Arabian oil and gas exports under threat from Iran

Iranian officials play up "ease" of shutting vital export corridor

Gulf oil and gas exports are under threat from Iranian threats to close the Straits of Hormuz.
Gulf oil and gas exports are under threat from Iranian threats to close the Straits of Hormuz.

Iran has caused oil prices to rise to nearly $110 a barrel after posturing that it may close the Strait of Hormuz, the Arabian Gulf's only outlet to international waters and vital oil supply routes if further sanctions are imposed over its nuclear programme.

Vice President Mohammad Reza Rahimi warned that "not a drop of oil will pass through the Strait of Hormuz" if sanctions are widened.

“Closing the Strait of Hormuz is very easy for Iranian naval forces,” Iran's Navy Commander Rear Admiral Habibollah Sayyari told Iran's Press TV as the Iranian Navy continued with the ten-day “Velayat 90” war games in the Strait of Hormuz and Sea of Oman, which began on December 24.

“Iran has comprehensive control over the strategic water way,” the Iranian commander added.

Sayyari's comment came a day after Iran's Vice-President Mohammad Reza Rahimi warned that not a drop of oil would be allowed to pass through the Strait of Hormuz if sanctions are placed against Iran's oil exports.

The Strait of Hormuz provides the primary sea route for oil produced in Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates (UAE) - to the Indian Ocean. About 40% of the world's tanker-borne oil passes through it, with the majority bound for Asian markets.

The Strait also provides the only outlet to Qatar's vast fleet of LNG super-tankers and their global customers in Europe, South America and Asia.

The US maintains a naval presence in the Gulf, principally to ensure the transport of oil remains open.

Washington has played down the Iranian threat. US State Department deputy spokesman Mark Toner told the BBC: "I just think it's another attempt by them to distract attention from the real issue, which is their continued non-compliance with their international nuclear obligations."

Adm Sayari said the manoeuvres were designed to show Gulf neighbours the power of Iran's military over the zone.

Abu Dhabi has been building its giant cross-coutnry Crude Oil Pipeline Project (ADCOP) in order to bypass the sensitve Straits for the past three years.

Originating from Habshan in Abu Dhabi - the current collection point for Abu Dhabi's onshore crude oil production - ADCOP terminates in Fujairah. The 48-inch-diametre pipeline has been designed to transport some 1.5 MMBPD of crude oil from ADCO facilities at Habshan over a distance of 370 km to an oil terminal in Fujairah for export through offshore loading facilities.

The scale of the project is immense and encompasses the construction of the main oil terminal and offshore loading facilities at Fujairah, in addition to the installation of the main pipeline.

The project is scheduled to be completed soon, and it is unclear if the pipeline is ready to begin exports should the Strait be closed.

Britain's Financial Times reported that in late Tuesday trading  ICE February Brent, the global benchmark, rose $1.21 to $109.17 a barrel. In New York, Nymex February West Texas Intermediate rose $1.47 to $101.15 a barrel.

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Oil & Gas Middle East - September 2020

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