DUBAI: Gulf governments are planning oil pipelines that will bypass the world’s most vulnerable energy choke point, the Strait of Hormuz, aiming to avoid possible Iranian threats to global oil shipments, according to Dow Jones Newswires.
If built, two pipelines could ferry as much as 6.5mn barrels of oil a day around the strait, an amount equal to nearly 40% of the daily exports currently shipped through the narrow channel at the entrance of the Gulf, says the DJN report.
Construction of the first, smaller line is forecast to begin this year, the Dubai branch of the UK’s Standard Chartered Bank reported. A second, more ambitious line carrying some 5mn barrels a day is still under discussion and could take a decade to build.
The attraction of the plan for oil traders is easy to understand. Around two-fifths of the world’s traded oil is shipped by tanker through the Hormuz Strait. But the 54km wide passage is highly vulnerable to threats from neighbouring Iran.
With tensions rising between Iran and the West over its nuclear programme, Iran’s Supreme Leader Ayatollah Ali Khamenei had warned that his country could disrupt the world’s oil supply if it comes under attack.
Bypassing the Strait of Hormuz could also lead to a drop in the price of crude.
Even before the crisis with Iran, traders have marked up prices by a so-called “security premium” of a few dollars a barrel because of fears of disruption in the turmoil since the 2003 US-led invasion of Iraq.
The new pipelines could reassure traders over the stability of exports and knock down the premium. The idea of the new pipelines among traders is so popular, “they think it’s a dream,” said Mustafa Alani, a security analyst for the Dubai based Gulf Research Centre.
“Crisis after crisis is threatening stability. We need a permanent solution. Any threat, real or imaginary, will increase the price a dollar or two. This project will give a new boost to the stability of oil,” he said.
Oil from the region is loaded onto tankers in the Gulf and shipped through the strait. The pipeline plans aim to take the oil by land from Arab countries to just outside Hormuz for loading.
The first, 360km pipeline will carry only oil from the United Arab Emirates, extending from the country’s Habshan oil field, across a mountain range, to the emirate of Fujairah, located outside the strait on the Gulf of Oman.
Abu Dhabi’s International Petroleum Investment Co is planning to build the line, which will carry 1.5mn barrels a day of crude oil, about 55% of the Emirates’ production.
A third of the crude will be used for a refinery planned in Fujairah. The second line, dubbed the Trans-Gulf Strategic Pipeline, would bring as much as 5mn barrels a day from various Gulf terminals to a newly-built export terminal outside the straits, perhaps in Oman.
A forthcoming Gulf Research Center study suggests six possible routes for the trans-Gulf pipeline, which could bring oil from as far north as Iraq, passing through Kuwait, Saudi Arabia and the UAE to the Omani capital of Muscat on the Arabian Sea, Alani said.
Other possible routes could see the pipeline terminating in Yemen or Fujairah.
The pipeline will shorten tanker routes by hundreds of miles, lower transport costs and reduce shipping traffic in the crowded Gulf. The trans-Gulf pipeline could be as long as 2,400km and traverse at least one mountain range.
If that isn’t enough of a headache for planners and engineers, they’ll have to bury it too. Keeping it above the ground may be cheaper and quicker, but would leave it vulnerable to terrorist attacks, Alani said.
Militants have set their sights on Gulf oil facilities. Al Qaeda claimed responsibility for last year’s attacks on oil installations in Saudi Arabia and Yemen after Osama bin Laden called on militants to stop the flow of oil to the West.
The group was also behind the 2002 attack on a French oil tanker that killed one person in the Gulf of Aden, off Yemen.
Alani declined to put a figure on the cost of the operation, but said oil exporters could afford it, particularly with the flood of cash from high oil prices in recent years.
Ministers from the GCC countries are scheduled to discuss the pipeline during one of two summits planned this year. – Agencies