Saudi Arabia has enough spare crude capacity to replace much of the heavy oil exported by Iran, which faces a European Union import ban, according to the Economist Intelligence Unit.
Saudi Arabia pumps about 9.8 million barrels a day, including oil from the partitioned zone the kingdom shares with Kuwait, and it still has 2.5 million barrels a day of spare capacity, said Robert Powell, a senior economist at the London-based research company. That’s about the same amount that Iran exports, he said today in an e-mailed response to questions.
Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries, increased exports by 721,000 barrels to 7.8 million barrels a day in November, according to data submitted by governments to the Joint Organization Data Initiative. Iran, the group’s second-biggest producer, raised its exports by 5,000 barrels in November to 2.02 million barrels a day, the data showed.
The EU announced on Jan. 23 it would ban oil imports from Iran starting July 1 because of concerns the country is developing nuclear weapons. The EU embargo will “bear bitter fruit,” Iran’s Foreign Affairs Ministry said this week.
Europe, collectively the second-largest buyer of Iranian oil after China, imported 865,000 barrels of oil a day from Iran in November, Abdalla el-Badri, secretary-general of OPEC, said on Dec. 7. The EU wouldn’t be able to replace Iranian crude oil easily, he said.
Sanctions targeting Iran’s oil exports may prompt the country to close the Strait of Hormuz to shipping, Iranian Vice-President Mohammad Reza Rahimi said on Dec. 27. About 20 percent of globally traded oil passes through the waterway at the mouth of the Persian Gulf.
In the event of a disruption to traffic in the strait, Saudi Arabia could shift some of its crude from the country’s Gulf coast to export terminals on the Red Sea. The kingdom has internal pipelines with a combined capacity of some 4.5 million barrels a day that can transport oil westward to the port of Yanbu, Powell said.
Still, Saudi Arabia would need to “ring-fence” about half of that 4.5 million barrels a day for domestic use, he said.