Suez Canal blockage highlights the importance of global pipelines

The mega container ship Ever Given has been stuck in the Suez Canal for several days, impacting on global oil shipping
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The blockage of the Suez Canal by the stranded mega-container ship Ever Given has made headline news around the world as global trade grinds to a halt.

According to data from shipping experts Lloyd’s List, an estimated £7 billion worth of good is being held up every day. That equates to £290 million every hour being lost because the waterway which links the Red Sea and the Mediterranean is now impassable.

Tracking from Lloyd’s List reveals that as of Friday 26th March, there were more than 160 vessels held up at either end of the canal. Included in that number were 41 bulk carriers and 24 crude oil tankers.

It is estimated that at least a third of the world’s daily oil supply is now stuck at sea, unable to pass through the Suez Canal from Africa to Europe and beyond because of the blockage. On Wednesday, oil prices spiked by around six percent as a result.

Initially, it was believed that engineers would be able to refloat and dislodge the Ever Given within a couple of days. The BBC have since reported that unblocking the Suez Canal has become much more challenging than first thought.

Guy Platten, the secretary general of the International Chamber of Shipping, told the Today programme that the ship was “hard fast aground”. It could now take weeks to remove the blockage.

Peter Berdowski, chief executive of Dutch dredging and heavylift company Boskalis, told the Netherlands’ Nieuwsuur television programme: “Bringing in all the equipment we need, that’s not around the corner.”

As a result, shipping companies are now beginning to avoid the Suez Canal, instead diverting their ships around the southern tip of Africa which adds about 3,500 miles to the journey and up to 12 days.

The disruption caused by the Ever Given blockage of the Suez Canal could not have come at a better time for the pipeline industry.

One of President Biden’s first acts was to kill off the controversial Keystone XL Pipeline, a clear sign of the new White House incumbent’s positions on pipelines.

Yet as a third of the world’s oil sits in tankers unable to pass through the Suez Canal, the strategic importance of pipelines to the global economy becomes clear.

In September 2020, Israel and several Arab States signed the Abraham Accords, normalising relations between Israel and its Middle Eastern neighbours.

One of the benefits of the accords was the energy security that cooperation between neighbours could offer. Oil from UAE, Qatar, Bahrain, Kuwait, Saudi Arabia and some Iraq ports previously had to bypass Israel and make its way to the Red Sea and through the Suez Canal to reach Europe.

Now, pipelines can carry oil and natural gas from the Middle East via Israel and straight to the Mediterranean – a quicker and easier route which is not at the mercy of disruption caused by international shipping.

As soon as the Abraham Accords were signed, the UAE reached agreement with Israel to send oil through Israel’s Eilat-Ashkelon pipeline, running from the city of Eilat on the Red Sea to Ashkelon on the Mediterranean, completely bypassing the Suez Canal.

President Trump’s US Energy Secretary Dan Brouillette spoke of the benefits of pipeline agreements between nations in the Middle East at a December meeting in Abu Dhabi with ministers from the United Arab Emirates, Bahrain and Israel.

“If we can move natural gas to the coast of Egypt or the coast of Israel, then we are moving it through the Mediterranean rather than going through some of the other choke points that we are all accustomed to,” said Mr Brouillette.

“Part of the conversation we’re having with the Abraham Accords is to look for alternatives to shipping, so that’s why these pipelines are so important.”

As the world’s oil supplies potentially face the prospect of weeks waiting to pass through the Suez Canal or a 3,500 mile diversion, how important is now obvious as a far more reliable alternative to shipping.

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