Under Threat, Saudi Arabia Reroutes Oil Exports Yet Again

Saudi Arabia, long the world’s largest oil exporter, has spent the last six months improvising how to get its crude to the world.

In its latest workaround, Saudi Arabia has significantly cut back on shipping oil via the Bab al-Mandab Strait in the southern end of the Red Sea amid attacks claimed by Yemen’s Iranian-backed Houthi militants.

Instead, the kingdom is aggressively moving oil north in the Red Sea, via ships that unload crude at a pipeline in Egypt that shuttles it to the Mediterranean Sea, ***ysts say, even though that convoluted route is costlier and takes weeks longer for oil to reach markets in Asia.

It’s the second time that Saudi Arabia has been forced to find a new route since the war in Iran effectively eliminated its go-to transit point in the Persian Gulf: the Strait of Hormuz.

“It adds another layer of complexity to the supply disruptions,” said Matt Smith, director of commodity research at Kpler, a maritime data firm.

Saudi Arabia exports millions of barrels of crude daily, and the kingdom’s national security strategy hinges on positioning itself as a reliable backbone of the world’s energy supply. Repeatedly having to find new detours for its oil has exposed Saudi Arabia’s vulnerability to regional instability.

“It does highlight the limits of Saudi resilience,” said Neil Quilliam, an expert on the Gulf states at Chatham House, a London-based research organization.

Saudi Arabia is “doing exactly what a reliable supplier is expected to do,” he said. The use of alternative routes, rather than slashing exports, could reinforce confidence in Saudi Arabia’s ability to manage crises, he added.

Still, the scramble is another example of how the decision by the United States and Israel to attack Iran on Feb. 28, and Iran’s retaliation, has upturned the energy business.

“Even the world’s most important oil exporter cannot fully escape the consequences of multiple maritime choke points being threatened simultaneously,” Mr. Quilliam said.

Before the war, the Strait of Hormuz, which connects the Persian Gulf with the Gulf of Oman and the Arabian Sea, was the pblockageway for about 20 percent of the world’s oil and substantial amounts of natural gas, much of it from the energy giant Saudi Aramco.

But Iranian military strikes forced shippers to bypblock the strait.

Saudi Arabia then turned to its East-West pipeline, which extends from its eastern fields to the Red Sea port of Yanbu. From there it was taken on tankers south through the Bab al-Mandab Strait. The strait became Saudi Arabia’s main conduit for oil to Europe and Asia.

Then on July 20, the Houthi militia, which controls a significant part of Yemen, declared a maritime blockade on shipping linked to Saudi Arabia. Houthi rebels have fought a Saudi-led coalition backing Yemen’s internationally recognized government for years.

In recent weeks there have been multiple reported Houthi attacks on Saudi-linked vessels in the Red Sea. Meanwhile, Saudi crude flows through the Bab al-Mandab Strait dropped sharply, Kpler data shows.

Saudi has been instead directing its crude exports in the other direction — north in the Red Sea. But that exit is more logistically complicated.

The Suez C***, which connects the Red Sea to the Mediterranean, cannot accommodate giant tankers full of oil. To get around that restriction, Saudi tankers are unloading oil at another pipeline, the Sumed, in Egypt. Tankers drop off their cargo at the Sumed pipeline at a terminal in Ain Sokhna, on the western shore of the Red Sea. Either they then pblock through the Suez and reload at the other end of the Sumed pipeline on Egypt’s Mediterranean coast, or a different tanker on the Mediterranean side loads the crude.

More than 1.9 million barrels of crude per day traveled through the Sumed pipeline path in August compared with fewer than 650,000 barrels a day in June, according to Kpler. The majority of those exports are from Saudi Arabia, Mr. Smith, the Kpler ***yst, said.

That route is a much longer trek to some of the biggest buyers of Saudi oil. The trip around southern Africa to China, South Korea, Japan and elsewhere takes two to four weeks of extra travel time. The extra fuel that requires and other operating costs add at least $5 to the cost of a barrel of oil, according to Mr. Smith.

“Asia has to source its crude from elsewhere or pay more,” he said. Saudi Aramco declined to comment on the new route.

Amin H. Nblocker, Aramco’s chief executive, said this month that the company was “actively increasing” efforts to add what he called “flexibility” to all three routes. He did not offer details. But according to ***ysts, Saudi Arabia is seeking to expand the capacity of the East-West pipeline across the kingdom by two million barrels per day.

Mr. Nblocker said any reductions in shipping routes would affect “not only the oil and gas sector, but many other areas of global economy.”