Oil Business: It’s All in the Pipeline

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Oil refineries

Producing oil or extracting natural gas from the ground is only part of the problem; the other part is getting the product to market in a timely and cost-effective manner. For the oil-producing countries of the Gulf, the task was relatively simple. From Kuwait in the northern Gulf to Oman in the south, they all have access to deep-water ports. All that was needed were pipelines, mostly across flat desert lands to reach the oil terminals on the sea and from there, on to a fleet of supertankers ready to carry the precious cargo to the world markets.

But for the oil producing countries of the Caspian Sea region and of Central Asia, getting their product to market meant getting it from the source to a port first, or better yet, into a pipeline which could take it straight to other land locked countries in Eastern Europe and even beyond.

Pipelines for Iran — even though the country has several hundreds of miles of coast on the Gulf and a number of good ports — the Islamic republic is looking at building pipelines to get away from being entirely dependent on transiting all its petrochemical production through the strategic and narrow Straits of Hormuz, where the U.S. Navy can shut down the passageway anytime they choose to do so if it ever came to a confrontation between Iran and the United States. Such a move would strangle Iran economically. In this case, the pipelines offer Iran a second option on ways in which it can safely export its oil.

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