Role Sumed Pipeline Egypt International Trade Kind

role sumed pipeline EGYPT international trade kind special services customers petroleum sector. notice: references internet .

Sumed Pipeline in Egypt

Traditionally, oil would be transported from the Persian Gulf to the Mediterranean region via the Suez Canal, which has also earned a remarkable historic resonance to its name. After a decade of construction, the Suez Canal was first used in 1869 and its aim is that of allowing transportation by water from Asia to Europe, without having to travel around Africa.

The Suez Canal is the traditional choice for transporting goods from one region to the other, and it is open to the access of all vessels, in times of war and peace, regardless of the flags carried by the vessels. Still, a shortage in using the Suez Canal is represented by the delays which can be encountered and the queues that can be created.

As a result of these issues, Egypt has sought out to create an alterative to more efficiently transporting oil and petroleum from Egypt to the Mediterranean region. Specifically, the Sumed pipeline spreads from Ain Sukhna on the Gulf of Suez to Sidi Kerir, in Alexandria and it is often recognized for its ease of usage and the limited occurrence of delays in shipments (Platts, 2011).

The initial cause for the creation of the Sumed pipeline was represented by the closure of the Suez Canal in 1967, which prevented the countries in the region from adequate trade operations. In order to decrease the dependency on the Suez Canal then, the governments in five Arab states created the pipeline company and commenced work in 1973. The Sumed pipeline was first issued into usage in1977 and it continues to play the same role of decreasing dependency on the Suez Canal, and supporting oil trade in the region.

From a technical standpoint, the Sumed pipeline has a total length of 200 miles and it is comprised of two parallel lines of 42 inches in diameter each. The capacity of the pipeline is of 2.5 million of barrels of oil per day, which has increased since its 1.1 million barrel per day capacity in 2009 (Strumph and Whittaker, 2011). For the future, the owner looks to further expand the pipeline. The new extension would go from Ain Sukhna to cross the Red Sea up to Sharm al Sheikh.

The Sumed pipeline is owned and operated by the Arab Petroleum Pipeline Company / Sumed Company, a joint venture between seven companies in five countries, namely EGPC in Egypt, Saudi Aramco in Saudi Arabia, IPIC in the United Arab Emirates, QGPC in Qatar and three other firms in Kuwait. The largest share is owned by the Egyptian firm, namely 50 per cent interest (Wikipedia, 2012).

The Sumed pipeline plays a multifaceted role within Egypt and its international trade operations, commonly referred to as the decreased reliance on the highly used Suez Canal. Nevertheless, aside from this, the Sumed pipeline also performs other roles, as follows:

Cargo tailoring

Stock transfer

Cargo topping

Time and cost savings

Crude oil swap

Undertaking, and Integrated storage solution.

At the level of cargo tailoring, this role is best revealed for the cargo carriers entering the Ain Sukhna terminal. These carriers can tailor the size of their shipment based on their individual capacity, the demands of their customers, but also the specifics of the ports they will be entering (in a context in which some ports implement limitations on cargo). Then, another benefit of the Sumed pipeline is that the company stores the oil and even transfers the required quantities from one ship to the other, based on the specifics of each carrier; the company provides this service free of charge.

The cargo topping option is useful in situations when the carriers do not have the possibility to fully load their tanks, and this often results from a shortage of oil at one of their partners. In the scope of avoiding dead freight, the company creates the possibility of completing the missing oil quantity.

Then, another important role played by the Sumed pipeline is revealed at the financial level, in the meaning that the usage of the pipeline generates efficiencies at the level of time consumed, as well as resources employed.

"Both the distance traveled by an oil cargo and the time it spends in transit have a direct impact on its ultimate cost. Compared to the long journey around the Cape of Good Hope, SUMED is a short -- cut to markets especially for Arab Gulf crudes heading Western destinations.

Being only few days away from refining centers in Europe, using SUMED saves refineries the capital cost of building storage tanks or maintaining high inventories to guarantee smooth operations" (Website of Sumed Pipeline, 2006).

Then, the Sumed pipeline, through its storage facilities, also allows the carriers to swap their oil products in order to clear the lagging stock. Additionally, the Sumed pipeline is also important from the standpoint of conducting trustworthy operations. In other words, the company intervenes in the relationship between the bank and the carrier and guarantees the shipment and communicates with the bank when the money should be released.

Finally, the Sumed pipeline plays the tremendous role of providing an integrated solution for storage and transportation. Specifically, the company has built storage facilities that are complementary to the transportation operations, and which help resolve some of the more challenging logistics tasks of crude oil transportation.

"SUMED has built two large storage tank farms, one at each terminal for handling various types of crudes transported while maintaining proper segregation. Moreover, and in light of operation's requirements, SUMED offers spare storage capacity for renting as a tool for augmenting and complementing the logistic needs of crude oil transportation activity through complete and fully integrated storage solutions tailored to satisfy the wide variety of shippers' requirements" (Website of Sumed Pipeline, 2006).