Looking at the World | Can Gulf Oil Transportation Bypass the Strait of Hormuz?

Xinhua News Agency, Beijing, March 16 — According to data from the maritime data analysis service company “Fengyun,” there were no ships passing through the Strait of Hormuz on March 14, 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, international crude oil futures prices once again broke the $100 per barrel mark at the start of a new trading week on the evening of the 15th.

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

This photo, taken near the Strait of Hormuz on July 21, 2019, shows the British oil tanker “Stena Imperial.” Xinhua/Iranian Student News Agency

Limited Oil Pipelines

Oil pipelines are the main alternative for transporting oil around 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 oil field in the west and reaches the Fujeirah port in the east, officially put into operation in July 2012. The 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-producing region to the Red Sea coast at Yanbu, with a total length of 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 it is maximizing the use of these pipelines to maintain supply.

According to the International Energy Agency, since the outbreak of the US-Israel-Iran conflict, more than a quarter of the crude oil and diesel products usually transported through the Strait of Hormuz continue to be shipped from the Gulf region, mainly via the two pipelines mentioned above.

U.S. 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, but 2 million barrels are used to supply western refineries, leaving only 5 million barrels for export. The Abu Dhabi Oil Pipeline has a rated capacity of 1.5 million barrels per day. However, due to the high risk of military strikes on oil infrastructure, energy analysts are more conservative in estimating current actual throughput, believing it to be just over 70% of the rated capacity.

This photo released by the Thai Navy on March 11 shows a Thai cargo ship attacked and set on fire in the waters of the Strait of Hormuz. Photo courtesy of the Thai Navy

The Irreplaceability of the Strait of Hormuz

The New York Times reported on the 14th that to bypass the Strait of Hormuz for oil transportation, many Gulf countries would need to lay cross-border pipelines. However, due to multiple factors such as geographic conditions, political situations, and economic circumstances, laying transnational pipelines is not only costly but also politically “tricky.” The report cites Qatar as an example, noting that the country severed ties with the UAE in 2017 and only restored them in 2023.

Even if the Strait of Hormuz is bypassed, no pipeline is completely safe. 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 pipelines were interrupted after being attacked 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, whether it can be implemented remains uncertain. The New York Times believes that compared to laying pipelines, building a multilateral oil export system is more complicated and unlikely to overcome economic and political constraints.

In response to US efforts to hinder oil exports, Iran activated a land-based oil pipeline in July 2021 that bypasses the Strait of Hormuz. This pipeline is 1,000 kilometers long, running from Ghol in Iran’s Bushehr Province in the west to Jask port in the Gulf of Oman in the east.

Nevertheless, the Strait of Hormuz remains an irreplaceable 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 to various parts of the world.

According to the International Energy Agency, since the outbreak of the US-Israel-Iran conflict, oil shipments through the Strait of Hormuz have sharply decreased, 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 reduced their oil output by several million barrels over just a week.

The IEA estimates that as of the 11th, oil-producing countries in the region have collectively cut production 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 declined.