The Strait of Hormuz

The Strait of Hormuz

The Strait of Hormuz is repeatedly in the headlines of international news. Mostly for political reasons. But the significance it has for the world economy and international trade and what developments are taking place in the region remains unknown to many people.

The Strait of Hormuz is located in the Middle East and forms the transition from the Persian Gulf to the Gulf of Oman and further into the Arabian Sea and Indian Ocean. In the north it is flanked by Iran, in the south by the Arabian Peninsula. Already in ancient times it was an important shipping route for the advanced civilisations settling there, in the early modern period up to the 19th century it was the most important trade route on the way between Europe and India. Today it is in the middle of the sea route of the oil and gas transports of the oil-exporting countries of the region. Saudi Arabia, Kuwait, Iraq, the United Arab Emirates, Qatar, Bahrain and Iran send their tankers through this bottleneck to Asia, Europe and America. About a third of the world's natural gas consumed (mainly from Qatar) and almost a fifth of the world's oil supply or, to put it another way, a third of the oil traded by sea is transported here. In the first half of 2018, the figure was 17.4 million barrels a day. Global daily consumption by industry in particular, but also by private consumers (in the form of heating oil, petrol and diesel), is just under 100 million barrels per day.

At its narrowest point, the Strait of Hormuz is only 33 km wide, but the fairway is only 3 km wide for each direction, because the water depth at other points is not sufficient for oil tankers. The international sea route functions in these virtual lanes according to the rules of the traffic separation scheme (TSS), both lanes are separated by a median three kilometres wide. The oil tankers pass through both Iranian and Omani territory on their way.

Since tensions have repeatedly arisen in the region in the past, some alternative routes have been planned and put into operation by the countries surrounding the waterway. The Iraq-Saudi Arabia Pipeline (IPSA) bypasses the Persian Gulf completely and runs from Iraq through Saudi Arabia to the Red Sea. However, it has not been in operation since the last Iraq war. A few years ago, the United Arab Emirates put the Habshan-Fujairah pipeline into operation, which runs from the Habshan fields in Abu Dhabi to Fujairah on the Gulf of Oman and thus also de facto bypasses the Strait of Hormuz.

There in the port of Fujairah, refineries and tanker port are located directly next to each other. The total storage capacity of the Fujairah oil zone is 8.8 million cubic metres, the daily output is 1.5 million barrels (1 barrel corresponds to 0.16 m3), which go directly to the oil export terminals with their nine berths. Capacity is to be increased to up to 3.5 million barrels per day.

In 2017, there was a discussion again as to whether Saudi Arabia and Iraq would put the IPSA back into operation. After modernization, it could produce 1.65 million barrels a day - but together with the volume in Fujairah, the figure is still a long way from the over 17 million barrels that pass through the Strait of Hormuz. In addition, the terminal in the Jeddah region on the Red Sea will considerably extend the sea transport of oil to Asia. Of the 17.4 million barrels of oil, around 85% goes to Asia, mainly China, Japan, India and South Korea.

It remains to be seen whether this will result in permanent alternatives to the transport through the Strait of Hormuz. Considering the global demand for oil and its derivatives, however, it seems unlikely that the alternative routes currently available could increase their frequency to such an extent that they would replace transport by the Strait of Hormuz.