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Expanded Suez Canal opens but LNG transit impact limited


ICIS ( have today published following article regarding the New Suez Canal

06 August 2015 11:11 Source:ICIS

The opening of the expanded Suez Canal on 6 August heralds a new era and should make transits quicker but the overall impact on LNG trade is understood to be limited. A 72km new shipping lane from Great Bitter Lake that runs parallel to the original route up to El Ballah has been designed to allow for two-way traffic and an end to anchoring along the waterway. Transit times should be reduced to 11 hours in both directions, the Suez Canal Authority (SCA) has said. Up to now, only northbound transits have been able to complete the journey in that sort of time, according to operations director, Jacob Guldager at Suez transit handler, Leth Agencies. Space constraints had required southbound vessels to anchor at either Great Bitter Lake or El Ballah for between two and four hours to allow for the passage of northbound vessels. From 6 August, the new lane should make southbound vessels able to transit without stopping, thereby equalising transit times in both directions. However, this saving of two to four hours for southbound transit still remains dependent on overall traffic. Although the expansion has increased the Suez Canal’s ability to handle more traffic, other constraints exist that make it unlikely that the SCA will reach its total daily throughput target of 97-100 transits. The canal was previously said to have been able to accommodate 80 transits/day but after its 2008 peak showed an average of 59 daily transits, traffic fell to an average of 45 daily transits in 2013. After factoring global economic dynamics, Suez throughput is also impacted by logistical concerns around the size and timing of its two daily convoys. There is only one northbound convoy and one southbound convoy. With an unofficial eight to ten minutes between each vessel starting its transit within a four-and-half-hour window every morning, only about 27 vessels can join each convoy, Guldager said. Vessels typically arrive some time before and queue to get into the daily convoy. This is where the new Suez Canal will also differ from the old one. Vessels previously needed to arrive before 02:00 for northbound transit and 19:00 for southbound but the arrival limit for both directions is now 23:00. The SCA has always been flexible in accommodating late arrivals but has increased the escalating scale. Instead of paying either an additional 3%, 5%, or 10% of normal transit dues in order to effectively jump the queue, late arrivals would now need to pay 5%, 10%, or 12% depending on how late they arrive. Overall, the marginal gains for southbound traffic through Suez is expected to have little impact for the LNG business. A bigger concern this year has been the reduction in the LNG transit rebate which took effect from 1 May (see GLM 04 February 2015). A 35% rebate on LNG carrier transit tolls, granted back in August 1994, was reduced to 25%, meaning that on average it became approximately $46,000-60,000 more expensive to transit the canal. However, in comparison to most port costs of above $100,000, the new economics as well as the logistics of the new Suez Canal are not expected to have much of a material impact on LNG trade flows, according to one LNG shipping analyst. Nonetheless in the two months of recorded SCA data since the rebate change LNG transits have fallen significantly. May and June respectively saw 17% and 14% less LNG throughput year on year. In June, 46 LNG transits were recorded - down from 54 in June 2014. In May, 58 transits were recorded - down from 70 a year earlier. This comes in contrast to the last month before the rebate - April 2015 - with 55 recorded LNG transits appearing almost flat on April 2014 with 54 transits. Two recent re-exports from the Mediterranean and northwest Europe to destinations east of Suez have travelled around South Africa instead of the Suez Canal.