Gulf States Re-evaluate Energy Export Routes

Gulf countries are actively reviewing their energy export strategies in response to disruptions in the Strait of Hormuz and the broader conflict with Iran. The situation is threatening global economic stability and renewing concerns about over-reliance on a key oil and gas chokepoint.

Pipeline Projects Gain Renewed Attention

Discussions surrounding pipeline projects designed to bypass the Strait of Hormuz are being revisited. Alternatives previously deemed too expensive or technically challenging are now under serious consideration, according to a report by the Financial Times on Thursday. This shift highlights growing anxieties about potential prolonged Iranian control or disruption within the strait.

Saudi Arabia’s East-West Pipeline: A Strategic Asset

The strategic importance of Saudi Arabia’s East-West pipeline, a 1,200-kilometer route to the Red Sea port of Yanbu, has been significantly reinforced. One senior Gulf energy executive described the pipeline as a “genius masterstroke” in retrospect. Amin Nasser, CEO of Saudi Aramco, stated it is the “main route that we are capitalising on right now,” as the kingdom explores expanding its capacity and developing additional Red Sea export options.

Long-Term Options and Challenges

Long-term possibilities include broader trade corridors extending from India through the Gulf to Europe. Some industry leaders believe pipelines to Mediterranean outlets will eventually be constructed. Yossi Abu, CEO of Israel’s NewMed Energy, emphasized the need for nations to “control their own destinies, with their friends.”

Significant Costs and Security Concerns

However, industry executives caution that substantial obstacles remain. Christopher Bush, CEO of Lebanon-based Cat Group, estimates replicating Saudi Arabia’s East-West pipeline would cost at least $5 billion, while more complex routes through Iraq, Jordan, Syria, or Türkiye could require $15 billion to $20 billion. Security risks in Iraq, including unexploded ordnance and militant activity, and engineering challenges in Oman pose further hurdles.

Immediate Steps and Urgent Policy Focus

In the short term, expanding existing infrastructure, such as Saudi Arabia’s East-West pipeline and Abu Dhabi’s route to Fujairah, appears more realistic than building entirely new cross-border systems. Christopher Bush noted that Gulf policymakers are now treating the issue with urgency, stating, “You have a lot of smart minds looking at all of this now. It is a big problem.”

Impact of Regional Tensions

The conflict with Iran and heightened tensions in the Strait of Hormuz have disrupted regional energy flows, contributing to supply concerns and increased global prices. On March 2, Iran announced restrictions on navigation in the waterway, warning of potential targeting of uncoordinated vessels. Approximately 20 percent of the world’s oil supply transits the strait daily, and increased insecurity has driven up oil prices, shipping costs, and insurance rates.