Before conflict erupted in Iran, roughly 15 million barrels of oil from the Persian Gulf were shipped daily through the Strait of Hormuz. Currently, many Gulf nations are planning to circumvent this critical passage. Due to Iran’s persistent control over the strait, combined with rising oil prices, these countries aim to redirect supplies to ports on the Red Sea, the Gulf of Oman, and the Mediterranean.

There are plans for at least seven significant pipeline projects. Some are under construction, others are in the planning phase, and additional possibilities are being considered. This shift has been triggered by the current geopolitical situation. Countries in the Gulf region, noticing the inherent risks, want to reduce their dependence on the Strait of Hormuz, which is perilously close to Iran’s coastline.

Despite these efforts, alternate routes have their vulnerabilities. Recently, Houthi rebels, supported by Iran, attacked two Saudi oil tankers in the Red Sea. This body of water serves as a key alternative to the Strait of Hormuz for Saudi exports.

Some of these alternative routes involve longer and costlier logistics. Nonetheless, reliance on the Strait of Hormuz is deemed an unsound strategy moving forward, according to Victoria Grabenwöger, a senior research analyst at Kpler. She adds that the Red Sea and Gulf of Oman will be crucial alternatives in the future.

The effective closure of the Strait of Hormuz would have had a more significant impact on the global economy, if not for a previously constructed pipeline in the 1980s by Saudi Arabia. This pipeline was built amidst worries that Tehran might disrupt shipping during the Iran-Iraq conflict.

This Saudi East-West pipeline carries oil from Abqaiq to Yanbu on the Red Sea, from where it is shipped either south to the Arabian Sea or north towards the Suez Canal.

The United Arab Emirates is redirecting more oil through Fujairah, which is situated along the Gulf of Oman, approximately 90 miles south of Hormuz. Both existing pipelines had additional capacity of about 3.5 to 5.5 million barrels per day before the war. Now, these pipelines are nearly at full capacity.

UAE’s Pipeline Expansion

Abu Dhabi’s government-owned oil company is actively working to complete a $3 billion, 200-mile-long pipeline to Fujairah. This new pipeline, running parallel to an existing one, intends to boost oil exports by over 1.2 million barrels a day. Originally started before the conflict began, the project is about halfway through and is expected to finish by early 2027, or possibly mid-2027, given the port expansion needs at Fujairah.

The timeline only became achievable due to the blockade on the Strait of Hormuz, indicates Grabenwöger.

Efforts in Iraq

In Iraq, plans are underway to develop alternative export routes for oil fields near Basra. Reliance on the Strait of Hormuz has forced Iraq to reduce production. Ninety percent of the country’s revenue comes from oil sales, prompting the pursuit of pipeline projects with U.S. firms.

One pipeline would route oil from Basra to Ceyhan in Turkey, passing to the Mediterranean via Baniyas in Syria. Potentially, 2 million barrels a day could flow through to Baniyas. Additionally, talks with Jordan focus on a pipeline to carry oil to Aqaba, from where it could be exported using the Red Sea or Suez Canal routes.

Challenges and Projections

The proposed projects to bypass Hormuz could transfer an additional 3.8 million barrels daily by next year and 7.3 million barrels per day by 2028, according to analysts at Goldman Sachs. This would mean that about 60% of the Gulf’s prewar exports might circumvent Hormuz in the future.

Pipelines routing oil to the Mediterranean provide limited help to Asian markets that previously relied on Hormuz for importation, requiring longer transportation around Africa. Additionally, pipelines are susceptible to attacks, illustrated by the Houthi drone strike in May 2019 that disabled the Saudi East-West pipeline.

The conflict has also disrupted supplies of liquefied natural gas (LNG) transported by ships. Before the war, approximately one-fifth of global LNG, mostly from Qatar, traversed the strait en route to Asia.

The piece has been corrected to reflect the proper designation of the U.S. Energy Information Administration.

Contributions were made by Qassim Abdul-Zahra in Baghdad to this report.