As US and Iran vie for control over Hormuz, oil nations build alternatives

As tensions escalate around the Strait of Hormuz, leading to attacks on tankers and threats to oil and gas exports, nations and companies are accelerating efforts to establish alternative routes. The critical chokepoint, through which approximately a fifth of the world's oil and gas traffic passes daily, is increasingly being bypassed through strategic pipeline development and new port infrastructure.

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We never really lost all the barrels from the Middle East that would go through the Strait of Hormuz because the Saudis stepped in immediately.

Saudi Arabia has significantly diverted its oil exports away from the Strait of Hormuz, utilizing the East-West pipeline. This 1,200-kilometer system transports crude oil from the eastern Abqaiq facility to the Red Sea port of Yanbu. From Yanbu, oil destined primarily for Asia is loaded onto tankers and shipped through the Suez Canal or the Bab el-Mandeb Strait. The pipeline currently has a capacity of 7 million barrels per day, with plans to expand it further, allowing Saudi Arabia to transport more oil without traversing the Strait.

The United Arab Emirates has also implemented similar measures, albeit on a smaller scale. The Abu Dhabi Crude Oil Pipeline, also known as the Habshan-Fujairah Pipeline, can transport up to 1.8 million barrels daily from oil fields in Abu Dhabi to an Emirati terminal on the eastern side of the Strait, effectively bypassing the chokepoint. These diversions have helped stabilize global oil markets, preventing widespread panic despite the ongoing conflict.

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They started diverting a big chunk of their exports away from the Strait of Hormuz into their pipeline that goes all the way across the kingdom into the Red Sea.

Analysts believe that while Iran may be able to disrupt energy markets through Hormuz for a limited period, its long-term leverage is diminishing. The ongoing conflict has spurred global adaptation, reducing dependence on this single, narrow energy corridor. However, opinions vary on the long-term viability of these alternative routes, especially as Iran, through its Houthi allies in Yemen, has threatened to extend its campaign to the Red Sea route.

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The UAE [and] the Emiratis have done the same, albeit to a much smaller extent, where they diverted some of their exports away from Hormuz into another pipeline that takes their oil export outside the Hormuz area.