Security Concerns Raised as Saudi Arabia Ramps Up Red Sea Oil Exports
Saudi Arabia’s national oil company, Aramco, is rapidly working to build up operations at its alternate terminal located on the Red Sea at Yanbu. The terminal was designed and built as a backup alternative, and as it works to fulfill its purpose, security consultants are warning that it is not without risks.
Yanbu was developed starting in the 1980s and underwent a large expansion completed in 2018. Saudi Aramco highlighted the expansion with the commissioning of Yanbu South Terminal (YST), which it reported would double capacity with an additional 3 million barrels per day. The first VLCC was loaded on October 18, 2018, with the company highlighting that the Yanbu South Terminal consists of a tank farm and offshore facilities to receive, store, and load Arab Light (AL) and Arab Super Light (ASL) crude oil. There is also a refinery located in Yanbu City. It said the additional capacity would reinforce the reputation of Saudi Aramco as a reliable energy supplier to customers throughout the globe.
The company’s CEO, Amin Nasser, announced this week that the kingdom was ramping up its operations to maximize oil exports from the western port. The port is connected to the main oil fields at Abqaiq by a 750-mile pipeline stretching across the Saudi desert. Nasser said that within a matter of days, they would hit the maximum daily capacity of approximately 7 million barrels.
Analysts point out that historically the terminal has been used to export around 1 to 2 million barrels per day. In February, LSEG data showed exports of 1.1 million barrels per day, while in the first nine days of March, Reuters reports exports rose to 2.2 million barrels per day. By March 9, Yanbu had reached 5.9 million barrels, according to data released by the International Energy Agency.
“A massive armada is on its way to load the kingdom's crude from the Red Sea in a workaround to a standstill in the Strait of Hormuz,” reports Bloomberg. Its analysts report that Saudi Arabia has already hired at least six VLCCs, and they expect the actual number to be much higher. The Financial Times and Bloomberg speculated on Thursday, March 12, that it could easily reach 24 to 30 VLCCs heading to Yanbu.
As this massive effort builds momentum, security consultants Diaplous issued an alert saying the risk is elevated for a potential strike targeting Yanbu. Citing third-party and internal sources, it writes, “Current indications suggest a credible threat involving USV (sea drones), UAVs (aerial drones), missiles, or other forms of attack.”
Beyond the security concerns at the terminal, analysts also note that the tankers will have to transit the Bab al-Mandeb both to reach Yanbu and then laden to exit the Red Sea. The Houthis so far have not acted but have threatened to resume their attacks supporting Iran.
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Further, even if Yanbu reaches 7 million barrels per day, it is a fraction of the 18 to 21 million barrels of oil that transit the Strait of Hormuz on a normal day. The United Arab Emirates is also working to activate another smaller pipeline that would permit it to bypass the Strait by sending crude oil to the port of Fujairah. The International Energy Agency data shows an average of 2.4 million barrels per day for this route between March 4 and March 9.
Saudi Aramco, which ships most of its products to China, India, and South Korea, according to Reuters, asked all clients to submit plans by Friday, March 13, for their oil purchases in April. Aramco is preparing Yanbu as a long-term alternative, anticipating that the Strait of Hormuz will remain unavailable for some time to come.
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