What fate expects Strait of Hormuz ?

The rising tensions over holding a ten-day naval drill in the Persian Gulf, aimed at showing Iran's capability in blocking the strategic Strait of Hormuz through which 20 percent of the global oil transfer is carried out, has raised debates over probable substitutes for the Strait.

Last week, the U.S. Energy Information Administration reported that some 17 million barrels of crude oil is transited through the 21-mile-wide Strait of Hormuz per day, equivalent to 35 percent of the total oil transportation of oil through open seas.

Each day, at least 17 oil tankers are sailing through the Strait of Hormuz. Some, 85 percent of the oil consignments, which pass through the Strait, are destined for Asian markets such as China, India, South Korea and Japan.

Iran is currently exporting up to 2.15 million barrels of crude oil (Its total oil export) through the Strait. So, closing it would be a suicide attack for Iran and would lead to outrage of major oil importers such as Iran's own partners, China and India.

Therefore, it is less probable to close the Strait of Hormuz as a result of drowning a number of ships in the deep waters of the strait. If the Strait is closed, it is likely to be reopened within a couple of days. However, the verbal threat and holding a naval drill by Iran caused a surge in oil prices.

The global economy, which is being restored partly after the August 2007 financial crisis, is in dire need of keeping oil prices low and oil markets stable to be able to maintain the path toward sustainable growth and improvement.

In 2011, the Persian Gulf littoral states exported one million barrels per day of crude oil more than 2009 and 2010 through the Strait of Hormuz on the average.

Iran has threatened it will close the Strait of Hormuz if it is threatened to be attacked. The Strait of Hormuz is 21 miles wide. Just 2 miles of the Strait is so deep that it enables oil tankers with the capacity of up to 150,000 tons can pass it through.

The UAE official news agency quoted Minister for Energy Mohammad Bin Dha'en Al Hameli as saying on Jan. 9 that an oil export pipeline from Habshan in Abu Dhabi to Fujairah that will bypass the strategic Strait of Hormuz will be ready within six months, by May or June.

The 370-kilometer Habshan-Fujairah pipeline, dubbed as the Abu Dhabi pipeline, is projected to transfer oil from the onshore UAE to the Sea of Oman, bypassing the Strait of Hormuz. The current capacity of the pipeline is some 2 mbpd. The UAE's oil output is around 2.5 million barrels per day as well.

The managing director of the National Iranian Tanker Company, Mohammad Souri, has recently said that the UAE is not after bypassing the Strait of Hormuz. But, it intends to start a news trade activity.

Apart from the UAE and Iran's 2.5 barrels of crude and gas condensates, which are transited through the Strait of Hormuz, other Arab countries of the Persian Gulf export some 12 million barrels of crude oil per day through the Strait. Saudi Arabia is the major crude exporter with the capacity of producing 10 million barrels of crude per day and an unused capacity of 2 million barrels in excess.

Besides the Strait of Hormuz, Saudi Arabia uses two oil transfer pipelines. The first is the 745-mile Petroline (East-West Pipeline), which extends from the Abqaiq region toward the Red Sea and has the daily capacity of 5 million barrels. But, just 2 million barrels is currently transferred through the pipeline.

The second pipeline is the Abqaiq-Yanbu Pipeline, which has been designed to transfer liquefied natural gas. The pipeline is extended toward the Red Sea parallel with the Petroline Pipeline. The Abqaiq-Yanbu Pipeline has the capacity of 290,000 barrels per day.

Transiting through both the pipelines is, of course, costlier than shipping lines. Moreover, Saudi Arabia will be able to compensate for transiting just half of its products through the pipelines and bypassing the Strait of Hormuz.

A pipeline, which is not currently in operation, dubbed as the Tapline or the Trans-Arabian Pipeline, with the capacity of 500,000 barrels per day extends from Qaisumah in Saudi Arabia to Sidon in Lebanon. The Pipeline is 1,214 kilometers long and has not been in operation since 1990.

Another pipeline, named IPSI Pipeline, which was suspended operation after the Iraqi military attack to Kuwait in 1991, has the capacity of 1.65 million barrels per day and extends from Iraq to Yanbu in Saudi Arabia.

Iraq is exporting less than one fifth of its crude oil, equivalent to 350,000-400,000 barrels per day, via the Kirkuk - Ceyhan Pipeline. The pipeline was destroyed in May 2011 following to a bomb attack. Moreover, 71 percent of Iraq's oil reserves locate at south of the country. According to latest statistics by the Iraqi Petroleum Ministry, the country extracts 2.13 million barrels of crude per day from southern oilfields at Basra and 697,000 barrels per day from northern oilfields at Kirkuk. Iraq exports some 2.2 million barrels of crude per day.

For the time being, Iraq, Kuwait, Saudi Arabia, Iran and the UAE transfer a majority of their export-bound oil via the Strait of Hormuz. Qatar also exports 77 million tons of LNG annually via the same route, as well.

The Persian Gulf littoral states export some two third of their oil products via the Strait of Hormuz to the East Asian countries. Closing the route will cause a problem, as finding substitute routes would significantly raise transit costs.


Dalga Khatinoglu/Trend/