Aging Shadow Fleet powered by Russian oil poses risk of disaster Ship’s crew

By Asad Zulfiqar

03/26/2023 (Bloomberg) – The oil tanker Turba should actually have melted down long ago.

The 26-year-old ship has not been fully inspected since 2017, according to a database dedicated to promoting safe shipping. It also lacks industry-standard insurance and flies the flag of a country with a poor reputation for overseeing maritime safety.

But instead of being steered to a beach in Bangladesh, India or Pakistan for dismantling, the tanker built in 1997 collects heavy fuel oil in the Russian port of St. Petersburg.

The fallout from European Union sanctions against Russia means the Turba has been included in a vast shadow fleet that transports Moscow’s oil around the globe. Its continued operation is a stark reminder that Group of Seven sanctions against Moscow pose an environmental risk.

The big concern is that some older vessels – the world’s fleet is now the oldest in nearly two decades – may not be properly inspected and maintained, leading to a catastrophic accident at sea.

Also read: “Shadow” tanker fleet increases the risk of accidents

“They are an environmental disaster waiting for us,” said Lars Barstad, chief executive officer of the management unit of Frontline Plc, one of the largest owners of supertankers.

In normal times, owners start thinking about demolishing tankers from around the age of 15. By the 20th year, the ships’ fate – sold for scrap – is usually sealed.

At the moment, however, shipowners are squeezing out a few more years because there is money to be made.

The sanctions imposed on December 5 are forcing ships to sail thousands of miles further, boosting demand and freight rates.

inspections

At least 40 ships transporting Russian oil to China and India between early December and early February were not insured by members of the International Group of P&I Clubs or routine safety management certificates, according to data from Equasis, the maritime safety database. Three, including the Turba, had no so-called classification that would show how seaworthy they are.

The Turba brings back unpleasant memories of one of the worst tanker oil spills in European history. The tanker Prestige broke up in November 2002, spilling thousands of tons of heavy fuel oil off the coast of Spain.

Seabirds and fisheries have been decimated and beaches in Spain and Portugal have been ruined.

The Turba is the same age as the Prestige and only picked up the same type of cargo from the same Russian port, according to data from Kpler, a shipping analysis company.

The Russian Ministry of Transport, the national federal agency for sea and river transport and Rosmorport, an entity that oversees port infrastructure, did not respond to emailed requests for comment. The Spanish Merchant Navy pointed out that it could not control activities outside its territorial waters.

Good reasons

There are good reasons for scrapping tankers when they are 20 years old. Often at stake is the cost of trying to keep them running as safety and maintenance requirements become more stringent.

But there are also the effects of years of wave pounding, saltwater corrosion and near-constant use that stress the integrity of the hull and propulsion systems.

Tankers normally receive inspections – so-called special surveys – every five years or so. The fourth time, the profitability of continued trading decreases sharply. The investigations can cost 3 to 4 million US dollars for large tankers and then require an intermediate inspection about 2 1/2 years later.

Port authorities also tend to take a closer look at older ships. The increased costs and lack of customers would – in normal times – encourage owners to sell them for scrap.

“Everything has to be checked – steel, engine,” said Halvor Ellefsen, a shipbroker at Fearnleys Shipbrokers UK Ltd. who has been in the industry for almost four decades. “The older they are, the more they find.”

European shutdown

The EU, for years the largest buyer of Russian oil, banned almost all sea exports from its former trading partner and joined the G-7 in trying to limit the price of Moscow’s crude oil to $60 a barrel. It is still possible to transport Russian oil at prices above the threshold, but not with Western services such as insurance, crewing, ship classification, financing and transportation.

The net effect has been an increase in long-distance shipments to Russia’s major remaining markets in Asia and the creation of a shadow fleet of tankers operating outside the G-7 corporate sphere.

The traders and shipping companies that do this business often have opaque ownership structures.

Sales to unknown buyers surged last year as more than 100 oil and fuel tankers changed hands. According to Clarkson Research Services Ltd., a unit of the world’s oldest shipbroker, scrapping also fell sharply over the same period.

Some of the aging ships transport their dangerous cargo on the high seas, often in international waters off Greece or the Spanish enclave of Ceuta in North Africa.

“This is a huge environmental risk,” said Adi Imsirovic, a veteran oil trader who is now a director at consultancy Surrey Clean Energy. “Tankers that should have been scrapped by now make many ship-to-ship transfers of millions of barrels of oil without proper insurance.”

According to Kpler, the Turba recently transported Ural — Russia’s flagship crude grade — to India and loaded heavy fuel oil at the port of St. Petersburg. If it sails to Asia, it has to navigate the Baltic Sea and pass several European coasts.

The Aframax-class vessel is owned by Scoot Chartering Corp., which is registered in the Seychelles by IHS Maritime, according to data compiled by Bloomberg. The last class renewal survey was held in 2017. The class was withdrawn by Bureau Veritas in 2021, the Equasis database shows.

High risk

Half a dozen tanker brokers and owners said they had no way of contacting Scoot, which does not appear on a Seychelles business register.

The tanker is flying the flag of Cameroon, one of a few blacklisted countries Paris Declaration of Intent, an international organization that promotes and coordinates safe shipping. It is the only blacklisted nation also described as “high risk”.

Certification by a member of the International Association of Classification Societies – which Equasis says the Turba lacks – means that a vetted international panel of experts has inspected a vessel to oversee that its hull is structurally sound, as well as its propulsion, steering and rudder systems and energy systems are reliable and functional.

According to Clarkson, the average age of the tanker fleet is now 12 years. Almost a third of the ships are older than 15, and the number of aging ships is forecast to increase rapidly in the coming years, said Svein Moxnes Harfjeld, CEO of DHT Holdings, an oil tanker company.

Given the lack of clarity around ownership, it’s likely the new operators won’t have the same level of experience and professionalism normally associated with the Russian fleet, said Ben Lucock, co-head of oil trading at Trafigura Group, at an FT Commodities Global Summit in Lausanne, Switzerland, this week.

“They have a lot of 17, 18 and 19-year-old boats crossing the Danish straits with the oil,” he said. “We changed the logistical capabilities around Russian oil in a very short time.”

–With support from Julian Lee, Alex Longley and Pius Lukong.

© 2023 Bloomberg LP

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