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Friday, 21 November, 2008, 23:10 GMT | more >>

Gulf states mull over Hormuz bypass



By Upstream staff 

Gulf producers are weighing oil pipeline options to bypass the strategic Strait of Hormuz waterway, should there be any escalation of tension between the West and Iran, the International Energy Agency (IEA) said today.

The United Arab Emirates (UAE) has taken the first steps among Gulf producers to ensure its oil exports and avoid the route, the IEA said, Reuters reported.

The strait hugs Iran's coastline from the Persian Gulf to Oman and the millions of barrels of oil that pass through it daily may be at risk if Tehran's relations with the West break down and turn to conflict.

Co-operation between Gulf countries to find a solution to circumvent the sea corridor will remain limited, the IEA said, until that scenario appears more likely.

Last month the UAE awarded a contract to a German firm, ILF, to build a a 360-kilometre pipeline from its Habshan oilfields to the port of Fujairah.

The pipeline wil have a capacity of up to 1.5 million barrels per day - just over half of the UAE's output, thereby reducing dependence on the straits.

The IEA said big Gulf Opec producers were well aware of the risks posed by Iran to their exports should there be a clash over Tehran's nuclear programme.

But it said plans for a large-scale pipeline were limited, mainly because of financing.

Of the estimated 13.4 million bpd passing through the strait the IEA said only between 2.8 and 4.3 bpd could be potentially re-routed on current capability and planned pipelines.

The IEA has previously said between 16-17 million bpd of Gulf oil passed through the sea corridor, but that was before a round of Opec production cuts. The latest estimate also excludes oil product supplies, the IEA said.

"While Iranian tensions have seen plans dusted off for a 5 million bpd trans-Gulf pipeline starting in Iraq and running south to the coast of Oman, the trans-national nature of the link and its vulnerability to political and insurgent tensions render it more problematic than the domestic UAE route," the IEA said.

Saudi Arabia, Opec's biggest exporter, already has some capability to by-pass the strait by using the Abqaiq-Yanbu pipeline, which links output to the Red Sea to the west of the kingdom.

Some 4.8 million bpd - over half of its current production - could be re-routed in the event of a crisis, the IEA said.

Iraq too could funnel exports through the Kirkuk-Ceyhan pipeline to the Mediterranean, but with only 300,000 bpd of an installed 1 million bpd capacity useable, options were limited it said.

The IEA said that left Opec members Kuwait and Qatar most vulnerable to escalating tensions around Hormuz.

But it said that with Kuwait struggling to advance core projects at home, and Qatar planning to focus more on the security of its 31 million tonnes per year of LNG exports, ideas were sparse.

Friday, 11 May, 2007, 16:12 GMT  | last updated: Friday, 11 May, 2007, 16:12 GMT

Desperate straits: Iran could disrupt oil exports through Hormuz
 

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