BACKGROUND

Chokepoints are narrow channels along widely used global sea routes. They are a critical part of global energy security due to the high volume of oil traded through their narrow straits. The Strait of Hormuz leading out of the Persian Gulf and the Strait of Malacca linking the Indian and Pacific Oceans are two of the world’s most strategic chokepoints. Other important passages include: Bab el-Mandab which connects the Arabian Sea with the Red Sea; the Panama Canal and the Panama Pipeline connecting the Pacific and Atlantic Oceans; the Suez Canal and the Sumed Pipeline linking the Red Sea and Mediterranean Sea; and the Turkish/Bosporus Straits joining the Black Sea and the Caspian Sea region to the Mediterranean Sea.

In 2007, total world oil production amounted to approximately 85 million barrels per day (bbl/d), and around one-half, or over 43 million bbl/d of oil was moved by tankers on fixed maritime routes. The international energy market is dependent upon reliable transport. The blockage of a chokepoint, even temporarily, can lead to substantial increases in total energy costs. In addition, chokepoints leave oil tankers vulnerable to theft from pirates, terrorist attacks, and political unrest in the form of wars or hostilities as well as shipping accidents which can lead to disastrous oil spills.

STRAIGHT OF HORMUZ

Located between Oman and Iran, the Strait of Hormuz connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. Hormuz is the world's most important oil chokepoint due to its daily oil flow of 16.5-17 million barrels (first half 2008E), which is roughly 40 percent of all seaborne traded oil (or 20 percent of oil traded worldwide). Oil flows averaged over 16.5 million barrels per day in 2006, dropped in 2007 to a little over 16 million barrels per day after OPEC cut production, but rose again in 2008 with rising Persian Gulf supplies.

At its narrowest point the Strait is 21 miles wide, and the shipping lanes consist of two-mile wide channels for inbound and outbound tanker traffic, as well as a two-mile wide buffer zone. The majority of oil exported through the Strait of Hormuz travels to Asia, the United States and Western Europe. Currently, three-quarters of all Japan’s oil needs pass through this Strait. On average, 15 crude oil tankers passed through the Strait of Hormuz daily in 2007, along with tankers carrying other petroleum products and liquefied natural gas (LNG).

Closure of the Strait of Hormuz would require the use of longer alternate routes at increased transportation costs. Alternate routes include the 745 miles-long Petroline, also known as the East-West Pipeline, across Saudi Arabia from Abqaiq to the Red Sea. The East-West Pipeline has a capacity to move five million-bbl/d. The Abqaiq-Yanbu natural gas liquids pipeline, which runs parallel to Petroline to the Red Sea, has a 290,000-bbl/d capacity. Other alternate routes could include the deactivated 1.65-million bbl/d Iraqi Pipeline across Saudi Arabia (IPSA), and the 0.5 million-bbl/d Tapline to Lebanon. Oil could also be pumped north to Ceyhan in Turkey from Iraq.

MALACCA

The Strait of Malacca, located between Indonesia, Malaysia, and Singapore, links the Indian Ocean to the South China Sea and Pacific Ocean. Malacca is the shortest sea route between Persian Gulf suppliers and the Asian markets –notably China, Japan, South Korea, and the Pacific Rim. Oil shipments through the Strait of Malacca supply China and Indonesia, two of the world’s most populous nations. It is the key chokepoint in Asia with an estimated 15 million bbl/d flow in 2006.

At its narrowest point in the Phillips Channel of the Singapore Strait, Malacca is only 1.7 miles wide creating a natural bottleneck, as well as potential for collisions, grounding, or oil spills. Recent reports by the International Chamber of Commerce show that piracy, including attempted theft and hijackings, are a constant threat to tankers in the Strait of Malacca.

Over 50,000 vessels transit the Strait of Malacca per year. If the strait were blocked, nearly half of the world's fleet would be required to reroute around the Indonesian archipelago through Lombok Strait, located between the islands of Bali and Lombok, or the Sunda Strait, located between Java and Sumatra. Malaysian, Indonesian and Saudi companies signed a contract in 2007 to build a $7 billion pipeline across the north of Malaysia and southern border of Thailand to reduce 20 percent of tanker traffic through the Strait of Malacca.

SUEZ/SUMED

The Suez Canal is located in Egypt, and connects the Red Sea and Gulf of Suez with the Mediterranean Sea. The Canal is one of the world’s greatest engineering feats covering 120 miles. Oil shipments from the Persian Gulf travel through the Canal primarily to European ports, but also to the United States. In 2006, an estimated 3.9 million bbl/d of oil flowed northbound through the Suez Canal to the Mediterranean, while 0.6 million bbl/d travelled southbound into the Red Sea.

Over 3,000 oil tankers pass through the Suez Canal annually, and represent around 25 percent of the Canal’s total revenues. With only 1,000 feet at its narrowest point, the Canal is unable to handle large tankers. The Suez Canal Authority (SCA) has discussed widening and deepening the Canal to accommodate VLCCs and Ultra Large Crude Carriers (ULCC).

The 200-mile long Sumed Pipeline, or Suez-Mediterranean Pipeline, also provides a route between the Red and Mediterranean Seas by crossing the northern region of Egypt from the Ain Sukhna to the Sidi Kerir Terminal. The pipeline provides an alternative to the Suez Canal, and can transport 3.1 million bbl/d of crude oil. In 2006, nearly all of Saudi Arabia’s northbound shipments (approximately 2.3 million bbl/d of crude) were transported through the Sumed pipeline. The pipeline is owned by Arab Petroleum Pipeline Co., a joint venture between EGPC, Saudi Aramco, Abu Dhabi’s ADNOC, and Kuwaiti companies.

Closure of the Suez Canal and the Sumed Pipeline would divert tankers around the southern tip of Africa, the Cape of Good Hope, adding 6,000 miles to transit time.

SUMED PIPELINE

BAB EL-MANDAB

The Strait of Bab el-Mandab is a chokepoint between the horn of Africa and the Middle East, and a strategic link between the Mediterranean Sea and Indian Ocean. It is located between Yemen, Djibouti, and Eritrea, and connects the Red Sea with the Gulf of Aden and the Arabian Sea. Exports from the Persian Gulf must pass through Bab el-Mandab before entering the Suez Canal. In 2006, an estimated 3.3 million bbl/d flowed through this waterway toward Europe, the United States, and Asia. The majority of traffic, around 2.1 million bbl/d, flows northbound through the Bab el-Mandab to the Suez/Sumed complex.

Bab el-Mandab is 18 miles wide at its narrowest point, making tanker traffic difficult and limited to two 2-mile-wide channels for inbound and outbound shipments. Closure of the Strait could keep tankers from the Persian Gulf from reaching the Suez Canal or Sumed Pipeline, diverting them around the southern tip of Africa. This would effectively engage spare tanker capacity, and add to transit time and cost.

The Strait of Bab el-Mandab could be bypassed through the East-West oil pipeline, which crosses Saudi Arabia with a 4.8 million bbl/d capacity. However, southbound oil traffic would still be blocked. In addition, closure of the Bab el-Mandab would block non-oil shipping from using the Suez Canal, except for limited trade within the Red Sea region.

Security remains a concern of foreign firms doing business in the region, after a French tanker was attacked off the coast of Yemen by terrorists in October 2002.

BOSPORUS

The Bosporus and Dardanelles comprise the Turkish Straits and divide Asia from Europe. The Bosporus connects the Black Sea with the Sea of Marmara, and the Dardanelles links the Sea of Marmara with the Aegean and Mediterranean Seas. The 17-mile long waterway located in Turkey supplies Western and Southern Europe with oil from the Caspian Sea Region.In 2006, an estimated 2.4 million bbl/d of mostly crude oil flowed southbound through this passageway. Oil shipments through the Turkish Straits decreased from 3.1 million bbl/d to current levels in 2006 as Russia shifted exports toward the Baltic ports. Traffic through the Straits is expected to increase as Azerbaijan and Kazakhstan augment crude production and exports in the future.

Source: U.S. Government

Only half a mile wide at its narrowest point, the Turkish Straits are one of the world's most difficult waterways to navigate due to its sinuous geography. With 50,000 vessels, including 5,500 oil tankers, passing through the straits annually it is also one of the world’s busiest chokepoints. It is an export route for oil production from the Caspian Sea region through the Black Sea en route to the Mediterranean Sea and world markets.

The ports of the Black and Baltic Seas, are the primary oil export routes for Russia and the Former Soviet Union. Oil exports have increased in the past 15 years, and Turkey has raised concerns over the navigational safety and environmental threats to the Straits. Commercial shipping has the right of free passage through the Bosporus Straits in peacetime, although Turkey claims the right to impose regulations for safety and environmental purposes.

Bottlenecks and heavy traffic also create problems for oil tankers in the Bosporus Straits. While there are no current alternate routes for westward shipments from the Black and Caspian Sea region, there are several pipeline projects in various phases of development underway. In 2008, construction is expected to begin on the Albania-Macedonia-Bulgaria (AMBO) pipeline, a 570 mile, 750,000 bbl/d pipeline connecting the Bulgarian Black Sea port of Burgas with the Albanian Adriatic port of Vlore (see Southeastern Europe Country Analysis Brief for additional information). Additionally, Russia has engaged in discussions with Bulgaria and Greece over a 173-mile pipeline, and also discussed the potential for the 120-mile Trans-Thrace and the Samsun-Ceyhan pipelines.

PANAMA CANAL

The Panama Canal is an important route connecting the Pacific Ocean with the Caribbean Sea and Atlantic Ocean. According to the Panama Canal Authority, 0.5 million bbl/d of crude and petroleum products were transported through the canal in 2006. However, the relevance of the Panama Canal to the global oil trade has diminished, as many modern tankers are too large to travel through the canal. Some oil tankers, such as ultra-large crude carriers (ULCC), can be nearly five times larger than the maximum capacity of the canal. The largest vessel that can transit the Panama Canal is known as a PANAMAX-size vessel (ships ranging from 50,000 – 80,000 dead weight tons in size and no wider than 108 ft.)

Source: U.S. Government

The Canal is 50 miles long, and only 110 feet wide at its narrowest point called Culebra Cut on the Continental Divide. Around 14,000 vessels transit the Canal annually of which around half account for traffic to and from the United States. However, the Panama Canal is not a significant route for U. S. petroleum imports.

In September of 2007 the Government of Panama began work on a US$ 5 billion project to expand the Canal. The expansion will add a third lane of traffic that will handle wider loads and new locks that will be 150 feet wide (compared to the current 110 feet) as well as deeper and wider access canals that will allow for larger modern ships to pass. This expansion is expected increase transit volume and almost double the current maximum size of ships able to use the canal. The plan is to be financed, in part, by raising current tolls through the Canal, the remaining funds will come from foreign credit.

Map of Panama Canal

It is unlikely that oil flows would increase dramatically, as many oil tankers would still be unable to use the canal. On the other hand, the expansion would open the new possibility of using the canal to transport liquefied natural gas (LNG), as almost all existing LNG tankers are too large to use the canal as it now stands. In addition, the expansion could allow greater flows of coal from South America, especially Colombia, into the Pacific Rim.

Like all important thoroughfares, closure of the Panama Canal would greatly increase transit times and costs adding over 8,000 miles of travel. Vessels would have to reroute around the Straits of Magellan, Cape Horn and Drake Passage over the tip of South America.

The Trans-Panama Pipeline (TPP - Petroterminal de Panama, S.A.) is located outside the former Canal Zone near the Costa Rican border and runs from the port of Charco Azul on the Pacific Coast to the port of Chiriquie Grande, Bocas del Toro on the Caribbean. The pipeline was built in 1982 with the original purpose being to facilitate crude oil shipments from Alaska’s North Slope to refineries in the Caribbean and the U.S. Gulf Coast. However, in 1996, the 800,000 bbl/d TPP was shut down as oil companies began shipping Alaskan crude along alternative routes. Since 1996 there have been intermittent requests and proposals to utilize the TPP. For example, EnCana shipped small volumes of Ecuadorian oil through the system in 2003. In 2005, Venezuela reportedly began talks about using the pipeline to facilitate oil exports to China.