Somali pirates wreack havoc in the Indian Ocean - RubyGoes via Flickr
Armed pirates hijacked a very large crude carrier (VLCC) headed to the U.S. Gulf from Kuwait on Wednesday morning. The Greece-flagged Irene SL was carrying about 1.98 million barrels of Kuwaiti crude oil, estimated to be worth around $200 million, and making up about 20% of total U.S. daily imports or about 12% of daily Middle East exports.
The ship was attacked and boarded at approximately 7:30 UTC (2:30 AM New York time) 350 miles South-east of Muscat, the capital of Oman, as it left the Persian Gulf, reports shipping paper TradeWinds.no. Only the fourth VLCC to fall into the hands of pirates, the Irene was taken in the Indian Ocean off the dangerous Somali coast. Enesel, a Greek private firm that operated the tanker, released a statement saying communications with the vessel could not be established, and that the 25 man crew included 7 Greeks, 17 Filipinos, and one Georgian.
Many New York-listed shipping companies were on the red on news of the attacks, with Frontline, Teekay Tankers, and even DryShips all down more than one percent. Somali pirates have been upping the ante, going for larger ships and bigger ransoms. According to different shipping organizations, cited by Bloomberg, pirates hijacked a record 53 ships and 1,181 crew members in 2010, a year where ransom payments averaged $5.4 million. They were only $150,000 in 2005. According to TradeWinds, “with the previous [VLCC] being released for a $9.5m ransom, pirates can expect to be in for a significant windfall.” The hijacking comes a day after Italian flagged Savina Caylyn, owned by Fratelli D’Amato was hijacked in the same waters with a crew of 22 and a cargo estimated to be worth well over $60 million.
Controversy over the initial response from security operations in the region have mounted, as the ships operators’ claims that all proper authorities were been contacted were refuted by the EU’s counter-piracy force NAVFOR. Discussions about the ship’s route have also surfaced, with NAVFOR apparently claiming the ship was headed for Suez, the waterway mired in uncertainty as Egypt solves its social and civil uprisings. Enesel’s release seems to make it clear that the ship, with a load too big to travel through the Suez Canal, would travel around the Cape of Good Hope on its way to the U.S. Gulf. (Read Trouble In The Suez! Oil Tankers Surge On Egyptian Violence).
According to the International Maritime Bureau, which recorded Wednesday’s incident but is “awaiting details,” there have been 58 pirate attacks so far in 2011, with 7 of those leading to hijackings. The information, last updated on Tuesday February 8, reports that only in Somalia, there have been 45 attacks and 8 hijackings, with a total hostage count of 169, making the troubled East African state more dangerous for shipping than the rest of the world combined. Currently, Somali pirates hold 31 vessels and approximately 700 hostages.
The shipping sector has suffered a volatile beginning to 2011. While an oversupply of ships, caused by excessive demand in the pre-crisis years, put negative pressure on rates this year, sending the Baltic Dry Index to two year lows, trouble in Egypt have forced ships to go on longer voyages and tighten the supply. Oil, which hit the $100 mark on Suez troubles two weeks ago, had been falling since violence in Egypt abated. On Wednesday, the international benchmark, Brent Crude, gained 1.76% to $101.68, while the U.S. benchmark, West Texas International, fell 0.1% to $86.85.
