Saudi Arabia weighs pipeline expansion to bypass Hormuz, holds talks with Gulf neighbours: Report

Saudi Arabia is considering to expand the capacity of its key East-West crude oil pipeline to the Red Sea coast, according to a Reuters report, citing five sources familiar with the discussions, a move that could allow the kingdom — and potentially other Gulf producers — to ship larger volumes of oil while bypassing the Strait of Hormuz.

The pipeline, which links oil fields in eastern Saudi Arabia to the Red Sea port of Yanbu, was constructed in the early 1980s and has gained renewed strategic importance following the outbreak of the Iran war in February.

The conflict disrupted maritime traffic through the Strait of Hormuz, a critical chokepoint for global energy supplies, prompting regional producers to explore alternative export routes.

More from World

The East-West pipeline currently has the capacity to transport up to 7 million barrels of crude oil per day.

According to the report, citing Saudi Aramco Chief Executive Officer Amin Nasser, around 2 million barrels per day are supplied to refineries on the kingdom’s western coast, while the remaining 5 million barrels per day are available for exports through Red Sea terminals.

An expansion of the pipeline would strengthen Saudi Arabia’s ability to maintain exports during periods of instability in the Gulf and could provide additional transit options for neighbouring oil-producing countries seeking to reduce reliance on the Strait of Hormuz.

Neighbours join pipeline talks

Saudi Arabia is holding preliminary discussions with several neighbouring countries over a possible expansion of its East-West pipeline capacity by up to 2 million barrels per day (bpd), according to the report, citing sources.

The sources said it remains unclear whether Saudi Aramco would achieve the increase through upgrades to the existing pipeline network or by constructing a new line. One source said the proposal could include a smaller parallel pipeline dedicated to transporting refined petroleum products.

The discussions come as several Gulf producers continue to seek alternatives to the Strait of Hormuz. Kuwait, Bahrain and Qatar do not have export routes that bypass the strategic waterway, while Iraq's pipeline to Turkey has been hampered by disputes and repeated shutdowns, leaving it significantly underutilised.

"We are in discussions with our brothers in Saudi Arabia and in the emirates to look at how to expand the pipeline system that they have to accommodate Kuwaiti barrels," Kuwait Petroleum Corporation CEO Sheikh Nawaf al-Sabah told the Atlantic Council Global Energy Forum last month.

The planned expansion could add between 1 million and 2 million bpd of capacity, two sources said, with the transportation of refined products also being considered. Another source said the project would take years to complete, require billions of dollars in investment and necessitate changes to Saudi Arabia's crude pricing mechanism.

Iran's blockade of the Strait of Hormuz forced Gulf producers to shut in as much as 12 million bpd of output, sending oil prices sharply higher. Although flows partially resumed following a preliminary US-Iran agreement reached last month, volumes remain below pre-war levels.

The United Arab Emirates, the only other Gulf state with substantial Hormuz-bypass infrastructure, has completed around half of a new west-east pipeline project that is expected to double crude export capacity to Fujairah when it enters service next year. The country's existing Abu Dhabi-Fujairah pipeline can carry up to 1.8 million bpd.

An expansion by Saudi Arabia "suggests that after the war, the next phase of the Saudi-UAE rivalry could be a race to the top on oil production, and therefore a race to the bottom on prices," Reuters quoted one industry source as saying.

With inputs from agencies