Siphoning confidence: Piracy and fuel theft

A statistical increase in the number of attacks on shipping has fed concerns that piracy is on the rise in and around South-east Asia.

The figures, for the first half of this year, were reported by the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP), and amplified by media and private security firms.

ReCAAP’s inter-governmental Information Sharing Centre (ISC) reported a year-on-year “surge” in first-half incidents, from 61 last year to 90 this year, but many of these involved petty theft.

Failure to differentiate serious attacks from relatively minor incidents commonly overstates the threat. However, perceptions matter where confidence is concerned.

ReCAAP’s third-quarter report reveals a marked overall improvement since July. Incidents dropped to 39, from 58 for the April-June period. The number of attacks in Indonesian ports and anchorages has continued to fall throughout this year.

Most serious incidents involved illegal fuel siphoning in the Straits of Malacca and the South China Sea.

Ten small tankers were hit between April and September. To put this in perspective – since 2011, a total of 18 siphoning attacks have been reported, of which 13 were successful.

Most siphoning attacks occur at night, well outside Singapore’s port limits, frequently in the less-policed waters north of Indonesia’s Bintan island.

Small product tankers (less than 5,000 deadweight tons) are boarded by small groups of lightly armed pirates and taken into the South China Sea; their names are sometimes re-painted and communications equipment disabled as they are taken to a rendezvous point with a second vessel.

Once there, the fuel can be offloaded within hours.

Shipments of marine gas oil (MGO) are targeted for several reasons. First, MGO sold illicitly is lucrative, fetching more than US$500 (S$650) a tonne. Illegal bunkering is a perennial problem beyond port limits. In remote areas, the black market might be the easiest way to obtain marine fuel.

Second, loaded product tankers present inviting targets, being low, slow and easily trackable. Third, many attacks betray the hallmarks of pre-planned, syndicate involvement: Siphoning operations are well organised, and conducted with apparent foreknowledge of the cargo fuel type and how to dispose of it.

Crews are normally unharmed.

ReCAAP’s most recent report notes that “(t)he possibility of conspiracy between the crew of the vessel and pirates; between the shipping company and pirates cannot be ruled out”.

Suspicions that “piracy” is being used as a cover for insurance fraud have mounted as some operators feature disproportionately in the statistics.

Targeted siphoning attacks, with strong indications of insider involvement, do not pose a generalised threat to shipping or the energy trade, although attacks do still occur on vulnerable vessel types elsewhere within the Straits of Malacca Traffic Separation Scheme.

Product tankers are at higher risk, with siphoning incidents continuing to occur roughly on a monthly basis.

Supply-demand market factors inform this risk. The recent collapse of the bunkering firm OW has stoked fears of shortages triggering more siphoning attacks.

However, Singapore’s Maritime and Port Authority has announced efforts to maintain adequate supplies of marine fuels. Lower oil prices (which are already boosting crude shipments via Malacca to China) should temper any inflationary effect beyond the immediate short term.

Siphoning attacks, lasting longer than most pirate boardings in South-east Asia, have tested the response capabilities of ReCAAP’s ISC and the mainly inter-naval Information Fusion Centre (IFC), both hosted in Singapore.

While ReCAAP’s ISC acts as a piracy information-sharing node between designated national focal points and the shipping industry, the IFC’s direct line to operations centres in the region brings an additional “cueing” function.

All three littoral states have deployed navy or coast guard vessels to the scene.

When the Ai Maru, a product tanker carrying 1,500 tonnes of MGO, was boarded while transiting the South China Sea in June, a prompt response from Singaporean and Malaysian navy ships disrupted the siphoning before it could be completed, although the perpetrators escaped.

Information provided by shipping firms to the IFC and ISC, which also share with each other, has played a valuable supporting role.

Coordinated law enforcement responses at sea and effective information sharing might help account for the declining incidence of siphoning attacks in the third quarter.

However, the successful attack on the MT Sunrise 698, hijacked last month off Anambas island in the South China Sea while en route from Singapore to Vietnam, demonstrates that the threat to product tankers remains active.

Moreover, no suspect has been apprehended in connection with the siphoning attacks.

Thus, further measures might be warranted in three areas:

First, arresting pirates at the scene who are operating on a “for-hire” basis will not seriously disrupt fuel-smuggling syndicates, whose centre of gravity is land-based and transnational.

Interpol’s beefed-up regional presence in Singapore could play a useful role by galvanising maritime law enforcement cooperation. Identification and prosecution of individuals within the syndicate hierarchy would be a powerful deterrent.

September’s break-up by Singapore’s Police Coast Guard of an MGO smuggling ring using modified tugs represents a step in the right direction, including the arrest of local financiers.

Second, product tanker owners inside or outside the major shipping associations could mitigate risk by adopting a regional version of best management practices (BMP), which prescribe self-help on-board security measures originally designed to “harden” merchant ships against piracy threats in the Indian Ocean.

This would encourage smaller vessels to maintain better security standards and avoid unnecessary risks such as anchoring outside port limits.

For coastal states in South-east Asia, opting for BMP is preferable to the use of armed guards on board merchant ships. To incentivise compliance, insurers should be encouraged to factor BMP into their actuarial assessments.

Third, in the lead-up to a regional BMP rollout, Singapore, Malaysia and Indonesia could agree to extend the Malacca Strait Patrols to “tag-team” a continuous constabulary presence in the southern reaches of the South China Sea during hours of darkness.

This would send a collaborative, deterrent signal to the pirates and reduce reaction times considerably.

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