Saudi Oil Tankers Face $2.6 Million Extra Cost Per Voyage Amid Red Sea, Hormuz Disruptions

Disruptions at two critical maritime chokepoints are forcing Saudi Arabia to reroute its oil tankers on a significantly longer and more expensive journey to reach key Asian markets. Attacks by Houthi militants in the Red Sea and previous tensions in the Strait of Hormuz have made the kingdom's primary export routes unsafe, prompting a costly shift in logistics.

Rerouting Adds Significant Costs and Delays

To bypass the Bab el-Mandeb and Hormuz straits, tankers carrying Saudi crude destined for Asia must now travel north through the Suez Canal and circumnavigate Africa. This detour dramatically increases both transit time and operational expenses for each voyage.

According to shipping data from Kpler and LSEG, the alternative route extends the journey to Taiwan from 19 days to 48 days. This adds approximately a month at sea and incurs substantial new costs:

• Fuel Costs: More than double from $1.26 million to $2.87 million per tanker, based on Reuters calculations using LSEG data.
• Suez Canal Fees: An additional $1 million in transit fees, according to LSEG.

In total, the rerouting adds approximately $2.6 million in costs for a single tanker voyage to Asia.

Logistical Hurdles and Potential Solutions

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The logistical shift is complicated by the fact that the majority of Saudi Arabia's oil buyers are now in Asia, unlike in the 1970s and 1980s when its primary customers were in Europe and the United States. The route around Africa is highly inefficient for Asian deliveries.

Furthermore, large oil tankers cannot transit the Suez Canal fully loaded due to depth restrictions, according to analysis from Energy Aspects. To manage this, Saudi Arabia can utilize the Sumed pipeline, a 320-kilometer link that bypasses the canal by connecting the Ain Sokhna terminal on the Red Sea to Sidi Kerir on the Mediterranean. Tankers can partially unload into the pipeline and top up their cargo in the Mediterranean.

However, the Sumed pipeline has a capacity of 2.5 million barrels per day (bpd), which can only accommodate a portion of the kingdom's total exports of 7 million bpd.

Geopolitical Context

The move to reroute shipments follows a series of escalating security threats. In February, Saudi Arabia shifted most of its exports from the Persian Gulf to its Red Sea ports after a U.S.-Iran conflict disrupted the Strait of Hormuz. This week, Houthi attacks on ships in the Red Sea rendered that workaround unsafe, forcing the latest pivot to the Suez Canal and the lengthy route around Africa.