Saudi Arabia’s long route to Asian buyers carries a measurable cost: about $5 per barrel in added freight, fuel, insurance and pipeline charges. Its larger value is less visible. When the Strait of Hormuz and the southern Red Sea are unreliable, an expensive route can keep crude moving while a faster one is unavailable.
That trade-off is reshaping how Saudi oil logistics are valued. Aramco is considering a separate pricing mechanism for crude loaded at Egypt’s Mediterranean port of Sidi Kerir, where transport costs differ sharply from the usual route to Asia. The proposal reflects a practical problem: the same grade of oil can carry different delivery costs depending on where it is loaded and how it reaches the buyer.
A backup route with a long way around
Saudi Arabia’s East-West Pipeline moves crude from producing areas in the kingdom’s east to Yanbu on the Red Sea, bypassing Hormuz. Aramco said the pipeline reached its full capacity of 7 million barrels per day in the first quarter of 2026. Roughly 2 million barrels per day supply refineries in western Saudi Arabia, leaving about 5 million barrels per day available for export.
Yanbu solves one bottleneck, but not every one. Asian-bound cargoes would typically travel south through the Red Sea and pass Bab el-Mandeb. Houthi threats and attacks have made that passage uncertain, prompting a longer alternative through Egypt.
The route still uses the northern Red Sea between Yanbu and Ain Sokhna. From there, crude crosses Egypt through the SUMED pipeline to Sidi Kerir, enters the Mediterranean, exits through Gibraltar and travels around the Cape of Good Hope before heading east across the Indian Ocean. That’s a substantial detour for oil that began relatively close to Asian markets.
Reuters estimates the trip to Asia can stretch from about 19 days to 48 days. Tanker fuel costs can rise from roughly $1.26 million to $2.87 million, before about $1 million in Suez Canal fees. Very large crude carriers may also have to unload part of their cargo into SUMED to transit the canal, then reload at Sidi Kerir.
For a two-million-barrel shipment, an estimated $5 per barrel in additional costs approaches $10 million. The precise burden will depend on the voyage and the charges involved, but the direction is clear: route flexibility comes at a price.
The value depends on the alternative
Judged against the shortest route in normal conditions, the Cape journey looks inefficient. But the relevant comparison during a disruption is not always a long voyage versus a short one. It can be a long voyage versus a delayed or unavailable cargo.
That distinction matters for sellers, buyers and refiners. An added $5 on an $85 barrel raises delivered costs, but a severe supply interruption can bring much larger expenses through lost volumes, tighter refinery supply and market price spikes. Saudi exports fell by around 2.4 million barrels per day year over year during the recent disruption, while Gulf exports fell to about 36% of pre-war levels.
Nor does a formal reopening of a shipping lane automatically restore confidence. Mines, drone attacks, vessel seizures or credible threats can increase insurance costs and lead shipowners to delay voyages. Red Sea attacks have shown how comparatively inexpensive weapons can disrupt commercial traffic. For oil traders, a route’s practical reliability can matter as much as its nominal availability.
Saudi Arabia has maintained several layers of export capacity: the East-West Pipeline, storage, alternative terminals and an international logistics network. Aramco reported 98.4% supply reliability in the second quarter of 2026 despite the regional disruption. The reroute helps explain what that reliability can require: additional infrastructure and higher costs when normal shipping corridors are exposed.
The route is akin to spare capacity elsewhere in an industrial system. It can sit unused or appear costly when the main channel works smoothly, yet become valuable when that channel fails. This doesn’t make every backup route economical in every market. It does change the calculation for a producer whose exports depend heavily on vulnerable maritime passages.
Pricing may start reflecting the route
Aramco’s possible Sidi Kerir pricing formula would make delivery logistics more explicit. Official selling prices, or OSPs, are monthly differentials set against regional crude benchmarks. They commonly account for crude quality and market conditions. A separate formula for oil loaded in Egypt could also reflect the extra expense of moving it through the Mediterranean and around Africa.
That pricing distinction need not apply permanently to every cargo. If Hormuz and Bab el-Mandeb become dependable again, Asian refiners have little reason to pay for an unnecessarily long voyage. Still, the infrastructure retains value even when it isn’t operating at full use: it gives Saudi Arabia another way to reach customers during a disruption.
Saudi Arabia is considering adding as much as 2 million barrels per day of East-West Pipeline capacity. That prospect, alongside the use of Yanbu, SUMED, Suez and Mediterranean storage, suggests a broader effort to widen the country’s export options. The investment question is whether the value of lower disruption risk can justify infrastructure that may be underused in calmer periods.
The same calculation could influence decisions beyond Saudi Arabia. Buyers may place greater value on suppliers with more than one workable export route, while terminals, storage and pipelines once viewed mainly through day-to-day throughput may gain value as backup assets. Those choices can raise the structural cost of delivering some barrels even if benchmark prices fall.
Resilient exports don’t settle the demand question
Saudi Arabia still faces a longer-term challenge that improved oil logistics can’t resolve. Efficiency gains, electric vehicles, alternative fuels and climate policy may gradually constrain oil demand growth. More reliable exports can protect revenue from disruption, but they don’t guarantee that global buyers will continue absorbing increasing volumes.
Riyadh’s Vision 2030 program aims to broaden the economy through tourism, logistics, mining, manufacturing, technology and renewable energy. The kingdom’s Vision 2030 annual report says non-oil activities made up 55% of real GDP in 2025, and non-oil government revenue had risen substantially since 2016.
Those figures show progress, but they don’t mean the economy has moved beyond oil. Crude remains central to exports and government finances, and oil revenues help fund many non-oil investments. The task is twofold: protect the income that oil still generates while building sources of growth that can eventually carry more of the economy.
The Cape route’s added cost is visible in the freight bill. Its less tangible return is the ability to deliver crude when the shortest paths are disrupted. For Saudi Arabia, the clearest takeaway is that export resilience now has a price—and the cost of a barrel may increasingly depend on the route it can actually take.
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Leon Stille has a background in energy sciences (MSc and BSc) and is pursuing a PhD in energy policy. He currently runs his own company,…
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