Economic Calendar

Tuesday, November 18, 2008

Somali Pirates Hijack, Divert Saudi Arabian-Owned Oil Tanker

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By Caroline Alexander and Alaric Nightingale

Nov. 18 (Bloomberg) -- An oil-laden Saudi Arabian supertanker with 25 crew members on board that was hijacked by Somali pirates is being taken to a region in the Horn of Africa used by gangs seeking ransoms for ships, the U.S. Navy said.

The hijackers boarded the Saudi Arabian Oil Co. Sirius Star about 450 nautical miles from the Somali coast on Nov. 15, the pirates’ farthest strike offshore so far, Lieutenant Nate Christensen of the U.S. Navy’s Fifth Fleet said by telephone from Bahrain.

The attack may be the most brazen in a year in which piracy in the Gulf of Aden between Yemen and Somalia has doubled to at least 60 incidents, according to London-based Chatham House, which does analysis on international affairs.

“It’s quite an escalation,” said Tudor Ellis, a maritime security expert at Drum Cussac, a London-based risk advisory company. “They’ve taken chemical tankers before and they’ve attacked oil tankers, but they’ve never taken an oil tanker before.”

The incident also marks the first seizure of a so-called very large crude carrier, the biggest used to transport oil, Christensen said. There have been more than 80 piracy incidents worldwide in 2008, according to the International Maritime Bureau Piracy Center.

The vessel was last tracked on Nov. 10 leaving the Persian Gulf, bound on its original course for St. Eustatius in the Caribbean Sea, according to data compiled by Bloomberg.

Approaching Somali Anchorage

Fifth Fleet Commander Jane Campbell said the incident took place southeast of Mombasa, Kenya, and that the ship was approaching anchorage near Somalia’s northern semi-autonomous region of Puntland. She denied reports from Al-Arabiya television that it had been freed.

The Star’s crew includes citizens of Croatia, the U.K., the Philippines, Poland and Saudi Arabia, Christensen said.

The ship is designed to carry more than 2 million barrels of crude, which at the current price would be worth about $110 million on the New York Mercantile Exchange. The ship is also three times the size of a U.S. aircraft carrier, Christensen said.

About 11 percent of the world’s seaborne petroleum passes through the Gulf of Aden en route to the Suez Canal or regional refineries. Crude prices briefly rose yesterday on the news.

The European Union last month joined the North Atlantic Treaty Organization, India, Malaysia and Russia in deploying vessels to combat piracy.

Pirates Adapt

The tanker was heading to a terminal in St. Eustatius operated by San Antonio-based NuStar Energy LP, said Greg Matula, a company spokesman, in an e-mail.

Dhahran-based Saudi Arabian Oil, known as Saudi Aramco, declined to comment on the incident, and Vela International, Aramco’s shipping unit, couldn’t immediately be reached for comment by phone or e-mail.

The Sirius Star was seized at around 7:20 a.m. local time on Nov. 15, Cyrus Mody, an official at the International Maritime Bureau, said by phone, adding the IMB had no further information. The bureau compiles data on piracy.

Christensen said the seizure shows pirates are successfully expanding their operations, and that previous attacks have occurred within 200 miles of land.

The attack demonstrates “the pirates’ ability to adapt their tactics and methods of attack,” said Vice Admiral Bill Gortney, the commander of the U.S. Navy’s Combined Maritime Forces.

The rate of successful pirate attacks on merchant vessels off the Somali coast has fallen in the past few months, to 31 percent in October from 53 percent in August, Gortney said in a statement.

Attack Thwarted

The increased international naval presence in the area has helped lower the rate, he said. On Nov. 11, a U.K. warship “successfully thwarted a pirate attack on a Danish shipping vessel and boarded the pirate ship responsible” for the assault, Gortney said.

Companies operating merchant ships in the area could help by placing security personnel on the vessels, he said.

“Companies don’t think twice about using security guards to protect their valuable facilities ashore,” Gortney said. “Protecting valuable ships and their crews at sea is no different.”

The attacks may force shipping away from the Gulf of Aden to take the longer route to Europe and North America around South Africa’s Cape of Good Hope. The extra weeks of sailing and fuel consumption may increase oil and commodity prices, according to Chatham House.

Odfjell SE, the world’s largest chemicals shipping line, said its vessels sail around Africa rather than risk attacks near the Suez Canal and Gulf of Aden.

Crude oil for December delivery fell $2.09, or 3.7 percent, to $54.95 a barrel at 2:42 p.m. local time yesterday on the New York Mercantile Exchange, the lowest settlement since Jan. 29, 2007.

To contact the reporters on this story: Caroline Alexander in London at calexander1@bloomberg.net; Alaric Nightingale in London at Anightingal1@bloomberg.net




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