The maritime landscape is changing as oil producers from the Gulf adapt to increasing congestion in the waters near the Strait of Hormuz. This shift has led to a growing trend of ship-to-ship (STS) oil transfers along India's west coast, particularly in the Gulf of Kutch.
Shifting Transfer Points
With rising congestion in critical transfer zones such as Fujairah in the UAE and Sohar in Oman, the Gulf of Kutch has emerged as a significant new hub for oil shipments. Sources indicate that September saw a total of 82 STS operations in this region, resulting in an impressive flow of around 680,000 barrels of oil per day. Notably, refined products made up approximately 65% of this volume.
Risks and Vulnerabilities
The strategy to redirect transfers to India's western coast comes in response to not only congestion but also security concerns. A recent attack on a tanker near Fujairah escalated fears about the safety of transiting through the Strait of Hormuz, leading companies to seek safer alternatives.
Saudi Arabia's East-West Pipeline has also encountered threats, highlighting the risks associated with traditional oil export routes. As a result, producers are opting for STS deliveries beyond Hormuz to mitigate these concerns while ensuring their oil reaches Asian markets.
Impact on Asian Markets
The top three recipients of oil from these transfers are India, China, and South Korea, collectively accounting for 70% of the oil transported via STS methods. Major producers including Adnoc, Aramco, and Iraq are adapting their strategies to maintain their customer base in Asia, facilitating oil deliveries outside the Strait of Hormuz.
This shift means that buyers can receive their oil shipments without the risk of their tankers entering congested and hazardous waters. However, this increase in STS operations may necessitate a larger fleet of ships to manage the longer trips to and from the new transfer points.
Currently, transfers onto very large crude carriers (VLCCs) have stabilized between five and seven million barrels per day since last month. These operations represent a significant portion, approximately 60-70%, of the total oil flowing through the crucial Strait of Hormuz, illustrating the importance of these deliveries in the global oil supply chain.
As countries like Kuwait consider similar approaches for their oil exports, the situation signals a need for long-term solutions to the challenges faced in the region. The prospect of negotiating a reopening of Hormuz remains crucial for the stability and efficiency of oil shipping.
