persian gulf oil

PERSIAN GULF OIL

DESTINATION – South China Sea

During a 24 hour period tankers with over 17 million barrels of crude oil depart the Strait of Hormuz and set a course for the Indian Ocean via the Strait of Malacca to the South China Sea.  The Strait of Malacca is the shortest sea route btween the Persian Gulf and the South China Sea. The Strait is approximately579 miles long, with a minimum width of 24 miles and an average depth of 82 feet. The Singapore Strait that follows the Strait of Malacca is 71 miles long and 10 miles wide.  It has a mean depth of 72 feet. The Straits have become an active area for pirates; however, in spite of that short coming the numbers of oil tankers entering the South China Sea is three times that of the Suez Canal and five times that of the Panama Canal.                      

  This  vast amount of  oil is bound to the major consumer’s all  bordering the Sea – China, Japan and South Korea. Almost a third of the global crude oil and half of liquefied natural gas (LNG) passes through the South China Sea each year and it is estimated that the amount of oil exported will increase as their economy is expected to increase. The Persian Gulf accounted for more than 70% of South China Sea crude oil imports. 

The South China Sea is a major trade route for crude oil, and in 2016, more than 30% of global maritime crude oil trade, or about 15 million barrels per day (b/d), passed through the South China Sea. More than 90% of crude oil volumes flowing through the Sea in 2016 transited the Strait of Malacca, the shortest sea route between suppliers in Africa and the Persian Gulf and markets in Asia, making it one of the world’s primary oil transit chokepoints. In addition, a significant amount of crude oil (about 1.4 million b/d) passes through the Strait on its way to Singapore and the west coast of  Malaysia, where it is refined  to motor gasoline and jet fuel before transiting the South China Sea to consumers

Saudi Arabia  by far, is the largest source of crude oil, exported to the area and makes up almost one-fourth of the oil.by volume exported.  Prior to the lifting of sanctions on Iran’s crude oil, Iran exported 52% of its crude oil to nations in the South China sea.                                         

 It is projected that in the coming years over 25% of all seaborne oil will utilize the Strait of Malacca. The increase in U.S. domestically produced crude oil is effectively altering the South China Sea trade patterns. With the increased U.S. production of light, low sulfur crude oil the U.S. no longer imports significant quantities of crude oil and China now becomes the world’s leading importer of crude oil – most shipped through the Strait of Malacca. 

More than a million barrels of imported Persian Gulf crude oil is utilized by refineries in Singapore and Malaysia for processing into gasoline and jet aviation fuel. These refined products are shipped, also by sea, to markets in countries bordering the South China Sea.. Twenty percent of the crude oil moving through the South China Seas goes to the East China Sea, bound for South Korea.  

The major importers of Persian gulf oil in the South China sea – China, Japan and South Korea account for about 80% of the total crude transiting the Strait in 2018 and about 90% of China’s crude oil imports were transported via the South China Sea and these imports have increased substantially over the past several decades as a result of China’s robust energy demands.. 

Saudi Arabia supplies almost 25% of the oil entering the South China Sea.  More than half of Saudi Arabia’s global crude oil exports accounted for more than 70% of South China Sea crude shipments in 2016.   Before the lifting of United Nations sanctions in 2016 on Iran’s crude oil exports, Iran relied heavily on Asian markets for most of its exports sales.

Singapore sits on one of the busiest straits in the world and is one of the world’s major maritime ports and is a power in the business of maritime trade. Singapore is a key factor in the process of refining petroleum products.  It has the third largest refining capacity in the world.  Its strategic location has large tanker discharging and loading terminals; its large refining capacity and storage capacity and a tanker distribution system for refining petroleum products. is virtually unmatched.  It is one of the world’s major refining centers, trailing only Rotterdam and Huston. It trails only New York and London.as a major oil trading center.

Singapore accounted for 2% of crude oil loadings that passed through the South China Sea in 2016. The three crude oil importers with the largest volumes passing through the Sea—China, Japan, and South Korea—collectively accounted for 80% of total crude oil volumes transiting the South China Sea in 2016. About 90% of China’s maritime crude oil shipments were transported through the South China Sea. China’s crude oil imports have increased substantially over the past few years as a result of the country’s robust growth. . The country recently surpassed the United States as the world’s largest crude oil importer. A significant portion of these imports  are sent to northern China from eastern Russia by a pipeline and by vessels that do  not pass through the China Sea.   

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Before the lifting of UN sanctions on Iran’s crude oil exports in January 2016, Iran relied heavily on Asian markets for most of its exports. After the sanctions were lifted, Iran could once again export crude oil to Europe. However, the South China Sea route still accounted for 52% of Iran’s crude oil exports in 2016.                                                                                                                                                                                                                                

Disrupting South China Sea Trade Routes

While there are several major passageways that offer entry into the South China Sea – the Sunda Strait and the Lombok Strait among them – the Strait of Malacca by far is the most widely utilized being  the shortest and most economical passageway between the Pacific and Indian Oceans.  There are a variety of scenarios that could disrupt shipping traffic and endanger commercial vessels passing through the Strait of Malacca. A short-term peacetime disruption would force vessels to either wait until access is reestablished or consider using an alternate route, while a long-term disruption could have far-reaching consequences for the trillions of dollars of goods that transit the South China Sea each year.  Yearly over 2000 ships transit the Sunda Strait, however, the water depths of the Strait are too shallow for the very large fully hazards, it is not as convenient as the Strait of Malacca. Its passage consumes more time and therefor increases cost on its oil cargo loaded crude oil super tankers (VLCC) in everyday use that now transit the Malacca Straits.

If the Strait of Malacca were blocked nearly half of the world’s shipping fleets would be forced to reroute around the Indonesian archipelago and use the Lombok Strait located between the Indonesian islands of Bali and Lombok. Rerouting would tie up global shipping capacity and add to shipping and energy prices.   Its depths are greater than 150 meters and fully loaded Super tankers and the ultra large super tankers would not be subject to the draught-limitations imposed on the use of Malacca and Singapore Straits. Tankers of over 230,000 deadweight tons (DWT)have to use the deeper  Lombok Strait route because of the  75-foot depth restrictions in place in the Straits of Malacca and Singapore transits,  Though the Lombok route is safer as it is relatively wide and deep and poses few navigationally hazards, it is not as convenient as the Strait of Malacca. Its passage consumes more time and therefor increases cost on its oil cargo. 

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INTERNET SITES OF INTEREST

*China’s Push to Secure Its Energy interest in the Middle East. “China Base Overseas Military Facility in Djibouti.”  An article by the Center for Strategic & International Studies.

https://features.csis.org/hiddenreach/china-middle-eastmilitary-facility

*“The Arab Gulf States Institute in Washington” (AGSIW) an independent, nonprofit institution dealing with  the relationship between the United States and the gulf region. Its newsletter,“The Dhow”is free.  https://Agsiv.org

*Weekly Maritime Security Threat Advisory.. Maritime Security Threat Advisory for the week.  https://channel16.dryadglobal.com/

INTERNET NEWS ITEMS

*Daily freight rates for medium-sized tankers, the crude-oil workhorses in the Black and Baltic seas, jumped to around $30,000 from about $10,000/day before the Russian invasion.  Such increases are nor unusual during war.

*Tanker freight rates have tripled since Russia invaded Ukraine. Most major operators aren’t hauling Russian oil and gas though many governments’ haven’t halted imports of fuel from that country.

*Two  undersea leaks that began in the Russian-owned Nord Stream (North Sea) gas pipelines were likely caused by powerful underwater explosions, according to Swedish and Danish seismographic data.

*A Tanker carrying hundreds of liters of fuel oil sank in the early hours of Tuesday off Romblon, Philippines.  The port manager reported all 20 people on board the MT Princess Empress that sank were rescued by a passing foreign vessel. Investingation revealed the tanker encounter engine troublr due to overheating. Due to heavy seas it became half-submerged and sank.

 

BIOGRAPHY OF THE AUTHOR

  The author-owner of this blog was a Physical Oceanographer who retired as  Head of the Special Projects Unit of the US Naval Oceanographic Office. He has worked for Navy contractors dealing with Underwater Systems. His special interest is Oil Tankers, especially the T2 type Tankers developed during World War II. He has published over a dozen articles dealing with maritime history and is currently a Volunteer Staff Aid in the Navy-Maritime Section of the National Archives and Records Administration in Washington, DC.