Oman's Strategic Pivot: A New Anchor for Gulf Energy Security Amidst Regional Tensions

Once the seat of a vast maritime empire stretching from Mozambique and Zanzibar to Gwadar in Pakistan, modern Oman, though smaller in territorial reach, commands a crucial position overlooking the Strait of Hormuz. The nation has not only benefited economically from regional conflicts but has also actively pursued mediation, positioning itself as a potential cornerstone of Gulf security. While the ongoing war has led the IMF to revise down economic growth forecasts across the region, Oman is projected to achieve a 4.1% expansion. Its debt burden has significantly decreased from a concerning 68% of GDP in 2020 to a more manageable 35-36% of GDP. This economic resilience is bolstered by record oil and gas exports, driven by high global prices, alongside robust performance in its heavy industrial sector, including refined petroleum, fertilizers, and aluminum. Oman's vital role as a transit route for goods is evident in the constant flow of lorries to and from the UAE border. Further solidifying its logistical importance, construction began in May 2024 on Hafeet Rail, a project set to link the industrial city of Sohar with Al Ain and Abu Dhabi by the final quarter of 2027. This rail link is anticipated to be an invaluable artery for industrial inputs into the UAE and the export of finished products like steel and aluminum. By late next year, Oman is also expected to complete a direct connection to the GCC electricity grid, enhancing its capacity for power exchange and supporting its burgeoning renewable energy sector. Although Oman has not been entirely insulated from the conflict, with its oil terminals at Mina Al Fahal, Duqm, and Salalah, as well as Sohar, experiencing drone attacks, and several ships being struck in its territorial waters and within the Omani lane of the Strait of Hormuz, the sultanate has endured significantly less physical damage and disruption compared to its neighbors. The nation is also developing new energy routes. In 2016, plans were announced for a substantial 200-million barrel petroleum storage terminal at Duqm, a capacity exceeding that of Fujairah, a global refuelling hub. This initiative aimed to redirect crude oil exports from the congested northern coast to a new terminal situated further from Iran, while also offering other GCC nations an alternative in case of a Strait of Hormuz blockade. Kuwait Petroleum Corporation's investment in the new refinery at Duqm underscored this potential. However, the envisioned large-scale pipeline route initially seemed improbable, with only a modest 5.2 million barrels of crude storage built, primarily for the refinery. Recent geopolitical shifts, including drone and missile attacks and the US strategy to confront Iran, have altered this landscape. Saudi Aramco is now evaluating a pipeline to Duqm, a project estimated to cost $7 billion and span 1,000 to 1,200 kilometers through the Empty Quarter. This new hub offers the strategic advantage of bypassing both the Strait of Hormuz and the Bab Al Mandeb strait, particularly relevant as Saudi exports via its East-West pipeline to Yanbu have faced disruptions from Houthi and Iranian-allied attacks. A Kuwait Oil Company representative indicated that Kuwait is assessing potential routes to Duqm, possibly involving tanker transfers to Saudi or UAE ports for onward overland transport. OQ, Oman's state energy investor, plans to expand Duqm's storage capacity to 10 million barrels within three years, with a long-term goal of 40 million barrels, and is considering acquiring two tankers for floating storage. An agreement with a German company has also been signed to design a new marine bunkering site at the port of Shinas, positioning it as a significant ship refuelling hub, albeit smaller than Fujairah. Despite these developments, Oman's central role in the Gulf's evolving infrastructure presents three key risks. Firstly, its proximity to Iran means its facilities remain vulnerable to attacks should hostilities escalate, potentially placing Muscat in the direct line of fire if Tehran perceives the bypassing of the Strait of Hormuz as a provocation. Secondly, a potential de-escalation of regional tensions could render some of these new infrastructure projects less critical. Given that new pipelines can take three to five years to construct, shifts in regional politics and security dynamics might lead to project cancellations or underutilization, especially considering Oman's more limited investment capacity compared to its wealthier neighbors. Thirdly, several of these projects may compete with existing Gulf terminals. Concerns have been raised regarding Muscat's perceived closeness to Tehran at times, particularly during mediation efforts, and its stance on issues like tolls for the Strait of Hormuz. While other Gulf nations acknowledge Oman's strategic depth, they are wary of undermining their substantial, decades-long investments in hubs like Fujairah, Jebel Ali, and Yanbu, as well as newer projects. Historical precedents of sabotage, nationalization, and commercial failures in cross-border pipeline ventures across Iraq, Syria, Turkey, and Saudi Arabia serve as cautionary tales. As Saudi Energy Minister Prince Abdulaziz bin Salman has noted, successful multinational pipelines necessitate cooperation among all stakeholders, emphasizing that securing the Gulf's energy future through Oman requires not only robust infrastructure but also political harmony.