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Apr 16 2012

Kuwait Weighing Its Options In Face Of Hormuz Threat

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Kuwait Petroleum Corporation

Kuwait Weighing Its Options In Face Of Hormuz Threat

State-owned Kuwait Petroleum Corporation ( KPC ) has been asked by the Kuwaiti authorities to look into alternative routes through which Kuwait could export its crude oil, in the event shipping routes are disrupted by the possible closure of the strategic Strait of Hormuz. “We have been asked by the oil ministry to look into contingency plans,” CEO and Deputy Chairman of KPC Faruq al-Zanki said on the sidelines of the Gulf Petroleum Conference in Kuwait on 9 April. “We are discussing many scenarios but we have not decided” which plan of action to adopt, he continued, stressing any decision would ultimately need to be made in consultation with the other members of the Gulf Cooperation Council (GCC). “This is something that needs to be coordinated with the GCC states… We need to revisit them [possible scenarios] and come up with a specific plan, agreed by all,” Mr Zanki said.

For some time now, Iran has been threatening to close off the Hormuz shipping lane in an attempt to use its control over the waterway as a political trump card in its ongoing dispute with the West over its nuclear program – Tehran vehemently denies allegations it is developing nuclear weapons. Around 20% of the world’s oil supply – 17mn b/d in 2011, according to the EIA – is estimated to pass through the strait, leading to fears a disruption in the transport of crude could potentially double the price of oil, plunging the world economy into a new depression. Of the GCC member countries, Qatar and Kuwait are completely reliant on the strait for their hydrocarbon exports, while Saudi Arabia and the UAE are in no position to re-route all their exports currently going through the strait via alternate pipelines.

The UAE is currently in the process of building a 1.5mn b/d capacity oil pipeline that would bypass the Strait of Hormuz and deliver up to as much as half the Gulf state’s output to its new export terminal in Fujairah. In January this year, the UAE Minister of Energy Muhammad al-Hamili said the pipeline would be operational by this summer (MEES , 16 January). However, MEES understands that completion of the project is set to take considerably longer, with sources suggesting the beginning of next year as a more reliable estimate (MEES , 27 February).

© Copyright MEES 2012.

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