Saudi Aramco is offering some Asian refineries crude oil deliveries outside the Strait of Hormuz via ship-to-ship transfers. The measure aims to limit risk for Saudi Arabia's exports amid ongoing security and shipping concerns in the region.
According to trade sources, the company is in talks to supply "Arab Medium" and "Arab Heavy" grades through "ship-to-ship" operations off Fujairah in the United Arab Emirates. Some of the cargoes being discussed are for September loading.
Separate offers have been made to transfer oil off Sohar in the Gulf of Oman. Both Fujairah and Sohar are located outside the Strait of Hormuz, allowing buyers to receive the commodity without sending their own tankers through the riskiest part of the route.
How the scheme works
In a "ship-to-ship" operation, cargo is transferred between two tankers at sea. In this case, one vessel transports oil produced or loaded in the Persian Gulf region to an area outside the Strait of Hormuz. There, the commodity is transferred to another tanker that continues to the final customer.
This scheme can reduce the direct exposure of shipowners and buyers to risks in the strait. However, it requires additional vessels, coordination, insurance coverage, and time, which increases logistics costs.
Satellite data for the period from August 12 to 16 shows that three very large tankers loaded about 2 million barrels of oil each from the Juaymah and Ras Tanura terminals. Thus, the total volume of these three cargoes reaches approximately 6 million barrels.
The ADNOC model
A similar model is already being used by Abu Dhabi National Oil Co. The company offers buyers options for oil delivery to storage facilities in Fujairah, Zirku and Das islands, as well as via ship-to-ship transfer in the area between Fujairah and Sohar or in Malaysia.
Since the beginning of June, ADNOC has sold over 100 million barrels of crude oil through a series of spot tenders, according to market data. Transfers and exports through Fujairah allow the emirate to partially bypass the Strait of Hormuz.
The existing "Habshan–Fujairah" pipeline has a maximum capacity of up to about 1.8 million barrels per day. The UAE is also accelerating a second pipeline, which is expected to double export capabilities through Fujairah after its anticipated commissioning in 2027.
Pressure on Saudi exports
Initially, Saudi Arabia tried to redirect some of its exports to the Red Sea port of Yanbu. It is connected to oil fields in the eastern part of the country via the "East–West" pipeline, which has a maximum capacity of up to about 7 million barrels per day.
This alternative also faces risks after Yemen's Houthis announced a naval blockade against Saudi Arabia. The combination of disruptions in the Strait of Hormuz and threats to shipping in the Red Sea complicates deliveries to key markets, including India.
Saudi Aramco has not publicly commented on the specific offers. For oil markets, such alternative routes are important because Middle Eastern producers continue to direct significant volumes to global trade, which limits the pressure for a sharper rise in the price of the commodity.