Saudi Arabia's New Bypass Plan for Red Sea Oil Exports

The East-West pipeline in Saudi Arabia has been a lifesaver for the global economy since the Iran war, allowing some of its oil to flow. However, with the Houthis trying to close an essential chokepoint for this workaround, the Saudis may need a bypass for the bypass.

Engineering a new detour that avoids the Bab el-Mandeb strait on the southern end of the Red Sea would be a tall task, requiring extra pipelines, oil tankers, and Middle Eastern diplomacy to keep everything running despite missile and drone threats. It won't be easy or cheap.

The Saudis can push their barrels north instead of south through the strait, but this isn't as simple as it sounds. They would need to take the Suez Canal to reach the Mediterranean Sea and then the high seas. However, the waterway is only an option for medium-sized oil tankers, not the largest ones that carry most of the Saudi crude.

The solution involves using the 50-year-old Suez-Mediterranean pipeline or Sumed, which connects Ain Sukhna in Egypt to Sidi Kerir near Alexandria on the Mediterranean coast. Another option is the Eilat-to-Ashkelon pipeline owned by Israel, built as a joint venture between Israel and Iran in the 1960s.

The Saudis will likely resort to using both pipelines simultaneously, with tankers shuttling crude from their oil port in the Red Sea to the Sumed pipeline. Asian refiners can then pick up the crude on the other side without their tankers having to cross the canal. However, the Sumed pipeline has a capacity of about 2.5 million barrels a day, roughly half of the current flow from Yanbu.

The extra capacity needed can be provided by the Israeli pipeline, which would add an extra 1.2 million barrels a day of transport capacity. Supertankers could also use the Sumed pipeline to offload part of their cargo, making it possible to navigate the Suez Canal with the rest.