Gulf oil exporters build bypass pipelines and overseas storage to avoid Hormuz

what happened

Oil producers in the Middle East are putting more money into alternative export pipelines, overseas crude storage and foreign energy assets to lessen their reliance on the Strait of Hormuz, Reuters reports. Energy consultant Anas F Alhajji, managing partner of Texas firm Energy Outlook Advisors, said during an online X Spaces discussion that Saudi Arabia, the UAE, Kuwait and Iraq are weighing options ranging from new pipeline routes to storage abroad.

Over the past eight weeks, regional producers boosted exports via the Gulf of Oman, but Alhajji warned that extra shipping costs could become unsustainable if prices fall. OPEC estimates cited in the report show VLCC freight from the Middle East to East Asia climbing about twelvefold in 2026, from $3.18 per barrel at the end of January to $37.13 at the end of October. The UAE is building a second crude line to Fujairah, roughly half complete, with commissioning expected by June 2027. Aramco CEO Amin Nasser said Saudi Arabia is studying an increase in its bypass pipeline capacity from about 7 million to 10 million barrels per day.

Iraq is looking at a Basra to Haditha line, while Saudi Arabia and the UAE are developing storage in Japan and Singapore. Gulf firms are also widening their foreign holdings: ADNOC's XRG agreed to buy Shell's stake in the North West Shelf venture in Western Australia for $1.45 billion, and Qatar is seeking 3 to 6 million tonnes of US LNG a year.

why it matters

For oil traders, this points to a longer-term rebuild of Gulf export logistics. Working bypass routes could ease the risk of disruption through Hormuz, yet high transport costs remain a concern while the conflict continues. Alhajji argued these arrangements only make economic sense if the war ends and freight costs fall back to normal levels.

market impact

Oil: bypass pipelines reduce the risk of Hormuz disruption, but high freight costs raise the cost of supply

• ↔Brent mixed — bypass routes ease Hormuz disruption risk, but higher freight raises export costs
• ▲VLCC freight rates pressure up — shipping around Hormuz lengthens routes and raises delivery costs

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