Estimates vary on how long it could take
before a crucial pipeline is repaired, but a prolonged shutdown could push oil
prices to their highest levels in months.
·
Saudi
Arabia has temporarily shut its East-West
Pipeline,
reportedly after damage caused by an Iran-backed militia.
·
The
750-mile pipeline had been transporting roughly 4 million barrels of oil per day (bpd) to Saudi ports on the Red Sea.
·
This
represents about 4%
of global oil supply
potentially being kept away from international markets.
·
The
pipeline had become Saudi Arabia's principal alternative export route after the
Strait
of Hormuz was effectively closed by the Iran war.
·
The
latest disruption leaves Saudi Arabia with fewer options for moving crude to
international customers.
·
Kpler analyst Amena Bakr described the
situation as “unprecedented”, citing simultaneous disruption of two
major waterways, continuing attacks and the absence of diplomatic talks.
·
Brent
crude was around $107/barrel,
approximately 50%
above its prewar level.
·
Kpler estimates that if the East-West Pipeline
remains offline for one month, the world could lose access to around 120 million barrels of crude.
·
Goldman
Sachs has warned that oil could reach $120/barrel if attacks in the Persian Gulf and Red
Sea continue.
·
Saudi
authorities initially described the shutdown as a precaution and have not
disclosed the extent of damage or a restart timetable.
·
Satellite
imagery from September
10–11
reportedly showed damage at two pumping stations.
·
Kpler estimates repairs could take 5–6 weeks, although partial restoration could
happen sooner.
·
Saudi
Arabia has repeatedly restored damaged oil infrastructure following attacks.
·
After
a major Houthi attack on Aramco facilities in 2019, pumping operations were restored within
days.
·
A
pumping-station attack in April, shortly after the Iran war began, was followed
by restoration of full capacity within seven
days.
·
Brookings'
Robin Brooks therefore questioned expectations that the pipeline could remain
offline for months.
·
U.S.
Energy Secretary Chris
Wright said
he expected oil flows through the pipeline to resume soon and described the
disruption as brief
and temporary.
·
Saudi
Arabia has oil-storage capacity across the country.
·
Its
Red Sea port of Yanbu can reportedly store about 24 million barrels.
·
However,
Rystad Energy estimates the available crude at Yanbu may represent only around 3–6 days of supply, limiting the duration for which storage
can compensate for the pipeline disruption.
·
The
pipeline runs from Abqaiq
in eastern Saudi Arabia to Yanbu on the Red Sea.
·
It was
specifically developed to provide an alternative to the Strait of Hormuz.
·
From
Yanbu, Saudi crude can potentially reach Asian customers through:
o the Bab al-Mandab Strait, or
o the Suez Canal and Egypt's pipeline network.
·
Aramco
chairman Yasir
O. Al-Rumayyan said in June that engineers had expanded
the pipeline's capacity to as much as 7
million bpd.
·
That
is nearly 30%
above its prewar capacity.
·
The
expansion was intended to strengthen Saudi Arabia's ability to bypass Hormuz.
·
The
Houthi group has gained substantial control over the Bab al-Mandab Strait and has attacked energy infrastructure in
Saudi Arabia.
·
Since September 7, only two Saudi vessels had travelled through the Red Sea,
according to Kpler.
·
Saudi
Arabia is consequently being pushed back toward routes through the Strait of Hormuz, despite the risks.
·
The
U.S. Navy has helped maintain some oil movement through routes close to Oman's coast, on the side opposite Iran.
·
The
article describes the operation as extensive
and dangerous.
·
Capital
Economics estimates that every week the East-West Pipeline remains closed while Hormuz is unavailable could reduce Saudi Arabia's economic
activity by at least 0.2%.
Saudi
Arabia is facing a “double-route” problem: its traditional export route through
Hormuz is constrained, while its key alternative—the East-West Pipeline to the
Red Sea—has been damaged and its Red Sea outlet is also threatened.
For
global oil markets, the key variables are the duration of the pipeline
shutdown, the extent of damage, Saudi storage availability and whether shipping
through Hormuz and the Red Sea can be sustained.
The
continued closure of a critical pipeline in Saudi Arabia risks keeping 4
percent of the world’s oil supply from reaching international markets and
driving energy prices even higher.
Saudi
Arabia scrambled this week to reroute roughly four million barrels of oil a day
when it temporarily shut its East-West pipeline, which it said on Friday was
damaged by an Iran-backed militia. The pipeline, a 750-mile network that
transports crude across Saudi Arabia to ports on the Red Sea, had been the
kingdom’s primary way of exporting oil since the war in Iran began in February.
And
there are scant signs that the threat to Saudi oil supplies will ease anytime
soon. In addition to the drone attack on the pipeline, the Iranian-backed
Houthi rebel group in Yemen gained control of a strategic Red Sea port and hit
energy facilities in Saudi Arabia. On Wednesday the Houthis claimed they had
downed a Saudi fighter jet, as Saudi Arabia said the Houthis had fired a drone
near the Muslim holy city of Mecca.
Now,
running out of options and under pressure to rapidly restore supply lines,
Saudi Arabia is facing the prospect of a severe energy crisis with global
implications, analysts said.
“It
is unprecedented,” said Amena Bakr, head of Middle East & OPEC+ Insights at
Kpler, a maritime data firm.
“We
have two major waterways obstructed, active attacks, Iran escalating attacks,
proxies being active and no signs of diplomatic talks,” Ms. Bakr said. “It’s a
disastrous situation when you’re looking at it from an energy security angle.”
Any
extended disruption to the pipeline network of Saudi Arabia, long the world’s
biggest oil exporter, would send shock waves through the global energy market.
Brent crude, the global benchmark for oil, hovered around $107 per barrel on
Wednesday, up 50 percent from its prewar level.
The
world could lose 120 million barrels of crude if the East-West Pipeline is
offline for a month, according to estimates from Kpler.
Goldman
Sachs warned that global oil prices could rise as high as $120 a barrel if
attacks in the Persian Gulf and the Red Sea continue.
The
precise amount of oil not making it to the global market will depend largely on
the severity of the damage to the East-West pipeline. Neither the Saudi
government nor Saudi Aramco, the national oil company, responded to requests
for comment.
Saudi
officials previously said only that the pipeline was shut as a precaution but
have not disclosed the extent of the damage or a timetable for how long it
might take to restart it. Satellite images taken on Sept. 10 and 11, reviewed
by The New York Times, show damage at two pumping stations on the pipeline.
Estimates
for how long it might take to get the pipeline running again vary widely.
Ms.
Bakr, the Kpler analyst, said she believed it could
take five to six weeks, but that partial repairs could be completed far sooner.
She
and others noted that the kingdom has extensive experience dealing with attacks
on infrastructure. In 2019, Aramco suffered a major Houthi attack on its
facilities and was able to restart pumping operations within a few days. And in
April, when a pumping station was attacked shortly after the war in Iran began,
full capacity was restored within seven days.
Robin
Brooks, a senior fellow at the Brookings Institution, a Washington think tank,
said he did not believe the “nightmare scenarios” that the pipeline could be
offline for months.
“This
attack has again raised in markets the fear that we could be on the cusp of
another big spike,” Mr. Brooks said. But, he said, “The track record is that
these things get repaired within weeks, and there’s already indications from
satellite imagery that repairs are happening.”
Chris
Wright, the U.S. energy secretary, said he believed oil flows through the
pipeline would resume soon. “This will be a brief and temporary interruption,”
Mr. Wright told CNBC on Tuesday.
Saudi
Arabia has oil stored across the country, including the capacity for about 24
million barrels at its Red Sea port at Yanbu, creating a cushion. But those
storage tanks are unlikely to be full, according to Rystad Energy, a consulting
firm that estimated the port has about three to six days’ worth of crude.
The
East-West pipeline was Saudi Arabia’s workaround when the war in Iran
effectively shut the Strait of Hormuz. Stretching from Abqaiq in the east to
the Red Sea oil terminal of Yanbu in the west, the pipeline bypasses the strait
entirely. Oil could be transported through the Bab al-Mandab Strait on the
southern end of the Red Sea or via the Suez Canal and a pipeline across Egypt
at the northern end of the sea, headed primarily to customers in Asia.
Yasir
O. Al-Rumayyan, the chairman of Aramco, said in June
that engineers had expanded the pipeline’s capacity to carry up to seven
million barrels per day, nearly 30 percent more than before the war.
“We
had a similar situation back in the ’80s, where the Strait of Hormuz was
threatened to be blockaded by the Iranian regime,” Mr. Al-Rumayyan
said. “It was decided since then that we will have a pipeline from east to
west.”
With
the Houthis now largely in control of the Bab al-Mandab Strait, Saudi Arabia is
once again steering vessels through the Strait of Hormuz, analysts said. Since
Sept. 7, just two Saudi vessels have traveled through
the Red Sea, according to Kpler.
The
U.S. Navy has been able to keep some oil flowing out of the Strait of Hormuz on
sea paths close to the coast of Oman, the opposite side from Iran. But those
efforts have required an extensive and dangerous operation.
Capital
Economics, an economic research firm, said that every week the East-West
pipeline is closed, while the Strait of Hormuz is off limits, will shave at
least 0.2 percent off Saudi Arabia’s economic activity.