The Zhitong Finance App learned that Saudi Arabia's Energy Minister Abdul Aziz bin Salman said at the World Petroleum Congress (WPC Energy Congress) held in Riyadh on Monday that Saudi Arabia is studying how to expand the oil pipeline delivery capacity to regions other than the Persian Gulf, and plans to increase it to 10 million barrels per day within the next two to three years.
The energy minister said last week that as of October 6, the east-west oil pipeline connecting the main oil-producing region in eastern Saudi Arabia to Yanbu Port on the Red Sea coast had reached 5.8 million b/d. The pipeline has a maximum delivery capacity of about 7 million barrels per day. Based on 5.8 million barrels per day, the current oil transportation capacity has exceeded 80% of maximum capacity. During the war, this pipeline played a critical role, not only guaranteeing Saudi crude oil exports through the port of Yanbu on the Red Sea coast, but also supplying crude oil to refineries on the west coast of the country.
As Saudi Arabia continues to respond to wave after wave of attacks on energy and aviation infrastructure by the Houthis in Yemen, the country is seeking to strengthen its resilience to risks. Abdul Aziz said the relevant plans include improving pumping station facilities along the east-west oil pipeline. Since the outbreak of the US-Iran war, this pipeline has been a key channel for Saudi Arabia to bypass the Strait of Hormuz to achieve oil exports. It stopped operating in September due to a drone attack.
Abdul Aziz said: “We are improving the pumping station facilities on the east-west oil pipeline.” He also emphasized the importance of the East-West oil pipeline during the crisis, and said that the benefits from the use of the pipeline have far exceeded its construction costs.
Furthermore, Saudi Arabia also plans to convert a gas pipeline into an oil pipeline. The modified gas pipeline can deliver about 1.2 million barrels of crude oil per day within seven to eight weeks. With further investment, its delivery capacity is expected to increase to 3 million barrels per day.
However, this arrangement will be temporary. Abdul Aziz said he has told Saudi Aramco CEO Amin Nasser that the pipeline can carry oil until May next year. After that, the pipelines needed to be cleaned and restored to their original use in order to supply natural gas to the country during the summer. He said that Saudi Arabia is cooperating with Saudi Aramco to promote the dual-use transformation of this pipeline, including installing pumping stations and compressors, so that the pipeline can transport oil or gas according to specific conditions.
Oil flows in the Middle East have clearly recovered, but there is still a risk of shipping disruptions and infrastructure attacks
While Saudi Arabia, an important east-west oil pipeline, has recovered more than 80% of its transportation capacity, oil flows throughout the Middle East region have also clearly recovered. Shell CEO Wael Savan said at the London Energy Intelligence Forum on October 6 that although the regional conflict continues, Middle East oil flows have now returned to about 80% of pre-conflict levels. However, he stressed that although oil flow in the Strait of Hormuz has recovered, it has not yet returned to normal levels.
Savan also warned that the longer the conflict continues, the harder it will be for the market to absorb these disruptions. He said that the most serious impact of the crisis has now been mitigated, but “this state of affairs cannot continue indefinitely,” and new supply disruptions may still occur.
Although oil supply in the Middle East is gradually being repaired, and at least so far, there have been no supply disruptions that are expanding at the same time as battlefield upgrades, the risks facing Middle Eastern shipping and infrastructure cannot be ignored. The Islamic Revolutionary Guard Corps Navy of Iran issued a statement on October 11 saying that earlier in the day, an “illegal” supertanker hit a water mine in the waters south of the Strait of Hormuz, exploded and caused a fire in the cabin. Media under the Islamic Revolutionary Guard Corps of Iran issued a statement saying that the ship was carrying crude oil and was trying to leave the Strait of Hormuz with the navigation system turned off. The accident occurred because the tanker violated waterway regulations and sailed on an “unauthorized” route. The statement also said that this is the third “illegal” tanker that has caught fire by lightning on an “unauthorized” route in the strait since the 10th.
The attack on the tanker itself does not necessarily mean that transportation in the Strait of Hormuz will be completely interrupted again, but if similar incidents continue to occur, it may further push up shipping insurance costs and push shipowners to reduce the number of ships passing through this channel.
The prospects for negotiations between the US and Iran on the reopening of the Strait of Hormuz are uncertain. Mohsin Rezai, secretary of Iran's Supreme National Security Council, said on October 11 that the United States has accepted some of the conditions proposed by Iran for reopening the Strait of Hormuz, but the situation is still unclear regarding other conditions proposed by Iran.
Meanwhile, the Houthis in Yemen have recently attacked core civilian and energy facilities in mainland Saudi Arabia several times. What is even more worrisome is that Saudi air defense systems are under increasing pressure. The market may be beginning to worry about a bigger question. Can Saudi Arabia continue to protect refineries, export ports, and other energy infrastructure?
Furthermore, US President Trump said he will consider whether to directly participate in Saudi military operations against the Houthis. Analysts believe that if the US launches a continuous attack on the Houthis, the war in the Middle East will face the risk of escalation, and the international energy market will also be more severely impacted.
As far as the oil market is concerned, the next thing we need to pay attention to is not only “how much oil is re-entering the market”, but also whether this oil can be delivered continuously and safely to buyers. Looking at it now, the recovery in supply is hedging some of the impact of the war, but as long as the security risks in Hormuz and the Strait of Mande persist, it will be difficult for the Middle East oil market to actually return to normal.