Tanker companies warn of rise in armada of ghost ships

Tanker companies warn of rise in armada of ghost ships
Harry Dempsey 20 Feb 2022 https://www.ft.com/content/af236fd9-f757-4acd-b3bc-f78b44d40625

Increased shipments of sanctioned oil are undermining their businesses

The number of ships carrying sanctioned Iranian and Venezuelan oil has trebled since 2019, according to three of the world’s largest tanker companies which warned the ghost armada is undermining their businesses.

Chief executives from Belgium’s Euronav, Bermuda-based DHT Holdings and Frontline said about 70 supertankers out of a global fleet of 850 such vessels are facilitating the trade of roughly 400mn barrels of oil a year. This is an increase from between 20 and 25 vessels in 2019, they said, and comes despite US sanctions on the trade. The global seaborne oil trade is some 45mn barrels of oil a day, according to Euronav.

“It’s a mystery to us that this industry can flourish,” said Lars Barstad, chief executive of Frontline, controlled by Norwegian shipping magnate John Fredriksen. “This hasn’t been seen before. This is a problem that has been growing and growing gradually to the point where it’s gapingly apparent that we have a challenge here.”

The trade in sanctioned oil has undercut the tanker business, the three tanker companies said, which between them account for 11 per cent of the global fleet. The proper enforcement of sanctions would force buyers of Iranian and Venezuelan oil to seek out other sellers and transporters, the companies said.

The trade of sanctioned oil contributed to the worst downturn for supertankers in decades last year when high oil prices prompted refineries to draw down oil inventories built up when prices were lower rather than buy new oil, thereby reducing demand for tankers. The price of oil is currently at about $92 a barrel.

The US reimposed sanctions on Iranian energy exports after the Trump administration withdrew in 2018 from the 2015 Iran nuclear deal with world powers. Indirect talks are under way in Vienna to revive the deal.

The Venezuelan regime of President Nicolás Maduro and some high level officials are under US sanctions because of corruption, drug trafficking and their undermining of the democratic system.

Estimating the size of the so-called dark fleet and volume of sanctioned oil exports is notoriously difficult because Iranian and Venezuelan crude is transferred to multiple ships and blended before reaching their destination. Vessels use tactics including switching off or “spoofing” their AIS systems, faking documents, regularly changing registries and using shell companies.

Samir Madani, co-founder of TankerTrackers.com, estimates the global ghost fleet of supertankers is higher — a total of 107 vessels excluding Iranian-flagged ships.

The severity of the problem became clear to executives at the three tanker companies last year when prices rose for old ships, which usually would be scrapped. The tanker companies’ calculations reflect their own and industry research, based on satellite images, export data and the number of older vessels that have not been scrapped.

They urged the International Maritime Organization, the UN shipping regulator, to take a harder line on countries accepting the oil. “I’m afraid we won’t be able to address it properly until after we have a massive spill which will hurt the environment and our industry,” said Barstad.

Frederick Kenney, director of legal and external affairs at the IMO, said the UN body has no operational arm or mandate to enforce US sanctions but was trying to expose fraudulent registries.

The industry executives said US sanctions on Iran were ineffective and, in fact, have been fuelling inflation for western consumers because the addition of non-sanctioned Iranian oil to the global market would help ease crude prices. “The US doesn’t recognise that those sanctions are backfiring against them,” said Hugo De Stoop, Euronav’s chief executive.