Middle Eastern oil producers are embarking on a significant debt-fueled spending spree, estimated at $30 billion to $50 billion by 2028, to construct alternative routes bypassing the Strait of Hormuz. This strategic shift is driven by escalating tensions and a desire to insulate oil exports from the vulnerable chokepoint. Analysts at Goldman Sachs project these new projects could facilitate the transport of an additional 3.8 million barrels of oil per day by the end of next year, and up to 7.3 million barrels per day by the end of 2028. This would allow approximately 60% of the Gulf's total pre-war exports of 23 million barrels a day to bypass the Strait if needed. Ben Cahill, a senior fellow at the Atlantic Council, estimates the total cost of these pipeline and port projects could reach tens of billions of dollars, emphasizing that Gulf states are willing to invest substantial funds for backup options, marking a "durable trend" likely to attract investment from sovereign wealth funds and infrastructure investors.
Several major pipeline projects are either underway, in planning, or under discussion, aiming to reroute supplies through the Red Sea, the Suez Canal, and the Gulf of Oman. The United Arab Emirates (UAE) is accelerating the construction of a $3 billion, 300-kilometer pipeline to Fujairah, running parallel to an existing one. This project, roughly halfway completed according to Kpler, is designed to increase oil deliveries to Fujairah by over 1.2 million barrels a day. Although initially slated for completion by early 2027, Kpler suggests a mid-2027 completion is more likely due to the need for port expansion. Victoria Grabenwöger, a senior researcher at data firm Kpler, notes that the ambitious timeline for this project "has only become feasible against the backdrop of the Strait of Hormuz blockade." Additionally, Iraq is pursuing projects, including a deal with Syria to rebuild the dormant Kirkuk-Baniyas pipeline, which could eventually carry 2 million barrels a day, and is also considering a pipeline from Basra to Aqaba in Jordan.
Pre-war, existing pipelines offered a spare capacity of 3.5 million to 5.5 million barrels per day but are now running near full capacity, handling about 6.5 million barrels per day. The urgency to develop new routes is underscored by the current geopolitical climate, where relying heavily on the Strait of Hormuz is "no longer a prudent long-term strategy," as stated by Grabenwöger. Greg Priddy, an energy expert at the Center for the National Interest, highlights that what was once considered a "$5 or $10 billion extraneous bet now looks necessary." This significant investment by Gulf states is driven by the imperative to ensure the security and flexibility of their oil exports, despite the geopolitical complexities and cost associated with these new infrastructure projects.
