WATCHING THE WORLD: Egypt’s rising energy stature

Feb. 4, 2008
Egypt’s increasingly strategic role in oil and gas shipping, as well as nuclear and alternative energy, was recently highlighted by US Sec. of Energy Samuel W. Bodman on his tour of the Middle East.

Egypt’s increasingly strategic role in oil and gas shipping, as well as nuclear and alternative energy, was recently highlighted by US Sec. of Energy Samuel W. Bodman on his tour of the Middle East.

“Egypt has long been a key energy ally of the United States, and we are committed to continuing and expanding the strategic partnership between our two nations,” Bodman said.

One does not often read of the “strategic partnership” between Egypt and the US. In fact, few people I know have ever even heard of it. But that does not mean the secretary is making things up.

In fact, Egypt really is going to have an increasingly important role in US energy security due to growing concerns about Iran and its ability to interrupt shipping through the Straits of Hormuz.

Alternative routes

If that were to happen, then alternative routes would have to be available immediately to ensure the continued flow of oil supplies to the US and its allies. One of those alternative routes, of course, is through the Suez Canal.

It was therefore not surprising to learn that Bodman also spoke with Chairman of the Suez Canal Authority Adm. Ahmed Ali Fadel to discuss Egypt’s recent announcement of increased transit fees as well as the canal’s importance to energy security.

In case you missed it, Fadel announced in December that transit fees would rise by an average of 7% from April 2008 but by 7.4% for crude oil tankers, 7.4% for oil product tankers, and 10.5% for LNG carriers.

At the time, Fadel expected canal revenues to reach $4.6 billion in 2007, the highest ever, and an increase of 20.5% from $3.82 billion in 2006. But Fadel wants to increase traffic through the canal even further.

Luring competition

By contrast with higher fees for oil and gas tankers, charges for container ships are to rise by a mere 5.7%. And that’s no accident.

“We want to lure more containers into using the US East Coast ports via Suez,” said Fadel. “We will give service with competitive and lower prices.”

The authority already is strengthening ties with US East Coast terminals, including the Port of Hampton Roads in Virginia, before the Panama Canal completes a 7-year, $5.2 billion expansion.

With the prospect of delays, strikes, and costs for inland transport rising across the US, the Suez Canal would offer a direct all-water route from the Far East to the US East Coast, said Fadel, who formerly commanded the Egyptian navy.

While such traffic might fatten Egypt’s coffers, it also means two things for the oil industry: ever higher prices to transit the canal due to competition and the prospect of increased collisions due to the higher numbers of ships that will be using it.

No wonder Bodman wanted to chat energy security with Fadel.