia to export more oil without relying on the Hormuz Strait, which Iran controls and has blocked during conflicts. Currently, the East-West pipeline can transport up to 7 million barrels daily to the Yanbu port on the Red Sea, with 2 million barrels directed to Saudi refineries and 5 million for export.

The pipeline, constructed in the early 1980s, became critical during the Iran-Iraq war by enabling Saudi oil exports without passing through the Hormuz Strait. Saudi Arabia is in preliminary talks with neighboring countries about this expansion, which is expected to take several years and cost billions of dollars. It remains unclear whether the capacity increase will be achieved by upgrading existing infrastructure or building a new pipeline. Additionally, plans include constructing a smaller secondary pipeline for refined petroleum products.

Currently, no alternative export routes bypassing the Strait of Hormuz exist for Gulf oil producers, causing significant disruptions during regional conflicts. Iraq's pipeline to Turkey operates below capacity due to frequent issues, while the United Arab Emirates is the only other Gulf state with a significant bypass route. The UAE is completing a new east-west pipeline to double its export capacity to the port of Fujairah by next year. The rivalry between Saudi Arabia and the UAE is expected to intensify in the oil sector, potentially leading to increased production and price competition.

Iran's blockade of the Strait of Hormuz forced Gulf oil producers to cut output by up to 12 million barrels per day, causing oil prices to surge. Although a recent preliminary agreement between the U.S. and Iran has partially restored oil flow, volumes remain below pre-conflict levels.