07 December 2011

How Will The Arab Spring Affect the Freight and Logistics Sector ?  

Political Upheaval Leaves an Uncertain Future for Energy Related Shipping Contracts

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UK – NORTH AFRICA – WORLDWIDE – After the much reported recent political turmoil in North Africa it is to be hoped that some nations are beginning to find their feet again. One of the great concerns for overseas governments is the uncertain state of the energy market and this has ramifications for many involved in the freight and logistics sector. Here in an interview Neel Ratti of Tuscor Lloyds reflects on the Arab Spring’s effect on the market and how it will create opportunities for British shippers.

“The UK has a long history of trade with the North Africa. Many cultural and economic ties still exist from colonial times, and more recently local people have appreciated the support and encouragement given to them by the UK during the political upheavals. British manufacturers retain an excellent reputation throughout the region. Trade is growing steadily and is bound to develop further after the UKTI announcement in October of the African Free Trade Initiative.

“For all their undoubted cruelty, the secular dictators of North Africa oversaw important investment programs in port infrastructure. As recently as January 2011, the Mubarak-led Egyptian government agreed capital expenditure of over $16 billion for new equipment and upgrades across the country’s port facilities. More investment is needed however and while democracy is good for trade, the newly elected North African governments must not be tempted to cancel the more astute decisions by their predecessors - no matter how hated their regimes were.

“A key industry for UK exporters to the region in the future will be the energy sector. According to The International Energy Agency’s 2011 World Energy Outlook, global demand for oil (currently at 88 million barrels per day) is likely to increase to 99 mb/d by 2035. The report claims productivity will fall for many oil producers over the same period and more importantly, production costs will increase for almost all suppliers. The outlook for the North African fossil fuel industry however looks bright, with almost the entire shortfall in productivity (nine tenths, according to the IEA) to be taken up by the Middle East and North Africa combined.

“The IEA estimates investment to the tune of $2.7 trillion is required across the North African region in the energy sector to achieve this goal. This level of commitment cannot be exclusively provided by local business, and it is likely much of this assistance will come from established oil companies with the expertise and resources to reach productivity targets. We can be sure that UK business will be at the forefront of the development and the all-important logistics services will be offered to British forwarders.”

Obviously in addition to Neel Ratti’s comments the seismic shift which is bound to occur in energy types and ratio’s over the coming decades is bound to have an enormous impact on the way we find, produce and disseminate energy. Many of our articles are dedicated to the progress being made in electric, fuel cell and hybrid vans and trucks, project freight forwarding contracts for the new giant turbines and other components which are essential to harness the power of wind, waves and the sun which must ultimately replace the thirst for oil and gas.

Shipping groups worldwide must prepare now for the future energy requirements which will be needed globally, already we are witnessing the recovery of oil and gas from places where the depths and conditions even a decade ago would have made such operations impossible and, accepting the fact that the world will always have a need for these natural resources the challenge of reaching them will involve ever more complex logistics.

For now however the insatiable thirst for oil and gas will mean that the North African region will remain a key source for the developed Western economies particularly as the unrest of the Arab Spring seems destined to continue to sweep irrevocably deeper into the heart of Arabia with the uncertain outcomes so feared by politicians.

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