The blockading of the Strait of Hormuz was something that was never going to happen\u2014until it did, paralyzing a fifth of global LNG and crude oil flows and causing quite a bit of economic pain to both producers and consumers of energy commodities. Now, they are taking care to never let a disruption of that scale happen again.<\/p>\n
The most immediate response to Iran\u2019s closure of the strait was switching to alternative pipeline routes for those that had them. Saudi Arabia demonstrated<\/a> foresight with its East-West pipeline that it used to reroute its export flows from the Persian Gulf to the Red Sea, ramping up to some 7 million barrels of crude daily along the pipe that had previously handled much lower volumes. The only major constraint in that rerouting was the capacity of the loading facilities at Yanbu Port, an issue Aramco will no doubt address soon.<\/p>\n It is worth noting that the risk of Iran closing off the Strait of Hormuz was precisely what made Saudi Arabia decide to build the East-West pipeline in the first place, back in the 1980s, as Reuters\u2019 energy columnist Ron Bousso noted in an overview of alternative oil and gas routes out of the Middle East in the aftermath of the Hormuz crisis.<\/p>\n Meanwhile, its neighbor and former fellow OPEC member, the UAE, will have to build a new pipeline to insulate itself from potential future Hormuz trouble. The country already has one pipeline that ships oil to the port of Fujairah, which sits right outside the Strait of Hormuz, but it now plans<\/a> to double its capacity with a new pipe, from 1.8 million barrels daily to 3.6 million barrels daily\u2014and it wants to do it fast. The new pipeline is scheduled to be ready by the end of next year. Related: Equinor to Boost Troll Gas Output with $412 Million Subsea Development<\/a><\/strong><\/p>\n Iraq is also trying to boost its pipeline capacity. More than 90% of Iraq’s oil exports traditionally move through the Persian Gulf, making the country especially vulnerable to Hormuz disruptions. Exports that averaged more than 3.3 million bpd before the conflict collapsed to a fraction of that level, triggering a sharp decline in government revenues and forcing Baghdad to prioritize domestic energy security over export volumes. Production plummeted from over 4 million barrels daily to barely over 1 million bpd.<\/p>\n Like its neighbor, the UAE, Iraq is looking to ramp up its existing pipeline infrastructure, specifically the Kirkuk-Ceyhan pipeline that handles oil flows from Iraq\u2019s northern fields. The pipeline currently has a capacity of around 200,000 barrels daily, but Baghdad is taking steps to increase this to some 770,000 barrels daily, and wants to do it in months. Then, Iraq is also considering a network of other pipelines to Mediterranean ports in Syria and Jordan as a way of bypassing Hormuz and the risk of future disruptions of tanker traffic there.<\/p>\n