Suez Canal Fights To Win Back Trade
Forty years on, the real challenge for the Suez Canal Authority (SCA) is to win back traffic to the canal, especially the northbound oil tanker trade, which accounts for one third of its $2bn annual revenue.
This traffic has dropped by over 30 per cent between 1991-95, from 3,549 vessels to 2473, with net tonnage reduced from 156,809,000 to 96,930,000.
The total number of vessels using the canal, the main conduit of maritime trade between east and west, has fallen from 19,791 in 1985 to 15,051 last year.
The trend towards larger vessels for cargo and crude has worked against the canal, being unable to make the 195km run between the Red Sea and Mediterranean when fully loaded.
Ahmed Fadel, new chairman of the Suez Canal Authority (SCA), said he was confident the canal could see off challenges from the expanding oil pipelines threatening its share of the vital oil tanker traffic. The SCA could cut tariffs by up to 90 per cent if necessary.
This year the SCA has frozen all tolls at 1994 levels, and introduced special discounts for long-haul oil tankers. These include a 10 per cent cut for all oil tankers using the canal, loaded or in ballast, and a system of incentives based on the total volume of crude shipped by each customer. A discount of 20 per cent for each round trip made by tankers carrying over 4 million tonnes was also introduced.
Before the canal was closed for eight years following the 1967 war, crude carriers made up more than 65 per cent of the yearly tonnage. Now they account for only 30 per cent.
Much of the oil from the Gulf states to the US and Europe is now either being carried by large ships around the Cape, or through the Suez- Mediterranean (Sumed) pipeline, which runs diagonally across Egypt from the Gulf of Suez to the Mediterranean.
The Sumed is half owned by Egypt, and half owned by five of the Gulf's main oil producing countries, who have more incentive to use the pipeline than the canal.
To help fend off these challenges, the SCA is working on an ambitious plan to deepen the Canal to 62 feet by the year 2000. This will accommodate the new generation of double hulled tankers ranging up to 250,000dwt fully laden.
It is still a long way off the depth required for very large crude carriers (VLCCs), which draw between 68 and 70 feet when fully laden.
The canal's main weapon will be `Mashour', the biggest dredger ever built, now being prepared for launch at the Kinderdijk shipyard of IHC Holland of the Netherlands. The new cutter dredger has an installed capacity of 30,080 hp and costs about $100 million. It is expected to join the SCA's existing 12 dredger fleet by mid-September.
In March, the SCA completed the first round of dredging. The canal was deepened from 56 feet, to allow ships with a 58 foot draught to pass through. These steps have increased the canal's capacity from 150,000 dwt to 180,000 dwt fully laden, and 560,000 dwt in ballast.
The canal can now accommodate super oil tankers with lighter loads, and the world's largest bulk carriers.
Sumed has stepped up the pressure on the canal by increasing the pipeline's pumping capacity from 84 million to 117 million tonnes of oil a year, equivalent to 2.5 million barrels a day. It has also greatly expanded its storage capacity at both terminals.
For its part, the canal authority is attempting to secure an agreement from Sumed to bar any tanker small enough to use the canal from transporting its oil through the pipeline. The SCA has introduced incentives for supertankers to empty some cargo at the Ain Sukhna terminal of the Sumed pipeline, allowing them to pass through the canal, and reload at the other end.
Tolls of $0.63 will be levied on each metric ton of crude oil cargo rather than on the net tonnage of the tanker. The maximum tolls for the round trip of such tankers, loaded and ballast, will be $500,000. Even though the London daily Lloyd's list calculated that a large tanker could save up to $200,000, few have been tempted.
The Israeli Tipline is another competitor for north bound oil traffic, with a present pumping capacity of 0.7 millio b/d from Eilat.
With the current stagnation of the West Asia peace process, it is unlikely that Israel will attract, for the time being, any significant volumes of Gulf Arab and Iranian Oil. However, over the next five years, the Israel Port and Railways Authority will invest $920 million to develop facilities at Haifa and Ashdod ports.
Despite the SCA's new initiatives, the seven months to July this year has seen 122 fewer oil tankers pass through the canal, with a 16 per cent fall in net tonnage, compared with the same period last year. This is combined with a 2.4 per cent drop in total canal revenue, one of Egypt's main sources of foreign currency.
In the background is the question of whether the SCA should continue as a state-owned entity. It is a question that will have to wait until well after the 40th anniversary celebrations of nationalisation have ended for an answer.