New base 27 march 2021 energy news issue 1419 by khaled al awadi2

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NewBase Energy News 27 March 2021 - Issue No. 1419 Senior Editor Eng. Khaled Al Awadi
NewBase for discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
UAE Top Power Producer Joins Global Peers in Renewables Push
Bloomberg - Anthony Di Paola and Yousef Gamal El-Din
The United Arab Emirates’ largest power producer plans to cut exposure to oil and natural gas
assets, joining energy companies around the world looking to refocus their operations on
renewables.
“Our focus is going to be on power and water, and less on oil and gas going
forward,” Abu Dhabi National Energy Co. Chief Executive Officer Jasim
Husain Thabet said in a Bloomberg TV interview.
The UAE, which can pump more than 4 million barrels of crude a day,
depends on oil exports for a large part of its national income. But energy
producers globally are looking for greener options as economies transition to
cleaner fuels. BP Plc, for instance, plans to shrink its hydrocarbon business
by 40% over the coming decade.
Taqa, as Abu Dhabi National Energy is known, last year took on the power generation assets of a
state-owned utility. It plans to boost its UAE electricity production capacity to 30 gigawatts by 2030
from 18 gigawatts and boost the portion of solar plants in that mix.
About 30% of Taqa’s total generation will be made up of solar or wind plants, Thabet said, and the
company will detail annual emissions later this year. It will also unveil a plan to reach net-zero carbon
emissions, Thabet said, without providing a timeline.

Taqa is considering options for its oil and gas assets, including a potential sale,
Bloomberg reported last week, but Thabet said on Wednesday he is “in no rush” to sell them. The
company has hydrocarbon assets centered mainly in North America with gas production businesses
in Canada.
It also has about 5 gigawatts of power generation in countries including Morocco and Saudi Arabia,
and plans to add 15 gigawatts more of electricity capacity internationally, Thabet said. Taqa also
plans invest 40 billion dirhams ($10.9 billion) in transmission and distribution assets in the UAE.
The company is “in good shape” to sell more shares after lowering limits of foreign stock ownership,
Thabet said in a separate interview. Selling more stock depends on the company’s owners, he said.
The Abu Dhabi government holds more than 98% of Taqa stock through a holding company.
The power producer will tap the bond markets for funding this year and will be looking at how much
debt to issue to refinance about $1.5 billion in securities maturing, he said. Future power plants will
also seek project financing, Thabet said, declining to give an estimate for how much the company
expected to expand capacity.
TAQA Group unveils 2030 Strategy for Sustainable and Profitable Growth
Abu Dhabi National Energy Company PJSC ("TAQA", the "Company" or the "Group"), one of the
largest listed integrated utility companies in the region, announced today its 2030 vision for
sustainable and profitable growth. The strategic plan places at its core the global acceleration of the
energy transition, and TAQA’s ambition to become a champion for low carbon power and water.
TAQA’s new strategy builds upon its identity post the TAQA and Abu Dhabi Power Corporation
(ADPower) transaction, in July 2020, to focus on being a regionally leading fully integrated utility.
As part of the plan, TAQA will drive efficiency from its existing assets while strengthening its
development, operations and digital competencies.
Growth is expected through meeting increased power, water and network capacity needed in its
home market of the UAE, as well as from selective opportunities internationally. TAQA’s business
will be anchored in ESG principles and practices. As part of that commitment the company is
working to develop and publish greenhouse gas emission reduction targets.

In addition, the company will remain focused on its financial strengths including protecting its stand-
alone investment grade credit ratings and delivering on its recently announced dividend policy. This
strong financial stewardship will complement the company’s ambitious and more focused growth
strategy.
Following the recent decision to allow foreign investors to own up to 49% of TAQA’s issued shares,
the company still expects to release a follow-on public offering, subject to market conditions and
shareholder approval.
Strategic Plan 2030 Highlights: Generation: -Increase gross power capacity from 18 GW to
30 GW in the UAE, and add up to 15 GW internationally.
 -Expand highly efficient reverse osmosis technologies to make up two-thirds of its
desalination capacity by 2030 with 200 MIGD already under construction.
 -Focus on renewable energy – particularly solar photovoltaic (PV) – to comprise more than
30% of the power generation portfolio by 2030, up from the current 5%.
Transmission & Distribution: -Execute substantial UAE-based infrastructure and networks growth
projects and invest an additional AED 40 billion by 2030 to grow its UAE Regulated Asset Base.
 -Continued focus on operational excellence, optimization and digitization across the entire
value chain to become a role-model for high-performing and efficient transmission and
distribution alongside improving the service for its customers.
 -Further strengthen the position of its operating company, Abu Dhabi Energy Services
(ADES), and grow new services in demand-side management, enabling public and private
entities to realize energy savings targets.
Oil & Gas: -Focus on commercially viable opportunities to reduce exposure to the hydrocarbon
sector.
 -Continue to pursue top quartile operations performance.
 -Highly selective capital allocation focusing on portfolio rationalization for value.
Mohamed Hassan Al Suwaidi, Chairman of
TAQA, commented: "TAQA has the
support of our shareholders for this new
strategy and is on its way to become the
recognized low carbon power and water
champion from Abu Dhabi, and this
strategy sets out how the company will
achieve this ambition.
As we emerge from the pandemic, around
the world there will be an increasing focus
on the need for clean, reliable and
sustainable sources of power and water.
TAQA is uniquely positioned to use its
platform to play a key part in meeting Abu
Dhabi’s own ambitions in this space, as

well as taking its expertise to international markets where it can add value.
Over and above the current strategic plan, TAQA will continue to capitalize on its unique position
as UAE’s utilities champion and leverage the UAE’s strong relationships to drive power solutions
across the region and globally, as well as consolidate its position within the UAE to deliver on
national objectives."
Jasim Husain Thabet, TAQA’s Group Chief Executive Officer and Managing Director, commented:
"TAQA will become a champion for low carbon power and water. This strategy sets out how we are
going to deliver on this promise and our vision for the future. We will build on our strengths and use
the unique position we have in Abu Dhabi as a platform for growth in the UAE and internationally.
We will expand our portfolio of renewables and highly efficient water desalination, drive efficiency
in our networks and distribution business and invest in growing the UAE Regulated Asset Base.
As one of the largest integrated utilities in the region, we are well placed to be at the heart of meeting
the accelerating demand for low carbon power and water. We have a strong pipeline of existing
projects and are ready to seize further opportunities in a way that benefits our stakeholders - from
shareholders to employees and customers."
Since the TAQA-ADPower transaction in July 2020, the company received upgrades to its issuer
ratings to Aa3 from A3 and a standalone rating of baa1 (from Moody’s) and AA- from A and
standalone rating to bbb+ (from Fitch).
In December of last year, TAQA’s shareholders approved a new dividend policy for 2020-2022,
which will see TAQA introduce quarterly dividend payments to its shareholders and an annual
increase of 10% to returns in 2021 and 2022. It also approved up to 49% of foreign ownership of
TAQA to diversify the company’s investor base, improve stock liquidity and support the
Government’s objectives to encourage foreign investment into the UAE.

U.A.E: Mubadala buys Petrobras Brasil RLAM refinery for $1.65bn
The National - Jennifer Gnana
Abu Dhabi's Mubadala Group bought a refinery and logistics assets from Brazil's state oil company
Petrobras for $1.65 billion, as the company looks to expand its oil and gas assets abroad. The
transaction included the sale of the Landulpho Alves Refinery as well its associated logistics assets
in the state of Bahia.
The refinery, one of Brazil's oldest, is also its third largest. It includes an integrated petrochemical
complex, which is one of the largest in the southern hemisphere. It is capable of refining liquefied
petroleum gas, gasoline, diesel fuel and lubricants. It has a capacity of 333,000 barrels per day.
Mubadala has exposure to the associated chemicals assets through its investment in Spanish group
Cepsa, in which it is the majority shareholder with a 63 per cent stake. Cepsa owns 72 per cent of
Camaçari in Bahia state, with the remainder held by Petrobras. The facility is the world's largest
linear alkylbenzene (LAB) manufacturing plants.
Cepsa is also a major producer of LAB – a component used in the manufacture of biodegradable
detergents. The Spanish firm is also developing a facility to produce LAB in Abu Dhabi in the Ruwais
downstream hub.
Mubadala has invested more than $2bn (Dh7.34bn) in Brazil in energy, infrastructure and other
sectors as of 2019.The company's deal with Petrobras provides for "adjustments in the sale value
due to variations in working capital, net debt and investments until the closing of the transaction",
the Brazilian company said in a statement.
Petrobras will continue to operate the refinery and associated assets until all the conditions for the
transaction are met and will continue to provide ongoing support during a transition period.
Mubadala, which manages more than $232bn in assets, invests on behalf of the Abu Dhabi
government across sectors. Its international investments include stakes in Softbank's Vision Fund,
Reliance Retail Ventures, Austria’s oil and gas entity OMV and petrochemicals companies Borealis
and Nova Chemicals.
Technical Features
- Total area: 6.5 km2
- 26 Process Units
- 31 Products
- 201 storage tanks
- 18 storage spheres
Capacity for 323,000 bbl/d (51,352 m3/d).

U.S. LNG exports in EIA’s AEO2021 side cases vary with crude
oil, natural gas prices… U.S. Energy Information Administration, Annual Energy Outlook 2021 (AEO2021)
The U.S. Energy Information Administration's (EIA) Annual Energy Outlook 2021 (AEO2021)
projects that the volume of U.S. liquefied natural gas (LNG) exports through 2050 will span a wide
range based on its published side cases.
In the AEO2021 Reference case, U.S. LNG exports continue to grow throughout the 2020s,
reaching 13.7 billion cubic feet per day (Bcf/d) after 2030. LNG exports vary across cases from
approximately 8 Bcf/d to more than 27 Bcf/d, which illustrates how the volume of LNG exports
depends on crude oil and domestic natural gas prices.
How the U.S. price for LNG compares with world LNG prices (which reflects the competitiveness of
U.S. LNG exports in the global market) influences whether new liquefaction capacity is built and
how EIA projects U.S. LNG export volumes.
EIA used its Natural Gas Market Module (NGMM) to project how U.S. LNG supply prices compare
with world markets using domestic natural gas prices and assumptions related to costs and fuel use
to develop its AEO2021. To determine their competitiveness, NGMM compares these prices with
world LNG prices for markets in both Europe and Asia, based on the following inputs:
 World oil prices
 Relative growth of natural gas consumption in markets in Europe and Asia
 Relative growth of LNG supply not sold under long-term contracts, or flexible LNG supply
The difference in projected U.S. LNG exports in the AEO2021 High and Low Oil Price cases reflects
the relationship of world oil prices to U.S. liquefaction capacity builds and utilization rates. In the

High Oil Price case, where the Brent crude oil price grows to almost $180 per barrel (b) in real terms
by 2050, U.S. LNG exports exceed 27 Bcf/d by the end of the projection period.
However, in the Low Oil Price case, where oil prices remain lower than $50/b in real terms during
the projection period, U.S. LNG exports do not exceed 8 Bcf/d after 2030 because U.S. liquefaction
capacity is underutilized. As a result of low oil prices, no new LNG export capacity is built beyond
what is already under construction and expected to enter service by late 2025.
In the High Oil and Gas Supply case, where Henry Hub natural gas prices remain lower than $3.00
per million British thermal units (MMBtu) in real terms, U.S. LNG export volumes continue to grow
through 2040, reaching a high of 21.4 Bcf/d in 2050.
The Low Oil and Gas Supply case generates higher domestic natural gas prices, which reduces the
global competitiveness of U.S. LNG exports. As U.S. Henry Hub prices rise from $5.00/MMBtu in
2030 to almost $6.50/MMBtu in 2050 in real terms, U.S. LNG export volumes decline to less than
9.0 Bcf/d by 2050, and existing liquefaction capacity becomes increasingly underutilized.
Market – report ( Reuters ) :-
Future liquefied natural gas (LNG) projects in Russia would be competitive at $3.7-$7 per 1 million
British thermal units (BTU), based on the country’s state LNG development plan. Russia would
compete with Qatar, Australia and the United States for customers in Asia, its target market, up to
2030, and their production costs are seen at $2.8-11 and $7-10 per 1 million BTU, respectively, the
plan showed.
Russia plans to increase its LNG production to nearly 140 million tonnes LNG per year by 2035
from around 31 million tonnes last year and aims to have about 20% of the global market share by
then. It targets new projects in Arctic and Russia’s far east to expand beyond existing LNG plants
on the Yamal peninsula and on the Sakhalin island in the Pacific Ocean, looking to Asia as its core
market to avoid competition with it99999s pipeline gas in Europe.

China's refineries processed more crude oil than U.S. refineries…
Source: U.S. EIA, Petroleum Supply Monthly; China’s National Bureau of Statistics
In April 2020, more crude oil was being refined in China's refineries than in U.S. refineries for the
first month on record, and the trend continued for all remaining months in 2020 except for July and
August.
China processed more crude oil than the United States not only because of the unique effects of
COVID-19 pandemic-related restrictions in 2020, but also because of differences in the longer-term
structural refining trends between the two countries.
Note: U.S. data reflect refinery net inputs of crude oil. China’s data reflect crude oil processing in refinery runs.
China’s National Bureau of Statistics only reports the country’s processing volume of crude oil. The
most direct comparison to the United States is refiner net inputs of crude oil.
U.S. refiners also report total gross inputs into distillation units, which include non-crude liquids such
as lease condensate and unfinished oils, making gross inputs about 0.5 million barrels per day (b/d)
larger than net crude oil inputs. China’s crude oil processing also exceeded U.S. gross inputs in
both May and October 2020.
April 2020 was the first full month for the United States in which responses to the COVID-19
pandemic reduced demand for petroleum products such as gasoline, distillate, and jet fuel.
Although net inputs of crude oil to U.S. refiners had seen record declines in April, China’s crude oil
processing began increasing above previous levels following a demand increase when COVID-19
cases declined in that country.
China’s refinery runs also started to rise in April 2020 partially because China implemented a policy
in 2016 that encourages refiners to refine more petroleum products by fixing product prices at $40

when the Brent crude oil price falls to less than $40 per barrel (b). The Brent crude oil price fell and
remained less than $40/b between March and May 2020.
While China processed a record 14.1 million b/d of crude oil in June and further rose to 14.5 million
b/d in November, U.S. refinery runs have not yet returned to their March 2020 levels because of a
combination of demand reductions and hurricanes in the fall that disrupted refinery processes.
Hurricanes Laura and Sally in late August and September, respectively, and Hurricanes Delta and
Zeta in October resulted in refinery shut-ins on the Gulf Coast, where more than half of U.S. refining
capacity is located. Although some refineries came back online in late 2020, U.S. refinery runs
remained lower than historical averages in 2020.

zewBase March 27-2021 Khaled Al Awadi
NewBase for discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Oil’s Most Volatile Week In Months Closes With a Whimper
Bloomberg + NewBase
Oil in New York barely nudged this week despite whipsawing over several days, as renewed
lockdowns in some regions blunted near-term demand outlooks and muted the impact of a standstill
at the Suez.
West Texas Intermediate futures fell less than 1% to close the week at $60.97, while Brent crude
just barely eked out a gain, snapping a streak of back-to-back weekly declines. Futures rose almost
6% and fell nearly 5% in sessions this week as traders recalibrated their positions from day-to-day.
Market volatility reached the highest since November.
Oil price special
coverage

While optimism remains over the long-term outlook for a global demand rebound, the downbeat
developments surrounding European lockdowns and rising case counts exacerbated an abrupt
unwinding of long positions in a market that was signaling it may have rallied too far, too fast. Still,
Goldman Sachs Group Inc. said crude’s decline in recent weeks had overshot market fundamentals,
and demand should still increase sharply through the northern hemisphere’s summer season.
The stage is set for crude’s rally “but the whole recovery trade got a little bit ahead of itself and oil
got a little bit ahead of itself,” said Jay Hatfield, CEO at InfraCap in New York. “Once we get the real
demand coming back, we can start to see prices heading to $70, $80 or even a superspike.”
Meanwhile, the Suez Canal remained blocked, with efforts to dislodge a massive container
vessel expected to take until at least Wednesday. The impact on headline prices was muted.
The grounding of the Ever Given ship on Tuesday set off a chain of events that’s wreaking havoc
on global seaborne trade -- shipping rates have increased, hundreds of vessels remain backed up
in the channel and ships are rerouting to avoid the logjam. Yet the impact on the oil market is likely
smaller than it would have been in the past, with flows from the Middle East to Europe declining due
to a long-term realignment of trade. And while plenty of oil is shipped from the North Sea to Asia,
it’s usually carried on tankers that are too large to pass through the canal.
Nevertheless, “the last days feel like oil investors are on a rollercoaster,” said Giovanni Staunovo,
a commodity analyst at UBS Group AG. “Drops are followed by a rise the day after, with fundamental
news not being able to explain those shifts.”
Oil prices have come under renewed pressure recently amid softening physical demand, a
strengthening dollar and the unwinding of long positions. The increased volatility over the past two
weeks has been felt across oil markets. Combined open interest in WTI and Brent has fallen nearly
7% to the lowest since January, refined product prices have slipped from the highs they hit after last
month’s deep freeze and crude’s underlying market structure weakened.

“The choppiness in oil prices this month is causing CTAs and risk-parity funds to de-leverage in
unison and this week was no exception,” Ryan Fitzmaurice, commodities strategist at Rabobank,
said in a note. “This dynamic is clear from the aggregate open interest data in oil, which started
declining last week and which continued into this week, in large part due to this mechanical selling
and portfolio re-balancing.”
Still, prices are up roughly 25% this year and there’s confidence in the longer-term outlook as
vaccination rates climb and OPEC+ keeps supply in check. The group meets next week to decide
on its production policy for May.
Beyond headline crude prices, the prompt timespread for global Brent crude flipped back into a
bullish backwardation structure, where near-dated contracts are more expansive than later-dated
ones, after briefly moving into a bearish contango earlier this week.
Oil Jumps
U.S. stocks rose to an all-time high on optimism over the vaccine rollout and after the Federal
Reserve freed banks from restrictions on dividends. Oil gained as the dollar slumped.
The S&P 500 Index climbed the most in three weeks amid a late-day surge and ended at a record,
with energy producers and health companies among the best performers Friday. Automakers
retreated as they confront a worsening global shortage of semiconductors.
Risk appetite also came back in Europe and Asia, capping a volatile week beset with vaccine-supply
disputes, a traffic block on the Suez canal and further deterioration in China’s relations with the
West. The U.S. outlook got a boost after President Joe Biden doubled the goal for vaccinations in
his first 100 days in office to 200 million.
“The tone of the market has somehow altered from angst to optimism, spurred by President Biden’s

doubling of the U.S. vaccine-rollout target and the Fed’s end to pandemic-era dividend cuts,” Nema
Ramkhelawan-Bhana, a strategist at Rand Merchant Bank in Johannesburg, wrote in a note. “It’s
remarkable how little it takes to shift the mood.”
The delay in freeing the ship stuck on the Suez Canal boosted oil, trimming a weekly loss in West
Texas Intermediate crude.
U.S. drillers add oil & gas rigs for second quarter in a row
U.S. energy firms added oil and natural gas rigs this week, with the total count rising for an eighth
month and a second quarter in a row as higher oil prices prompt drillers back to the wellpad.
The oil and gas rig count, an early indicator of future output, rose six to 417 in the week to March
26, its highest since April last year, energy services firm Baker Hughes Co said in its closely followed
report on Friday.
That puts the rig count up 71% from a record low of 244 in August 2020, according to Baker Hughes
data going back to 1940. The total count, however, is still 311 rigs, or 43%, below this time last year.
In March, the total rig count was up for an eighth month in a row for the first time since July 2017,
rising by 15.

NewBase Special Coverage
The Energy world – March 01- -2021
Suez Canal Traffic Snarl Is Making Shipping Costs Skyrocket
Bloomberg - Will Wade ( + NewBase )
It’s going to be tough to come up with a single figure that covers everything, and much will depend
on how long the massive cargo ship remains stuck in the waterway. But here’s what’s already
skyrocketed in price since the Ever Given ran aground Tuesday, blocking $10 billion of oil and goods
that sail through the passage on a typical day.
The cost to ship a 40-foot container from China to Europe has climbed to about $8,000, almost
quadruple the figure a year ago. Cost to ship a standard container to Europe has quadrupled
Rerouting around Africa would cost $300,000 just for the fuel
Vessels wait to enter the Suez Canal, blocked by the Ever Given, top left, on March 25.
Earnings for very large crude carriers, or VLCCs,
hauling oil from the Middle East to China rose to
$1,371 a day, registering a profit for only the second
day in more than seven weeks. And that route isn’t
even affected by the logjam in the Suez Canal.
Suezmax vessels, which typically carry 1 million
barrels of oil, are now getting about $17,000 a day, the
most since June 2020.
Caterpillar Inc., the U.S.’s largest machinery producer
and one of the biggest in the world, is facing shipment
delays due to the Suez Canal blockage and is
even considering airlifting products if necessary.

The Suez Canal blockage is forcing the shipping industry to incur heavy costs for rerouting
shipments of good and commodities, including oil and LNG.
With the canal potentially out of commission for weeks, shippers are now weighing the cost of
rerouting their vessels around Africa. It’s not an easy decision. Sailing around the Cape of
Good Hope adds 6,000 miles (9,650 kilometers) to the journey, and fuel costs alone would be about
$300,000 for a supertanker delivering Middle East oil to Europe.
What Is the Suez Canal and Why Is It So Important?
The Suez Canal, which cuts through Egypt to connect the Mediterranean and Red seas, is so
important to world trade that world powers have fought over it since it was completed in 1869.
That strategic shipping lane was completely blocked on March 23, when the heavily laden cargo
ship Ever Given, longer than the Eiffel Tower is tall, went askew in heavy winds and got its bow
wedged into the side of the waterway.
The mishap snarled international shipping amid efforts by elite teams to refloat the massive vessel.
1. What’s the Suez Canal?
The 193 kilometer (120 mile) man-made waterway cuts through Egypt to connect the Mediterranean
Sea to the Red Sea, and by extension the Atlantic and Indian oceans.
That makes it a key transit point for ships moving goods between Asia and Europe and the eastern
U.S. It entered service in 1869, 45 years before the Panama Canal, which is much shorter, linking
the Pacific and Atlantic oceans. The sea-level canal is the longest in the world without locks, with a
normal transit time from end to end of about 13-15 hours, according to GlobalSecurity.org.
2. Why is it so important?
About 12% of world trade passes through the canal each year, everything from crude oil to grains
to instant coffee. Without Suez, a supertanker carrying Mideast crude oil to Europe would have to

travel an extra 6,000 miles around Africa’s Cape of Good Hope, adding some $300,000 in fuel costs
(although there would be savings from avoiding the Suez passage tolls, which can run hundreds of
thousands of dollars.) Because it has no locks, it can even handle aircraft carriers.
3. What travels through it?
Just about every good imaginable, adding up in 2019 to 1.03 billion tons of cargo, according to
the Suez Canal Authority.
That’s roughly four times more than passed through the Panama Canal. The canal’s location makes
it a key link for shipping crude oil and other hydrocarbons from countries such as Saudi Arabia to
Europe and North America.
Among other goods, 54.1 million tons of cereal passed through the canal, 53.5 million tons of ores
and metals and 35.4 million tons of coal and coke in 2019.
Tight Fit
There’s not a lot of room for maneuver in the Suez Canal for a ship as big as Ever Given
Source: Suez Canal Authority and ship tracking data monitored by Bloomberg
4. What are the origins of the canal?
The idea dates back to antiquity but it wasn’t until the mid 19th century that Egypt’s Ottoman viceroy
Said Pasha granted a French company a concession to build the canal. The project took 10 years
and some 1.5 million laborers and cost $100 million, twice the initial estimate. The canal entered

service in 1869 but its owners faced financial difficulties shortly after and were forced to sell a
controlling stake to the U.K., which ran the canal for the next eight decades.
5. Who owns it today?
Egypt’s anti-colonial President Gamal Abdel Nasser nationalized the canal in 1956, a move that
sparked the Suez Crisis that same year when Israeli, British and France forces staged an invasion
of the Sinai and canal zone.
The crisis, which ended after the U.S. intervened against the invasion, resulted in the
canal’s closure for a year. (It also saw the first UN peacekeeping force.) A decade later, the 1967
Israeli-Arab war prompted Egypt to close Suez to ship traffic for eight years as Egyptian and Israeli
forces faced off across the water.
Today, the canal is operated by the state-owned Suez Canal Authority and is a major money-earner
for Egypt’s government, generating $5.61 billion in revenue last year. An $8 billion expansion of the
canal was launched in 2015 with the goal of increasing ship traffic and more than doubling revenue.
Oil Tanker Diverts Around Africa to Avoid Suez Canal Disruption
Supply Lines is a daily newsletter that tracks trade and supply chains disrupted by the
pandemic. Sign up here
tanker Marlin Santorini abruptly changed course Thursday afternoon to head around Africa on its
journey from Houston to Asia, apparently to avoid the risk of getting caught in the growing tailback
of vessels waiting to transit the Suez Canal. With no end in sight to the blockage of the vital
waterway, the longer voyage around the Cape of Good Hope is starting to look more attractive.

A problems for the globe
The behemoth cargo ship stuck in the Suez Canal and blocking traffic in one of the world’s
most important maritime trade chokepoints isn’t set to break free just yet.
The Ever Given, a 220,000-ton mega ship nearly a quarter-mile long with a 20,000 container
capacity, ran aground after being blown by strong winds while entering Egypt’s Suez Canal from
the Red Sea. It’s completely blocked the passageway that is home to as much as 12% of the world’s
seaborne trade and through which 50 container ships normally transit per day.
Tugboats and dredgers are currently working to dislodge the ship, which has been stuck since
Tuesday evening. But the operation could take weeks, one of the executives involved has
warned.
“While we believe and hope the situation will get resolved shortly, there are some risks of the ship
breaking,” JPMorgan strategist Marko Kolanovic wrote in a note Thursday. “In this scenario, the
canal would be blocked for an extended period of time, which could result in significant disruptions
to global trade, skyrocketing shipping rates, further increase of energy commodities, and an uptick
in global inflation.”
Stranded container ship Ever Given, one of the world’s largest container ships, is seen after it ran aground, in Suez Canal,
Egypt March 25, 2021.
The crisis is another blow to the global supply chain after a brutal year ridden with delays, shortages
and price squeezes on the back of the coronavirus pandemic.
What does this mean for global trade?
The shipping delays could impact everything from the clothes and shoes you ordered online to gym
equipment, electronics, food, and energy supplies — meaning gas prices could get higher, too.
“Suez Canal container blockage to further rattle global supply chains, to drive pricing higher given
pent-up demand,” analysts at JPMorgan said in a research note Thursday.

The man-made Suez, at 120 miles long, is a key transit point connecting East to West. And the
20,000 ships that pass through it yearly transport everything from oil and gas to machine parts and
consumer goods.
While it’s still early to say what the full impact of the tanker crisis will be, the bank expects that in
the near term, “the blockage is likely to add to industry supply strains, which are already hampered
by ongoing supply chain bottlenecks″ in the form of port congestion and shortages of both vessels
and containers due to Covid-19.
Ships are going to have to shift to entirely different routes, “will result in longer voyage times and
causing further delays,” JPMorgan wrote.
And those delays could be more than 15 days for many ships, whose alternative is sailing around
the Cape of Good Hope at the southern tip of Africa, which analysts say would increase shipping
times by up to 30%.
The immediate impact of delays in the canal will centre on European – Asian trade, adding delays
to already disrupted supply chains affecting oil and refined products’ supplies,” ING senior
economist Joanna Konings wrote in a client note Wednesday.
Impact on crude prices
The Ever Given’s misfortune has already impacted oil prices.
News of the Suez blockage drew in buyers, and along with other economic data contributed
to international benchmark Brent crude’s one-month futures contract gaining “its biggest one-
day gain in nearly a year to close at $64.41” on Wednesday, according to Arctic Securities, though
it lost some of those gains by Thursday.
In the meantime, between 5% and 10% of all seaborne oil is transported through the Suez, meaning
that for each day that the ship remains stuck, it delays the shipment of another 3 million to 5 million

barrels of oil per day. Several tankers carrying jet fuel and gasoil are also held up on the Persian
Gulf-Europe route, as well as empty tankers crossing to pick up North Sea oil, S&P Platts reported
Thursday.
A graph showing shipping traffic halted around the Suez Canal after the ship Ever Given began
wedged in the canal. Source: MarineTraffic
The canal is also a transit point for around 8% of global liquefied natural gas (LNG), and a prolonged
disruption could impact flows to primarily the European market.
Any price effect will likely be brief, however, says Peter Sutherland, president of Houston-based
energy investment firm Henrietta Resources.
“It won’t have a lasting impact on prices, but it will help lend support in the run-up to the OPEC+
meeting,” Sutherland told CNBC.
“The risk premium in oil markets will likely be short-lived, but the canal back-up still managed to shift
the market narrative.”
The winners
The canal blockage is certainly not bad news for everyone — spot freight rates are set to jump even
higher on pent-up demand, making money for the operators, market watchers say.
“A more prolonged closure of the Suez Canal would see container shipping as the biggest
beneficiary, while tanker, dry bulk and air cargo might also see some higher rates,” wrote JPMorgan,
describing the tightening of shipping rates “as a upside risk.”

Satellite images of container ship Ever
Given stuck in Egypt’s Suez Canal.
Source: European Space Agency
Sentinel-2 Satellite
Who is set to benefit most?
JPMorgan highlights Asian
liners, saying that despite
higher bunker costs due to
longer rerouted journeys and
increased congestion, they
expect higher spot freight
rates. “This instead of hurting
profitability is expected to be
positive for bottom-line for
Asia liners, in our view,” the
bank wrote.
Bank of America’s analysts agree. “A Suez closure of a few weeks would be very positive for spot
freight rates — by effectively removing supply by adding 20-30% to sailing distance via Cape of
Good Hope,” it wrote in its note Thursday.
Risks and vulnerabilities grow
In the meantime, the Suez Canal’s blockage “will add to an already rising Middle East risk premium
for oil and refined products,” Torbjorn Soltvedt, principal MENA analyst at Verisk Maplecroft, said,
highlighting increased risk of attacks on oil facilities amid regional tensions.
The uncertainty over the blockage’s duration “creates a window of opportunity for state and non-
state actors seeking to maximize the impact of attacks against tankers and energy infrastructure in
the Persian Gulf and Red Sea,” he warned.
Cargo ship “Ever Given” stuck
and blocking traffic in the Suez
Canal Source: Reuters
Most analysts expect the
situation to be cleared
within the week. But “the
disruption could be
prolonged if there are
complications or hull
damage,” Bank of America
wrote Thursday. When the
traffic eventually gets
cleared, ships will be
arriving at their ports
behind schedule, creating
yet more congestion.
Still, the bank writes, “a blockage of a few days would be broadly manageable to the container
shipping industry — perhaps involving additional fuel cost as shipping companies speed up their
services to make up lost time.”
The whole fiasco underscores just how fragile the trading network that the world relies on really is,
says Sutherland. “Paired with the recent attacks on Saudi installations, it’s a reminder of the many
vulnerabilities in the global oil and gas supply chain.”

NewBase Energy News 27 March 2021 - Issue No. 1419 call on +971504822502, UAE
The Editor:” Khaled Al Awadi” Your partner in Energy Services
NewBase energy news is produced Twice a week and sponsored by Hawk Energy Service – Dubai, UAE.
For additional free subscriptions, please email us.
About: Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
www.linkedin.com/in/khaled-al-awadi-38b995b
Mobile: +971504822502
khdmohd@hawkenergy.net or khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with over 30 years of experience in the Oil & Gas
sector. Has Mechanical Engineering BSc. & MSc. Degrees from leading U.S.
Universities. Currently working as Technical Affairs Specialist for Emirates General
Petroleum Corp. “Emarat “with external voluntary Energy consultation for the GCC
area via Hawk Energy Service, as the UAE operations base. Khaled is the Founder
of NewBase Energy news articles issues, an international consultant, advisor,
ecopreneur and journalist with expertise in Gas & Oil pipeline Networks, waste
management, waste-to-energy, renewable energy, environment protection and
sustainable development. His geographical areas of focus include Middle East,
Africa and Asia. Khaled has successfully accomplished a wide range of projects in
the areas of Gas & Oil with extensive works on Gas Pipeline Network Facilities &
gas compressor stations. Executed projects in the designing & constructing of gas
pipelines, gas metering & regulating stations and in the engineering of gas/oil supply routes. Has drafted &
finalized many contracts/agreements in products sale, transportation, operation & maintenance agreements.
Along with many MOUs & JVs for organizations & governments authorities. Currently dealing for biomass
energy, biogas, waste-to-energy, recycling and waste management. He has participated in numerous
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