Monday, June 10, 2024

WWIII

Dutch Navy Accuses Chinese Jets of "Unsafe" Close Approach

Dutch Navy image of a Chinese fighter flyby — Dutch Ministry of Defense

Chinese fighters made an "unsafe" close approach to the Dutch frigate Zr.Ms. Tromp off the coast of China last week, according to the Netherlands' ministry of defense.

The Tromp was deployed to the East China Sea to join in the international monitoring mission for enforcement of UN sanctions on North Korea. While the Tromp was under way in international waters, two Chinese fighters made a close approach to the frigate. "This created a potentially unsafe situation," the ministry warned.

After this incident, the Tromp's helicopter was approached by a Chinese helicopter and two fighter jets.

The encounter concluded without mishap and Tromp continued onwards to her journey, headed for Japan. She will be crossing the Pacific to join in the U.S. Navy's RIMPAC 2024 exercise off Hawaii, which begins June 26 and runs until early August.

A Chinese helicopter also approached a Dutch naval helicopter (Dutch Ministry of Defense)

The run-in was the latest in a long series of tense interactions between the Chinese military and the Western warships tasked with enforcing UN sanctions on North Korea. Though it is a signatory to the sanctions measures, China is widely believed to allow banned maritime trade with Pyongyang.

Tensions between China and Western-allied neighbors are also running high. Last week, the Philippines accused Chinese forces of stealing a food drop near the Philippine base at Second Thomas Shoal. The China Coast Guard intercepted one out of the four parcels that were parachute-dropped to the outpost during an airborne supply run in mid-May. During that altercation, the China Coast Guard boats moved to within five meters of the base, prompting Philippine marines to draw firearms as a precautionary measure. China routinely blockades the outpost using its coast guard and maritime militia vessels, often with aggressive and hazardous tactics.

The Armed Forces of the Philippines has also accused the China Coast Guard of attempting to forcibly block a medical evacuation at Second Thomas Shoal last month. Philippine Coast Guard spokesman Cmdre. Jay Tarriela said that Chinese vessels intentionally rammed a rigid hull inflatable and made multiple attempts to cut off the medevac vessels.

New Zealand to Reverse its 2018 Offshore Oil Exploration Ban

CONSERVATIVE REVANCHINIST GOVERNMENT

New Zealand’s government is moving to reverse a ban on offshore petroleum exploration, part of a suite of proposed amendments to the country’s Minerals Act. In a statement on Sunday, Resources Minister Shane Jones said that the reversal of the ban is targeted at resolving energy security challenges posed by rapidly declining natural gas reserves.

New Zealand issued a moratorium on new offshore oil exploration permits in 2018, during the Labor Coalition government of former Prime Minister Jacinda Ardern. While environmental groups at the time hailed the decision as a historic victory, the opposition parties led by the National Party (now the ruling party) described the ban as economic vandalism. Reversing the ban was an election pledge of current Prime Minister Christopher Luxon.

The Minerals Amendment Bill will be the latest piece of legislative reform introduced by the government aimed at revamping the energy sector. The Bill will be introduced to Parliament in the second half of this year. Recently, the government also introduced the Fast-track Approvals Bill, which is seen as an incentive for renewable energy investments. The bill has provisions such as one-stop-shop approvals, allowing energy projects to obtain a wide range of environmental and planning permits in one process.

“Our job as the Government is to provide the right policy settings to enable the sector to get to work, and that’s exactly what we are aiming to achieve through these amendments. New Zealand cannot ignore the significant economic contributions the petroleum and resources sector delivers,” said Shane Jones.

New Zealand government estimates that the petroleum and mineral sectors contributed nearly $1.2 billion to its GDP in 2020-21 and $144 million in government revenue in 2022-23. Extra natural gas projects will help plug electricity generation gaps for intermittent sources such as wind, solar and hydro, the administration said.

The minerals bill also seeks to change how petroleum exploration permits are allocated. Currently, permits are awarded through a competitive tender process. The bill proposes allowing the choice between a tender and a non-tender (called priority in time) method.

Distribution of Food From Gaza Aid Corridor "Paused" Again

Aid pier off the coast of Gaza — Courtesy U.S. Department of Defense

Distribution of food aid from the U.S.-operated maritime aid corridor for Gaza has paused once again, one day after repairs to the Pentagon's temporary floating pier were completed. About 500 tonnes of aid has reached shore, but on-the-ground security issues are still preventing the food from reaching the local populace.

The U.S. military has deployed a carefully choreographed, complex cargo delivery system called Joint Logistics Over The Shore (JLOTS) to bring much-needed food aid into Gaza. This expeditionary capability consists of a fair-weather temporary pier, designed to work in conjunction with an offshore receiving station and a flotilla of landing craft. The Pentagon believes that it will be able to handle up to 150 truckloads of aid per day, enough to satisfy about 40 percent of Gaza's typical needs. Contractors are handling the truck-driving delivery from the pier to shore, and the White House has emphasized that no American servicemembers will enter Gaza during the operation. The World Food Programme and a consortium of NGOs are taking care of the distribution on the ground, in consultation with USAID.

In an interview with CBS on Sunday, World Food Program director Cindy McCain said that distribution from the aid pier has been "paused." On Saturday, two warehouses belonging to WFP were "rocketed," McCain said. One WFP staffmember was injured, and WFP and the rest of the humanitarian community in Gaza are undertaking a review of the tenuous security situation.

"We’ve stepped back for the moment to make sure that we’re on safe terms and on safe ground before we’ll restart. But the rest of the country is operational," she told CBS. "We’re doing . . . everything we can in the north and the south."

USAID confirmed to AP that it is working with NGOs to restart aid delivery once a security review has been completed.

The maritime aid corridor has had a difficult start. Beginning May 25, unexpectedly heavy weather hit the Eastern Mediterranean. Wind and waves drove three of the operation's landing craft ashore and caused the pier to break up. The components were recovered and towed to Ashdod, where the system was repaired and reassembled in sheltered waters. After about two weeks of work, it was towed back out to the operating site on Gaza's shores, and it resumed its operations on Saturday.

The startup process was equally challenging. During the logistics operation to set up the pier, one of the sealift ships carrying its components had an engine room fire, forcing it to return to Florida for repairs. After construction began, a patch of rough weather forced the team to withdraw to Ashdod and assemble the pier in a sheltered port, foreshadowing later weather-related difficulties. Shortly after it entered operation, three people were injured in a forklift accident as the sealift ship USNS Roy P. Benavidez was unloading, including one person who sustained critical injuries. The initial deliveries of aid were further delayed by security problems on the ground during early attempts at distribution.

Finland Wants a Spill Response Vessel to be Ready for "Dark Fleet" Risks

iStock image of a tanker — iStock / SHansche

Finland is raising the alarm over growing risks of a spill from Russia’s "dark fleet" of tankers, and it has vowed to push the European Union (EU) to invest in a standby response vessel specifically dedicated to the waters of the Gulf of Finland, which are not easy to navigate during winter.

The Nordic nation’s Ministry of Transport and Communications contends that with Russia resorting to using shadowy oil tankers that are unusually old, the risks of oil spills in the Baltic Sea and especially in the Gulf of Finland are real. The country estimates that on average, 70 old tankers with a capacity to transport more than 100,000 tons of crude oil each navigate through the Gulf of Finland every week. Analysis by the Norwegian Coastal Administration shows that the majority of these ships in the Baltic are significantly old, with an average age of 29 years.

Finnish authorities believe that the possibility of a spill is heightened in Baltic winter conditions, considering the older vessels are poorly equipped and not suited to ice navigation. The fact that the vessels frequently engage in ship-to-ship transfers further adds to the risk of incidents. In the event of a spill, recovery in ice conditions is more demanding and expensive than in open-water spills.

In response to this threat, Finland is pushing the European Maritime Safety Agency (EMSA) to acquire a standby vessel that is capable of navigating in ice and suited to conditions in the northern parts of the Baltic Sea.

Currently, EMSA has a network of 14 oil spill response vessels, but only one of them is stationed in the southern parts of the Baltic Sea. The network has been established through contracts with commercial operators, and although they continue to carry out commercial operations, they cease normal activities and mobilize anywhere in European waters and shared sea basins in the event of an oil spill.

“Finland feels that the EMSA should contract a new vessel for the northern parts of the Baltic Sea in addition to the existing vessel stationed in the southern parts,” said the Ministry of Transport in a statement.

It added that having a dedicated vessel for the northern part of the Baltic is critical and will ensure that EMSA spreads its network of stand-by oil spill response vessels more evenly across European waters.

Russian Tanker Moves Oil to Notorious Shadow Tanker to Avoid Sanctions

tankers STS — Ocean Hermana (left) was caught last year in an Iranian oil transfer and now linked to a Russian STS (MMEA)

Russian tankers sanctioned by the United States for price cap violations are copying a technique from the Iranians using ship-to-ship transfers to avoid the U.S. and European sanctions. Reuters is citing data from Kpler of a 1-million-barrel STS completed last week while Bloomberg working with TankerTrackers.com tracked the vessels and reports it was the first of several likely transfers. This comes as Russia is desperate to maintain its oil income which Bloomberg reports rose almost 50 percent in May versus a year ago.

The U.S. Treasury began listing tankers in October 2023 for violations of the G7 Russian oil price cap. Among the first two listed was the SCF Primorye (158,000 dwt) which at the time was registered in Liberia. The U.S. accused the crude oil tanker and its Dubai-based management of transporting Novy Port crude at prices above $75 per barrel after the $60 cap was imposed. After that, the tanker in December switched to the Russian flag but according to Bloomberg’s research, the vessel remained idle for nearly six months. The U.S. has sanctioned about 40 tankers and listed Sovcomflot as well as various managers.

Working with TankerTrackers.com, Bloomberg reports that SCF Primorye loaded about one million barrels of Urals crude and traveled from Novorossiysk on the Black Sea to a point off Malaysia about 70 miles east of Singapore. The two organizations identified the Ocean Hermana (159,000 dwt) as the tanker that came alongside for the transfer on June 3. Kpler confirms it reporting that the vessel is still in the anchorage but expected to sail for China.

It is not the first time the Ocean Hermana, registered in Panama, has been caught in an illegal transfer. In October 2023, the Malaysian Maritime Enforcement Agency (MMEA) detained it and another tanker carrying Iranian oil for suspicious activities. Bloomberg tracked the Ocean Hermana to multiple voyages shuttling between Singapore and the Malacca Strait to China. The vessel is 20 years old with its current manager and insurance details uncertain. Some reports are saying it is managed from India, but Bloomberg said the listed company is only supplying crew to the tanker.

Typical of other STS transfers, the vessels went dark according to Bloomberg turning off their AIS signals. SCF Primorye resumed transmitting and is now showing that it is sailing to Hong Kong with Bloomberg reporting its draft indicates it is now empty.

Bloomberg’s analysis reports another Russian tanker that was sanctioned in February 2024 is also sailing laden to Asia. Now known as Brask (156,500 dwt) and registered in Russia, the crude oil tanker was named NS Burgas when it was listed in February. It had been flagged in Liberia till 2024, then briefly in Gabon, before switching to Russia.

Bloomberg estimates Brask will arrive in Southeast Asia next week. They are also reporting that seven other crude oil tankers recently went dark in the Black Sea, but note to transit the Turkish Straits they are required to turn on the AIS signal.

Container Feeder Sinks off Sihanoukville

Floating containers off Sihanoukville — Image courtesy National Committee on Maritime Security

[Brief] On Sunday, a small container feeder went down off the coast of Sihanoukville, Cambodia, according to the government's National Committee for Maritime Security.

The Thai container vessel Chiang Laan was under way off Sihanoukville when it encountered severe weather conditions off Koh Rong Island, including high winds, powerful waves and torrential rain. The ship took on water and began to sink. With assistance and coordination from national authorities, all crewmembers were safely rescued by a nearby fishing vessel, and they were returned to port without further incident.

Image courtesy National Committee on Maritime Security

The 10 Thai crewmembers were provided with a medical exam, accommodations and food. No injuries were reported.

Photos from the scene show some of the small vessel's 53 containers afloat on the surface. The extent of any pollution risk remains to be assessed.

Chiang Laan was a 150-foot coastwise container feeder owned and flagged in Thailand. The house-aft, low-freeboard feeder ship was built in 1994, and had a maximum cargo capacity of about 1,300 dwt. Consistent with many locally-trading vessels in Southeast Asia, the Chiang Laan had no record of international port state control inspections.

Video: Taiwanese Tanker Holed in Allision with Port Stanchion

[Brief] A product tanker operating a coastal service in Taiwan appears to have misjudged a turn leaving the port of Kaohsiung on Saturday, June 8 with disastrous results. The vessel received a large gash on its starboard side aft, but fortunately it did not puncture tanks and the vessel was not in danger of sinking.

The Tong Yun (40,500 dwt) was built in 2011. It is owned by the China National Petroleum Corporation (CNPC).

The vessel was departing Kaohsiung midday on Saturday and the port authority said it turned to avoid other traffic in the port. The starboard side however came in contact with the concrete stanchion which ripped a large hole in the hull.

The port authority reports the vessel applied for emergency permission to return to the dock and was back on berth Saturday evening. To ensure environmental safety, oil booms were deployed around the ship and personnel were dispatched to monitor the ship’s status.

CRIMINAL CAPITALI$M

Norway Fines Shipowner $750,000 for Illegal Export of Ships for Scrap

tanker scrapping — Teekay contends its inspectors visited the yard to ensure it maintained Hong Kong Convention standards (Teekay)

Four years after raiding the offices of the shipping company then known as Teekay Offshore, Norwegian regulators today imposed an approximately $750,000 fine for illegally exporting two ships to India for scrapping. The company today known as Altera Infrastructure continues to dispute the allegations saying that it has not received replies and justification from the Norwegian National Authority of Investigation and Prosecution of Economic and Environmental Crime (Økokrim).

The two vessels in question were shuttle tankers operating in the North Sea ferrying oil from the larger ocean-going tankers to terminals. Økokrim contends for commercial reasons the maximum operating age of North Sea shuttle tankers is 20 years and both vessels were exported for scrap as they approached 20 years.

Both vessels were built in 1998 and at the time they were retired were registered in Panama. The Navion Britannia was 124,000 dwt and departed Norway in March 2018 bound for India. The Alexita Spirt was 127,000 dwt and departed four months later in July 2018. Both vessels were beached in India to be dismantled.

The following year, Teekay highlighted that since 2017 it had recycled four vessels in India, all at recycling facilities that have been verified to be in compliance with the Hong Kong Convention. “Before selecting these facilities, we audited the yards to ensure they could meet our strict standards. In addition, throughout the recycling process, which typically takes about 6-8 months, our staff continually monitor HSEQ performance and visit regularly to perform inspections and provide skills training to increase the safety and sustainability performance of the yard,” the company said in a release posted to its website.

Økokrim however is calling scrapping on the beach such as what is done at Alang, India “a major global environmental problem.” They highlight the environmental concerns for pollution from heavy metals and other hazardous substances. Norwegian law requires companies to receive approval to transport vessels outside the country as waste.

“Økokrim takes a serious view of export of Norwegian-operated obsolete ships and their associated waste and environmental problems to developing countries with weaker legislation and law enforcement than Norway,” said Maria Bache Dah, Økokrim's police prosecutor. They said they had offered the company a briefing on the investigation’s findings.

A spokesperson for the company responded to media inquiries claiming that the vessels had been offered for further service. They contend the company spent a year looking for further service and expected that the ships would “get a new life.”

“We completely disagree,” said Steffen Rogen, spokesperson for Altera. He says the company believes, “that there is no factual basis for either allegation.” He says they are demanding the background and basis for the claims. The company cooperated after Økokrim raided its offices in Stavanger in 2020.

The dispute highlights the challenges shipowners face in disposing of obsolete, end-of-life, vessels. There are only a handful of recognized facilities for recycling and it will be getting harder as the Hong Kong Convention comes into force after its 2023 ratification. Yards in Asia are mostly not approved by the EU for disposal.

Altera spun off from Teekay in March 2020 emerging as a public-traded infrastructure company. Under Norwegian regulations, the company has two weeks to consider whether they will accept the fine.

Strong Consumer Demand Drives Up TEU Imports but Also Widens U.S. Trade Gap

container imports — Import TEU numbers expected to remain strong based on consumer spending (Los Angeles file photo)

With strong consumer spending continuing, container import levels at the major U.S. ports are expected to reach their highest levels in two years. The National Retail Federation raised for the second consecutive month its forecast for container imports but the strength of the imports also contributed to a widening of the U.S. trade deficit.

The U.S. Department of Commerce reported that the April trade deficit grew by 8.7 percent. It was the largest it has been since October 2022 with the data citing a surge in imports including motor vehicles, computers, and industrial supplies. The value of imports was up 2.4 percent while exports also edged up by less than one percent.

“Consumers are continuing to spend more than last year, and retailers are stocking up to meet demand, especially as we head into peak shipping season,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “The high level of imports expected over the next several months is an encouraging sign that retailers are confident in strong sales throughout the remainder of the year. Unfortunately, retailers are also facing supply chain challenges again, this time with congestion at overseas ports that are affecting operations and shipping rates.”

The trade figures are projected to continue as the demand for imported merchandise remains strong according to the Department of Commerce. The one positive note they highlighted was a narrowing of the gap with China as the value of goods imported from China declined in April.

The strength of consumer spending also led the NRF to increase its forecast. They jumped the second quarter forecast for the number of TEUs by nearly three percent versus last month’s prediction with the NRF now predicting a total of 6.22 TEU in Q2, which is better than four percent above their expectations in April.

“In the last couple of years, we have witnessed a flattened peak season that has stretched out the volume of imports over extra months versus the strong, consolidated surge seen in the past. Reasons range from retailers restocking following strong sales after the pandemic to trying to get ahead of increased tariffs on goods from China set to take effect in August and ensuring sufficient inventories for the holiday season amid strong consumer demand,” said Ben Hackett, Found of Hacket Associates.

The retail trade association however expects that we are at the beginning of at least a seven-month string of import levels above two million TEU per month at the major ports. They noted that imports surpassed the two million TEU mark for the first time this year in April. They are forecasting further gains peaking at 2.17 million TEU in August but remaining steadily above two million through at least October. The third quarter total is forecast at 6.33 million TEU.

The import numbers come as NRF is forecasting that 2024 retail sales, excluding automobile dealers, gasoline stations, and restaurants to focus on core retail, will grow between 2.5 and 3.5 percent in 2024 over 2023.

For the first half of 2024, they are now projecting a total of 12.1 million imported TEUs. This represents a 15 percent increase versus 2023.

MONOPOLY CAPITALI$M

Noble Corp. Buys Diamond Offshore Continuing Sector Consolidation

offshore drillship — Noble is making its third acquisition since emerging from bankruptcy (Noble)

Noble Corporation announced its third acquisition since emerging from bankruptcy as the company continues to drive consolidation in the offshore drilling sector. In a deal valued at approximately $1.6 billion, they will acquire smaller competitor Diamond Offshore Drilling to create one of the largest modern drillship fleets.

According to the companies, it will merge two highly complementary fleets to strengthen its position. After closing the acquisition by the first quarter of 2025, the combined company will own and operate a fleet of 41 rigs, including 28 floaters and 13 jackups. Noble currently operates 31 vessels which it bills as one of the youngest and most advanced fleets in the offshore drilling industry. Diamond also comes with a current $2.1 billion backlog which will give the combined company a backlog as of today of $6.5 billion reflecting the oil industry’s strengthened position and move to expand offshore resources.

Noble is highlighting significant cost savings for the combined company. They expect to realize annual pre-tax cost synergies of $100 million, with three-quarters expected to be realized within one year of closing. Diamond’s shareholders will receive stock plus cash under the definitive merger agreement and will own approximately 14.5 percent of Noble’s outstanding stock after the closing.

It will create a more “fully scaled platform,” according to Diamond’s management with more opportunities as the oil industry continues to consolidate. Several of the major oil companies have separately announced in recent months plans for acquisitions which is seen as further strengthening the industry’s recovery after a prolonged downturn.

According to the analysts at Bloomberg, buying Diamond fits Noble’s strategy of going after the biggest offshore oil contractors around the world with some of the newest deepwater rigs. They said the combined company will “boast the biggest selection of top-tier drillships.”

Four years ago, during the pandemic, Noble was the latest in a long string of drill companies to file for bankruptcy reporting it needed to shed $3.4 billion in bond debt. Shortly after emerging from bankruptcy, Noble acquired Pacific Drilling in an all-stock transaction. The deal was reported to strengthen Noble’s geographic position, including West Africa and the Mexican GoM, as well as a boost for its current footprint in the U.S. Gulf.

Eight months after announcing the merger with Pacific Drilling, Noble launched a much larger deal valued at $2 billion to combine with Maersk Drilling. It was a significant fleet expansion and drove industry consolidation, but required an agreement to sell portions of Maersk’s fleet to receive approval. It took nearly a year to close that acquisition.

Noble is highlighting that today’s transaction has been unanimously approved by each company’s board. They believe the company will be strongly positioned to meet the anticipated increases in demand for deepwater drilling to provide new sources for oil producers.

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