Kenya’s fuel supply security is facing fresh challenges after Saudi Arabia was forced to shut down an alternative pipeline that it has used to export the commodity for the better part of this year after the Middle East war paralysed movement across the Strait of Hormuz.
The closure of the East-West pipeline was announced on Friday following drone attacks that damaged parts of the critical infrastructure in Riyadh and Medina.
Saudi Arabia is the world’s biggest exporter of oil, and its inability to supply this commodity due to closure of the East-West pipeline and the Strait of Hormuz will rattle the globe, choke fuel supply and send prices skyrocketing.
What is the East-West pipeline?
It is a 1,200-kilometre (km) (746-mile) pipeline, also known as the Petroline, that carries roughly four to five million barrels of oil per day (bpd) and links Saudi Arabia’s major oil-producing fields in Abqaiq with the Red Sea port of Yanbu.
Saudi Arabia built the facility in the 1980s during the Iran-Iraq War, to help the country bypass maritime threats arising from the conflict.
The East-West pipeline is the primary alternative oil pipeline that Saudi Arabia relies on to bypass the Persian Gulf, which is now impassable due to the US-Iran conflict.
Prices of Brent crude, the primary benchmark for fuel prices globally, hit $107 (Sh13,865.06) per barrel on Tuesday, reflecting the impact of the US-Iran attacks that have intensified in the past few weeks.
Closure of the pipeline could compel Saudi Arabia to ship the four-five million barrels of oil through the Strait of Hormuz, a not so welcome scenario given the current paralysis of the critical maritime chokepoint.
How big is the damage to the pipeline and how long will it remain closed?
The Saudi government did not give an official statement on the extent of the damage inflicted by drones. However, satellite photos from media outlets showed at least one pumping station was charred and badly damaged.
The duration of the closure remains unknown, but unnamed sources within the government said that damage could take upto six weeks to repair, but could be fixed sooner and pumping could resume partially while repairs are ongoing.
How critical is it to Saudi Arabia’s fuel exports in the wake of the closure of the Strait of Hormuz?
The pipeline became Saudi Arabia’s alternative route to ship fuel from the oilfields in Abqaiq on the Persian Gulf to the Red Sea without relying on Gulf shipping routes. It is estimated that the pipeline has been carrying about four percent of the global fuel supply, helping to significantly ease the impact of the closure of the Strait of Hormuz.
Oil buyers and traders in Saudi Arabia reckon that the country will run out of oil stocks available for export if it does not restart the drone-damaged major pipeline to the Red Sea within days.
What are some of the impacts of the closure of the East-West pipeline?
Closure of the pipeline could potentially force Saudi Aramco, the operator of the pipeline, to look for alternative routes to ship out fuel.
Forced rerouting of fuel exports from Saudi Arabia will trigger steep freight charges, besides the skyrocketing prices of the commodity due to the Middle East war.
Kenya, which relies on Saudi Aramco and two other Gulf oil majors for fuel supplies, is now staring at uncertain months ahead.
On Monday, Energy and Petroleum Cabinet Secretary Opiyo Wandayi owned up to the jitters, saying that closure of the pipeline will significantly impact fuel prices.
What happens to Kenya and other importers of refined fuel now that the East-West pipeline has been shut down?
The pipeline has been critical in helping Saudi Arabia to increase exports to Kenya despite the disruptions at the Strait of Hormuz.
Official data shows that Saudi’s exports to Kenya rose to Sh24.60 billion in March, Sh31.50 billion in April and Sh43.69 billion in May, compared to Sh13.50 billion and Sh11.35 billion in January and February this year, before the outbreak of the war.
Has Kenya found herself in a similar state of supply uncertainty in recent times?
Closure of the East-West pipeline marks the second time since the start of the US-Iran war that Kenya’s security of supply has been threatened.
In March this year, a vessel that was loaded at the Jebel Ali port in Dubai was unable to sail to the port of Mombasa, and this forced Kenya to seek back-up cargoes to avert a fuel shortage.
Saudi Aramco disclosed that it has been forced to load fuel at ports in Europe and India in order to avoid the Strait of Hormuz.
An extended shutdown of the East-West pipeline could see the company stick to alternative ports in order to ensure uninterrupted fuel supply to Kenya.
Has the East-West pipeline been in the past and were there any major disruptions?
Last week’s drone attack was the third in seven years, with the first being in May 2019. The attacks led to minor damages at at least three pumping stations.
The pipeline was also attacked in April this year, months into the US-Iran war, with minor damages to pumping stations forcing Saudi Arabia to cut supply by an estimated 700,000bpd.
But the two attacks in May 2019 and April this year did not trigger a prolonged shutdown of the pipeline. Last week’s drone attacks are the first that look set to keep the facility out of use for an extended period.