A third Asian host

Good morning, friends. The Gulf is building its backup plan for Hormuz in steel and rock, and this morning we look at who’s building it, who’s paying for it, and whether it will hold.

The plan runs on three clocks, and the first is Saudi crude stored closer to its Asian buyers from 2H 2027. Aramco plans to store crude 150 meters down at Jurong Rock Caverns under an MoU with Singapore’s Energy Market Authority and JTC Corp, energy ministers from both countries said yesterday, Reuters reports. The two sides want terms settled within a few months, and neither has disclosed volume or duration. Singapore would be Aramco’s third Asian storage host after Japan and South Korea, where the host government gets first call on the barrels in a shortage.

The second clock is the Kingdom’s pipeline target: Riyadh wants 10 mn bb /d of crude pipeline capacity outside the Gulf within two to three years, so more of its exports can reach buyers without passing through Hormuz. Saudi pipe makers already have the orders: Aramco has directly awarded them c. SAR 2.4 bn in contracts since January, about 80% of the more than SAR 3 bn they’ve booked this year, and some 85% of their order book came after the war began.

Who’s paying? Aramco. Who’s lending? Just about everyone. The oil giant is in the final stages of talks with international banks on a revolving credit facility to shore up its finances while regional conflict puts crude exports at risk, Bloomberg reports, citing sources close to the talks. The agreement is expected to be signed within weeks, with pricing set at 60 basis points (bps) above the Secured Overnight Financing Rate. Lenders include Bank of China, Citigroup, HSBC Holdings, Industrial and Commercial Bank of China, JPMorgan Chase & Co., and Mitsubishi UFJ Financial Group.

The third clock is the slowest, and it’s our Lede this morning: How much of the Gulf’s Hormuz problem a railway due in 2030 can solve. One Atlantic Council fellow tells us it can solve about half, and a supply-chain analyst we spoke to doesn’t expect the full network until the early 2030s.