Exclusive: Saudi readies oil line to counter Iran Hormuz threat

Thu Jun 28, 2012 7:08am EDT
 
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By Amena Bakr and Daniel Fineren

DUBAI (Reuters) - Saudi Arabia has reopened an old oil pipeline built by Iraq to bypass Gulf shipping lanes, giving Riyadh scope to export more of its crude from Red Sea terminals should Iran try to block the Strait of Hormuz, industry sources say.

The Iraqi Pipeline in Saudi Arabia (IPSA), laid across the kingdom in the 1980s after oil tankers were attacked in the Gulf by both sides during the Iran-Iraq war, has not carried Iraqi crude since Saddam Hussein invaded Kuwait in 1990.

Saudi Arabia confiscated the pipeline in 2001 to compensate for debts owed by Baghdad and has used it to transport gas to power plants in the west of the country in the last few years.

Iran in January threatened to block the Strait of Hormuz in retaliation for U.S. and European sanctions that target its oil revenues in a bid to stop Iran's nuclear program.

A European Union ban on Iran's oil starts on Sunday and Israel has threatened military action against Iranian nuclear facilities if Iranian talks with Western powers fail to stop uranium enrichment.

Alarmed, Saudi Arabia has now quietly reconditioned IPSA to carry crude, test pumping along the line over the last four to five months, several sources with knowledge of the project say.

"The testing started because Saudi Arabia wanted to secure alternative routes to export oil," an industry source in Saudi Arabia said.

Western industry sources said the tests through the 1.65-million barrel-a-day line had delivered into storage facilities at Mu'ajjiz near Yanbu on the Red Sea for at least four months.   Continued...