Yemen losing tanker business

Yemen losing tanker business

Oil and liquefied natural gas (LNG) tankers that had been intended to berth at Yemen have been diverted elsewhere, partly because insurers have warned that hull and cargo might not be covered under existing policies.

At least four tankers were reported to berth at Yemen. One of Yemen's LNG production plants has been taken offline. France's Total and APR Energy PLC are reported to have evacuated staff and curtailed operations.

The Aden Refinery has suspended a tender process for crude oil as it is unclear whether it would be able to re-export the refined product.

Reuters reported that oil tanker Hong Ze Hu, chartered by Italy's ENI, had been chartered to carry 60,000 tonnes of high sulphur gasoil to Little Aden from South Korea, but that it had turned around near Sri Lanka and was now near Singapore.

An unnamed source told the agency that "insurance companies are rejecting to berth the vessels in Yemen, so some of the vessels are refusing to berth there".

Three other tankers registered as heading for Yemen with early April arrival dates have been recorded as being diverted. However, all are still currently at sea, which would, at least in the short term, keep open the options of the tanker owners.

A variety of mechanisms and policy wordings are used to insure tankers, but war risks are generally excluded from ordinary hull and P&I liability policies. The purchase of a facultative war risk "in running" would likely be prohibitively expensive, given the current situation in Yemen.

Charter companies are required to notify  underwriters in advance if a ship is moving into a conflict area. The underwriter could then offer war risk insurance at an additional charge and for a finite period of time, usually between 48 hours and seven days. But the size of that premium depends on the underwriter's perception of the risk. A loading of 10% of the market value of the vessel would not be unheard of*.

* Martin S. Navias and E.R. Hooton, Tanker Wars: the Assault on Merchant Shipping During the Iran-Iraq Conflict, 1980-1988 provides excellent data on the impact on insurance rates during the Iran-Iraq conflict.

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