The state-owned tanker fleets of Saudi Arabia, Iran and Iraq are looking to secure a greater portion of their own crude oil exports, with varying degrees of success
The term “Middle East” is a loose definition for a list of 15 countries in the region, which may or may not include Egypt, Israel and the Palestinian Territories, depending on the politics of the day. However, from a tanker ownership and operational point of view, only five countries have tanker fleets of any significant size or value.
The largest national fleet by value is that of Saudi Arabia. It is no coincidence that the five largest tanker owners in the Middle East are from those countries that have the lowest oil production costs in the world. Saudi Arabia is said to have a crude oil production cost of less than US$5 per barrel.
Saudi Arabia controls 46 VLCCs, which together make up 80% of the Saudi fleet’s capacity. All the VLCCs are operated by Bahri, the state-owned shipping company. Bahri changed its name from National Shipping Company of Saudi Arabia in early 2012.
The company is now one of the largest operators of modern VLCCs . Bahri also owns National Chemical Carriers, which operates 31 tankers of 1.4M dwt, including 27 MR chemical/product tankers.
In 2012, Bahri purchased a share in fellow Saudi Arabian tanker company Vela International Marine for a reported US$1.3Bn and brought 17 VLCCs into the Bahri fleet.
The Saudi Arabian policy toward Bahri is clear, to drive the short- and long-term transportation of crude oil sold by Saudi Aramco onto Bahri vessels, leaving fewer cargoes available for the independent tanker owners. Bahri has been ordering newbuildings and purchasing tonnage on the sale and purchase market to boost the size of the fleet. The stated aim at the time was to become the largest operator of VLCCs in the world, all under the Saudi Arabian flag.
In 2015, this policy produced a contract of affreightment agreement between Bahri and S-Oil of South Korea to transport crude oil from Saudi Arabia to refineries in South Korea. The deal was worth US$67M per year and set to run for 10 years until 2025.
However, the market was left puzzled by a later announcement that Bahri was to commercially manage Shell VLCCs loading in the US Gulf; in return, Shell gained control of Bahri cargoes moving to the Far East. The commercial operation swap gives both entities entry into each other markets, again at the expense of the independent owners who were already operating in those spaces.
The first fruit of the deal was somewhat ironic, in that Shell used the Bahri-owned, 298,750-dwt Shaden (built 2017) to load US crude oil at Louisiana Offshore Oil Port (LOOP) in February 2018 for a cargo buyer in the Far East.
The voyage came shortly before Bahri took delivery of Amad,the last in a series of 10 VLCCs ordered at Hyundai Samho Heavy Industries in 2015 and one of the five VLCCs financed by Standard Chartered Bank, Arab National Bank, National Bank of Abu Dhabi and Bank Albilad, according to a Bahri announcement at Tadawul (Saudi Arabia Stock Exchange) on 30 November 2016.