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Oil Tanker Attack May Spur Increased Security, New Routes




By Fred Pals and Gianluca Baratti

Nov. 18 (Bloomberg) — The hijacking of a Saudi Arabian supertanker off the east coast of Africa may spur oil and shipping companies to step up security and use alternative routes, delaying cargoes to Europe and the U.S., analysts said.

“It seems reasonable to travel with additional security measures that provide an adequate response given the advanced armory and boats the pirates possess,” Cyril Widdershoven, an Amsterdam-based energy analyst at Deloitte, said today in an interview. “It may take up to four weeks longer for crude to reach its destination if routes are diverted.”

The Sirius Star, the largest merchant ship ever seized, is anchored close to the Somalian coast after being captured by pirates yesterday, the U.S. Navy said. About 11 percent of the world’s seaborne petroleum passes through the Gulf of Aden en route to the Suez Canal or regional refineries. Oil companies declined to say if they’re reviewing security.

Crude prices in New York pared losses when news of the weekend hijacking broke yesterday. Futures surged to a record in July after Iran threatened to blockade the Strait of Hormuz, the shipping lane for a fifth of the world’s crude, if its nuclear facilities were attacked.

The attacks may divert shipping away from the Gulf of Aden in favor of longer routes to Europe and North America around South Africa’s Cape of Good Hope. The extra weeks of sailing and fuel consumption could drive oil and commodity prices higher, according to Chatham House.

`Higher Costs’

“Companies may see insurance premiums rise because of this event,” John Mitchell, an associate research fellow at the London-based research organization, said today in an interview. “This is clearly a security issue and it could lead to higher costs.”

Frontline Ltd., the world’s largest owner of supertankers, is considering routing its ships away from Somalia.

Ships passing close to Somalian waters carry oil from the Middle East via the Suez canal and Asian-made goods to Europe and the U.S. Some companies including Odfjell SE, the world’s largest chemicals shipping line, have said they will shun the canal because of the attacks off Somalia.

“We recommend that ships travel through high-risk areas at night and travel at a speed of at least 16 knots,” Giles Noakes, chief maritime security officer at BIMCO, a shipping association, said in an interview. Such a speed creates a wake large enough from the bow of the ship that makes it almost impossible to get aboard from a smaller ship, he said.

Royal Dutch Shell Plc, Europe’s biggest oil company, wasn’t immediately available for comment on security issues. Although it doesn’t own any very large crude carriers, Shell chartered seven VLCC’s in 2007 and owns 17 crude carriers, ranging from large to small capacity, according to its 2007 annual report. The company’s total fleet consists of 94 oil tankers.

Shell’s output in Nigeria has been disrupted by militant attacks since 2006. Crew members were kidnapped from a French vessel supplying a Cameroonian offshore oil rig earlier this month. The boat was owned by Bourbon SA, a French oil services company.

LNG Risk

Shell’s liquefied natural-gas shipments from Qatar may be disrupted by the increased risk of offshore attacks, according to Deloitte’s Widdershoven. “This attack was the biggest thing that could happen and if they can pull this off, they can also hijack an LNG tanker.”

Shell signed a 25-year service contract last year to manage a fleet of 25 Qatari LNG tankers to reach distant markets including North America. The vessels will cost about $300 million each and have a capacity ranging from 210,000 cubic meters to 266,000 cubic meters. The project will start operations around the end of the decade.

“We are advising unarmed assistance,” Bimco’s Noakes said, to prevent the risk of violence. “This means extra watches and manning hoses,”

Hoses are used to pour water down the sides of the ship, making it more difficult for assailants to get on board, he added.

BP Plc, Europe’s second-largest oil company, declined to comment, as did Italy’s Eni SpA. SBM Offshore NV, the world’s largest producer of floating oil production platforms, wasn’t available for comment.

Total SA, France’s biggest oil company, declined to comment. At the end of 2007, the company had a fleet of 65 chartered vessels, according to its Web site.

To contact the reporter on this story: Fred Pals in Amsterdam at[email protected]

Last Updated: November 18, 2008 08:48 EST


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