Gulf races to build alternative oil routes as Hormuz crisis exposes vulnerability

Gulf oil producers are accelerating multibillion-dollar pipeline projects to reduce their dependence on the Strait of Hormuz, as the conflict with Iran has underscored the risks of relying on one of the world's most important energy chokepoints.

Before the war, about 15 million barrels of Persian Gulf oil passed through the Strait of Hormuz every day. With Iran's continued disruption of shipping and elevated oil prices, countries across the Gulf are investing heavily in new export routes to ports on the Red Sea and the Gulf of Oman.

According to government officials, oil companies and analysts, at least seven major pipeline projects are under construction, in the planning stage or under discussion.

The renewed push follows the realisation that reliance on the narrow waterway along Iran's southern coast is no longer a viable long-term strategy.

"Relying so heavily on the Strait of Hormuz is no longer a prudent long-term strategy," said Victoria Grabenwöger, senior research analyst at Kpler.

Red Sea, Gulf of Oman become key alternatives

Saudi Arabia and the United Arab Emirates already possess pipeline infrastructure that allows some oil exports to bypass Hormuz.

Saudi Arabia's East-West pipeline, built during the Iran-Iraq war in the 1980s, transports crude from Abqaiq to the Red Sea port of Yanbu for onward shipment through either the Suez Canal or the Arabian Sea.

The UAE, meanwhile, exports oil through the Gulf of Oman via Fujairah, about 145 kilometres south of Hormuz.

Before the conflict, the two routes together had an estimated spare capacity of between 3.5 million and 5.5 million barrels per day, according to the US Energy Information Administration. Both are now operating close to full capacity.

UAE speeds up pipeline expansion

Abu Dhabi's state-owned oil company is accelerating construction of a $3 billion, 300-kilometre pipeline running parallel to its existing Fujairah route.

The project is expected to increase export capacity through Fujairah by more than 1.2 million barrels per day.

Although originally scheduled for completion in early 2027, analysts believe the timeline has become more urgent following the Hormuz disruption, though expansion of Fujairah port means completion by mid-2027 is more likely.

Iraq explores new export corridors

Iraq is also moving to diversify its export routes from its southern Basra oilfields, which previously shipped more than 3 million barrels a day through Hormuz.

Baghdad is pursuing pipeline projects with US companies linking Basra to Turkey's Mediterranean port of Ceyhan, with a branch extending to Syria's Baniyas port.

The proposed network could eventually transport around 2 million barrels per day to the Mediterranean.

Iraq is also reviving discussions with Jordan on a long-planned pipeline from Basra to Aqaba on the Red Sea, providing another export alternative.

New routes come with fresh risks

Analysts at Goldman Sachs estimate the new projects could add 3.8 million barrels per day of alternative export capacity by the end of next year, rising to 7.3 million barrels by the end of 2028.

That would enable around 60% of the Gulf's pre-war oil exports to bypass Hormuz if necessary.

However, the alternative routes also face significant challenges.

Exports through the Red Sea remain vulnerable to attacks by Yemen's Iran-backed Houthi rebels, who claimed on Thursday to have targeted two Saudi oil tankers. The Houthis have previously disrupted shipping through the Bab el-Mandeb Strait, another critical maritime chokepoint.

The Suez Canal also cannot accommodate the largest crude tankers, making transportation more expensive.

Pipelines themselves are not immune to attack either. Saudi Arabia's East-West pipeline was temporarily shut down after a Houthi drone strike in 2019.

Moreover, pipeline expansion offers no solution for liquefied natural gas (LNG) exports. Before the conflict, about one-fifth of global LNG supplies—much of it from Qatar bound for Asian markets—passed through the Strait of Hormuz by ship.