Efforts to Diversify Oil Shipping Routes Intensify in the Persian Gulf
Countries that produce oil in the Persian Gulf are pushing to reroute ships away from the Strait of Hormuz, especially after Iran’s recent attacks on civilian vessels.
On Thursday, it was reported that “at least seven major pipeline projects are either under construction, in planning, or under discussion.” These initiatives have gained momentum after Iran served as a “wake-up call” for Gulf oil producers.
The aim is to create and enhance a pipeline network allowing nations like Saudi Arabia, the United Arab Emirates (UAE), and Iraq to avoid traditional maritime routes through the Strait of Hormuz, which leads to buyers in Asia.
However, one of these alternative routes, the Red Sea, is now facing threats. This area is influenced by the Houthis, a group linked to Iran. They have recently attacked oil tankers and proclaimed a “maritime embargo” on Saudi Arabia.
Saudi Arabia has an existing pipeline that can direct oil to Red Sea ports, while the UAE manages a port at Fujairah that could also potentially bypass the Strait of Hormuz. But there are concerns about possible Iranian attacks. The UAE’s gas processing facility in Habshan, on the pipeline’s opposite end from Fujairah, aims to keep the energy sector competitive.
The UAE is working on another pipeline to Fujairah, with a $3 billion project expected to be operational by mid-2027, an expansion of the Habshan-Fujairah pipeline conceived when the UAE was bracing for conflict with Iran. The UAE has also declared intentions to withdraw from OPEC and boost oil production, which ties into the urgency of this expansion following Iranian disruptions earlier this year.
Iraq is collaborating with a U.S. company to construct a pipeline transporting oil from a terminal in Basra to ports in Turkey and Syria. There are also considerations for a third pipeline that would facilitate oil transport to Jordan’s Aqaba port.
Particularly, the U.S. State Department is reportedly interested in the Iraq-Syria pipeline project. There are plans to revamp a pipeline that had fallen into disrepair since the U.S.-Iraq War in 2003. I mean, repairing this line seems more appealing now, especially after significant political changes in Syria.
For Iraq, reviving this pipeline will establish a Mediterranean oil route. Syria hopes to enhance its regional status and gain revenue; the U.S. views this as a path towards stability, while everyone, really, is aiming to lessen the significance of the Strait of Hormuz.
Last week, the State Department applauded the signing of a memorandum of understanding (MOU) between Baghdad and Damascus regarding this pipeline, framing it as a “priority infrastructure initiative” of both bilateral and regional importance.
Analysts noted that if these pipeline projects are completed on schedule, nearly 60% of the oil that previously transited through the Strait of Hormuz could be redirected, thereby diminishing Iran’s influence. Smaller vessels may prove beneficial, too, since they could navigate through the Suez Canal more easily than larger ones.
That said, Iran is likely to attempt to assert its influence through attacks on pipelines and oil infrastructure to thwart these bypass efforts. Plus, while Qatar produces considerable amounts of liquefied natural gas (LNG), it still faces significant challenges; reliable alternatives for transporting LNG apart from through Hormuz are lacking.
Challenges remain for several Gulf states that don’t have the same pipeline resources as the UAE, Saudi Arabia, and Iraq. Countries like Kuwait and Bahrain face similar hurdles.
Kuwait is investigating ways to connect with Saudi and UAE pipeline networks. According to reports, Kuwait’s Oil CEO told a recent forum that the Gulf Cooperation Council (GCC) had established a framework years ago for member states to support each other’s oil exports in emergencies, but currently, that hasn’t been feasible for anyone.
He remarked on how Iran has successfully targeted pipelines in Saudi Arabia and the UAE, referencing multiple attacks on Fujairah.
Currently, Kuwait’s oil output has dropped to about 25% of its pre-war capacity, leading to a severe decline in exports because of the crises around Hormuz. The official noted that production could rise to 80% pretty quickly if the crisis resolves or if alternative routes are established, but restoring the final 20% could take several months due to complexities involved.
Bahrain, on the other hand, has not solidified any plans to bypass the Strait of Hormuz yet. However, it has been collaborating with Oman to ensure a “safe navigation corridor” for ships, especially in light of the Iranian Revolutionary Guards’ activities targeting vessels even in Oman’s waters.
