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TSA plans further rate hike next month
( LL ) TRANSPACIFIC Stabilization Agreement lines have planned further rate hikes next month following initial success of their general rate increase programme this month.
According to a press statement, TSA is recommending a GRI from August 1 and will determine and announce the guideline amount in mid-July.
The prospective hike is due to “current unsustainable freight levels overall and the likelihood of continued strong demand through August”, the statement added.
“With the overall uncertainty already seen in the eastbound freight market, the central issue for shippers and carriers alike is maintaining service and schedule reliability,” TSA executive administrator Brian Conrad said.
“All partners in the supply chain need to be able to respond quickly and cover contingencies in the event of cargo surges or bottlenecks. And they need to know that their costs are covered in the process.”
TSA carriers have already charged an extra $400 per feu for shipments to the US Pacific northwest, east and Gulf coast ports and via intermodal to inland US points from July 1.
They also increased rates by $200 per feu to Pacific southwest ports in California from July 1, and will charge a further $200 per feu on July 15.
According to the Shanghai Containerised Freight Index, the July GRI programme already resulted in a notable rate spike in the week to July 4, with prices from Asia to the US west coast and east coast climbing 4.1% and 9.3% respectively.
Drewry’s Hong Kong-Los Angeles container freight rate benchmark rose 12% to $1,850 per feu in the same period.
Member lines were also comforted by the latest development in the US west coast labour negotiations, in which employers and the International Longshore and Warehouse Union promised there would be no disruption to cargo movement despite the previous employment contract having already expired on July 1.
Mr. Conrad said: “We respect the need for confidentiality in the negotiations, but it makes the kind of reassurances we have received all the more important to maintaining confidence in the market.”
Tankers prepare for rise in Libyan oil exports
AFRAMAX crude tankers can expect to load additional cargoes of Libyan oil over the coming weeks as the country increases its oil exports.
Exports will rise from the key Libyan ports of Es Sider and Ras Lanuf, which have been handed back by rebels to the state-run National Oil Corp, according to international media.
Regaining the ports means the National Oil Corp can gradually increase the number of shipments.
Libyan oil shipments have been in the doldrums due to rebels seizing oil production facilities.
Exports averaged as low as 265,000 barrels per day in May, from 1.1m bpd a year ago, according to Lloyd’s List Intelligence data.
Libya is capable of exporting 1.5m bpd when production is running at full throttle.
That level of 1.5m bpd provides cargoes for around two aframaxes a day, the main tanker type carrying cargoes out of Libya.
The drop to 265,000 bpd offers loads for about a mere one aframax a week.
The latest development follows recent comments to investors at a London conference attended by Lloyd’s List, at which Libya’s National Oil Corp said production at the disrupted terminals would return to normal soon.
A barrier to production, however, is the quota granted by the Organisation of the Petroleum Exporting Countries, of which Libya is a member.
Until the exact quota is known, Libya will resume exports gradually, said the National Oil Corp at the London conference.
Gradually raising exports should also prevent sharp swings in the price of oil.
Three-day break for west coast labour talks
NEGOTIATORS working on a new labour contract for US west coast dockworkers are taking a three-day break.
The International Longshore and Warehouse Union and the Pacific Maritime Association issued a brief statement overnight saying that talks between the two sides would resume at 0800 hrs on Friday July 11.
During the 72-hour interlude, the previous six-year contract — which expired on July 1 — will be extended.
The break has been called to allow union leaders to attend unrelated negotiations taking place in the Pacific Northwest, the parties said in a joint communiqué.
The PMA and ILWU have been engaged in virtually non-stop talks since mid-May on a new contract covering almost 20,000 dockworkers employed at 29 US west coast ports.
Although the previous contract expired at the start of the month, both employers and union leaders have reassured the industry that they expect to reach agreement on a new deal without any disruption to cargo operations.
Nicaragua canal route approved
A $40bn shipping canal through Nicaragua is a step closer to reality after getting the green light from a key committee in the small Central American nation.
The proposed canal, which would compete with the Panama Canal further south, received approval from a group of Nicaraguan business people, bureaucrats and academics, despite lingering doubts over its environmental and economic viability.
The committee’s approved route would see a shipping channel from the mouth of the Brito River on the Pacific to the Punto Gorda River on the Caribbean, passing through Lake Nicaragua.
At a length of 278km, the Nicaraguan Canal would be almost three times as long as its counterpart in Panama and is expected to have a width of between 230 m and 520 m and a depth of 27.6 m.
Driving the project is the Hong Kong Nicaragua Canal Development Investment Co, led by Chinese lawyer and telecoms executive Wang Jing.
Further environmental and social impact studies are still expected as there are ongoing concerns about the project’s environmental effects on Lake Nicaragua, which is an important source of fresh water for the impoverished nation.
Proponents hope to begin work as early as December with a view to completion in 2019.
Mr Wang said at an event in Nicaragua that the five-year project will provide many employment and development opportunities.
“Nicaragua has a geographical advantage that is one of its kind — it’s where the western and eastern hemispheres meet.
“The canal will be the largest construction project in human history,” Mr Wang said.
Mr Wang also stressed the construction will only begin after the environmental review process, which is expected to be completed in October.
“We won’t begin construction unless we have a sound, scientific and plausible environment plan…and we are confident of our plan and that we can begin construction by year-end,” he added.
The idea of a canal through Nicaragua is old, dating back to the early 19th Century, and Napoleon III is understood to have written a paper on the concept.
Nonetheless it lost out to Panama, despite being much further from the US, which ultimately bankrolled the project after buying out French interests.
Brazil’s oil exports disappointing for tankers
( LL ) BRAZIL’s crude and fuel oil exports averaged 473,000 barrels per day in May, down sharply from 773,000 bpd six months ago, highlighting a malaise in production and exports from the country that is cutting the number of cargoes available for tankers to haul out.
Average crude and fuel oil exports last year dropped to 481,000 bpd, from a 631,000 bpd average in 2012, according to the latest Lloyd’s List Intelligence data.
The fall affects employment opportunities for very large crude carriers, suezmax crude tankers, aframaxes and panamaxes – the tanker types employed to carry these cargoes out of Brazil, according to Lloyd’s List Intelligence.
Fuel oil, also called dirty products, is used as bunker fuel for ships or as a fuel source in the industrial power sector.
May’s average of 473,000 bpd is equivalent to loads for around three suezmaxes per week, or a VLCC and a suezmax.
However, the 773,000 bpd average six months ago offered cargoes for around five suezmaxes per week, or two VLCCs and one suezmax.
The drop raises questions over Brazil’s crude production, heralded around seven years ago as a potential saviour of the oil production and export industry due to offshore deepwater discoveries.
While deepwater production in areas such as the Santos and Campos basins still holds a great deal of potential to boost global oil production, and therefore business for tankers, equipment and regulatory issues are leading to disappointment in Brazil’s production.
Many have said that the requirement to use Brazilian equipment and the requirement to be a junior partner to Brazil’s oil company Petrobras, means international oil companies need a great deal of patience if they want to eventually reap rewards in Brazil.
Maersk Oil’s disappointment
Maersk Oil, part of Danish shipping and energy giant AP Moller-Maersk, has just taken a hit from its Brazilian venture.
The company, having acquired stakes in three Brazilian oil blocks from SK Energy for $2.4bn in July 2011, said today that it has revised its strategy and will no longer pursue growth or operatorship for its business in Brazil.
It has divested its ownership share in the small producing field Polvo to Brazilian operator HRT O&G Exploracao e Producao de Petroleo.
Maersk said the remaining fields Wahoo and Itaipu, in the offshore Campos Basin, contain significant potential resources, and it is expected that the operating partners of these fields will at a later date be able to present commercially viable development plans.
However, despite the potential, Maersk’s assessment has led it to expect that these plans will result in a lower value than originally anticipated, as the appraisal drillings have come out at the low end of the original expectations.
In addition, adverse impacts from increased development costs and lower oil price also must be expected, said Maersk.
As a result, the Danes have made a hefty impairment to the book value of Maersk Oil’s Brazilian assets of $1.7bn, bringing down the value to as low as $600m, which it said will be included in AP Moller-Maersk’s second-quarter financial result.
AP Moller-Maersk chief executive Nils Andersen said that the SK Energy investment was made “at a time when the outlook for the oil industry and oil prices were more positive than today and we had growth ambitions for our Brazilian oil business”.
He added: “We have now adapted our strategy to the situation we see today, but it is of course clearly unsatisfactory that the oil volumes in the acquired fields Itaipu and Wahoo after appraisal drilling has proved to be in the low end of our original expectations.”
Maersk Oil chief executive Jakob Thomasen said: “It is important that we embed the learnings from Brazil into our future plans to grow the business.”
Brazil strives to overcome
Despite disappointment over production and exports, Brazil is determined to grow its output and exports, having only become a net exporter of crude in 2007.
In March last year, Brazil launched a 10-year energy plan to expand oil production to more than 5m bpd by 2021, with oil exports of more than 2.25m bpd, according to the Energy Information Administration.
Acknowledging issues with its production, this was a slight decrease from the country’s previous ambitious plan of over 6m bpd by 2020.
To meet growth, Brazil is reportedly investing almost $240bn over to boost production.
Greater production will generate opportunities for VLCCs and other large tankers to carry the crude long-haul to China, say shipping analysts.
China is diversifying its source of crude amid ongoing tensions in the Middle East.
The long-haul voyage from Brazil increases tonne-mile demand for the vessels, pushing up the number of days spent employed and earning.
So, although Brazil is proving to be something of a disappointment for exports on tankers at the moment, its offshore production and export business is a bit like its football World Cup squad — they have their eyes firmly on the prize, so never rule them out.
What sets apart the world's three gas giants
( ShipingWatch ) When you ask in the industry who is the market leader within the segment for the major gas vessels, VLGC, the answer is unanimous: BW LPG, the gas carrier under the family-owned BW Group in Singapore, considered one of the world's largest maritime companies in the field of energy transport, such as LPG and crude oil.
BW LPG currently has 30 ships in the water, some of which are on time charter with purchasing options, meaning that they are de facto BW vessels. Furthermore, the company has a newbuilding fleet of eight ships, with one being delivered this year, five in 2015 and the last two in 2016, according to the company's website.
The original LPG business dates all the way back to before the Second World War, 1935, when Sigval Bergensen established a tanker carrier in Stavanger, which then developed rapidly after the war. LPG transport did not really pick up speed until 1978, and the same thing applies to the company, which was at this time also operating in dry bulk and later in crude oil and offshore.
Today Bergensen, along with World-Wide Shipping - established in Hong Kong in 1955 by the Sohmen family - has become BW Group, which Carsten Mortensen will soon be heading when he takes over as new CEO.
What is the difference ?
The Norwegian gas collaboration between Stolt-Nielsen, Sungas Holdings and Frontline 2012 - Avance Gas - currently has six ships, and according to Avance Gas CEO Christian Andersen, whose background includes work at BW as head of the group's LNG business, BW LPG and Avanace resemble each other in terms of their strategies.
They are both pursuing work on CoA contracts (Contracts of Affreightment) that follow the price of the spot market. In this way the carriers avoid freezing coveted ships on bad prices in a market that is currently hitting USD 100,000 per day.
So Avance Gas is not interested in time charter contracts, and if the company is forced to do this it would have to be a contract with a flowing rate tied to the spot market, says Christian Andersen.
As such, BW LPG and Avance Gas differ from Dorian LPG, which currently has three VLGC's in the water, two of which are sailing on time charter contracts. When ShippingWatch recently spoke to the company's new head of chartering, Maersk Tankers' Tim Truels Hansen, he pointed out that Dorian LPG is the market leader in terms of its newbuilding fleet of 19 VLGC's, set for delivery ahead of 2017.
And it is far from unthinkable that Dorian LPG will alter its strategy, switching from long-term contracts to focusing more on the spot trade when Tim Truels Hansen, starting September 1st, will develop the future strategy for the company.
Avance: We are number 2
Christian Andersen of Avance Gas describes Tim Truels Hansen as "immensely skilled." But he does not agree with Tim Truels Hansen's assessment, for as he says:
"We're running five ships in the spot market, which makes us the biggest player in spot and number two on the market today," he says, acknowledging that if one includes the newbuilding fleet the carrier is obviously number three, as Avance has a mere eight newbuildings set for delivery in 2014 and 2015:
"But they only have five to seven ships more than us, so we'll likely be number two by 2016. So if you go by the current fleet and orderbook, Dorian is number two, but it's so far away and so much is going to happen before that time. As such, I'm talking about what's there today, and here Dorian is 'Mr. Nobody'," says Christian Andersen.
Competitor to BW LPG
But if all three players are working to expand their fleets, how will Avance Gas ever catch up with BW LPG? According to Christian Andersen the competitors today are not carriers, but rather all the ships in the market. BW LPG will not become a de facto competitor until Avance Gas has realized its ambition of reaching a fleet of 30-40 ships during the next year and a half, enabling it to offer world wide freight:
"I want to be able to go to Shell, BP and the other oil players and offer shipments from the Middle East, the US Gulf and South America on short notice. That's why I want a big fleet. BW has a somewhat similar strategy. Significant things will have happened one year from now and at that time the difference will be clear," he says.
The VLGC segment is currently experiencing favorable rates of up to USD 100,000 per day, which according to analysts do not look set to fade anytime soon. Among the three players figure several major shipping magnates such as Norwegian John Fredriksen in Avance Gas and Scorpio's Robert Bugbee in Dorian LPG.
China Shipping Development and MOL book Yamal LNG carriers
( LL ) CHINA Shipping Development and Mitsui OSK Lines have firmed up their deals to build three ice-class liquefied natural gas carriers to ship gas from Russia’s Yamal project.
The two companies ordered three 172,410 cu m vessels from Daewoo Shipbuilding & Marine Engineering for approximately $932m in a long-expected deal, according to an exchange filing from CSD, the Shanghai- and Hong Kong-listed subsidiary of state conglomerate China Shipping Group.
The three vessels, half owned by CSD and half by MOL, will be delivered by the end of March 2018, the end of December 2018 and the end of December 2019 respectively.
CSD and MOL have agreed to honour the deal in five instalments. The newbuildings will be 30% funded by internal sources and 70% by bank loans.
Separately, the two companies sealed deals to lease the vessels to Yamal Trade, a unit of Yamal LNG, the project company 60% owned by Novatek, 40% by Total and 40% by China National Petroleum Corp.
The Arctic project, scheduled for start-up in late 2017, is expected to produce 16.5m tonnes of LNG per year.
A year ago, Total and Novatek signed a deal to reserve slots to build up to 16 LNG carriers of around 170,000 cu m each at DSME for shipping gas from the Yamal project.
In March, Sovcomflot confirmed the first LNG tanker order in this project for $317.9m.
A 50:50 joint venture between Teekay LNG and China LNG Shipping has also sealed a letter of intent to build six carriers at DSME to ship LNG cargoes from Yamal and is expected to finalise the deal soon.
CLNG itself is half owned by China Merchants Energy Shipping and half by Cosco Dalian.
Aframax tanker charter points to Canada’s clout
UK-HEADQUARTERED shipowner N.S. Lemos & Co has chartered out its aframax crude tanker Sparto for three years for as much as $20,500 per day, and the tanker will be shipping crude out of Canada – an intriguing source of cargoes for crude tankers that is poised to exert considerable influence on the tanker community.
The 2004-built Sparto was booked by Canadian energy company Suncor, which produces crude from Canada’s oil sands in Alberta, according to an N.S. Lemos employee, who preferred not to be named.
He told Lloyd’s List that the tanker was booked at a premium because Suncor had specific requirements for an ice-class aframax to haul oil cargoes out of Montreal on the St Lawrence River.
The export route comes out of Canada’s east coast, so those cargoes could find buyers across the Atlantic in Europe during the three-year charter.
Canada’s big moves
It is all part of Canada’s efforts to sell its controversial oil from its oil sands in Alberta to international markets.
Critics claim the oil is more harmful to the environment than other crudes because it is so energy-intensive to extract.
But that is not stopping Canada, which is determination to haul it out of the country and sell it, from either coast.
Last month, Canada approved a pipeline to pump crude from the oil sands to its west coast.
That ambitious $6.5bn project will see 525,000 barrels per day pumped through the so-called Northern Gateway pipeline to a port at Kitimat for export on crude tankers to Asia.
It is significant for Canada because US president Barack Obama recently delayed construction of the Keystone XL pipeline that would have taken Canadian oil sands crude down to the US Gulf.
N.S. Lemos fully expects business to grow for tankers hauling crude out of Canada.
“There’s no doubt that Suncor will become a much more prominent charterer of vessels,” said the N.S Lemos source.
“The Canadians are looking to new customers for their exports.”
Aframax fleet shrinkage
N.S. Lemos’ charter deal involved an aframax crude tanker, a segment that has positives going for it.
The aframax fleet is expected to shrink over the next couple of years as scrapping exceeds deliveries, said the source.
Scrapping of aframaxes will rise as new bunker fuel regulations come into force next year.
Elderly vessels that cannot burn low-sulphur diesel fuel “will have to seek pastures new”, he said.
Fewer vessels competing against each other should help raise freight rate earnings for owners.
Despite this bullish scenario, there are negatives for the segment.
The decline in North Sea oil production reduces aframax employment, say analysts.
Moreover, the closure of European refineries erodes European trades for aframaxes shipping crude to those refineries.
In addition, aframax crude tanker trades from Libya and Syria have dwindled over the last few years due to violent unrest in those countries and sanctions.
Libya appears to be poised to increase oil production, but nothing in the North African country is certain.
“There’s been a number of false dawns… we’ll have to wait and see,” said the source.
Meanwhile, spot market earnings for aframaxes are currently a mixed bag, and nothing to shout about at the moment.
The cross-Mediterranean aframax crude tanker spot market route from Ceyhan in Turkey to Lavera in France is offering vessels earnings of around $6,000 per day, showing little significant movement over the last two weeks, according to Baltic Exchange data.
The Caribbean to US Gulf route is proving to be the most rewarding for aframax crude tankers at the moment; earnings are up at around $24,000 per day, from around $15,000 per day two weeks ago.
The North Sea to northwest Europe route offers earnings of just $10,000 per day, around the same as two weeks ago, while the Baltic Sea to northwest Europe trade offers earnings of around $15,000 per day, again not much change from two weeks ago.
It costs around $8,000 per day for an owner to run a modern aframax, according to accountants Moore Stephens.
Sulphur alliance between leading carriers now a reality
( ShippingWatch ) Several of the world's leading carriers have now founded the Trident Alliance, which will work to ensure that the new sulphur regulations - set to come into force in six months - will be enforced by the authorities. The alliance has spent a long time on the drawing board and has, as of today, become a reality, says one of the founding members of the alliance, J. Lauritzen, in a statement.
The new alliance currently consists of 11 carriers, including Stena, Maersk, Wallenius Wilhelmsen Logistics, Unifeeder, UECCm Rickmers-Linie, Höegh Autoliners, American Roll-on Roll-off Carrier, Torvald Klaveness, Eukor Car Carriers Inc. and J. Lauritzen.
J. Lauritzen CEO Jan Kastrup Nielsen says the following in the statement about the new collaboration:
"I am pleased that the alliance has been founded and that J. Lauritzen from the beginning is part of this important initiative to work for effective enforcement of sulphur regulations thus securing a level competitive playing field while supporting the environmental benefits intended by the legislators," he says.
The new sulphur regulations in Northern Europe have led to significant concerns in the industry, especially because it appears that the authorities are working with completely different approaches to ensuring that carriers comply with the rules.
Significant sums of money can be saved by opting not to switch to the new and more environmental MGO, which forms one way to comply with the new regulations, according to several industry players.
Not a coffee club
Norwegian Wallenius Wilhelmsen Logistics came up with the idea for the alliance, which met in May in Copenhagen at a meeting facilitated by Maersk, the first carrier to publicly voice support for the alliance.
Following the meeting in Copenhagen, Roger Strevens, Vice President and Global Head of Environment at Wallenius Wilhelmsen Logistics, told ShippingWatch that the parties agreed in principle to establish the alliance, after which they would present the basis for the collaboration at the respective companies.
"The meeting in Copenhagen was highly constructive and everyone agrees that the Trident Alliance is the right tool to handle this challenge. None of us want to see this evolve into a coffee club. This is an initiative that will get the work done."
Ukraine bans international shipping from Crimea ports
( LL ) UKRAINE has announced imminent plans to ban international shipping from ports on the breakaway Crimea peninsula, which declared independence earlier this year.
The decree — which covers the ports of Evpatoria, Kerch, Sevastopol, Feodosia and Yalta — could come into effect as early as tomorrow, according to local shipping sources.
It follows a statement circulated via the International Maritime Organization in May, in which Ukraine warns that it is not in a position to uphold its obligations on safety and security in the region.
Odessa-based Eurogal Surveys, the official Lloyd’s agent, said in an email to Lloyd’s List this morning: “We are aware about this news and as per obtained information, the decree will come into force after its official publication. Official publication, as per obtained information, is going to be tomorrow.
“We can only briefly say that such a decree means that any vessel that arrives at the sea ports of the Crimea, does so at its own risk, as shipowners and ship captains who ignore such a ban may face serious problems (fines or even imprisonment).
“Such precedents already exist and nobody can predict what situation will be in future.”
While it will be difficult physically to enforce the decree on territory not under its control, the Kiev administration is the recognised government under international law and has the right to make such a ruling.
The IMO has already circulated a statement drafted by Ukraine to all its members, setting out Kiev’s view of the situation.
In the document, Ukraine describes the ports listed above as under the occupation of the Russian Federation as a result of the illegal annexation of Crimea.
“[The] Russian Federation’s actions make it impossible for Ukraine to be responsible for the safety of vessels and maritime security in accordance with international obligations,” the statement argues.
“It is necessary to notify International Maritime Organization member states about the high level of property risks on approaches and in water areas of above mentioned sea ports and about Ukraine’s inability to assure required level of maritime security in those ports in compliance with international commitments regarding safety of life at sea, search and rescue.”
Nigeria ‘ban’ on armed ship guards throws industry into confusion
( LL ) SHIPOWNERS and private security firms have been left operating in a legal grey area after Nigeria appeared to ban the use of armed guards aboard vessels, but failed to clarify previous agreements that licenses security firms to operate in the country.
Nigeria’s representative at the International Maritime Organization has unequivocally stated to Lloyd’s List that the use of armed security specialists on vessels in the country’s waters is not allowed.
But despite official requests from industry organisations including BIMCO, the Security Association for the Maritime Industry and the IMO itself, no clarification regarding the details of the policy has yet been forthcoming from the Nigerian government.
The ongoing uncertainty leaves shipping operators – including offshore operators and tanker owners servicing Nigeria’s economically crucial oil industry – in a position of not knowing what arrangements they can legally make in a part of the world where attacks on vessels are a growing menace.
The development also poses an obvious challenge to the business model of the relatively small number of private military security companies, such as Libertine Global Solutions and Port2Port, which offer armed guard services on ships through Nigerian affiliates.
The security situation for shipping in Nigeria meanwhile remains increasingly risky for operators and the Gulf of Guinea is already a listed area for hull war, piracy and related perils.
Bergen Risk Solutions, a Norwegian consultancy that advises on the region, has documented 20 attacks on ships in the Niger Delta area in the three months to the end of March, up from 13 in the final quarter of 2013. Worryingly, in nine of the attacks, crews were taken hostage.
In an email to Lloyd’s List, Ibrahim Olugbade, a London-based diplomat who forms part of Nigeria’s IMO delegation, seemed to leave little room for doubt on his government’s stance regarding the employment of armed guards to protect against the growing problem.
“It is clear that Nigeria does not allow the use of armed guards on board merchant ships,” he said.
“The Nigeria navy have their statutory role to protect the maritime domain of the nation, and ensure that the territorial waters are regularly patrolled and … all necessary assistance is provided to protect the maritime integrity of this domain.”
The policy is now being enforced by the Nigerian navy, which appears especially concerned to prevent the country’s marine police from providing their services on a freelance basis, shipping professionals in the country have told Lloyd’s List.
A maritime security specialist based in Lagos, who asked to remain anonymous, said that local naval and police forces sometimes undertake paid freelance guarding activity.
A second source also confirmed that this has happened, at least in the past, although the problem does appear to be diminishing, he added.
While the top brass disapprove, they do not always have sufficient assets to prevent abuses.
A directive from the Chief of Naval Staff in the last year has reiterated that naval personnel are only allowed to operate on naval vessels, and conversely are not authorised to operate on merchant vessels, he said.
While Nigeria’s marine police is empowered to work on rivers and within ports, they have been known to overstep these limits, leading to tensions with the navy that have on occasions spilled out into ‘blue on blue’ clashes,
According to a circular issued by BIMCO, there have been reports of incidents in which policemen have opened fire on Nigerian naval vessels, believing they were pirates, and where seafarers have been killed or injured in the crossfire.
Giles Noakes, chief maritime security officer at BIMCO, said that shipowners trading in Nigeria should be aware that they are at risk of potentially significant liabilities and delays if they employ armed guards on ships who are sourced from the Nigerian military police.
“It would seem that the only legitimate method of acquiring armed security protection in the territorial waters and exclusive economic zone of Nigeria is by utilising the services of the Nigerian navy, although this seems to exclude armed guards on vessels,” he said.
One of the most prominent PMSCs active in Nigeria is British-owned Port2Port, which operates in the country through a local-incorporated affiliate.
Managing director Andrew Varney said that following incidents in which Nigerian naval personnel were injured, the Nigerian navy withdrew personnel from merchant vessels some two years ago.
However, they are still allowed to board protection vessels remote from the client vessels to provide escort duties. But this is inevitably expensive, capability is limited, and many owners would prefer guards to escort vessels.
The marine police started to plug the gap, at least in the distance between the fairway buoy and the limits of territorial waters, which are within its proper jurisdiction. This can only be exceeded in cases of ‘hot pursuit’ of those suspected of criminal acts.
While this compromise was accepted in practice, the navy is unhappy with this outcome and wants to regain primacy as its capability improves.
While the current confusion over the legality of armed guards has left industry operators demanding clarity, Mr Varney insisted that a memorandum of understanding signed by the government continues to give dispensation to Nigerian-registered companies, including P2P’s affiliate, to provide security cover.
“We find ourselves in a situation that is very fluid and developing and I think [Capt Olugbade] may not be fully conversant with how things are evolving day to day, in terms of the Nigerian navy’s perception of this,” he said.
An IMO spokesperson confirmed to Lloyd’s List that Nigeria and other countries had been asked to provide further information on their policies towards armed guards on ships, but no response had yet been received.
“We would welcome clarity from all coastal States as to what is their position, so that merchant ships do not inadvertently fall foul of coastal State laws.”
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