Damage to Sumed pipeline could trigger another oil price jump

Egypt may not be among the Middle East’s significant oil producers, but the country’s turmoil has placed upward pressure on oil prices nonetheless.

The most important explanation is the market’s fear that Egypt’s revolution may spread to the rest of the region. But there is also a secondary concern about the security of important transit routes across Egyptian territory.

The Suez Canal is not as important for crude oil supplies as might be thought. According the most recent figures available from the Suez Canal Authority, only 573,000 barrels per day passed through the Canal in 2009, less than half the figure for 2006.

The Sumed pipeline, running from the Red Sea to the Mediterranean, is of greater significance. Analysts believe this 220-mile link is currently transporting 1.1m barrels per day, almost twice as much as the Suez Canal.

A pipeline is inherently more vulnerable than a Canal and Sumed follows a far more exposed route, beginning at the Ain Sukhna terminal on the Gulf of Suez and running north-west, past Cairo to the Sidi Kerir tanker facility on the Mediterranean coast near Alexandria.

As such, the pipeline passes uncomfortably close to the main centres of unrest. Reports say that troops have been deployed to guard Sumed and the number of sentry posts has been doubled to 30 – which does not sound very much for a structure that is 220 miles long.

So far, there are no reports of sabotage or accidental damage. None of the players in the political confrontation in Egypt has an obvious interest in disrupting the pipeline. Even if it were to be cut off, the Suez Canal would serve as an alternative. In extremis, tankers could be rerouted around the Cape of Good Hope.

With the market in such a febrile state, however, any suggestion of damage to Sumed could have significant repercussions.

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