Aramco Weighs Expanding Pipeline That Bypasses Strait of Hormuz

Saudi Aramco is exploring the expansion of its East-West pipeline, which carries Saudi crude to Red Sea export hubs, as an alternative route to avoid the Strait of Hormuz. The announcement was made by the state oil company's CEO, Amin Nasser, on Tuesday, November 3, amid what he described as the largest energy supply shock in history, after the effective blockade of the strait cut off a channel through which 20% of the world's oil previously flowed.

According to Aramco's third-quarter results presentation, preliminary engineering work has already begun on the expansion of the roughly 1,200-kilometer pipeline, which connects the kingdom's eastern oil region with Yanbu, on the Red Sea. The company is weighing raising total east-to-west crude transport capacity from 7 million to as much as 10 million barrels per day, a target previously outlined by Saudi Energy Minister Prince Abdulaziz bin Salman at the World Petroleum Congress in Riyadh on October 12. Options under review include the temporary conversion of a domestic gas pipeline, which could add 1.2 million barrels per day within seven to eight weeks, and upgrades to pumping stations that would add about 3 million barrels per day over two to three years.

The East-West pipeline, which currently has capacity of up to seven million barrels per day, has come under attack on several occasions during the war between the United States and Iran, and Nasser previously called it a critical lifeline. According to the executive, more than 130 attacks on tankers were reported, mainly targeting VLCCs, driving freight rates up more than 15-fold compared with a year earlier. Nasser warned that higher shipping costs, fertilizer shortages, and the impact on food and consumer goods are fueling inflationary pressures across the global economy.

Sources differ on Aramco's third-quarter figures: Baird Maritime reported that quarterly net profit grew by more than a third, while ports news rusia noted that adjusted net income rose 9% to $31.2 billion, with free cash flow of $28.2 billion. Nasser also stated that the original construction costs of the East-West pipeline were recouped in just about 15 days amid the current regional trade disruptions, and noted that supply reliability fell to 97.8% from 99.9% a year earlier.

Despite confirming the start of the engineering process, Aramco executives remained tight-lipped about the exact scope of the project, giving no details on where or by how much capacity would be expanded. The company clarified that no final investment decisions on the new routes have been announced yet, and that it continues to study other corridors through its gas system and increased crude storage in consuming markets and along export corridors, which include the Persian Gulf, the Red Sea and the Mediterranean, with connections via the Suez Canal and Egypt's SUMED pipeline.