MENA oil exporters search for sustainable rerouting alternatives

The Gulf states and Iraq are reportedly revisiting pipeline expansion and cross-border corridor ideas that had previously been shelved for being too expensive, politically complicated, or slow to develop, as they look to secure export routes outside of Iran’s control.

Secondary pipelines that producers had previously taken for granted are now vital lifelines. Saudi Arabia had just maxed out the capacity of its East-West pipeline, now pumping 7 mn bbl/d and exporting 5 mn bbl/d from Yanbu — almost half of its pre-war volumes that went through Hormuz. The UAE also maxed out its Adcop pipeline — the Habshan-Fujairah bypass — with some 1.5 mn bbl/d now flowing, or about 40% of pre-war levels. Meanwhile, Iraq is now pushing volumes by land through Syria and exporting some 200k bbl/d through its Kirkuk-Ceyhan pipeline — a meager 5% of its pre-war exports of 4.4 mn bbl/d.

But other energy exporters are not as lucky: Iraq, Kuwait, Bahrain, and Qatar don’t have the geographical advantages that Saudi and the UAE do — they’re fully dependent on Hormuz.

Here is what’s being pitched

#1- Syria-bound corridors for Iraq? Iraq appears to be going all in on Syria as its hedge for Hormuz disruptions. Iraqi officials said earlier this week they are discussing a possible pipeline project with Syria, and Iraq is also reviving a mid-century corridor to move about 650k metric tons of fuel oil per month overland through Syria, marking the first time the route has been used in decades. Another option could be a Jordan-bound connection.

#2- Expanded East-West pipelines for Saudi (and perhaps the wider Gulf): Riyadh is currently exploring whether to expand the current Yanbu-bound East-West pipeline or build a new one altogether connected to new Red Sea terminals like Neom, Christopher Bush, the CEO of Cat Group and one of the main executors of the Saudi East-West pipeline, told the Financial Times.

#3- A redundant network: One of the long-term ideas being explored by policymakers includes working on a redundant “web of corridors” rather than a single pipe, the Atlantic Council’s Maisoon Kafafy told the FT.

Challenges remain

The price tag would be staggering. Bush estimates that replicating the East-West pipeline today would cost at least USD 5 bn due to the difficulty of blasting through hard basalt mountain ranges. More complex multi-country routes through Iraq, Jordan, or Syria are estimated to cost between USD 15 bn and USD 20 bn.

Then, you have physical and political risks. Any network passing through Iraq or Syria will have to contend with unexploded munitions and the persistent threat of militants.

And building a “web of corridors” would require an unprecedented level of regional cooperation. Gulf countries will need to abandon individualist policies and reach a governance agreement on who operates and controls cross-border flows, as well as how much volume each country will be entitled to.