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Russian Oil Producers Start Using Tankers the World Did Not Want

Russian Oil Producers Start Using Tankers the World Did Not Want thumbnail

Russian oil producers are starting to book up an increasing number of tankers owned by the nation’s state tanker company, boosting demand for a fleet that fell from international favor after the invasion of Ukraine.

Rosneft PJSC and Gazprom Neft PJSC, two state-run oil producers, both booked large numbers of tankers owned by Sovcomflot PJSC over the past few weeks to collect and deliver crude from across Russia to buyers in Asia.

Sovcomflot, itself state run, owns the world’s largest fleet of mid-sized oil tankers, but a big chunk of them became under-employed since the war after some international insurers stopped covering the vessels.

If Russia succeeds in using more of the vessels for deliveries, then it would aid Moscow in getting crude to buyers. It is a departure from the norm for the Russian producers to hire ships directly. It costs several thousand dollars a day to run a single oil tanker, even before debt repayments are taken into account.

Sovcomflot declined to comment.

Rosneft, Gazprom Neft

Rosneft, the country’s largest oil producer, is increasingly sending the nation’s flagship Urals grade on Sovcomflot vessels to destinations including India’s west coast, where Nayara Energy Ltd. and Reliance Industries Ltd. are among companies that operate oil refineries, said people with knowledge of the matter.

Likewise, Gazprom Neft also booked several oil tankers owned by Sovcomflot to load Eastern Siberia Pacific Ocean, or ESPO, crude in May, according to shipbrokers.

If the trend continues, it could boost demand for a Sovcomflot fleet that became less active after the invasion of Ukraine. It would mirror similar moves that Iran undertook in the face of sanctions with the deployment of state-run vessels for deliveries.

Sovcomflot’s fleet could also get busier after the company sold 14 tankers to pay down debt. It’s not yet clear which vessels were sold or what the buyer plans to do with them.

Of Sovcomflot’s 66 oil tankers that were previously engaged in carrying cargoes to different markets, half were either anchored, drifting, or slow-steaming in various places around the world with no cargo on board.

The tracking data, collated before the sale of vessels, don’t cover Sovcomflot tankers that shuttle back and forth between Russian ports, or the company’s fleet of non-oil carriers.

All Change

At least some of the India-bound cargoes supplied by Rosneft were previously meant for other customers, according to the people familiar with the consignments. The shipments were diverted to the South Asian nation after other buyers began to shun Russian imports due to the war.

Nine Sovcomflot vessels delivered, or are in the process of delivering, crude to India from western Russia since the invasion of Ukraine. There were none last year.

The India-and-back route, a voyage of at least 9,000 miles each way, is about three and a half times as long as the most common trip the ships previously made.

Some buyers refused to accept Sovcomflot tankers after the company’s addition to the UK’s list of sanctioned entities and the fleet still needs more cargoes. The UK’s move prompted international insurers to distance themselves from the shipowner. That eventually contributed to a plunge in flows of Sokol crude, which heavily relies on the Sovcomflot fleet.

Several of the company’s vessels that have been idling have done so close to Russian export terminals, likely waiting for their next cargo.

From the eastern port of Kozmino, which loads ESPO crude, Sovcomflot’s tanker Sakhalin Island is currently headed to Longkou in China after picking up its shipment around May 14, ship-tracking data compiled by Bloomberg show.

There are at least three other Sovcomflot’s vessels booked to ship cargoes by suppliers, mostly Gazprom Neft, and another group known as “small suppliers” who’ve also hired vessels, according to shipbrokers. The list of tankers may change closer to loading date as the charters aren’t finalized yet.

Some new names are also appearing on the list of charters, including a company called Bellatrix. The company has hired five Aframax tankers to load Urals crude from Baltic port of Primorsk this month, according to port agent reports. Four are on Sovcomflot vessels.

Most of Sovcomflot’s fleet comprises smaller vessels, including Aframaxes and Suezmaxes that are well suited to the country’s ports but less than ideal for long-distance shipments from the nation’s western export terminals to Asia.

Moscow’s priority, however, is on maintaining oil flows, a key source of revenue for Vladimir Putin’s regime. That’s occupying the fleet and pressing it into use on longer journeys.

–With assistance from Sharon Cho.

4 Comments on "Russian Oil Producers Start Using Tankers the World Did Not Want"

  1. Biden's hairplug on Sun, 22nd May 2022 3:40 am 

    The international opinion tide regarding the Ukraine war is turning. While hawks like Biden and Johnson insist that Russia needs to be defeated on the battlefield, saner voices say that is not possible and that diplomacy and negotiations should prevail. Voices like the NY-Times and Rand Paul or in Europe, the Italians are leading the initiative:

  2. Theedrich Yeat on Mon, 23rd May 2022 4:21 am 

    Eden’s talking snake has multiplied in America. Its replicates are found by the many thousands in federal, state and city governments throughout the nation, funded by Davos elites, Big Cyber, unions of all sorts, international narcotics organizations, murderous Chinese fentanyl exporters, and other diabolical sources. The accelerating cultural collapse is seen everywhere in the conversion of once beautiful cities into massive trash dumps filled with the mentally diseased, with teenage killers, with criminals and addicts of every type. Big Snake Biden is importing death-dealing parasites from Planet Outhouse by the millions, his forked tongue hissing and whispering things about “equity,” “humanitarianism,” “fighting White racism,” etc.

    The primary reason for serpentine hatchlings to seek office and slither throughout the catacombs of power is to get rich at any cost. Psywar (psychological war) has been developed into a fine art. The herd no longer recognizes that it is being led to the slaughterhouse. Sports and entertainment are used to divert the masses from noticing what is happening. Artificial hatred is generated against Russia, just as it has been generated against all of America’s other prey in the last century and a half. Republicans pretend to be for patriotism and diversifying wonderfulness, while engorging themselves on taxpayer money, itself becoming more worthless by the day due to debasement of the currency. The military is an anti-White minstrel show, happy to enlist every biological mutant in the humanoid species. To fight anything White and civilized, in addition to threatening a nuclear doomsday in order to advance “American interests.”

    The only reaction from Mr. Average White? The deer-in-the-headlights look of incomprehension.

    Just before the deer is killed by impact.

  3. Dredd on Mon, 23rd May 2022 7:40 am 

    Seaport problems eh (Seaports With Sea Level Change – 22)?

  4. Ted Wilson on Mon, 23rd May 2022 1:19 pm 

    From 1 USD = 80 Rubles, it slid to 122 after sanctions, but now with Rubles for Gas, it has increased to 58.

    Seems Ruble will be currency to buy natgas in future just like petrodollar.

    This is another OPEC like movement when those oil exporting countries realized power of oil after than war in 1973.

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