Tanker Trade Facing Years of Disruption

The tanker market is expected to remain a “minefield” of sanctions, cargo seizures and pipeline disrruption for the time being. In its latest weekly report, shipbroker Gibson said that “disruption to crude exports is nothing new, however recent geopolitical events have highlighted the precariousness of crude exports in some parts of the world, particularly where exports involve transiting another nation. In the past 12 months, disruptions have been observed on the Caspian Pipeline Consortium (CPC) and Kirkuk-Ceyhan pipelines, whilst unrest in Sudan threatens flows on the Greater Nile Pipeline”.

According to Gibson, “aside from its own crude production, Russia has the power to stop exports via the CPC pipeline, and some argue that Russia has already taken actions to disrupt CPC exports since the invasion of Ukraine. The terminal was forced to reduce exports to undergo repairs in August last year, whilst loadings were also disrupted in March and April 2022 due to suspected storm damage. Last June, operations were halted due to a search for unexploded ordinance. Despite the interruptions last year, volumes were broadly similar to the 3 year average, with export flows so far in 2023 averaging at record levels. However, for the market there remains a significant risk that Russia could disrupt a major source of oil supply and demand for the Aframax and Suezmax markets, should it wish to do so. Due to the perceived risk, Kazakhstan has explored exporting oil across the Caspian sea to Baku for injection into the Baku-Tbilisi-Ceyhan (BTC) pipeline, however, so far this has not exceeded 1-2 cargoes per month and is unlikely to expand much further given the logistical challenges and costs involved”.

“More recently, as covered in our report at the end of March, a spat involving Iraqi Kurdistan, Baghdad and Turkey has led to all oil exports on the Kirkuk-Ceyhan pipeline ceasing. Whilst Erbil and Baghdad have finalised an agreement to resume flows, it remains unclear whether Turkey will be willing to facilitate shipments. A recent arbitration award at the international chamber of commerce ordered Turkey to pay $1.5 billion in compensation to Baghdad, something Turkey contests. Whilst exports could resume this weekend if Turkey allows, the Aframax and Suezmax markets eagerly await the return of ~400kbd of seaborne crude flows”, Gibson added.

The shipbroker also noted that “another lingering threat comes from Sudan, where fighting between rival Generals could lead to disrupted exports from South Sudan via Sudan to the Red Sea. So far exports have continued unbated but with the pipeline running close to key conflict zones including Khartoum, disruption to exports cannot be ruled out. Although the export volume is relatively low, averaging just over 110kbd last year, combined with other supply risks and a tighter oil market, the price impact could still be felt. In essence, anywhere crude exports from one country rely on transiting another country, the risk of disruption persists, with the transit country having the leverage over the landlocked exporter, should their political goals not align”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide