CAIRO and ISMAILIA: Brazil could be Egypt's Suez Canal's biggest competitor. Pirates aside, the canal's preeminence atop international shipping lanes could be under attack from two relatively relatively new shipping destinations: Brazil and Panama. Brazil is currently in the process of developing a number of massive oil refineries that could make shipping companies think twice before passing through the expensive, pirate infested waters of the Suez Canal. It has government officials worried. Although still in its infancy in terms of development, Brazil’s state-run Petrobras announced in May that it had signed an agreement with the Japanese trading company Mitsui & Co. to study the viability of an oil refinery in the Ceara state in the north of the country. This would be the second refinery Petrobras plans on building in addition to three other refineries under construction. The goal is to move Brazil into an exporter of oil products, not only crude. “The memorandum [of understanding] is based on Mitsui's interest to act as potential partner of the project,” Petrobras said in a statement. “[It] aims to execute a joint study to analyze the implementation of the project with the participation of Mitsui.” With Japan on board, Petrobras is looking at establishing Brazil as the so-called Mecca of oil refinement, which could affect Egypt’s economy immensely. Brazil’s continued efforts to bolster its already strong oil industry has led to plans to expand the Panama Canal in order to facilitate easier transport to and from both Brazil and oil powerhouse Venezuela. It is working. A spokesman for the Panama Canal Authority, Silvia de Marucci, says that the expansion of the canal would give alternate routes throughout the Caribbean and South America to Asian nations. “Today, through the Panama Canal, we see cargoes of crude oil and products that originate in Venezuela, Colombia and the Caribbean with destinations on the west coast of the Americas,” Silvia de Marucci argues. The passageway is being expanded and new locks are being constructed as part of a $5.25 billion project due to be finished sometime in 2014. This would enable a massive increase in traffic through the canal, Marucci adds. She is not convinced that it will be detrimental to the Suez Canal, but says that by enlarging the existing canal, “it will give shipping companies options.†The 9,286 nautical mile voyage from Venezuela to Shanghai, China, would take 28 days at a speed of 14 knots passing through the canal as opposed to 48 days if taking the Suez Canal or the Cape of Good Hope off South Africa’s coast. “All these drivers will determine the route to be selected, but the point for us is that there will be an additional route choice once the third set of locks is ready,” Marucci adds. Here in Egypt, analysts and government officials are not convinced that this will make global shipping easier, or even cheaper. SCA spokesman Tariq Hassanein said in an interview earlier this year that doomsayers who argue that the Suez Canal could become second to other transit areas are “wrong and don’t understand the importance the canal plays in international shipping.†Although he admitted that the canal is going through a rough time as a result of piracy in the Gulf of Aden and the global financial crisi, he believes the situation will “work its way toward a positive result†and that the canal will continue to be the number one shipping channel. “All the talk of other locations becoming more mainstream for the shipping community is not founded, despite our drops in revenue over the past few months. Everywhere this is happening, so it is not unique to the canal,†he began, “and we are confident that in time, we will get back to the capacity the canal was at before the economic crisis.†He didn’t talk about the Panama Canal or Brazil’s efforts to bolster its refining industry, adding that it “is not something we are concerned with at the present. There are other issues that need to be taken care of first.†Todd, an American ship captain who has taken a number of vessels through the canal, believes that only with time will Egypt be able to discern whether the Suez Canal will remain the number one shipping lane in the world. “I think it will be a while before we can honestly say whether the Suez Canal will lose its top status,†he begins, asking that his surname remain anonymous due to security reasons. “If it is true that going elsewhere would save time, then that option will be carefully studied because in the shipping industry, time is money,†the captain continues. He says that the discussion about Brazil making in roads into garnering the shipping industry is only relevant if piracy remains a big issue for companies. “If the Somali pirates continue to be a problem, then I definitely believe that we will be looking into going south around Africa and if Brazil has the capabilities to compete globally, then, sure, this would be a good idea and could hurt the Suez Canal. But, right now, I just don’t see that happening. It is years away,†he adds. All this is not optimistic news for the Suez Canal Authority (SCA), which has continue to report revenue drops in 2009. They hope that the new year will bring new promise, but if Brazil can establish itself as an alternative, the future could be very bleak. BM
