OIL'S GLOBAL SHIPPING BOTTLENECKS
June 06 - 12, 2005
More than 35 million barrels of oil is transported by ship and pipeline every day. Much of this oil passes through bottlenecks that are narrow and hazardous. Some of these choke points are even known to be targeted by pirates or terrorists. It takes only one such incident to upset the balance of global oil trade. Even a small incident could set in play a domino effect, hitting shipping routes, travel times, and delivery schedules.
PANAMA CANAL AND TRANS-PANAMA PIPELINE
Location: Panama; connects the Pacific Ocean with the Caribbean Sea and Atlantic Ocean.
Oil Flows: 0.4 million barrels a day.
Concerns: The Panama Canal's capacity is restricted because it cannot handle two-way traffic. A long-term program is under way to widen the narrow, eight-mile stretch of Gaillard Cut to allow unrestricted two-way traffic. Much of the traffic through the canal moves between Asia and the east coast of the US, while the second-largest volumes are represented by trade between Europe and the west coast of the US and Canada.
SUEZ CANAL AND SUMED PIPELINE
Location: Egypt; connects the Red Sea and Gulf of Suez with the Mediterranean Sea.
Oil Flows: 3.8 million barrels a day estimated by the end of 2003. Of this total, the Sumed Pipeline transported 2.5 million barrels of oil northbound, nearly all from Saudi Arabia.
Destination: Predominantly Europe also United States.
Concerns: Closing of this route would divert tankers around the southern tip of Africa, adding greatly to transit time and effectively tying up tanker capacity.
Location: Djibouti/Eritrea/Yemen; connects the Red Sea with the Gulf of Aden and the Arabian Sea.
Oil Flows: 3.2-3.3 million barrels a day.
Destination: Europe, United States, Asia
Concerns: Any disturbance could keep tankers from the Persian Gulf from reaching the Suez Canal/Sumed Pipeline complex, diverting them around the southern tip of Africa. This would add greatly to transit time and cost, and effectively tie up spare tanker capacity. Security remains a major concern of foreign firms doing business in the region. The French-flagged tanker Limburg was attacked off the coast of Yemen by terrorists in October, 2002. The Canadian oil company Nexen, which operates the ash-Shihr oil export terminal, agreed in January, 2003, to provide assistance to the Yemeni government in improving security.
RUSSIAN OIL AND GAS EXPORT PIPELINES/PORTS
Locations of pipelines: Russian oil and gas exports are shipped via pipelines that pass through Ukraine, Belarus, Hungary, Slovakia, the Czech Republic, and Poland.
Locations of oil export ports: Novorossiisk, Primorsk, Ventspiis, Odessa
Destination: Eastern Europe, Netherlands, Italy, Germany, France, other Western Europe locations.
Concerns: 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.
Location: Turkey; this 28km long waterway divides Asia from Europe and connects the Black Sea with the Mediterranean Sea.
Oil Flows: 3.0 million barrels a day, nearly all southbound; mostly crude oil and some oil products.
Destination: Western and Southern Europe.
Concerns: Turkish Straits are one of the world's busiest and most difficult-to-navigate waterways — only half a mile wide at their narrowest point. Exports through the Turkish Straits have grown since the breakup of the Soviet Union, and there is growing concern that projected Caspian Sea export volumes exceed the ability of the Turkish Straits to accommodate the tanker traffic.
Location: Oman/Iran; connects the Persian Gulf with the Gulf of Oman and the Arabian Sea
Oil Flows: 15-15.5 million barrels a day
Destination: Japan, United States, Western Europe
Concerns: The Strait, the world's most important oil choke point, consists of two-mile wide channels for inbound and outbound tanker traffic, as well as a two-mile wide buffer zone. Any potential closing would require use of longer alternate routes at increased transportation costs. Such routes might include moving oil by pipelines across Saudi Arabia to the Red Sea.
STRAIT OF MALACCA
Location: Malaysia/Singapore; connects the Indian Ocean with the South China Sea and the Pacific Ocean.
Oil Flows: 11 million barrels a day
Destination: Japan, South Korea, China, other Pacific Rim countries.
Concerns: The Strait of Malacca, linking the Indian and Pacific oceans, is the shortest sea route connecting three of the world's most populous countries — India, China, and Indonesia — and considered to be the key choke point in Asia. The narrowest point of this shipping lane is only 1.5 miles wide, with the potential for a collision, grounding, or oil spill. If the strait were closed, nearly half of the world's fleet would be required to sail further
HOT SPOTS: GLOBAL OIL TRADE'S TROUBLED REGIONS
Trade sanctions were lifted in May, 2003, but the restoration of Iraqi production to prewar levels is likely to take time due to such problems as security, infrastructure damage, looting, and electricity shortages. Violence has continued, with oil production and exports frequently affected. According to the Oil and Gas Journal, Iraq contains 1.15 billion barrels of proven oil reserves, the third-largest in the world (behind Saudi Arabia and Canada). Estimates of Iraq's oil reserves and resources vary widely, however, given that only 10 percent or so of the country has been explored.
As the Caspian Sea becomes a significant oil and gas exporting area, the Caucasus is potentially a major world oil and gas transit centre. Exporting this oil and gas to world markets, however, is complicated by geography and geopolitics. The region's existing export infrastructure sits dangerously close to ethnic conflicts in Chechnya, Georgia, and the autonomous enclave of Nagarno-Karabakh. Azerbaijan's northern "early oil" pipeline, which can carry 100,000 barrels a day, passes through Chechnya en route to the Black Sea port of Novorossiisk.
The second-largest proven crude oil reserves in the Western Hemisphere (after Canada) and a major oil exporter to the United States. Venezuela is experiencing considerable social, economic, and political difficulties. Continued instability has had serious implications for the country's energy sector, its state oil company, Petroleos de Venezuela, and world oil markets. Venezuela produces about 2.8 million barrels of oil.
US economic sanctions and diplomatic pressure are complicating Iran's efforts aimed at attracting needed investment to its oil and gas industries. Continuing points of contention, from questions about Iran's pursuit of a nuclear power capability to Iranian purchases of missiles and other military equipment from North Korea, Russia, and elsewhere have complicated matters. The United States has had no diplomatic ties with Iran since 1979, after Islamic militants stormed the US Embassy and held 52 Americans hostage for 444 days.
Direct diplomatic relations between the United States and Libya were restored in June, 2004, after 24 years, and with the relaxation of sanctions, numerous oil and gas companies are eager to expand operations and/or re-enter the country, with its estimated 36 billion barrels of high-quality oil reserves as well as geographic proximity to Western markets. Occidental Petroleum, ConocoPhillips, Marathon Oil, and Amerada Hess have begun negotiations with Libya's National Oil Corp. to resume operations from which they withdrew in 1986, when US sanctions forced their departure.
With 5,000 security guards, the Saudi National Guard, regular Saudi military forces, and Interior Ministry officials on the job, the head of Aramco says "there is nowhere in the world that oil facilities are protected as well as in Saudi Arabia." Saudi Arabia maintains crude oil production capacity of about 10.0-10.5 million barrels a day, while producing about 9.5 million barrels a day. This leaves Saudi Arabia with surplus production capacity to make up for supply losses elsewhere in the world and to help maintain oil prices at desired levels.