Suez Canal blockage suggests need for new clauses: GECF
The shipping industry faced a "new black swan" on March 23 2021, when the containership Ever Given ran aground in the Suez Canal. In the event, the LNG market was not much affected, the Gas Exporting Countries Forum (GECF) said July 7, but the situation could have been much worse, had it lasted longer than a week or happened in the depths of winter.
Among its suggestions, the GECF recommends reviewing supply and charter contracts and considering splitting shipping costs fairly between LNG exporters, importers, and shipping companies.
The Suez Canal plays a crucial role in the global LNG transportation, connecting the Atlantic basin markets with Middle Eastern and Asia Pacific markets.
In total, 686 LNG carriers used the canal 2020, of which 388 were laden. Of those, 276 sailed east-to-west, nearly all carrying LNG from GECF member Qatar to Italy and UK. The other 112 were primarily delivering Russian and US LNG cargos to Asia.
LNG carriers transported over 32mn metric tons through the waterway last year and the March blockage stopped 16 LNG carriers. Some took alternative routes, mainly around the Cape of Good Hope in Africa. That added 10 days to the journey from the Middle East to Europe.
Owing to the time of the year and plenty of shipping capacity, the blockage had little impact on the global gas market, pushing LNG spot charter rates up by only about 15%, to $20,000/day. And LNG carriers in the canal were likely to be chartered on medium- and long-term basis, meaning no impact on the spot market. In this context, the blockage impacted mainly LNG loading and discharging schedules in various ports.
But it demonstrated the importance of "this crucial trade route, while alternative routes are inconvenient and more costly. As such, any disruption at the waterway may have severe consequences for all stakeholders, including the GECF member countries," GECF said.
Other solutions GECF proposed were the inclusion of alternative trade routes, such as the Cape of Good Hope, in case of transportation disruption at the Suez Canal in the charters and, more ambitious, for LNG importers to develop gas storage to moderate supply disruptions.
Algeria to host Gas Research Institute
Algeria has to host the GECF's Gas Research Institute under Azzedine Adjeb, GECF said July 8. It said the work of the forum was becoming more important as natural gas and its place in safeguarding environmental sustainability came under closer scrutiny.
GECF secretary-general Yuri Senturin said also: “Our collective commitment to the GECF community is set to facilitate technology improvement in the gas and LNG industry in the GECF countries. Therefore, we are required to strengthen our co-operation on digital technologies, artificial intelligence, the internet of things and advanced analytics in the industry.”
As technology and digitalisation grow, the necessary security surrounding them has tended to lag, exposing major energy arteries to the risk of sabotage or interruption. The most recent case was the halting of operations at the Colonial oil products pipeline in the US, until the hijackers were paid.