Saudi Arabia Uses Pipeline Conversion and Overseas Oil Storage Expansion to Bypass Gulf-Red Sea Shipping Routes

Saudi Energy Minister Prince Abdulaziz bin Salman announced on Monday at the 25th World Petroleum Congress in Riyadh that Saudi Arabia will temporarily repurpose a domestic natural gas pipeline for crude oil transport, raising crude oil export capacity by up to 1.2 million barrels per day within seven to eight weeks, and aim over the next two to three years to lift total export capacity to around 10 million barrels per day by upgrading the East-West pipeline and pumping stations. According to the World edition of the Times of India, Abdulaziz said further investment could expand the pipeline's additional export capacity to up to 3 million barrels per day.

Saudi Arabia has authorized Aramco to use the pipeline for crude oil transport until May of the following year, after which the pipeline must be cleaned and returned to natural gas operations to meet summer gas demand. Aramco CEO Amin Nasser, speaking at the same event, said the company is exploring additional crude oil export channels and expanding overseas oil storage capacity. Saudi officials said the pumping station upgrades and Aramco's alternative route studies are designed to shift crude oil that was previously transported primarily through the Gulf and Red Sea onto overland pipelines.

Reuters, citing Kpler ship-tracking data, reported that the Middle East (excluding Iran) exported an average of 18.11 million tons of crude oil and condensate per week in September, approaching the weekly average of about 18.22 million tons recorded before the conflict with Iran began at the end of February this year, with tanker traffic through the Strait of Hormuz largely restored. However, Middle East refined product exports remain below half of pre-war levels, as regional refinery capacity suffered damage during the conflict.

Saudi Arabia's investments in pipelines and overseas storage capacity indicate that energy producers are hedging against uncertainty in shipping routes with overland infrastructure. The gap between the recovery in crude oil transport and the lag in refined product supply, compounded by the fact that the progress of refinery repairs has not been clarified in existing reporting, means markets reliant on Middle East refinery products will continue to face supply pressure.