Against a backdrop of escalating geopolitical rivalry over control of the Strait of Hormuz, the world’s most critical energy chokepoint, the Middle East is embarking on an unprecedented wave of pipeline construction stretching from the Mediterranean coast to the Red Sea and Gulf of Oman. Arab oil-producing nations are racing to build alternative export routes to avoid reliance on the waterway, where Iran has been pushing to assert dominance over global energy supplies.
Industry analysts project that tens of billions of dollars will be invested in these bypass infrastructure projects over the coming years. While the region has a history of ambitious large-scale energy projects that failed to move forward, energy experts emphasize that the political and economic commitments to reconfigure regional oil flows are genuine this time. “When we speak to our customers in the region, they say they never want to deal with this [Hormuz-related risk] again,” Artem Abramov, deputy head of analysis at Rystad Energy, told Middle East Eye. “These bypass projects will move forward.”
The United Arab Emirates (UAE) is leading the expansion, currently constructing a second pipeline to the Gulf of Oman port of Fujairah—located outside the Strait of Hormuz— that will double the country’s bypass export capacity by 2027, reaching 3.6 million barrels per day (bpd). Last month, a senior executive from the Abu Dhabi National Oil Company revealed that the state energy producer is also considering a third pipeline to carry refined petroleum products including jet fuel, gasoline and diesel to Fujairah. The country’s crude oil output hit an all-time record high of 4.1 million bpd in June, with existing capacity already allowing it to maintain steady exports through both Hormuz transits and the existing Fujairah pipeline.
Meanwhile, Iraq, OPEC’s second-largest producer, signed a landmark agreement with Syria in July to rehabilitate an aged pipeline linking its northern oil fields to Syria’s Mediterranean port of Baniyas. A consortium led by U.S. energy major Chevron, Los Angeles-based TI Capital, and the Syrian-Qatari al-Khayyat billionaire brothers is spearheading the rehabilitation project. If completed, most of the Iraqi crude moving through this new route will likely be sold to European markets, as very large crude carriers (VLCCs) too large to transit the Suez Canal make long-haul shipments to Asia economically unviable, according to analysts.
Saudi Arabia’s decades-old East-West Pipeline, which runs from the Gulf coast’s Abqaiq oil field to the Red Sea port of Yanbu, has become the regional model for Hormuz bypass infrastructure. Originally built in the 1980s and expanded multiple times since, the pipeline currently carries around 4 million bpd of crude for export, with an additional 2 million bpd supplied to domestic refineries on Saudi Arabia’s west coast. Riyadh is now actively pursuing capacity expansion, with reports indicating it aims to add 2 million bpd of export capacity, a project that will likely require constructing a parallel pipeline and upgrading port facilities at Yanbu to accommodate more VLCCs simultaneously. Despite lower export volumes in early 2024, Saudi oil revenue hit a three-year high in March on the back of elevated global prices.
This large-scale reconfiguration of regional oil flows is already creating clear winners and losers, reshaping the geopolitical and economic balance of power across the Gulf. Geopolitical and energy analysts note that Saudi Arabia and the UAE have emerged as the primary beneficiaries, cementing their positions as the region’s most influential power brokers and most reliable energy suppliers. In contrast, the geographic vulnerabilities of smaller Gulf states including Kuwait and Bahrain have been laid bare by the ongoing tensions.
“UAE and Saudi will realise the biggest windfalls from this. Kuwait and Bahrain are the biggest losers,” explained Gregory Brew, senior Iran and energy analyst at Eurasia Group. Kuwait, which depends on the Strait of Hormuz for nearly 100 percent of its oil exports due to its location at the northern tip of the Persian Gulf, has already opened discussions with Saudi Arabia and the UAE to access their bypass pipeline networks. Bahrain, an island kingdom connected to the outside world only by a causeway to Saudi Arabia, faces similar constraints. “Kuwait and Bahrain will require transit agreements and potentially revenue-sharing deals with Saudi Arabia and the UAE,” Brew noted, adding that this arrangement will significantly increase Riyadh and Abu Dhabi’s regional leverage.
Qatar, the world’s leading liquefied natural gas exporter, is expected to remain almost entirely dependent on the Strait of Hormuz for its exports, analysts predict. The geographic reality of each country’s position dictates the economic benefits and drawbacks of the new pipeline network: while Saudi Arabia and the UAE can maintain access to key Asian markets via their Red Sea and Gulf of Oman ports, Iraq’s new Mediterranean route locks it into primarily serving European markets at the cost of easier access to high-demand Asian economies. “Iraq wants to tap the Asian market. But with this pipeline they would be sending crude to Europe. The ability to generate considerable revenues from that market is constrained,” Brew added.
Despite the momentum behind the pipeline boom, experts warn that the alternative routes do not eliminate strategic risk. Greg Priddy, energy expert at the Center for the National Interest, points out that all new bypass infrastructure remains within range of Iranian missiles and drones, mirroring how Ukraine has been able to disrupt Russian energy infrastructure with long-range attacks. “The caveat to all these bypasses is that they are still vulnerable to Iranian missiles and drones. The balance in warfare has swung decidedly to offence, away from defence, making it hard to protect these assets,” Priddy said. “Fujairah is a great example. It is close enough to Iran that they can hit anything there with accuracy.”
The vulnerability of bypass routes was recently underscored by Houthi forces in Yemen, which are backed by Iran. The group recently declared an embargo on Saudi shipping in the Red Sea, forcing at least eight commercial tankers to reverse course to avoid potential attacks on transits through the Bab el-Mandeb Strait.
Escalating tensions around the Strait of Hormuz have intensified after Iran attacked commercial vessels belonging to Saudi Arabia, the UAE, Qatar, Kuwait, Bahrain and Jordan transiting the waterway earlier this month, breaking a recent ceasefire with the U.S. that included a critical sanctions waiver. Some Western diplomats and analysts now argue Iran may have overextended its efforts to assert control over the chokepoint, requiring further escalation to maintain its influence. “Iran might have overplayed its hand in the Strait of Hormuz. It will need to escalate in new ways to impose itself,” one anonymous Western diplomat familiar with Yemen affairs told Middle East Eye.
Energy analysts agree that the push for bypass infrastructure is a durable long-term trend, with funding secured from regional sovereign wealth funds and global infrastructure investors. “These pipelines are expensive and geopolitically complicated, but the Gulf states will spend serious money for back-up options,” said Ben Cahill, senior fellow at Washington-based think tank the Atlantic Council. “This is a durable trend. There will be backing from sovereign wealth funds and probably infrastructure investors.” As Priddy put it: “What used to look like a $5 or $10bn extraneous bet now looks necessary.”
