Nov 15, 2024 (MarketLine via COMTEX) --
While the illegal seizure of oil after hijacks may seem like the criminal exploits of a bygone age, the threat remains a reality in many of the worldaEUR(TM)s petroleum-producing regions.
As an increasing number of attacks on oil tankers in the Red Sea made headlines in 2024, the security issues around petro-piracy have reared their heads for oil companies worldwide.
As a subset of piracy, petro-piracy is defined as the illegal hijacking and theft or siphoning of oil or other petroleum products from ships, pipelines, and storage facilities.
Tankers offer profitable targets for pirates as they contain a highly valuable commodity and play a crucial role in international energy trade, transporting crude oil, liquified natural gas (LNG), and petroleum products, while also serving as offshore storage terminals.
Though less commonly attacked than tankers, offshore installations are also at risk due to their remote locations within open waters.
The combined effect of attacks against offshore assets and onshore infrastructure can cause long-term damage to industry supply chains, as pirates steal goods (both refined and unrefined) for lucrative black markets or hold workers and products for ransom.
Petro-piracy typically affects regions with disordered or relatively unregulated oil and gas industries, reduced levels of maritime law enforcement, and geographical terrains suited to the logistics of staging attacks, such as areas with bottlenecks or island chains.
In recent years, piracy hotspots such as the Gulf of Guinea have experienced fluctuations in reported incidents due to shifts in geopolitics and oil prices. There has been an additional transition in the dynamics of piracy towards the illegal transfer of oil between ships or from tampered pipelines, known as oil bunkering.
As criminal organisations advance their attacks, the threat of petro-piracy remains ever present, requiring oil companies to keep abreast of the complexities within the piracy domain to avoid the loss of precious stock and the subsequent impact on bottom lines.
Unpacking modern petro-piracyPirates preying on the spoils of the oil industry have a variety of choices for targets, including pipelines, rigs, or tankers. Valuable petroleum products and expensive machinery can be stolen, including communication devices, navigation instruments, engines, powerful spotlights, drilling rigs and pumping machinery.
Announcements of oil explorations and discoveries, coupled with steadily rising market prices, attract the attention of criminals who can profit from selling stolen products on the global black oil market, which has an estimated value of over $1bn.
The US Energy Information Administration (EIA) forecasts that global oil prices will rise in 2025 to $84 per barrel, setting the stage for a high value return on investment for successful pirate attacks.
Piracy against oil operations can take on a political as well as financial element. Research on the theft of oil in the Niger Delta finds that the exercise is commonly seen as a aEURoelegitimate re-appropriation of a resource which international companies have taken from local communitiesaEUR.
Since the early 2010s the Gulf of Guinea has been petro-piracy hub as it encompasses two major oil producers: Nigeria and Angola. These West African nations are cumulatively responsible for approximately 3% of global oil production. The Gulf itself, which stretches from Senegal to Angola, hosts major oil fields such as Owowo West and Preowei.
Shaun Robertson, intelligence analyst at EOS Risk Group, a global security risk and crisis management practice, explains that in the Gulf of Guinea petro-piracy was initially an onshore operation.
aEURoeInsurgents would attack pipelines and kidnap oil executives. Then when infrastructure was moved offshore, thataEUR(TM)s when petro-piracy started in the waters with the siphoning of oil from vessels,aEUR he added.
In the 2020s, pirates refocused their efforts on hijacking pipelines and transferring oil to illegal refineries. In Nigeria the scale of these operations is immense, as the Nigerian National Petroleum Corporation has destroyed almost 6,000 illegal refineries since 2021. In September alone, NigeriaaEUR(TM)s army seized over 198,000 litres of stolen crude oil.
Despite onshore criminal activity taking centre stage, maritime petro-piracy hasnaEUR(TM)t been entirely eradicated, as oil tankers have increasingly been caught in the crossfire of geopolitical conflicts.
Houthis get involvedSince late 2023, the Yemeni Houthi militant organisation have been attacking oil tankers in the Red Sea and Gulf of Aden in response to IsraelaEUR(TM)s invasion of Gaza, hitting oil assets to make a political statement.
A significant attack occurred in late August, as the Houthis fired missiles and detonated explosives on the Greek-owned and flagged MV Sounion, which was carrying approximately one million barrels of crude. The barrels have since been salvaged and the tanker towed to safety.
Other Houthi-led attacks in 2024 have hit Saudi, Chinese and Panamanian-flagged oil tankers. The escalation has forced industry giants such as BP and Shell to divert their fleets around the Cape of Good Hope in South Africa, disrupting global trade and increasing shipping costs.
In turn, the rerouting and subsequent additional transit time has led to a spike in CO2 emissions. With the additional risk of oil and gas spillage from attacked vessels, the environment could becomes another victim of petro-piracy.
Cyrus Mody, deputy director of the International Chamber of CommerceaEUR(TM)s International Maritime Bureau (ICC IMB), has confirmed that pirates also kidnap entire tanker crews for ransom, which aEURoecreates other dangers [as if the] people on board are not competent in navigating a vessel it puts other shipping traffic and the environment at risk if there is a collision.aEUR
Research from Rice UniversityaEUR(TM)s Baker Institute for Public Policy states that disruption caused by piracy can create a broader asymmetry in energy commodity trade. In the case of the Red Sea, Russian crude cargoes have flown through to Asia unabated. Meanwhile, Qatari LNG shipments to Europe have detoured en masse or been replaced by alternate cargoes sourced in the Atlantic basin.
Changing targets and emphasisThe frequency of attacks on oil tankers means that industry attention is geared towards protecting vessels. But as pirates in the 21st century have adjusted their operations offshore platforms have come under increasing threat. The belief that platforms are safer because they are aEURoenot easily accessible targetsaEUR, as stated in research from the 1980s, is no longer the case.
Chris Long, director of compliance at private security company Neptune P2P, identifies the Gulf of Mexico as a problematic area for platforms such as those owned by state oil company Pemex. He believes that aEURoedrug cartels are involved in these frequent attacks.aEUR
Somalia exemplifies the development and growth of petro-piracy operations. Having dominated the early 2010s, Somalian piracy saw a decade-long decline but has resurged in the past year with a spate of hijackings, of vessels of various sizes.
According to Robertson, Somalian pirates have expanded their ransom operations from crews and oil barrels on vessels to platforms, as the nation progresses towards utilising and selling its estimated reserves of 30 billion barrels.
The IMBaEUR(TM)s Piracy Reporting Centre has warned that Somali pirates have also developed the ability to target assets up to 1,000 nautical miles from the coastline. This capability puts projects such as TA 1/4rkiyeaEUR(TM)s ongoing exploration of three offshore oil and gas blocks in Somalia at higher risk of attack, as Long tells Offshore Technology that the aEURoeslow-moving and static targets there have raised concernsaEUR.
Reported declines in piracy incidents should not lead to complacency with security measures. A consistent trend across piracy hotspots is that decreases are followed by resurgences, often with replenished weaponry that ranges from small arms, rocket propelled grenades, to water-borne improvised explosive devices.
Investing in anti-piracy securityPetro-piracy is an expensive business for all parties involved, including entire nations. In 2011, it was estimated that West African countries lost $1bn in oil revenue due to piracy.
For oil companies, 2024 has brought increased war risk insurance premiums, translating into hundreds of thousands of dollars of additional costs for extended voyages.
Ships are also encouraged by the International Maritime Organisation (IMO) to avoid or speed up through danger zones such as the Red Sea, which piles on extra fuel expenses. This is on top of the high freight rates seen in 2024, as oil tanker operators have reported record profits.
The maritime oil transportation supply chain contains numerous parties and stages, which can lead to gaps in safety. Companies must outsource tankers and safety responsibility to ship owners.
There is then the additional risk of a vesselaEUR(TM)s registered country failing in its safety responsibilities to operate under less stringent regulations, known as aEUR~flags of convenienceaEUR(TM). Failure at any point in this chain opens opportunities for petro-piracy.
Dirk Siebels, senior analyst at Risk Intelligence, states that aEURoepiracy remains a potential issue for all vessels. At particular risk are those vulnerable to boardings. Crude oil or LNG tankers in ballast are hard to board due to the high freeboard, but that changes when they are fully laden".
Construction is crucial in the fight against petro-piracy. In 1992, the International Convention for the Prevention of Pollution from Ships made it mandatory for tankers of 5,000 deadweight tonnage and above to be fitted with double hulls. But Long points out that aEURoetankers today still have vulnerable areas, particularly at the rear, making them a big target.aEUR
Piracy best management practice, known as BMP5, advocates for vessels to be hardened with razor wire, water spray and foam monitors, a protective citadel for the crew, and enhanced bridge protection, which is typically the focal point of pirate attacks.
Mody verifies that a key strategy for pirates is to aEURoedamage navigation and communication equipment so that the crew cannot call for helpaEUR.
Meanwhile, safeguarding platforms differs from tanker protection, as Long explains: aEURoeUsing arms or anything potentially explosive around a platform is difficult to authorise, so non-kinetic security is used instead.aEUR
Security guards play a vital role in protecting platforms, the construction and maintenance of each one can cumulatively amount to almost a $1bn.
Security software has also been enhanced since the peak of petro-piracy in the 2010s. Software companies such as Cambridge Pixel provide solutions that can process data from navigation radars on offshore oil infrastructure to patrol and track small targets such as pirate vessels.
Cambridge Pixel sales director Mark Saunders explains to Offshore Technology that aEURoeAlarms can be set off when a ship crosses a boundary line around an installation. Augmented reality then shows the name and destination of the vessel through an automatic identification system. If a shipaEUR(TM)s data doesnaEUR(TM)t show, then it can be identified as a piracy risk.aEUR
Alarms are also built for complex scenarios, such as highlighting the presence of a boat that is loitering near an installation. Alternatively, an urgent alarm can be set for a boat that is making a direct approach at high speed.
Saunders identifies that such technology is predominantly used only on offshore platforms as opposed to tankers. aEURoeVessels typically rely on the vigilance of the crew, whereas with more expensive infrastructure in West Africa for example, thereaEUR(TM)s no questions asked about companies spending money on increased platform security.aEUR
The cost of investing in such a variety of security solutions to deter petro-piracy provides a return on investment for oil companies to avoid the higher price of vandalisation or production stoppages.
LongaEUR(TM)s general advice is for companies to aEURoeget a thorough risk assessment of where you can operate, what the threats are in that region, and how best to mitigate against them.aEUR
As for the post-attack stage, Mody stresses the importance of sharing information between public and private organisations. The IMB leads global piracy reporting as the only 24/7 monitor for incidences. aEURoeThe sooner reports come in, the more chance that [the IMB] and the navies or law enforcement in the waters have to respond.aEUR
The future of petro-piracyWhile the Red Sea is the latest focal point for security concerns, there is a possibility that increasing attacks on oil assets could inspire upturns in historically hazardous areas such as the Gulf of Guinea and Somalia.
Robertson points out that there is a vicious cycle in petro-piracy, whether it happens onshore Aor offshore. aEURoeAs illegal refineries are prone to blowing up and ruining ecosystems, local fishermen in the Gulf of Guinea for example can no longer fish, and so they turn to a life of crime.aEUR
Continued international cooperation between countries is key to snuffing out these threats, as Mody explains: aEURoeWhile boundaries out at sea may be defined, they are not well-patrolled or overseen, so moving from one jurisdiction into another for a criminal is extremely easy, whereas it is difficult for a coast guard for example to move from their jurisdiction into another. This is where bilateral agreements come in.aEUR
The diversion of oil trade routes away from the Red Sea has worked to deter the Houthis, according to Long. aEURoeWhat's happening in the Red Seas is worrying, but I think it's temporary. They're running out of legitimate targets as vessels continue to reroute.aEUR
Mody asserts that recorded reductions in piracy incidents are a result of aEURoeinternational focus on any problem areas and the coastal authorities, private arms companies, and navies coming together to allocate resources and safeguard waters. Without this, there would be an increase in incidents of at least 15%.aEUR
However, he acknowledges that some incidents go unreported, further emphasising the need for the oil industry to be on its guard.
Robertson concludes that aEURoepetro-piracy could come back tomorrow with a bang, as weaEUR(TM)ve seen with the recent return of Somali pirates. TheyaEUR(TM)ve got the capability and the opportunity, so you should never hang your hat up.aEUR
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