Traffic Jams1 March 2006
The world economy continues to rely on oil, so sea freight and pipelines maintain their vital importance to supply. However, geography dictates that the flow of traffic is not as smooth is we might hope. The Energy Information Administration looks at the key world oil transit chokepoints.
A significant volume of oil is traded internationally by oil tankers and oil pipelines. About two-thirds of the world's oil trade (both crude oils and refined products) moves by tanker and, of that trade, about 43 million barrels per day is crude oil. Tankers have made global (intercontinental) transport of oil possible, as they are low-cost, efficient and extremely flexible.
Oil transported by sea generally follows a fixed set of maritime routes. Along the way, tankers encounter several geographic 'chokepoints', or narrow channels.
Chokepoints are critically important to world oil trade because so much oil passes through them, yet they are narrow and theoretically could be blocked – at least temporarily. In addition, chokepoints are susceptible to pirate attacks and shipping accidents in their narrow channels.
Pipelines, on the other hand, are the mode of choice for transcontinental oil movements. Pipelines are critical for landlocked crudes and also complement tankers at certain key locations by relieving bottlenecks or providing shortcuts.
Pipelines come into their own in intra-regional trade, because they are at least an order of magnitude cheaper than any alternative such as rail, barge or road, and because political vulnerability is a small or non-existent issue within a nation's border or between neighbours such as the USA and Canada.
Pipelines are also an important oil transport mode in mainland Europe, although the system is much smaller, matching the shorter distances.
Major chokepoints of the world include:
Closure of the Bab el-Mandab could keep tankers from the Persian Gulf from reaching the Suez Canal / Sumed Pipeline complex, diverting them around the southern tip of Africa (the Cape of Good Hope). This would add greatly to transit time and cost, and effectively tie up spare tanker capacity.
The Bab el-Mandab could be bypassed (for northbound oil traffic) by the East-West oil pipeline, which traverses Saudi Arabia and has a capacity of about 4.8 million barrels per day (mb/d). However, southbound oil traffic would still be blocked.
In addition, closure of the Bab el-Mandab would effectively block non-oil shipping from using the Suez Canal, except for limited trade within the Red Sea region.
The ports of the Black Sea, along with those in the Baltic sea, were the primary oil export routes of the former USSR, and the Black Sea remains the largest outlet for Russian oil exports.
Exports through the Turkish straits have grown since the break-up of the USSR in 1991, and there is growing concern that projected Caspian Sea export volumes exceed the ability of the Turkish straits to accommodate the tanker traffic.
Turkey is concerned that the projected increase in large oil tankers would pose a serious threat to navigational safety and the environment.
The largest tankers that can pass through the Bosporus are the Suezmax class tankers (120,000–200,000 dead weight tons).
STRAIT OF HORMUZ
By far the world's most important oil chokepoint, the strait consists of two mile-wide channels for inbound and outbound tanker traffic, as well as a two-mile wide buffer zone.
Closure of the Strait of Hormuz would require use of longer alternate routes (if available) at increased transportation costs. Such routes include the 5mb/d capacity Petroline (East-West Pipeline) and the 290,000-barrel per day Abqaiq-Yanbu natural gas liquids line across Saudi Arabia to the Red Sea.
In addition, the 1.65mb/d Iraqi Pipeline across Saudi Arabia (IPSA) also could be reopened, the 0.5mb/d Tapline to Lebanon could be reactivated, and more oil could be pumped north to Ceyhan (Turkey) from Iraq if security conditions improve.
The Strait of Malacca, linking the Indian and Pacific oceans, is the shortest sea route between the Persian Gulf and Asian markets, including three of the world's most populous countries – India, China and Indonesia – and is considered to be the key chokepoint in Asia.
The narrowest point of this shipping lane is the Phillips channel in the Singapore Strait, which is only 1.5 miles wide at its narrowest point. This creates a natural bottleneck, with the potential for a collision, grounding or oil spill (piracy is also a regular occurrence in the Singapore strait).
If the strait were closed, nearly half of the world's fleet would be required to sail further, generating a substantial increase in the requirement for vessel capacity. All excess capacity of the world fleet might be absorbed, with the effect strongest for crude oil shipments and dry bulk such as coal.
Closure of the Strait of Malacca would immediately raise freight rates worldwide. More than 50,000 vessels per year transit the Strait of Malacca. With Chinese oil imports from the Middle East increasing steadily, the Strait of Malacca is likely to grow in strategic importance in coming years.
The USA is the dominant country of origin for all commodities transiting the Panama Canal, and it is also the single largest destination. However, the USA is not heavily reliant on the Panama Canal for its petroleum imports.
In 2004, slightly more than 1% of total US petroleum imports (crude oil plus petroleum products) transited the canal en route to American ports. On the whole, very little crude oil passes through the canal to the USA (55,000 barrels per day or 0.6% in 2004).
As a share of US imports, however, the canal is more important for petroleum products. In 2004, a little over 4% of all US imported petroleum products came to the USA through the Panama Canal.
The Trans-Panama pipeline (Petroterminal de Panama SA) is located outside the former Canal Zone, near the Costa Rican border, and runs from the port of Charco Azul on the Pacific Coast (near Puerto Armuelles, southwest of David) to the port of Chiriqui Grande, Bocas del Toro on the Caribbean. It ships over 100,000 barrels per day of Ecuadorian crude oil to US Gulf ports.
RUSSIAN OIL AND GAS PIPELINES / EXPORT PORTS
Russia is a major supplier of crude oil and natural gas to Europe. All of the ports and pipelines are operating at or near capacity, leaving limited alternatives if problems arise at Russian export terminals.
With a windfall in oil export tariffs over the past several years, Transneft, the state oil transport monopoly, has taken steps to upgrade the country's pipeline system, with an emphasis on building new export pipelines to increase and diversify export routes for oil exporters. Nearly 80% of Russia's natural gas exports to Europe are routed through Ukraine.
In an effort to diversify its export routes, as well as reach new markets, Russia is expanding its natural gas pipeline system. The Blue Stream pipeline to Turkey is the centrepiece of Russia's export diversification strategy. Construction on the 565 billion cubic feet capacity pipeline, which consists of twin pipelines laid on the bottom of the Black Sea, was completed in October 2002.
SUEZ / SUMED
In 2004, about 3,300 oil tankers passed through the Suez Canal, an increase of almost 20% in tanker traffic from 2003 levels. Total oil shipments increased from 1.4 to 1.7mb/d between 2003 and 2004.
Oil historically has represented about 25% of Suez Canal revenues. Currently, the Suez Canal can accommodate Suezmax class tankers with drafts of up to 62ft and 200,000 deadweight-ton maximum cargos.
In 2001, the Suez Canal Authority (SCA) launched a five-year programme to reduce tanker transit times (from 14 hours to 11 hours) through the Canal.
The SCA also is moving ahead with a ten-year project to widen and deepen the Canal, so that by 2010 it can accommodate Very Large Crude Carriers or VLCCs (200,000–300,000 dead weight tons) and Ultra Large Crude Carriers or ULCCs (up to 350,000 dead weight tons).
The Sumed pipeline, with a capacity of about 2.5 million barrels per day, links the Ain Sukhna terminal on the Gulf of Suez with Sidi Kerir on the Mediterranean.
Sumed consists of two parallel 42in lines, and is owned by Arab Petroleum Pipeline Co, a joint venture of EGPC (50%), Saudi Aramco (15%), Abu Dhabi's ADNOC (15%), three Kuwaiti companies (15% total), and Qatar's QGPC (5%).
The pipeline has been in operation since January 1977, and has served as an alternative to the Suez Canal in transporting loads from tankers that are too large to pass fully laden through the canal.