Key facts
- At least two Asian crude oil buyers are in talks with Saudi Aramco to reroute oil flows around Africa.
- Houthi attacks on tankers in the Red Sea are prompting buyers to seek alternatives to the Bab el-Mandeb chokepoint.
- Gulf oil producers are investing billions in new pipelines to bypass the Strait of Hormuz.
- Pakistan is seeking alternative crude oil sources from the U.S., Nigeria, and Central Asia.
- The UAE's pipeline to Fujairah aims to increase oil supply by over 1.2 million barrels a day.
Gulf oil producers are investing billions of dollars in pipelines to reroute crude oil around the Strait of Hormuz, a critical maritime chokepoint, due to ongoing geopolitical tensions and supply risks. Before the recent conflict, approximately 15 million barrels of Gulf oil passed through the Strait daily, representing about a fifth of the world's traded oil.
At least seven major pipeline projects are currently under construction, in planning, or under discussion to push supplies out through the Red Sea, the Suez Canal, and the Gulf of Oman. This strategic shift is driven by the precariousness of relying on the Strait of Hormuz, especially with renewed conflict involving Iran. Brent crude is trading around $93 a barrel and WTI at roughly $90 a barrel.
Victoria Grabenwöger, a senior researcher at Kpler, stated that heavy dependence on the Strait of Hormuz is no longer a prudent long-term strategy. Existing alternative routes, such as Saudi Arabia's East-West pipeline to Yanbu on the Red Sea and the UAE's channelling of oil to Fujairah on the Gulf of Oman, are operating near their limits. These routes had a combined spare capacity of 3.5 to 5.5 million barrels a day before the war.
The UAE is accelerating the completion of its $3 billion, 300-kilometer pipeline to Fujairah, designed to increase deliveries by over 1.2 million barrels a day. However, its completion target may slip to mid-2027 due to port expansion needs.
The Red Sea route itself faces vulnerabilities, as demonstrated by recent Houthi rebel attacks on two Saudi tankers, the Encelia and the Layla. The Houthi group has previously disrupted the Bab el-Mandeb Strait, a key chokepoint for global trade.
Iraq, heavily reliant on oil exports for state revenue, is urgently pursuing pipeline projects to bypass the Strait of Hormuz. Prime Minister Ali al-Zaidi has secured numerous agreements with American firms, including a significant deal with Syria to rebuild the dormant Kirkuk-Baniyas pipeline, which is expected to be executed by Chevron and have an initial capacity of 2 million barrels a day. Baghdad is also considering a pipeline from Basra to Jordan's Aqaba. The US ambassador to Turkey, Tom Barrack, suggested these agreements could render the Strait of Hormuz an "afterthought."
Pakistan is also seeking alternative crude oil sources from the U.S., Nigeria, and Central Asia due to the escalating supply risks in the Middle East.
At least two Asian crude oil buyers are in talks with Saudi Aramco to potentially reroute flows around Africa after Houthi attacks on tankers in the Red Sea, according to traders familiar with the matter. The refiners are mulling alternatives to using Bab el-Mandeb, the chokepoint at the southern end of the Red Sea, the traders said, asking not be named as talks aren’t public. These may include taking oil from the Egypt’s Sidi Kerir port in the Mediterranean, instead of the Saudi Red Sea hub at Yanbu, they said.