Energy exporters adapts to canal disruptions: Al-Attiyah Foundation

Many energy exporters are adopting improved asset utilisation and embracing predictive analytics for dynamic shipping adjustments in light of recent canal disruptions, according to Al-Attiyah Foundation’s latest Energy Research Paper."Geopolitics and Climate Shifts: Canal Disruptions and the Emergence of New Energy Trade Routes,” underscores how recent canal disruptions are shaping new strategies in global energy logistics.Climate impacts and geopolitical events have reduced transit capacity in major channels, with daily Suez Canal shipments down by 50% since early 2024, and Panama Canal shipments constrained by a 32% reduction since October 2023.To mitigate these challenges, energy exporters are diversifying their routes, notably using the Cape of Good Hope, despite the higher operational costs associated with these longer journeys.The report emphasises that, while historically short-lived, such disruptions are becoming increasingly routine. This marks a shift as canal access is now susceptible to climate-induced factors like drought, which has severely impacted the Panama Canal, and security risks in regions like the Red Sea.Such factors are expected to persist, leading the energy market to integrate contingency plans, such as advanced logistics systems that enable faster rerouting and enhance real-time decision-making capabilities. Strategies like dynamic scheduling and intermodal transport can increase flexibility based on real-time data and market forecasts to help adjust shipping plans quickly.The current Red Sea crisis has inadvertently led to improved asset utilisation, with minimal idle time for container ships and tankers as they connect with alternate modes of transportation to allow for more efficient transfers and reduce costs.Additionally, the increased reliance on alternative routes has presented both logistical and financial challenges. Routing around the Cape of Good Hope, for instance, raises fuel costs and extends delivery times, affecting overall trade flow volumes.However, technological improvements in ship efficiency and enhanced tracking systems are helping to mitigate some of these costs, reducing idle time for vessels and streamlining cargo movement.The Al-Attiyah Foundation report notes that recent improvements in shipping capacity and management have kept charter rates relatively stable, even amidst these extended trade routes.Despite the rise in shipping costs due to these changes, energy prices have remained resilient. The report states that this stability is due to lower-than-expected demand coupled with ample supply. Mena energy exporters, particularly those in the Gulf Cooperation Council (GCC) region, are maintaining steady trade flows through strategic adjustments in trade routes, helping to balance global energy supplies.Furthermore, the report highlights proactive measures in the industry, such as Saudi Arabia's use of the East-West Pipeline to bypass the disrupted Bab el-Mandeb strait, preserving its exports to Europe.Other exporters, including Qatar, are actively investing in new LNG carriers and expanding fleet capacity to support their shipping flexibility. The growing interest in resilient infrastructure solutions, like electric and hybrid vessels, and practices like just-in-time co-ordination, showcases how energy markets are pivoting toward sustainable, resilient supply chain models that can withstand external disruptions.The Al-Attiyah Foundation’s report concludes that while these rerouting strategies help stabilise the energy trade in the short-term, the ongoing climate and security challenges could lead to long-term shifts in global energy routes.The findings underscore the need for continued investment in adaptive infrastructure and logistics innovations, ensuring a robust and responsive energy supply chain.