Iran-UK tanker row escalates in Strait of Hormuz standoff

A diplomatic row between Iran and the UK involving oil tankers escalated Thursday after a standoff in the world’s biggest oil shipping artery raised fresh concerns over global energy security which have also spiked insurance costs for ships transiting the Middle East.

The UK government said Thursday that an oil tanker owned by oil major BP, the British Heritage, was approached by three Iranian vessels in the Persian Gulf attempting impede the vessel. The Iranian ships turned back, however, after a British Navy frigate accompanying the tanker intervened.

“HMS Montrose was forced to position herself between the Iranian vessels and British Heritage and issue verbal warnings to the Iranian vessels, which then turned away,” the spokesman added. “We are concerned by this action and continue to urge the Iranian authorities to de-escalate the situation in the region.”

Iran’s Revolutionary Guards denied responsibility, according to a statement carried by Fars news agency.

The incident comes a week after a supertanker carrying Iranian crude, Grace 1, was seized in Gibraltar by the Gibraltar government and the UK Marines for breaching EU sanctions for allegedly carrying Syria-bound oil. Iran threatened to retaliate against the seizure of Grace 1 last week by targeting UK ships.

TANKER TUSSLE

BP has not disclosed to market participants whether it will stop sending ships to the Persian Gulf due to ongoing security concerns, shipping sources said.

BP CEO Bob Dudley was asked about the safety of BP’s tankers in the region on Wednesday night, before the incident.

“We’ve just got to be really careful about our ships, of course, as they have threatened to seize a British tanker somewhere,” Dudley said.

At least six British-flagged tankers are currently in the Persian Gulf region. These tankers include Leonara Kosan, Atlantic Pioneer, Nordic Aquarius, Stena Important, Security and Hakusan, according to data from S&P Global Plats trade flow service cFlow.

Two other British-flagged tankers – BW Gemini and the Stanley Park passed through the Strait of Hormuz over the weekend.

Singapore-based market sources said other BP-controlled vessels in the Persian Gulf and the Red Sea region currently include the 314,014-dwt VLCC KHK Majesty that is on time charter with BP Shipping for three to five years.

KHK Majesty was sailing off the coast of Oman on Thursday, according to S&P Global Platts trade flow software cFlow.

The global tanker markets have been reacting cautiously to recent events of repeated incidents on tanker sabotage in the Persian Gulf.

“This kind of development is always a concern for the shipping market. We need to watch and see,” a shipowner said. “I don’t think BP will stop sending ships to the Persian Gulf,” another broker said.

Ship operators in the region have been on high alert and insurance rates have soared since tanker attacks near Fujairah in May and June.

“Continued incidents may further impact pricing and coverage,” a source close to the oil trading community said.

The US has blamed Iran for the attacks, while Iran denies responsibility. About 30% of the world’s seaborne crude travels through the Strait of Hormuz.

CHINESE CONNECTION

Last week, a crude shipment on the British Heritage was cancelled after escalating tensions between the UK and Iran, according to shipping sources.

The British Heritage, a Suezmax tanker in BP’s fleet, was chartered by Shell last week to load a 140,000 mt Iraqi crude cargo at the Basra oil terminal in southern Iraq on July 5-7 for delivery to Northwest Europe or the Mediterranean.

“We are monitoring the situation closely and expect all vessels we charter to consider applicable industry guidelines and relevant Department for Transport guidance on shipping in the area,” a Shell spokesperson said.

The British Heritage is registered with the Isle of Man flag registry. The beneficial owner of the vessel is China’s ICBC Financial Leasing, and the registered owner is Hai Kuo Shipping 1502 Ltd, according to shipping data provider VesselsValue.

BP is the disponent owner, meaning that BP is chartering the vessel on a “bareboat” basis without crew or provisions.

It is part of BP Shipping’s Century class fleet of Suezmax tankers, which are the largest tankers able to transit the Suez Canal in a laden condition, and designed to fit through the expanded Panama Canal, with a cargo capacity of over 1 million barrels of oil, according to BP’s website.

“Basically, all owners will put their vessels on alert and give them some best practice guidelines while transiting the Straits of Hormuz or passages close to Iran,” a broker said. “We don’t think Iran will carry out such threats. The repercussions will be heavy.”
Source: Platts