The risks of trading in the Middle East remain of real concern

Complicating an already complex situation is the death at the end of November of Iran’s top nuclear scientist, Mohsen Fakhrizadeh, the leader of a groups of scientists believed to be building Iran’s nuclear arsenal. He was killed when he stepped out of his bullet-proof car to inspect damage caused by the vehicle running over an object. He was shot and killed by a gun mounted on a nearby car and controlled by satellite. Iranian authorities believe only Israel has such technology in the Middle East region. So it is highly likely that Iran will take some form of retaliation and while it cannot directly attack Israel (yet), it can easily increase its level of harassment of tankers in the Straits of Hormuz.

Israel has not claimed responsibility for the assassination and is actually going through a period of rapprochement with its Middle East neighbours. A key issue here is a deal to re-open a pipeline that links the eastern Mediterranean seaboard of Israel with its Red Sea coastal region. Israel has long regarded the pipeline as of strategic importance.

Under a deal between Europe Asia Pipeline Co., controlled by Israel’s government, and UAE-based MED-RED Land Bridge Ltd, a memorandum of understanding has been signed to collaborate on the transportation of crude and oil products between the Persian Gulf and Western markets.

This would have a significant impact on tanker tonne-mile demand by cutting out the Suez Canal and the SUMED pipeline. The Eilat-Ashkelon pipeline, built by Israel and Iran in the 1960s, has a capacity of 600,000 barrels a day and 23M bbls of storage. Originally, Iran shipped oil to Eilat for transport through the pipeline to Ashkelon on the Israeli Mediterranean coast. The aim of the new agreement will reverse the flow, taking oil from the Black Sea region by tanker through the pipeline for sale in Asia.

“While Iran cannot directly attack Israel, it can easily increase the level of harassment of tankers in the Straits of Hormuz”

Israel’s partnership with UAE investors is a huge step forward for Middle East energy politics. There is considerable investment taking place in the UAE in tanker shipping. It is tempting to relate the investment in three VLCCs plus three options by Adnoc Logistics & Services to the pipeline news, but it is surely coincidental. The shipping arm of the Abu Dhabi National Oil company almost certainly placed the order due to the low VLCC prices on offer. At US$84M-85M, this is the time to order VLCC at basement prices.

For the UAE – Israel pipeline investment, the main issue would be the stability or otherwise of Yemen and the safety of tankers loaded with crude oil from Eilat in Israel passing through the Bab el Mandeb strait and into the Gulf of Aden from the Red Sea. This is another area where Iran continues to create havoc by proxy through its involvement in the Yemen war, which has brought in conflict with Saudi Arabia. This has led to several incidents where tankers in port have been damaged.

In October 2020, the 2010-built, Eastern Mediterranean Maritime-managed Aframax tanker Syra fell victim to the hostilities in the Middle East. Maritime intelligence gathering and security communications group UKMTO Watchkeeper issued an advisory on 5 October 2020.

"UKMTO is aware a MT has experienced a possible explosion at 032000ZOCT20 whilst operating at an oil terminal in position 1359.25N 04754.07E [13°59’25", 47°54’07"]. Investigations are ongoing," UKMTO’s incident description said, listing the vessel’s master as the source of the information.

UKMTO said the explosion was reported on 2 October 2020, and UKMTO Watchkeeper issued a notice for vessels transiting the area to exercise caution.

According to regional media reports, the vessel was loading crude oil at the Bir Ali single point mooring buoy in Yemen when an explosion occurred alongside the vessel. The explosion was blamed on suspicious objects that were seen drifting toward the tanker, suspected to be floating IEDs, which have been found elsewhere in the region. No group or faction in the ongoing Yemeni civil war has claimed responsibility.

According to VesselsValue, in late July, Syra sailed for Das Island in the UAE from the Fujian Huadong Shipyard in China. After loading, the vessel then sailed for the Byco SPM in Pakistan to discharge. It is unclear when Syra arrived at the Bir Ali SPM at the Al Nashima terminal, Yemen, but VesselsValue’s website lists Syra as having arrived at Fujairah under its own power on 4 October to transfer around 65,000 tonnes of cargo to another tanker before reportedly departing for repairs.

In the latest development, the 2009-built, TMS Tankers-managed Aframax Agrari was holed above the waterline while in a Saudi Arabian port. The damage is believed to have been caused by a floating IED. The incident took place at the end of November 2020 during a time when Saudi Arabian forces were reporting interception and destruction of these devices on a daily basis.

“Israel’s partnership with UAE investors is a huge step forward for Middle East energy politics”

“Agrari was struck about a metre above the waterline and suffered a breach,” TMS Tankers said in a statement. “It is confirmed the crew are safe and there are no injuries. No pollution has been reported. The vessel is in ballast condition and stable,” the company said.

No group has claimed responsibility but Saudi Arabian state media pointed the finger at forces in Yemen opposed to Saudi Arabia’s intervention in the conflict. The vessel is believed to have finished discharging at the al-Shuqaiq Steam Power Plant in the Red Sea some 200 miles north of the Yemeni border when the incident took place.

So far, the use of sea mine IEDs have not caused any major pollution incidents, but the longer the Yemen conflict lasts, the greater is the risk of a serious pollution incident involving the abandoned FSO Safer.

Safer is a single-hull 400,200-dwt FSO originally built in 1976 as Esso Japan. In 1987 the tanker was converted to an FSO by Hyundai Heavy Industries in South Korea. The vessel was anchored about 60 km north of the port of Hudaydah and acted as an oil terminal and storage facility. The port is now in a rebel-held area.

In March 2015, the vessel was abandoned due to the conflict in Yemen. It is believed there is still 1.1M barrels of crude oil on board the vessel. The vessel has received no maintenance, and the engine and inert gas systems are believed to have been dormant since 2015. There are reports that water has entered the engineroom.

The vessel was all but forgotten about outside Yemen until the United Nation’s under-secretary-general for humanitarian affairs and emergency relief co-ordinator Mark Lowcock brought the world’s attention to the humanitarian disaster that would unfold if the vessel broke up and released its cargo.

The vessel is in a region effectively controlled by forces referred to by the United Nations as Ansar Allah-affiliated authorities, part of the groups known as Houthis. In June 2019, the UN attempted to place a team of experts on board to inspect the vessel. The UN team was refused permission by Ansar Allah/Houthis to visit the ship.

The difficulty for the UN is that it has recognised the interim government of Yemen, which is opposed to the Ansar Allah/Houthis groups. Furthermore, the Ansar Allah/Houthis require that they control any revenue (approximately US$30M) derived from off-loading and selling the oil.

If the vessel breaks up, crude oil could flow around the coastline, as far as the Red Sea or even the Suez Canal, according to some estimates. At the end of November 2020, the Houthi rebels had agreed to allow a UN mission to inspect and secure the abandoned tanker, according to the UN.

UN spokesman Stephane Dujarric said work could begin early next year. Mr Dujarric said the agreement, announced in an official letter from the Houthis, would be more formal and "represents an important step forward in this critical work". According to the BBC, the UN is said to be discussing the division of the proceeds between the Houthis and the Yemeni government, which is backed by a Saudi-led coalition of Arab states.