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Few export options for gulf oil states
by Staff Writers
Dubai, United Arab Emirates (UPI) Jan 19, 2012

As Persian Gulf tensions mount over Iranian threats to close the strategic Strait of Hormuz, the region's energy producers are scrambling to find alternative export routes but the outlook is grim.

The U.S. Energy Information Administration estimates that if the narrow waterway at the southern end of the gulf is sealed, only around 3 million barrels of oil per day could realistically be redirected through Saudi Arabia via a trans-Arabian pipeline to the Red Sea port of Yanbu on the kingdom's west coast.

That's only a fraction of the estimated 17 million bpd in exports, mainly for Asia and Europe, carried by supertankers every day through the 4-mile-wide shipping lanes in the 112-mile-long strait from the gulf states into the Arabian Sea.

And there would be no other way to transport any of the 31 million tons a year of liquefied natural gas -- around 20 percent of world consumption - exported by Qatar every year.

That would be potentially calamitous for Britain, which military chiefs say imports 84 percent of its LNG from Qatar. All told, almost half the United Kingdom's gas imports come from the gulf.

"Britain's dependence on Qatari LNG has grown so stark that last year all but two cargoes on the product shipped into the U.K. came from the small Persian Gulf state," the Financial Times reported.

However, less than 1 percent of Britain's oil imports move through Hormuz.

Wood Mackenzie, the Scottish energy consultancy, says the United Kingdom lags far behind other gas importers, such as Japan, in "minimizing its vulnerability" to energy crises.

The United Arab Emirates says that a 230-mile overland pipeline it has been building to bypass the strait to carry oil to an offshore terminal in the emirate of Fujairah on the Gulf of Oman, south of Hormuz, is nearing completion.

But the $3.29 billion pipeline, with a capacity of around 1.5 million bpd, or most of the emirates' oil production, won't be ready until May at the earliest. Capacity is eventually scheduled to rise to 1.8 million bpd.

The much-delayed pipeline runs from Habshan in Abu Dhabi, the emirates' oil-rich economic powerhouse, to the Fujairah terminal, a major oil storage hub outside the strait.

Once the pipeline's up and running, it should help ease congestion in the Strait of Hormuz. But more importantly it will be a major step toward ensuring the security of gulf oil exports.

Other pipeline infrastructure in Saudi Arabia has been in place since the 1980s, when the kingdom built pipelines to avoid the gulf during the 1980-88 war between Iraq and Iran.

The Saudis, like the other gulf monarchies, backed Saddam Hussein's Baghdad regime during the conflict as Iraq was the bulwark between newly Islamist Iran and the Arab states strung out along the gulf's western shore.

That meant tankers carrying their oil exports were targets for the Iranians during the so-called Tanker War in 1984-88. All told, 546 vessels involved with the two sides were sunk or damaged, with 430 merchant seamen killed in the heaviest campaign against shipping since World War II.

Saudi Arabia's only operational pipeline is the 747-mile Petroline running westward from the eastern oilfields on the gulf to the Red Sea coast. The 5 million bpd Petroline is used to carry oil from fields around Yanbu to the port for export to Europe and North America.

It could theoretically carry 60 percent of Saudi exports to Yanbu. But it's tied up supplying markets west of the Suez Canal, leaving spare capacity at around 5 million bpd.

Iraq sends nearly 80 percent of its oil exports, drawn from fields in the south, through the gulf. The remainder is pumped north to neighboring Turkey's Ceyhan terminal of the eastern Mediterranean.

Baghdad, striving to boost oil production to fund national reconstruction, is reported to be seeking to boost volume through the northern pipeline from its current 1.5 million bpd by 1 million bpd to reduce reliance on the southern gulf route.

But the pipeline, repeatedly attacked by insurgents after the U.S. invasion in 2003, is in poor shape and is unlikely to be of much help to counter any Hormuz closure.

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Closing Gulf oil route remains option for Iran: envoy
United Nations (AFP) Jan 19, 2012 - Iran would not try to block the Strait of Hormuz unless a foreign power seeks to "tighten the noose" in a growing nuclear showdown with the West, Tehran's UN envoy said Thursday.

"All the options are or would be on the table," if Iran is threatened, ambassador Mohammad Khazaee said on US television, referring to the strategic shipping route, which is a chokepoint for one fifth of the world's traded oil.

"There is no decision to block and close the Strait of Hormuz unless Iran is threatened seriously and somebody wants to tighten the noose," Khazaee said on the Charlie Rose show.

"We believe that the Strait of Hormuz should be the strait of peace and stability," the envoy added. "But if foreign powers want to create trouble in the Persian Gulf, of course it would be the right of Iran as well as the rest of the countries in the region to try to defend themselves."

Amid growing speculation of a military strike against Iran's nuclear facilities, Khazaee said the growing tensions should be end through "peace, dialogue and stability."

Iran has accused Israel of involvement in the killings of its nuclear scientists. But the ambassador said he did not think Israel would try to bomb Irans nuclear facilities. "There are enough wise politicians around the world to advise them in case if they want to do that not to do it," he said.

The United States, France, Britain and Germany accuse Iran of seeking to build a nuclear bomb. Iran says its atomic drive is peaceful.

The United Nations said meanwhile that there an "urgent need" to defuse tensions between Iran and the West through dialogue.

The solution "also includes the need on the part of the Iranian authorities to prove to the satisfaction of the international community that their nuclear program is for peaceful purposes," said UN spokesman Martin Nesirky.

He added that because of the Strait of Hormuz's key role for oil supplies, UN leader Ban Ki-moon believes "it is important that free passage be guaranteed in accordance with the law of the sea."

Ban has discussed the Iran tensions with leaders from China and Gulf states during talks in recent days.


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