Following the war with Iran: The rush for the oil and gas pipeline business
More than 20,000 km of new pipelines are under discussion against the backdrop of the conflict in the Strait of Hormuz. Countries in the Persian Gulf and Africa have discovered the potential, which is already yielding profits: "Demand is not expected to fade."
The business of pipelines for transporting oil and gas around the world is thriving in the shadow of the war with Iran, which has proven how vulnerable global shipping is to threats, and in an era where the USA no longer serves as the international protector of free trade. According to a study by the company Global Energy Monitor, more than 20,100 kilometers of new pipelines have been under discussion in recent months, mainly following attempts by the major energy exporters from the Persian Gulf to adapt themselves to the new emerging balance of power, in which Iran controls the Strait of Hormuz.
Among the new projects proposed: doubling the existing oil pipeline between Habshan and Fujairah within the UAE, a route that bypasses the Strait of Hormuz for nearly 400 kilometers; upgrading and significantly increasing the export volume along the route of a neglected pipeline connecting Kirkuk in northern Iraq to the port of Baniyas in Syria, with a length of about 800 kilometers (under the auspices of American energy companies); building additional oil pipelines to connect Iraq to Syria and then moving on to Turkey, with a length of thousands of kilometers; and doubling the oil pipeline from the Persian Gulf to the Saudi port of Yanbu on the Red Sea, which stretches for 1,200 kilometers.
The rationale behind the new plans is clear: that same Saudi pipeline from east to west allowed the national oil company of Saudi Arabia to record a 29% increase in export profits in the second quarter of the year, despite the war with Iran and the de facto paralysis of exports through Hormuz. According to The Economist magazine, the cost of pumping oil through pipelines is only a fifth (in a rough calculation and depending on the geographical route) of transporting it via trucks. "The rulers of the region are eager for more pipelines," the magazine estimated. "Global demand for them is not expected to fade soon."
Infrastructure of 350,000 km
The "boom" in the pipeline business is not limited to the Persian Gulf region. With the increasing production of oil and gas in various places around the world, transport infrastructure is expanding. An oil pipeline that will connect Uganda to the coast in Tanzania will soon allow for exports from the African country, and in West Africa, Senegal is working on a network of pipelines for transporting gas for liquefaction for export purposes. According to Global Energy Monitor data, there is currently a global infrastructure of about 350,000 kilometers of pipelines for transporting energy sources around the world, and another 12,300 kilometers are currently under construction.
Notable projects
-
Route bypassing Hormuz in the UAE
-
Connection between northern Iraq and Syria
-
Doubling the pipeline from the Persian Gulf to the Saudi port of Yanbu
-
Connection between Uganda and Tanzania
The cost of building a pipeline stands at a minimum of about 5 million dollars per kilometer and can rise beyond that if the route where it is planned to pass is problematic from an engineering perspective. Complex financing deals for a decade ahead, guarantees of minimum gas or oil flow, and more have made the field particularly attractive to private equity funds such as KKR, Blackstone, and Brookfield. According to a report by the consulting firm McKinsey, the volume of investment by private funds in this field of transport pipelines in the gas and oil sector has quadrupled in the last decade, to a total of 1.6 trillion dollars in 2025.
Danger of sabotage
However, these pipelines are also exposed to potential attacks. The Nord Stream 2 project, for example, which was laid on the Baltic Sea floor at a cost of more than ten billion dollars, and was supposed to transport natural gas from Russia to Germany, brought huge losses to Austrian banks and the governments of Germany and Russia after it was blown up by saboteurs in the service of Ukraine, according to suspicion. In recent months, Norway has increased naval patrols in the area of the pipelines transporting gas to Europe and the UK from its production fields in the North Sea.
According to the entities investing in the field, despite their vulnerability, transport pipelines can be repaired relatively quickly if there is safe access to the site. "The risks are lower compared to other infrastructure," one of the managers of the large investment funds told The Economist. A more complex factor is obtaining construction permits and coordination between different countries in the common cases where a pipeline crosses an international border. A Goldman Sachs report that examined the industry found that the duration of pipeline construction within a country was 2.5 years on average.
Plans for building pipelines are published as "trial balloons" to test feasibility, and then shelved due to local opposition or geopolitical reasons, and at least 35,000 kilometers of pipelines that were announced in the last seven years have been cancelled, according to Global Energy Monitor data. According to the data, China and Iraq are the two countries where there are the most comprehensive plans for the future laying of oil and gas pipelines, while in India and Iran, the most comprehensive construction is actually taking place, as of the beginning of the year.
