Smuggling of Iranian Oil Raises Insurance Complications Amid Western Sanctions

A handout image shows the RSS Supreme's rigid-hulled inflatable boat in the vicinity of the burning vessels following a fire on two oil tankers about 55 km northeast of the Singaporean island of Pedra Branca, July 19, 2024. Reuters
A handout image shows the RSS Supreme's rigid-hulled inflatable boat in the vicinity of the burning vessels following a fire on two oil tankers about 55 km northeast of the Singaporean island of Pedra Branca, July 19, 2024. Reuters
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Smuggling of Iranian Oil Raises Insurance Complications Amid Western Sanctions

A handout image shows the RSS Supreme's rigid-hulled inflatable boat in the vicinity of the burning vessels following a fire on two oil tankers about 55 km northeast of the Singaporean island of Pedra Branca, July 19, 2024. Reuters
A handout image shows the RSS Supreme's rigid-hulled inflatable boat in the vicinity of the burning vessels following a fire on two oil tankers about 55 km northeast of the Singaporean island of Pedra Branca, July 19, 2024. Reuters

A collision between two tankers off Singapore in July raises questions over insurance claims, as one of the vessels previously shipped Iranian oil, potentially complicating payments due to Western sanctions, ship-trackers and industry sources told Reuters.

What Happened?

The Singapore-flagged Hafnia Nile and the Sao Tome and Principe-flagged Ceres I collided and caught fire about 55 km northeast of the Singaporean island of Pedra Branca on July 19.

No oil spill has been detected, only a sheen believed to be from damage to the Hafnia Nile's bunker tank, Malaysia's Marine Department said.

The vessel, which was carrying a cargo of naphtha, suffered engine damage and was secured by tugs at the collision site.

On Thursday, ship manager Hafnia said that an oil boom has been deployed at the stern of the ship and around the damaged area, and two tugboats are dispersing the light oil sheen.

Hafnia said it was working with Malaysian and Singaporean authorities to finalize a towage plan.

What’s the Iranian Oil Connection?

The Ceres I had no cargo at the time of the accident.

However, ship data from providers including LSEG and Kpler show the tanker carried Iranian crude in the past.

Ceres I last loaded Iranian oil via transfer with an Iranian tanker in March off the country's Kharg terminal, subsequently transferring the cargo to two tankers around the Malacca Strait between April 7-9, said Claire Jungman, chief of staff at advocacy group United Against Nuclear Iran, which tracks Iran-related tanker traffic via satellite data.

That cargo reached China on May 29, Jungman said.

Ceres I loaded Iranian oil at least four times since 2019, transporting 8 million barrels, according to analysis by Jungman. The vessel also made four trips carrying Venezuelan oil between 2021 and 2023 totaling 7.5 million barrels, she said.

The China-based owner of the Ceres I listed in shipping databases could not be reached for comment.

China, the biggest buyer of Iranian crude, says it opposes unilateral sanctions, but traders rebrand Iranian oil destined for the country as originating elsewhere. Chinese customs have not reported any imports of Iranian oil since June 2022.

Growing Shadow Fleet

This is believed to be the first such collision in recent years involving a vessel that is part of the so-called shadow fleet of tankers transporting oil cargoes that are subject to Western sanctions, insurance specialists told Reuters.

Government and industry officials have raised concerns over risks posed by the growing shadow fleet.

“The recent collision between Hafnia Nile and Ceres I marks a dangerous precedent,” said Jonathan Moss, head of transport with law firm DWF and an insurance claims specialist.

“Neither vessel nor owners are designated (by Western sanctions), however, if the Ceres I was or had in the past been carrying Iranian crude, their insurers may have reason to decline cover or may need to notify the authorities of a potential sanctions breach,” he said.

What Insurance is in Place?

Ships typically have protection and indemnity (P&I) insurance, which covers third-party liability claims including environmental damage and injury. Separate hull and machinery policies cover vessels against physical damage.

The Hafnia Nile is covered by Norwegian P&I insurer Gard, one of the top 12 such providers covering around 90% of the world’s ocean-going ships.

Gard said it was “actively supporting” its member BW Group, which operates the Hafnia Nile, declining to give specifics.

Typically, a P&I club that is part of an international group of the 12 biggest companies in the sector covers the first $10 million of P&I losses, with members mutually reinsuring each other by sharing claims above $10 million to $100 million. The group holds reinsurance cover up to $3.1 billion.

A person familiar with the matter said the Ceres I has P&I coverage with an international insurer that is not among the leading 12 providers, and hull and machinery coverage from a Chinese insurer.

What Happens with Claims?

Claims in this case could include costs to repair both vessels, towing the Hafnia Nile to a dock, time in dock for repairs and those incurred by the salvage company and tugs as well as ship surveyors.

Typically, each party in a collision instructs its own loss assessor to prepare a report on what happened, establishing liability and then notify its insurers and make a claim.

The claims process itself is typically dealt with by both hull and P&I insurers and will last months if not longer.

Liability will be determined by a court, probably in Asia.

Any claims sent to hull & machinery, cargo and P&I insurers will be complicated by sanctions rules, DWF's Moss said.

Moss said if the hull & machinery or P&I cover had been placed by insurers in the London market or other jurisdictions, sanctions exclusion clauses could be triggered. This could prevent investigation of the claim including the appointment of loss assessors, loss adjusters, fire experts and others, potentially leaving the insured without cover from both direct insurers or reinsurers, Moss added.



Chevron Announces First Oil at Ballymore Project in Gulf of Mexico  

The logo and trading information for Chevron is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York City, US, June 27, 2022. (Reuters)
The logo and trading information for Chevron is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York City, US, June 27, 2022. (Reuters)
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Chevron Announces First Oil at Ballymore Project in Gulf of Mexico  

The logo and trading information for Chevron is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York City, US, June 27, 2022. (Reuters)
The logo and trading information for Chevron is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York City, US, June 27, 2022. (Reuters)

Chevron has started oil and gas production from a project in the US Gulf of Mexico, the oil major said on Monday, bringing the company a step closer toward its goal of growing production from the ocean basin by 50% this year.

The $1.6 billion project called Ballymore, located about 160 miles southeast of New Orleans, is composed of three wells that are expected to produce up to 75,000 barrels of oil per day.

Chevron aims to grow oil and gas production from the Gulf to 300,000 barrels of oil equivalent per day in 2026, and at the same time, it is working to cut up to $3 billion in costs across the business.

Instead of building a new production platform for Ballymore, the wells will transport oil and gas back to an existing platform, which the company said will allow it to increase production at less expense.

“Ballymore is interesting in that it's a tie-back to an existing facility, which has allowed us to bring production to market more quickly,” said Bruce Niemeyer, president of Americas exploration and production, in an interview.

The project is also Chevron's first in a geological formation of the Gulf called Norphlet, where the oil and gas industry has historically had fewer discoveries than in other parts of the ocean basin, he added.

Advancements in technology are key to expanding resource exploration, such as the use of ocean bottom nodes, which allow geophysicists to collect better data underneath the ocean floor, Niemeyer said.

Chevron is the operator of Ballymore with a 60% interest, while co-owner TotalEnergies has 40%.

Ballymore holds an estimated 150 million barrels of oil equivalent in potentially recoverable resources.

The company owns 370 leases in the Gulf of Mexico and expects to participate in a lease sale this year by US President Donald Trump's administration, Niemeyer said.

The Ballymore start-up comes after Chevron announced first oil in August at Anchor, a Gulf of Mexico project that is a technological breakthrough with the ability to operate in deepwater pressures of up to 20,000 pounds per square inch.