News
10/06/26
Kuwait eyes regional pipeline tie-ups to bypass Hormuz
Kuwait eyes regional pipeline tie-ups to bypass Hormuz
Dubai, 10 June (Argus) — Kuwait's state-owned KPC is exploring potential tie-ups
with fellow Gulf Co-operation Council (GCC) countries Saudi Arabia and the UAE
that could help move its crude and oil products in the event of any future
disruptions to flows through the strait of Hormuz. Kuwait is totally dependent
on the strait to export its crude and oil products, while Saudi Arabia and the
UAE have pipelines that allow them to divert a share of their oil to ports
outside the strait. That has helped them better navigate the more than
three-month closure of Hormuz triggered by the start of the US-Iran war on 28
February. "We are in discussions with our brothers in Saudi Arabia and in the
Emirates to look at how to expand the pipeline system that they have to
accommodate Kuwaiti barrels coming up," KPC chief executive Sheikh Nawaf
al-Sabah told the Atlantic Council Global Energy Forum. Saudi Arabia's 7mn b/d
capacity East-West pipeline can carry crude from the Abqaiq oil processing
complex in the Eastern Province to the Yanbu terminal on the Red Sea for export.
The UAE's 1.7mn b/d Adcop pipeline carries crude from Habshan in Abu Dhabi to
Fujairah, outside the strait of Hormuz. Sheikh Nawaf said the GCC typically has
a mechanism that if one member cannot export oil for whatever reason, another
with additional capacity could export on their behalf "and tally it up
afterwards." But since "nobody has that capacity" given the situation in the
strait, "instead, we are working with our brothers to look at pipeline capacity
that can grow out," he said. He did not specify which projects Kuwait was
studying with its neighbors. The KPC chief did caution, however, that an
alternative export route would not totally insulate Kuwait, or any other
country, from risk. Pipelines "are only as safe as the export facility at the
end of it," Sheikh Nawaf said. "And you've seen how Iran has targeted both the
Saudi and Emirati pipelines, and how those [attacks] have been effective, to a
certain degree." Fujairah was targeted on five separate occasions between late
February and early June, according to Argus tracking, Saudi Arabia's Yanbu port
was targeted once, and the East-West pipeline was targeted once , temporarily
reducing throughput capacity by around 700,000 b/d. "A long pipeline needs
compression. So, if you hit one node of that compression, you've got to rebuild
that," said Sheikh Nawaf. "The easiest thing to rebuild or replace is the
pipeline itself. But if you hit the compression facility, that takes more time."
"And worse yet, is if you hit the export facility, because then, the pipeline is
essentially useless," he said. "And we would have to work together with our
partners [to recover]." Swift-ish recovery The disruption of oil flows through
the strait of Hormuz forced Kuwait to scale back its crude production capacity
to about 25pc of pre-conflict levels. "We took our production levels down at the
beginning of the war, carefully and methodically, to what is only required for
local consumption in Kuwait, because we could not export anything," Sheikh Nawaf
said. Latest Argus estimates put Kuwaiti crude output at 580,000 b/d in May,
compared with 2.59mn b/d in February. Many weeks of on-and-off diplomacy between
Iran and the US has not led to clarity on when marine traffic could meaningfully
recover, but Sheikh Nawaf said when it does Kuwait should be able to resume the
majority of its production within less than a month. "We could get back to 80pc
of our shut-in production [back] in less than a month, probably three weeks,
because we have resilient reservoirs," he said. With around 2mn b/d of crude
output shut-in, this would imply a return of 1.6mn b/d within weeks, lifting
output to around 2.1mn b/d. Sheikh Nawaf suggested the shut-in of some
reservoirs may have "benefited" them because it "allowed them to settle and
recharge, essentially, the underground pressure." But he said the final 20pc "is
always the hardest," which could take another "three to four months" to recover.
By Nader Itayim Send comments and request more information at
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