Suez Canal - Capacity
With only 1,000 feet at its narrowest point, the Canal is unable to handle the VLCC (Very Large Crude Carriers) and ULCC (Ultra Large Crude Carriers) class crude oil tankers. The Suez Canal Authority is continuing enhancement and enlargement projects on the canal, and extended the depth to 66 ft in 2010 to allow over 60 percent of all tankers to use the Canal.
Year-to-date through November of 2010, petroleum (both crude oil and refined products) as well as liquefied natural gas (LNG) accounted for 13 and 11 percent of Suez cargos, measured by cargo tonnage, respectively. Total petroleum transit volume was close to 2 million bbl/d, or just below five percent of seaborne oil trade in 2010. Almost 16,500 ships transited the Suez Canal from January through November of 2010, of which about 20 percent were petroleum tankers and 5 percent were LNG tankers.
The 200-mile long SUMED Pipeline, or Suez-Mediterranean Pipeline provides an alternative to the Suez Canal for those cargos too large to transit the Canal (laden VLCCs and larger). The pipeline has a capacity of 2.3 million bbl/d and flows north from Ain Sukhna, on the Red Sea coast to Sidi Kerir on the Mediterranean. The SUMED is owned by Arab Petroleum Pipeline Co., a joint venture between the Egyptian General Petroleum Corporation (EGPC), Saudi Aramco, Abu Dhabis National Oil Company (ADNOC), and Kuwaiti companies. SuMed has a carrying capacity of 2.5 millionbarrels a day and a disruption there would have a bigger impact on oil and shippingmarkets than a shutdown of the canal itself.
The majority of crude oil flows transiting the Canal travel northbound, towards markets in the Mediterranean and North America. Northbound canal flows averaged approximately 428,000 bbl/d in 2010. The SUMED pipeline accounted for 1.15 million bbl/d of crude oil flows along the route over the same period. Combined, these two transit points were responsible for over 1.5 million bbl/d of crude oil flows into the Mediterranean, with an additional 307,000 bbl/d travelling southbound through the Canal. Northbound crude transit represented a decline from 2008 when 940,000 bbl/d of oil transited northbound through the Canal and an additional 2.1 million travelled through the SUMED to the Mediterranean.
Total oil flows from the Suez Canal declined from 2008 levels of over 2.4 million bbl/d in 2008 to just under 2 million bbl/d on average in 2010. Flows through the SUMED experienced a much steeper drop from approximately 2.1 million bbl/d to 1.1 million bbl/d over the same period. The year-on-year difference reflects the collapse in world oil market demand that began in the fourth quarter of 2008 which was then followed by OPEC production cuts (primarily from the Persian Gulf) causing a sharp fall in regional oil trade starting in January 2009. Drops in transit also illustrate the changing dynamics of international oil markets where Asian demand is increasing at a higher rate than European and American markets, while West African crude production is meeting a greater share of the latters demand. At the same time, piracy and security concerns around the Horn of Africa have led some exporters to travel the extra distance around South Africa to reach western markets.
Unlike oil, LNG transit through the Suez Canal had been on the rise since 2008, with the number of tankers increasing from approximately 430 to 760, and volumes of LNG traveling northbound (laden tankers) increasing more than four-fold. Southbound LNG transit originates in Algeria and Egypt, destined for Asian markets while northbound transit is mostly from Qatar and Oman, destined for European and North American markets. The rapid growth in LNG flows over the period represents the startup of five LNG trains in Qatar in 2009-2010. The only alternate route for LNG tankers would be around Africa as there is no pipeline infrastructure to offset any Suez Canal disruptions. Countries such as the United Kingdom and Italy received more than half of their total LNG imports via the Suez Canal in 2009 while over 90 percent of Belgiums LNG imports transited through the canal.
Oil prices shot up to above $100 per barrel in reaction to the Egyptian unrest due to fears that tanker traffic through the Suez Canal, a key oil and LNG transit route, might be disrupted, and over concerns of turmoil elsewhere in the oil-rich Middle East. Experts say the likelihood that Egypt would close the canal is low. There has been no threat of closure, and there probably won't be. Egypt deployed troops 28 January 2011 to help protect the SuMed pipeline transporting crude alongside the Suez Canal, while the facility's own guards doubled their number of sentry posts.
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