Kuwait may increase the volume of oil it stockpiles in the Far East in response to renewed Iranian threats to close the Strait of Hormuz. The Gulf state, which ships all its crude exports through the strait, is assessing plans to build additional oil storage facilities in Asian countries such as Vietnam and China where it is developing refineries, Reuters said, citing unidentified industry and diplomatic sources. "Storing oil there is one of the options being considered," a senior western diplomat said. His comments today followed broadcast statements by Mohammed Ali Jafari, the commander-in-chief of the Revolutionary Guards of Iran, who said the country could easily close the key oil shipping route "on an unlimited basis" if it were attacked over its nuclear programme. "In view of the proximity of the Strait of Hormuz... to our shores, this distance is within the range of an assortment of weapons and its closure for us is very feasible, and we face no limitations from the point of view of time," Iranian state radio quoted him as saying. Mr Jafari also said Iran's military had tested a new naval weapon with a range of more than 300km - nearly six times the width of the strait at its narrowest point. The announcement, reported by the state-run Islamic Republic News Agency, came after Iran failed to meet the latest deadline set for it to reply to an offer from the US, Russia, China, France, the UK and Germany of a package of economic and diplomatic incentives in exchange for suspending its controversial uranium enrichment programme. Some western governments see the programme as a cloak for developing nuclear weapons, a charge Iran denies. On Sunday, the US said it wanted a diplomatic solution to the dispute, but it has not ruled out military action. It said Tehran had left the UN Security Council no option but to impose more stringent sanctions on Iran. The Strait of Hormuz, between Iran's southern coast and the Omani territory of Mussandam, is the seaway through which 40 per cent of internationally traded oil and substantial volumes of liquefied natural gas (LNG) travel en route to the Indian Ocean. Far Eastern markets would be especially hard hit if those shipments were disrupted. As a result, demand has been growing for joint stockpiling of oil by the Gulf's producing states and their Asian customers. China, the world's second-biggest oil consumer after the US, has started to build strategic oil stocks and plans to develop storage capacity for about 100 million barrels by the end of this year. Kuwait already has a joint storage deal with South Korea for two million barrels of crude. In June, Saad al Shuwaib, the head of Kuwait Petroleum Corporation, a state-owned entity, said Kuwait was developing precautionary plans with other Gulf states to continue oil exports if Iran closed the strait. He did not elaborate. Parliamentary deputies in Kuwait have also called on the government to prepare for a military conflict in the Gulf. Alternative plans for Gulf oil exports, however, might take many months or even years to implement. Kuwait's refinery project in Vietnam, for instance, is five years away from completion. A UAE project to build a pipeline to carry half the state's crude exports to a Fujairah port will not be completed until 2010. The International Energy Agency, the energy adviser to 27 industrialised countries, recently estimated that 15 million barrels per day (bpd) of oil passed through the Strait of Hormuz. That includes six million bpd of crude exports from Saudi Arabia, 2.5 million bpd from Iran, 2.3 million bpd from the UAE, 1.7 million bpd from Kuwait, 1.6 million bpd from Iraq, 0.7 million bpd from Qatar and a combined 1.6 million bpd of petroleum products from Gulf countries. Qatar and the UAE also respectively ship 31 million and 5.5 million tonnes of LNG annually through the strait. Saudi Arabia and Iran also each import about 130,000 bpd of oil products through Gulf ports, and would be unable to meet domestic demand if the shipments were halted. The only existing alternative routes for oil shipments from the Gulf are Saudi Arabia's east-west crude pipeline from its eastern oilfields to the Red Sea Yanbu terminal, and possibly Iraq's northern oil pipeline through Turkey. The underutilised Saudi line has capacity to handle about 2.5 million bpd of crude exports from the kingdom that are currently shipped through the Gulf. Oil prices yesterday rose to an intra-day high of US$126.35 a barrel, partly over concerns about Iran. They later retreated to about $124.50 a barrel. @Email:tcarlisle@thenational.ae
Kuwait may boost stockpiled oil
Gulf state assesses plans to stockpile oil in Asian countries following threats to close the Strait of Hormuz.
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