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Saudi readies oil line to counter Iran’s Hormuz threat


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 Saudi Arabia has reopened an old oil pipeline built by Iraq to bypass Gulf shipping lanes, giving Riyadh scope to export more of its crude from Red Sea terminals should Iran try to block the Strait of Hormuz, industry sources told Reuters.

Riyadh took the step as international pressure grows on Iran to curb a nuclear program that Western powers say has a covert military purpose. A European Union embargo on buying Iranian oil takes full effect on Sunday, cutting Tehran’s income.

With the sanctions regime tightening on Iran, grains traders said its attempts to secure millions of metric tons (1.1023 tons) of wheat through barter deals with India and Pakistan are failing, and Tehran is about to pay premium prices on international markets to secure food supplies and stave off popular unrest.

Iran’s chief nuclear negotiator Saeed Jalili warned world powers on Thursday against adopting “unconstructive measures” that harm talks, state television reported. “Those who replace logic in talks with illegitimate tools are responsible for harming the constructive trend of talks,” Jalili wrote to EU foreign policy chief Catherine Ashton.

The effects of tensions have been diverse, with Saudi Arabia’s decision to widen its export routes the latest evidence of states in the region preparing for difficulties.

The Iraqi Pipeline in Saudi Arabia (IPSA), laid across the kingdom in the 1980s after oil tankers were attacked in the Gulf by both sides during the Iran-Iraq war, has not carried Iraqi crude since Saddam Hussein invaded Kuwait in 1990.

Saudi Arabia confiscated the pipeline in 2001 as compensation for debts owed by Baghdad and has used it to transport gas to power plants in the west of the country in the last few years.

Iran threatened in January to block the Strait of Hormuz in retaliation for U.S. and European sanctions that target its oil revenues in an attempt to stop the nuclear program.

An EU ban on Iranian oil starts on Sunday and Israel has threatened military action against the country’s nuclear facilities if talks with Western powers fail to stop uranium enrichment.

Alarmed, Saudi Arabia has now quietly reconditioned IPSA to carry crude, test pumping along the line over the last four to five months, several sources with knowledge of the project say.

“The testing started because Saudi Arabia wanted to secure alternative routes to export oil,” an industry source in Saudi Arabia said.

Western industry sources said the tests through the 1.65-million barrel-a-day line had delivered into storage facilities at Mu’ajjiz near Yanbu on the Red Sea for at least four months.

More than a third of the world’s seaborne oil exports pass through the narrow Strait of Hormuz from the oilfields of Saudi Arabia, Iran, Kuwait, Iraq, the United Arab Emirates and Qatar. Qatar’s liquefied natural gas exports are all shipped through Hormuz. — Reuters

[ Business ] 2012-06-30