Second Turkish drilling ship stokes EU tensions

Turkey’s first drilling vessel, Fatih, above, has already started searching for gas and oil in waters considered part of Cyprus’s exclusive economic zone. (Reuters)
Updated 07 July 2019

Second Turkish drilling ship stokes EU tensions

  • Cyprus has issued arrest warrants for Fatih’s crew members, accusing the ship of breaching the republic’s sovereign territory

ISTANBUL: A second Turkish ship will begin drilling for oil and gas in a disputed region off Cyprus next week, an official said, ramping up exploration activity despite increasing tensions with the EU, which has deemed Ankara’s search “illegal.”
The discovery of huge gas reserves in the eastern Mediterranean has fuelled a race to tap underwater resources and triggered a dispute between Turkey and EU member Cyprus, which also plans to ramp up its exploratory activities in the area.
Turkey, which on June 20 sent a second ship for exploratory activities off the eastern Mediterranean, said its actions abide by international law.
“God willing we will be starting the first drilling within a week,” Energy Minister Fatih Donmez was quoted as saying by the private NTV broadcaster. The ship called Yavuz will be exploring off the peninsula of Karpasia, the minister added.

FASTFACT

30% - Gas represents over 30 percent of Turkey’s total energy demand, more than half of which is supplied by Russia.

The EU last month warned against Turkey’s “illegal” drilling, raising the threat of sanctions unless Turkish officials abandon the project. But Ankara insists that it is drilling inside its continental shelf.
Turkey’s first drilling vessel, Fatih, has already started searching for gas and oil in waters considered part of Cyprus’s exclusive economic zone.
Cyprus has issued arrest warrants for Fatih’s crew members, accusing the ship of breaching the republic’s sovereign territory.


Tankers defer retrofits to cash in on freight rates

Updated 19 October 2019

Tankers defer retrofits to cash in on freight rates

  • The rates for chartering a supertanker from the US Gulf Coast to Singapore hit record highs of more than $17 million and a record $22 million to China earlier this week

SINGAPORE: Tankers that had been scheduled to install emissions-cutting equipment ahead of stricter pollution standards starting in 2020 have deferred their visits to the dry docks to capitalize on an unexpected surge in freight rates, three trade sources said.

US sanctions on subsidiaries of vast Chinese shipping fleet Cosco in September sparked a surge in global oil shipping rates as traders scrambled to find non-blacklisted vessels to get their oil to market.

The rates for chartering a supertanker from the US Gulf Coast to Singapore hit record highs of more than $17 million and a record $22 million to China earlier this week.

By comparison, prior to the sanctions, shipping crude from the US Gulf to China cost around $6 million-$8 million.

The extraordinary spike in freight rates proved too good to miss for some shipowners who were due to send vessels to the dry docks for lengthy retrofitting and maintenance work.

“We can confirm several owners have postponed dry docking earlier scheduled for the months of October and November to take advantage of the skyrocketing freight rates,” said Rahul Kapoor, head of maritime and trade research at IHS Markit in Singapore.

The shortage of ships to move crude oil was so acute that some shipowners also switched from carrying so-called “clean” or refined fuels like gasoline to “dirty” cargoes that include crude oil, despite the costs of having to clean them later.

“Current rate levels are a no-brainer for pushing back scrubber retrofitting,” said Kapoor.

Starting Jan. 1, 2020, the International Maritime Organization (IMO) requires the use of marine fuel with a sulfur limit of 0.5 percent, down from 3.5 percent currently, significantly inflating shippers’ fuel bills.

Only ships fitted with expensive exhaust cleaning systems, known as scrubbers, which can remove sulfur from emissions, will be allowed to continue burning cheaper high-sulfur fuels.

Ships must be sidelined for up to 60 days for fitting these, according to IHS Markit and DNV GL.

While freight rates have abruptly come off their recent highs, shipowners can still profit from the higher charges.

“One cargo loading at current elevated rate levels can not only finance the scrubber capex, but also account for extra costs incurred to install the scrubber at a later date,” said Kapoor, referring to the capital expenditure of fitting the scrubber.

Freight rates are expected to hold firm for the rest of the year.

“With seasonal demand support and tanker supply deficit still pronounced, we expect (fourth-quarter) tanker freight rates to stay elevated and end the year on a high note,” Kapoor said.