November 19, 2008 at 10:22 pm #3308
Frontline Oil Tankers May Shun Somalia as Insurance Costs Rise
By Alaric Nightingale
Nov. 18 (Bloomberg) — Frontline Ltd., the world’s largest
operator of supertankers, may divert vessels away from Somalia
after pirates captured a Saudi Arabian oil tanker and insurance
The Sirius Star, the largest merchant ship ever seized, was
taken Nov. 15 and is now anchored off the coast of Somalia, east
Africa, along with its crew of 25. Supertankers cost about $148
million and its cargo of 2 million barrels of oil about $110
million. An attempted hijacking of Frontline’s Front Voyager
tanker in the same area was thwarted in September.
“When it comes to the safety of our crew, we don’t take any
chances,” Jens Martin Jensen, interim chief executive officer of
Frontline’s management unit, said by phone from Singapore today.
The Hamilton, Bermuda-based company has yet to make a final
decision, he said.
There have been 88 attacks against ships in the area since
January and Somalian pirates are holding 250 crew hostage on
board 14 merchant vessels. To avoid Somalia, ships would have to
go around South Africa’s Cape of Good Hope rather than use
Egypt’s Suez Canal, increasing the cost of shipping crude.
“Shipping costs will rise significantly as insurance
premiums increase substantially,” IHS Global Insight Inc. said
in a report today. The attacks are “likely to spur international
efforts to secure the region’s shipping lanes.”
The Joint Hull Committee, a group representing ship
insurers, is advising shipowners to avoid Somalian waters,
Chairman Simon Stonehouse said today. Insurance premiums will
rise and unless the Egyptian government becomes “more actively
interested” in combating piracy in the region they risk damaging
the business of the Suez Canal, Stonehouse said.
Odfjell SE, the world’s largest operator of chemical
tankers, said yesterday it will divert ships away from Somalia.
About 11 percent of the world’s seaborne petroleum passes
through the Gulf of Aden, using the Suez Canal. Ships also use
the route to carry Asian-made goods to the U.S. and Europe.
Routing vessels around Africa will lengthen journeys and
effectively reduce ship supply, said Nikos Varvaropoulos, an
Athens-based official at Optima Shipbrokers.
December freight-derivative contracts tied to the price of
shipping Saudi Arabian crude to Japan, the global benchmark,
advanced 8.2 percent to 66 Worldscale points, according to data
from Justin King, a London-based broker of the contracts at
Tradition Financial Service.
Worldscale points are a percentage of a nominal rate, or
flat rate, for more than 320,000 specific routes. Flat rates for
every voyage, quoted in U.S. dollars a ton, are revised annually
by the Worldscale Association in London to reflect changing fuel
costs, port tariffs and exchange rates.
“Every single ship is coming under attack,” Captain
Nasrollah Sardashti, chartering manager of the National Iranian
Tanker Co., operator of Iran’s supertankers, said by phone from
Tehran today. “That’s what the captains are saying to us.”
Shipping lines are increasingly forming convoys to navigate
the Gulf of Aden, he said. The European Union last month joined
the North Atlantic Treaty Organization, India, Malaysia and
Russia in deploying vessels to combat piracy.
“Piracy like terrorism is a disease that affects everyone
and we have to deal with,” Saudi Arabia’s Foreign Minister Saud
Al-Faisal said today in Athens.
November 19, 2008 at 10:27 pm #6449
As article indicates if Egypt doesnt get off its but & protect the Suez then they will lose a lot of money and ships will just take long way around; they price canal rates so that is usually ~cost neutral anyway, so its just time vs. risk……and now risk is too high (especially with insurance cost for trying added ontop).
Someone somewhere is already saying ok lets just avoid the MidEast and Suez Canal because of insurance cost and risk going thru it.
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