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Iran says it aims to complete by March 2021 a long crude oil pipeline from its northwest deep in the Persian Gulf to a southern terminal east of the Strait of Hormuz, in order to export oil by shipping it first onshore to the terminal to bypass the world’s most critical oil chokepoint.
According to Touraj Dehghani, Deputy CEO and Member of the Board at Iranian company Petroleum Engineering and Development Company (PEDEC), Iran will be able to bypass the Strait of Hormuz once the Goureh-Jask Crude Oil Pipeline project becomes operational.
The pipeline, which will cost US$2 billion, will be 1,100 kilometers (684 miles) long and capable of carrying 1 million bpd of crude oil from the Goureh oil terminal in the northwest to the Jask region on the Sea of Oman, without the need to have tankers travel through the Strait of Hormuz.
PEDEC’s Dehghani spoke to Iranian media while tensions between Iran and the West continue to run high in the Middle East. In one of the latest incidents in the Gulf, Iran seized a British-flagged oil tanker in what appeared to be a retaliatory move after the British overseas territory Gibraltar seized an Iranian oil tanker with the help of the UK Royal Marines at the beginning of July.
In the Persian Gulf, just two oil producers—Saudi Arabia and the United Arab Emirates (UAE)—currently have some (limited) options for bypassing the Strait of Hormuz, where the daily transit in 2018 was 21 million barrels of oil per day, or the equivalent of some 21 percent of global petroleum liquids consumption. Iran, like all others, currently relies on the strait to get its oil to the market.
Iran’s arch rival in the region, Saudi Arabia, plans to boost the capacity of its East-West pipeline stretching from the oil fields in the east (and on the Gulf) to the Yanbu port on the Red Sea in the west, in order to have more of its oil exports bypassing the Strait of Hormuz.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
That is why it is pivotal for Iran to complete by March 2021 a long crude oil pipeline from its northwest deep in the Persian Gulf to a southern terminal south of so as to bypass the Strait of Hormuz.
Iran has always threatened that if attacked by the US or if its oil exports were prevented from passing through the Strait of Hormuz it will disrupt oil shipments from the other Gulf States.
However, if the trade war between the US and China escalated into a full-blown conflict, then the first action the US will take is to starve China of oil by blocking all oil shipments from the Gulf even if this meant closing the Strait of Hormuz. More than 75% of China’s oil imports pass through the Strait.
Moreover, 80% of China’s oil imports have to pass through the Strait of Malacca. China is overwhelmingly dependent on the Strait as 80% of its oil imports pass and this vulnerability has led to several Chinese initiatives to find alternatives. The Strait links the Indian and Pacific Oceans, and is the main route for oil from the Middle East to reach Asian markets.
The growing dependence on oil imports has created an increasing sense of ‘energy insecurity’ among Chinese leaders. Some Chinese analysts even refer to the possibility that the US is practicing an ‘energy containment’ policy toward China, or could implement one in the future. With the American Navy patrolling the southern end of the Strait of Malacca and the Indian Navy patrolling the northern end, China feels sandwiched in and strategically vulnerable. The former president of China, Hu Jintao, has referred a number of times to what he describes as the ‘Malacca dilemma’.
China’s answer to the “Malacca Dilemma” was the newly-opened China-Myanmar crude oil pipeline which bypasses both the Straits of Hormuz and Malacca. China financed the pipeline as part of its “One Belt, One Road” program, a massive infrastructure campaign across much of Asia.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London