Saturday, October 11, 2008
Oil and Hormuz Strait Pt………III
Earlier I discussed about the strategic importance of Hormuz Strait in relation to global oil supplies. It is equally sensitive to political developments in any of those counties surrounding it, specially Iran. There is an alternative transportation route for oil bypassing this strait out of gulf region. The route is 1190 Km (745 miles) long East-West Pipelines through Saudi Arabia stretching to Red Sea. But this pipe line at best can handle five million barrels per day, that makes one third of the oil what oil tankers can handle. So, additional capacity is required to be created but that would increase the transportation cost. At the same time the pipe line would relieve the strait of its heavy tanker’s traffic and hazards involved. But this move will be unwelcome by many Gulf States , since this will benefit the Saudi Arabia, as it will receive the transit fees for the oil transported, paid by them.
There are reports, that Iran threatened closure of the Strait of Hormuz is a global threat. Global energy security is at stake under such threats, like closure, blockage or barricading even for a temporary period. Any such move ever comes true that will take one quarter of total global oil supplies out of the market. Obviously the oil price will surge and may touch the level of zenith
It is estimated that total global oil reserves of crude oil is about 170-180 billion tones. At the current level of production they are likely to last for another 40 years. The oil reserves are highly concentrated, about 65 per cent of global oil reserve is in the gulf region. Saudi Arabia alone has 25 per cent of global oil. The oil fields are aging and no major oil province that is commercially viable has been discovered for the past three decades. The productions form the existing fields are declining day by day. Though the major consuming countries are looking for alternative source for their oils, but the Gulf Countries will ever remain the main source of oil shipments. So the Strait of Hormuz will require rationalize use as the most important chokepoint. Any political uncertainty over the strait may pose serious problem for shipment of energy form the Persian Gulf.
Historically, the Straits have been protected by international law as points through which all nations may navigate. In 1982, the Law of Sea Conventions further protected the international access for nations to sail through the straits and canals and even ensured that these passageways are available as aviation routes for all nations. For obvious reasons the law gained the international acceptance. Straits are gifts or nature , or facts of geography irrespective of their rulers, regimes, ideologies, political systems and governments and every nations have the right to access them for their energy security , trade and commerce. It is the sheer responsibilities of International communities to maintain rule of law, and that for Strait of Hormuz as well.