Although the tensions between Iran and the US and Europe have relaxed somewhat in the past couple of months, not everyone is taking for granted that a long-term solution to the Iranian development of nuclear technology will conclude peacefully. Iran’s threat to close the Strait of Hormuz prompted Oman to build an entirely new crude pipeline that delivers crude to the Gulf of Oman. And now, Saudi Arabia has reopened its Iraqi Pipeline in Saudi Arabia (IPSA), a crude pipeline that can transport 1.65 million barrel/day to the Red Sea and that hasn’t been used in more than 20 years.
Reuters reports exclusively that the Saudis have been reconditioning and testing the pipeline for several months in advance of the July 1st European embargo on Iranian oil. The Saudis do not want to be caught without an alternative in the event Iran closes the Strait, preventing Saudi crude from exiting the Persian Gulf.
The combined capacity of the Omani and Saudi pipelines is about 20% of the crude that currently passes daily through the Strait. Existing pipelines, whether operable or not, won’t replace the flow of crude through the Strait, but even 3 million barrels/day or so is better than nothing.