Saudi Aramco Plans to Expand Pipeline Capacity to 10 Million Barrels a Day to Bypass Hormuz

Saudi Aramco is working to expand the capacity of its East-West Crude Oil Pipeline, also known as the Petroline, to 10 million barrels a day from approximately 7 million, while studying additional export routes that would reduce the kingdom's reliance on the Strait of Hormuz, Steven John reported for Fortune.

Saudi Arabia plans to expand its East-West Crude Oil Pipeline to increase oil-export capacity through the Red Sea and reduce reliance on the Strait of Hormuz. [Photo: aramco Facebook]

Aramco Chief Executive Amin Nasser discussed the plan in an interview with Al Arabiya Business, according to Fortune. The proposal follows comments earlier in October by Saudi Energy Minister Prince Abdulaziz bin Salman, who said the expansion could take two to three years.

The pipeline runs roughly 750 miles from the Abqaiq processing hub near the Persian Gulf to the Red Sea port of Yanbu.

It provides Saudi Arabia with an alternative route for moving crude oil to export markets without sending all of it through the Strait of Hormuz.

The strait is a crucial route for global oil shipments, and disruptions to shipping and energy infrastructure during the conflict involving Iran have increased the importance of alternative export routes.

Before the war, the East-West pipeline typically carried about 2 million barrels a day.

According to the reporting, it reached its existing capacity of approximately 7 million barrels a day in late March, although some of the oil transported through the pipeline was used by Saudi refineries rather than exported.

Saudi crude production was reported to have fallen below 7 million barrels a day for much of the first six months of the conflict, compared with more than 10 million barrels a day before the war, before recovering to about 8 million barrels a day in September, according to the International Energy Agency.

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Expanding pipeline capacity by another 3 million barrels a day would be a substantial infrastructure project.

Even if completed, the increase would not necessarily translate into an equivalent rise in oil exports, since domestic refinery demand, production levels, storage, shipping capacity and the security of the pipeline would all affect how much crude reaches global markets.

Gilbert Metcalf, a visiting professor at the MIT Sloan School of Management and a former US Treasury official, told Fortune that an increase in pipeline flows to 10 million barrels a day could add roughly 2% to the global oil market.

He cautioned that the effect on prices would depend on uncertain conditions, including whether additional oil could be produced and processed and whether the infrastructure remained secure.

The planned expansion could give Saudi Arabia greater flexibility during disruptions in the Strait of Hormuz. However, it is not guaranteed to eliminate the risks posed by regional conflict or substantially lower global oil prices.