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Source: Business Times
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Oil traders are concerned about supply disruptions via the Malacca Strait after the Singapore Navy warned of possible attacks on tankers, but said alternate routes could be used that add slightly to costs while stocks on landed and floating storages offer ample buffer.
However, they cautioned that the more than 30 tankers crowding the waters off Singapore, Malaysia and Indonesia used as storage tanks for distillates, fuel oil and crude could also be targets.
Malaysia and Indonesia are bolstering security in the Strait of Malacca, through which flows at least 15 million barrels of oil each day, while Singapore also raised alert levels and beefed up security at its airport and new casino resorts after the navy’s warning.
“Of course, we are concerned. But there’s nothing more that we can do on our part as the cargo owners to prevent this from happening,” a senior Singapore-based Asian trader said today.
“The alternatives are easy enough. The diversion around Indonesia adds two to three days to sailing time and costs a little bit more, but that’s OK.”
The trader said in the event of an attack on a tanker, the loss of a single cargo might be a problem for the owner, “but it’s an opportunity for everyone else to sell at higher prices”.
If the strait was blocked after an attack, tankers could sail further south along the western coast of Indonesia’s Sumatra via the Sunda Strait and head north to Singapore, adding two to three days of sailing time. Ships moving to North Asia could sail towards East Java via the Lombok Strait or Banda Strait.
For example, this would add US$20,000-US$30,000 (RM68,000-RM102,000) per day to the cost of carrying diesel or kerosene on an 80,000-tonne tanker.
Traders said the loss of a single cargo, even if it was on board a Very Large Crude Carrier (VLCC), would have minimal impact on the market’s demand-supply dynamics because for distillates alone, some 14 million barrels were being stored on tankers in international waters around Southeast Asia.
“It could be disruptive to oil trades, but it would be not catastrophic,” said David Kirsch, PFC Energy’s Director of Market Intelligence Service.
“It would also raise insurance rates, but typically the price of oil rises in conjunction with these insurance rates, so the impact is on the consumers, not the transit trade.”
Shipping and industry groups have advised shippers to take extra care when passing through the Malacca Strait and have increased vigilance on their vessels.
Traders also said there were about 4 million to 5 million tonnes of fuel oil and crude on board converted VLCCs anchored off Malaysia’s southern ports of Tanjong Pelepas and Pasir Gudang.
While these provide a comfortable cushion to the market if an attack triggers serious disruptions, they also face risks.
“They are as vulnerable as any tanker sailing along the Strait. But maybe less of a risk, because they are in closer proximity with each other and help can be rendered more readily,” said a trader, who has cargoes on floating storages.
“Also, it’s probably less dangerous because fuel oil and distillates are less flammable. But I don’t think these crazy guys are going to have the intelligence to check what’s on board before they decide to go after a ship.”
Carl Larry, president of Oil Outlooks and Opinions LLC said a global market struggling with oversupply would view disruptions such as a closing of the Malacca Strait or the refinery damage in Chile as supportive factors.
“As with Chile, the refined products that are in great oversupply are already water-borne and easy enough to move around the Strait,” he said, pointing to recent moves to send diesel to the quake-hit Latin American country, which have sent gas oil cracks to 11-month highs near US$10 a barrel.
“I think there is the shock and hype factor about the delay for ships to get through, but the supply that so many are desperately looking to move gets a chance to ease.”
Still, most traders welcomed the heightened security in the Strait, which has been plagued by piracy, adding that this would help deter attacks and ease their worries.
“I would expect the Strait to be very heavily patrolled, and the likelihood of any attack materialising is quite low — you have all that security on standby to prevent it from happening,” said a distillates trader with a European firm.
Source: Malaysian Insider
Thursday, March 4, 2010
International Maritime Bureau piracy reporting centre head of Asian region Noel Chung said the organisation was alerted by a foreign agency to this threat and has passed on the alert to the relevant regional authorities in Malaysia, Singapore and Indonesia.
He said that while threats of piracy were common in both straits, a terror threat against ships was new to the waters.
“This alert was not issued by us, so we cannot tell you what level or how serious the threat is,” he told The Star.
Chung advised ships plying both straits to be extra vigilant and conduct radar lookouts.
“Usually, ships keep a lookout after dark to thwart pirate attacks. We are advising them to keep a 24-hour watch,” he said.
International news agency AFP reported that an unidentified terrorist group is planning attacks against oil tankers in the Malacca Straits, one of the world’s busiest shipping lanes, quoting the Singapore Navy and a shipping association on Thursday.
The Singapore Shipping Association said it had received an advisory from the Singapore Navy Information Fusion Centre about “an indication that a terrorist group is planning attacks on oil tankers in the Malacca Straits.”
It said “this does not preclude possible attacks on other large vessels with dangerous cargo.”
“The terrorists’ intent is probably to achieve widespread publicity and showcase that it remains a viable group,” the Singapore Navy said in its advisory.
It reminded shipping operators that the militants could use smaller vessels such as dinghies and speedboats to attack oil tankers and urged them to take precautions.
Pirates and robbers have also used small fishing vessels to board ships during previous attacks in the Malacca Straits, it noted.
Security analysts have said that the Malacca Straits, bordered by Singapore, Malaysia and Indonesia, is a prime target because more than 30% of global trade and half the world’s oil shipments pass through the narrow waterway.
“If the Singapore Navy is providing this information, it should be taken very seriously,” said John Harrison, a maritime security expert at the S. Rajaratnam School of International Studies in Singapore.
He said that on the threat level scale, an “indication” is lower than a “warning”, but precautions should still be taken.
A “warning” refers to a credible threat that an attack is likely to be carried out against a target over a specific time frame, while an “indication” is gathered from a series of suspicious activities in a certain area.
“Certainly, we do know that there has been a long-term concern about terrorism in the Malacca Straits but the threat level remains fairly low,” Harrison told AFP.
“That said, it was very prudent for the Singapore Navy to pass this warning along because it keeps the threat level where it is.”
While the Singapore Navy did not name any group, Harrison said the South-East Asia-based Jemaah Islamiyah (JI) militant group or al-Qaeda itself could not be ruled out.
“JI could certainly be one of the groups. We have not seen any public evidence indicating they have the capability to operate but that does not mean they are not developing them,” he said.
In its advisory, the Singapore Navy recommended that ships should “strengthen their onboard security measures and to adopt community reporting to increase awareness and strengthen the safety of all seafarers,” according to the shipping association.
Singapore, one of Asia’s most affluent cities and a regional base for thousands of multinational companies, is a prime target for attacks by militant groups, officials have said.
One of the plots foiled by Singapore authorities was a plan by Islamic militants to hijack an airliner in Bangkok and crash it into Changi airport in 2001 following the September 11 attacks that year in the United States.
Singapore has also arrested several militants involved in a plot to bomb the US embassy and other targets in the city-state.
Source: The Star