India-bound VLCC laden with crude returns to Persian Gulf after Sep fire

Singapore — The fully laden Indian Oil Corp.-chartered super tanker New Diamond that caught fire and leaked bunker fuel last month will not unload its cargo in India and is instead returning to the Persian Gulf, several sources involved in salvage operations said Oct. 6.

The 260,000 mt crude cargo is safe so far, but it would be risky to undertake discharge operations at any of India's ports, multiple sources told S&P Global Platts.

Keeping in mind the fragile ecology of the Indian subcontinent, it is in the best interest of all stakeholders that the 20-year-old VLCC New Diamond turns back with the cargo, one source said.

"As per the passage plan forwarded for approval, the destination of the ship is Khor Fakkan," a Sri Lanka Navy representative said.

The cargo can be potentially transferred to other ships at the UAE port for subsequent delivery to IOC.

Sri Lanka has been paid Sri Lankan Rupees 442 million ($2.4 million) for the expenses it incurred in the incident, the representative said.

IOC executives and the ship's owner, New Shipping, could not be reached for comment.

An Indian Coast Guard official said the ship owner and its insurers would also have to pay the ICG for the services it has provided.

"The ship's engines are no longer operating but it is seaworthy to be towed and due to the risks involved, Indian Coast Guard ships with pollution response gear have been deployed as a preventive measure as it is taken back to the Persian Gulf," the ICG official said.

ICG spearheaded the perilous firefighting operation, which involved at least six of its ships and two Dornier aircraft, and lasted over a week in early September. It succeeded in dousing the intense blaze on board the 333 meter supertanker, preventing a major oil spill and averting an ecological disaster.

The navigation and safety of commercial ships has recently come under sharp focus.

In July, a newcastlemax bulk carrier Wakashio, owned by Japan's Nagashiki Shipping and chartered by Mitsui OSK Lines, deviated and ran aground in Mauritius, leaking 1,000 mt of bunker fuel and splitting into two.

While Wakashio was ballasting and therefore did not have a cargo onboard, the New Diamond VLCC is laden with 270,000 mt of Kuwaiti crude, making it critical to safely tow to a suitable port for a ship-to-ship transfer at the earliest.

It leaked bunker fuel up to 2 nautical miles in Sri Lankan waters last month before the situation was brought under control. Positioning the ship in a way that prevented wind fanning the fire toward the forward section ensured there was no crude spill, sources said.

VERY OLD SHIPS

The incident has once again brought to fore the maritime debate over chartering very old ships and their obtaining regulatory approvals for sailing.

Globally, 15 years for super tankers is a critical threshold, after which getting regulatory approval is difficult due to stringent international maritime laws.

Many oil companies do not charter tankers more than 15 years old due to safety concerns and at times they are unable to clear vetting at load and discharge ports. However, several refiners do not hesitate to take such ships if they are able to get port clearances, as they are available at a discount to prevailing freight rates.

Both cargo and freight rates are subdued at present due to the demand destruction caused by the coronavirus pandemic, significantly narrowing the freight discount between old tankers and approved ships.