Sources: Saudi Arabia intends to expand the oil pipeline in the direction of the Red Sea to bypass the 2 million barrels of increased capacity in the Strait of Hormuz

ON 7 JULY, FIVE INFORMED SOURCES REVEALED THAT SAUDI ARABIA WAS CONSIDERING EXPANDING ITS CRUDE OIL PIPELINES TO THE WESTERN COAST OF THE RED SEA TO ENABLE SAUDI ARABIA AND ITS NEIGHBOURS TO TRANSPORT MORE OIL WITHOUT PASSING THROUGH THE STRAIT OF HORMUZ. THE STRATEGIC IMPORTANCE OF THIS PIPELINE, WHICH WAS BUILT IN THE EARLY 1980S, HAS BECOME INCREASINGLY IMPORTANT SINCE THE OUTBREAK OF THE IRANIAN WAR IN FEBRUARY AND THE SUSPENSION OF SHIPPING IN THE STRAIT OF HORMUZ. THE PIPELINE CAN DELIVER UP TO 7 MILLION BARRELS OF CRUDE OIL PER DAY TO THE PORT OF YANBU IN THE RED SEA. IN MAY, THE SAUDI ARABIAN-AMERICAN CEO INDICATED THAT ABOUT 2 MILLION BARRELS OF IT WERE FOR THE WEST COAST REFINERY AND ABOUT 5 MILLION BARRELS WERE FOR EXPORT. ACCORDING TO THE SOURCE, SAUDI ARABIA IS CONDUCTING PRELIMINARY CONSULTATIONS WITH SOME NEIGHBOURING COUNTRIES ON THE EXPANSION OF THE PIPELINE AND PLANS TO INCREASE THE CAPACITY OF APPROXIMATELY 2 MILLION BARRELS PER DAY. IT IS NOT CLEAR WHETHER THE EXPANSION PLANNED BY THE UNITED STATES IS TO UPGRADE EXISTING INFRASTRUCTURE OR TO CONSTRUCT NEW PIPELINES. ACCORDING TO ONE OF THE SOURCES, THE PROGRAMME ALSO INCLUDED A SMALLER PIPELINE OF FINISHED OIL. ACCORDING TO TWO SOURCES, THE SIZE OF THE BUILD-UP COULD RANGE FROM 1 MILLION TO 2 MILLION BARRELS PER DAY, AND THE FINISHED OIL WAS CONSIDERED. ACCORDING TO ANOTHER SOURCE, THE PROJECT WOULD TAKE YEARS AND COST BILLIONS OF DOLLARS AND WOULD NEED TO ADJUST THE SAUDI CRUDE OIL PRICING MECHANISM. KIM XIAN