Gulf countries accelerate the development of alternative oil transport routes, as dependence on the Strait of Hormuz faces long-term restructuring

(1) Before the Iran war, approximately 15 million barrels of Gulf crude oil were exported daily through the Strait of Hormuz. However, the long-standing geopolitical risks associated with the Strait are prompting oil-producing countries to invest billions of dollars in alternative pipelines, redirecting more supplies to ports along the Red Sea and the Gulf of Oman. At least seven major pipeline projects are in the construction, planning, or discussion stage. (2) The east-west pipeline in Saudi Arabia and the Abu Dhabi to Fujairah pipeline in the UAE had an excess capacity of about 3.5 million to 5.5 million barrels per day before the war. Both are now operating near full capacity, and Abu Dhabi is fast-tracking a parallel pipeline costing $3 billion and stretching about 300 kilometers, aiming to boost Fujairah's supply capacity by more than 1.2 million barrels per day, with completion expected as early as early 2027. (3) Iraq is intensifying efforts to develop alternative export routes from the southern Basra oil fields, planning pipelines to Turkey's Ceyhan port and Syria's Banyas port, with an eventual capacity of up to 2 million barrels per day. Discussions have also resumed with Jordan over a pipeline to Aqaba port, but shipping routes via the Red Sea are also exposed to Houthi militant attacks. (4) According to analysis from Goldman Sachs, once all the aforementioned bypass projects are operational, by the end of next year bypass capacity could increase by about 3.8 million barrels per day, reaching 7.3 million barrels by the end of 2028. By then, roughly 60% of the Gulf region's pre-war total daily exports of about 23 million barrels would be able to bypass the Strait of Hormuz if necessary. However, alternative routes take more time, are more expensive, and the pipelines themselves also face security threats. (5) Liquefied natural gas transport still cannot be replaced by pipelines; before the war, about one-fifth of global LNG passed through the Strait of Hormuz. Qatar’s supply routes to Asian clients are unlikely to be resolved by pipeline solutions in the short term, so the structural impact of a blockade on the natural gas market will persist.