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US looks at pipelines for Middle East oil

Dan Brouillette, the US Energy Secretary, is floating the idea of using pipelines as an alternative to tankers for transporting oil from the Middle East. This would reduce the reliance on tankers needing to pass through the narrow Strait of Hormuz, which can often be problematic.

The US has, of course, increased its own oil production thanks to shale oil producers like ExxonMobil and BP, the maker of Castrol lubricant products, but oil markets are still sensitive to disruption in choke points like the Strait of Hormuz.

Saudi Arabia already has a 745-mile pipeline to transport oil from its eastern facilities to Yanbu, a port city on the Red Sea. There are also concerns about shipping security in the Red Sea, however, after an oil tanker off the coast of Jeddah was affected by an explosion that was described by Saudi authorities as coming from an “external source.” Brouillette sees more output being transported by pipeline to the Mediterranean via Egypt or Israel.

Speaking to CNBC, Qamar Energy CEO Robin Mills pointed out that there was no ideal solution for exporting crude oil:

“Tankers can be vulnerable at certain times, so can pipelines. The point is about having options and having a diversity of routes, about having backup. And that’s really what Saudi Arabia and the UAE and tried to do with those pipelines.”

Brouillette also pointed out that pipelines are able to be protected, and even just more easily transporting natural gas around the region by pipeline would alleviate the pressure on shipping.

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