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IONS Seminar 2014 - Session 3 - Petroleum Supply and Trade Security Challenges in the Indian Ocean
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IONS Seminar 2014 - Session 3 - Petroleum Supply and Trade Security Challenges in the Indian Ocean


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Speaker: Dr Rupert Herbert-Burns, Triton Consulting

Speaker: Dr Rupert Herbert-Burns, Triton Consulting

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  • 1. Petroleum Supply & Trade Security Challenges in the Indian Ocean Maritime Economy Dr. Rupert Herbert-Burns Indian Ocean Naval Symposium, Perth, 27 March 2014
  • 2. Agenda 1. What are the features that combine to make up the petroleum energy system in the Indian Ocean Maritime Economy? 2. What are the various challenges in trying to ensure the security of petroleum supply and trade in the Indian Ocean Region? 3. Examine oil and gas target vulnerabilities, and assess the threats to the petroleum sector at strategic, operational and tactical levels 4. Consider different possible futures & offer some recommendations
  • 3. To put things in perspective… • Indian Ocean has total surface area of 21.45 million sq nautical miles (or 73.56 million sq km) [some 20% of the planet’s total water surface area] • The 36 states that comprise the IOR have approximately 35.4% of the world’s population - over one third • Between them, these states combined have 38.13% of all world’s coastline • As is well known, the region also has the worlds most critical chokepoints – Bab al Mandeb, Strait of Hormuz, Strait of Malacca and Suez Canal • Proven oil reserves: 50.1% of global total • Oil production capacity: 37.5% of global total • Crude oil & products lifted through region: 42.5 % of global total • Proven gas reserves: 49.6% of global total • Gas production capacity: 28.0% of global total • LNG lifted through region: 55.9% of global total • Refining capacity: 18.1% of global total – almost a fifth • Primary refining nodes: India, Saudi Arabia & Singapore
  • 4. What comprises the petroleum energy system in the IOR? Reserve Base Exploration, Development & Production Export Terminals & Shipping SLOCs/SPS [Petroleum on the water] Petroleum Gateways Physical Markets • All of these features, or components, require security in order to ensure holistic systemic security in the IOR • Some can only be ensured by state means such as Reserve Base, Physical Markets & Petroleum Gateways • Some can only be ensured through international law [UNCLOS] and collective security, namely SLOCs • Terminals & shipping requires both state & industry means • Centres of E,D & P are a mix of state, industry and if necessary international assistance
  • 5. Proven Crude Oil & Gas Reserve Base Country Oil reserves as % of global total Strategic source volume indicator Saudi Arabia 15.9 Exceptional – Global Iran 9.4 Very High – Global Iraq 9.0 Very High – Global Kuwait 6.1 High – Global UAE 5.9 High – Global Qatar 1.4 Medium – Global Country Gas Reserve as % of global total Strategic source volume indicator Iran 18 Exceptional – Global Qatar 13.4 Exceptional – Global Saudi Arabia 4.4 Very High UAE 3.3 Very High Australia 2 Very High Iraq 1.9 Medium Indonesia 1.6 Medium Egypt 1.1 Medium Kuwait 1 Medium
  • 6. 0 10 20 30 40 50 60 70 80 90 100 11 12 49 13 1 13 1 1 95 3 2 Drilling rig count Offshore Exploration, Development & Production Source: Baker Hughes & Rigzone Increases in drilling rigs and subsequently offshore production units out to 2030
  • 7. Offshore Exploration, Development & Production
  • 8. Strategic Export Terminals in the IOR Key Crude Oil Terminals - 37.5% of global total Key LNG Liquefaction Terminals 55.9% of global total
  • 9. Strategic Petroleum Streams [SPS] • Based on long-established Sea Lines of Communication (SLOC), SPS are the world’s crude, product, LNG & LPG super- highways • Security is underpinned by combination of sovereign state protection/monitoring (TW & EEZ); inter-state co-op (e.g. Malacca) & UNCLOS-Freedom of Navigation. • The security of the vessels (and the associated petroleum stream) is considered of vital national security to exporters & consumers, and essential to international economic security • Historically, SPS have been targeted by states, terrorist groups & criminals (pirates) alike, though for different motives Continuous stream of oils & liquefied gases ‘on the water’ that must not stop
  • 10. Chokepoints Chokepoint Alternative Routes Volume of crude oil per year Approx. number of tankers per year Suez Canal Additional 6,000 nm transit via Cape Agulhas for tankers; some oil can be diverted through Sumed Approx. 1.64 billion barrels (223,738,063 metric tonnes) [Sumed – 2.5MBD] 1,398 (av. crude oil tanker size in global fleet is 160,000 DWT) Bab el Mandeb Additional 6,000 nm transit via Cape Agulhas Approx. 1.2 billion barrels (164,324,693 metric tonnes) 1,027 (av. crude oil tanker size in global fleet is 160,000 DWT) Strait of Hormuz Some oil can be diverted via Petroline from Abqaiq to Yanbu & via ADCOP Approx. 6.12 billion barrels (834,924,966 metric tonnes) [ADCOP = 1.5MBD] 5,218 (av. crude oil tanker size in global fleet is 160,000 DWT) Malacca Straits VLCCs & ULCCs must re- route via Lombok Strait; smaller ships can transit via nearer Sunda Strait Approx. 5.5 billion barrels (750,341,064 metric tonnes) 4,690 (av. crude oil tanker size in global fleet is 160,000 DWT)
  • 11. Petroleum Hubs & Gateways Requirements: • Strategic location • Massive tanker handling capacity & roads • Storage capacity • Refining capacity & flexibility • Product & distillate redistribution network • Stable political environment & robust national security Security challenges & realities: • Security of SPS and routes to/from gateway • A vital security concern for all not just for state in which it is sited – collective security • Attractive target for sufficiently capable terrorist group • Critical node in time of war
  • 12. A changed trading picture… Changing petroleum trade logic Increasing trend towards larger shipments of refined products & distillates to countries with limited/no refining capacity + value of cargoes has resulted in change in export trade patterns from massive regional refining hubs & petroleum gateways Dominated by: • Saudi Arabia (Abqaiq/Ras Tanura/Jubail: 1.11 million barrels per day • India (Jamnagar) 1.24 million barrels per day • Singapore: 1.35 million barrels per day (3 sites combined)
  • 13. Petroleum Markets • Market security is a vital part of system. For the economic (and political) security of producers/exporters to be ensured, security of market is essential to ensure its ability to purchase/consume – Phenomenon classically symbiotic • Market security is ensured in the following ways: security of the shipping routes that lead to it; alliances and/or trade agreements with the producer (in the case of LNG); security of EEZ, littoral and territorial approach waters to national terminals/processing infrastructure; and, security of vessels themselves • This reveals in a stark way the mutual dependency between producers & consumers not only in the IOME but also the wider Indo-Pacific region, Suppliers • Saudi Arabia • UAE • Qatar • Australia • Iran • Iraq • Malaysia • Mozambique • Tanzania • Kenya • Somalia Consumers • Kenya • Tanzania • Iran • Seychelles • Comoros • India • Sri Lanka • China • Philippines • PNG Intermediate Consumers • India • Singapore
  • 14. Challenges, targets & threats
  • 15. Challenges to ensuing the security of the IOME • Region is multifaceted: geographically & thematically • Dispersal of industrial activity – some emerging regions do not have adequate resources to ensure offshore security • Eclectic and unpredictable range of possible threats to security • Mutable geopolitical and geostrategic realities • Complex state, intergovernmental organisations & commercial sector cooperation • Considerable challenges to development of multi- dimensional collective security architecture in absence of formalised cooperative/alliance structures
  • 16. Mutable Geopolitical & Geostrategic realities & possibilities • Increasing international O & G exploration investment in East Africa and IO SIDS – leading to extra-regional state interests (Europe, China & US) • Expansion/extension of Indian naval power projection & influence throughout IOR • Chinese expeditionary naval deployment & protection of its supply interests further westwards • Potential reintegration of Iran into the regional and international arena – both politically & commercially • Triangular power inter-relationship between Iran, Iraq & the GCC • US ‘flexible response’ to the IOR amidst declining crude requirements from region
  • 17. Threats to petroleum sphere: Past, present & future Past • Tanker War • M/T LIMBURG • ABOT & KHAOT • M/T M.STAR • Balhaf Terminal • AQ attack on Abqaiq • Piracy • Territorial disputes • Sanctions Present • Extant maritime terrorist threat: AQAP, LeT • Somali hijacking, piracy & armed robbery at sea • Persian Gulf geopolitical fragility • Intra-state conflict: Egypt, Iraq, Yemen & Somalia • Territorial disputes – Iran & UAE • Sanctions Future • Somali piracy resurgence • Non-Somali piracy (Bay of Bengal) • Intra-state conflict • Inter-state conflict • Sanctions & blockade • Territorial disputes – Kenya & Somalia
  • 18. Security threat & vulnerability convergences This view reveals the paradox of great separation of activity in terms of time & space juxtapose the problem of threat & target convergence
  • 19. Risk: targeting complexity & consequence VLCCProduct / chemical tanker VLGC Coastal processing facility (inc. refinery) Offshore support vessel Coastal terminal Offshore terminal MOPU (FPSO) Inshore gravity drilling rig Complexity Consequence MODU Seismic survey / sub- sea construction
  • 20. Threat Examples: Strategic Level Interstate war in major supply region – SPS, Chokepoint & tanker security impacted during the Iran-Iraq War • Attacks against by both sides throughout war resulted in over 540 attacks, 324 merchant seamen killed & hundreds of millions of dollars in lost ships and cargo • Tanker War was most intense assault on merchant shipping since the Second World War • Targets: 58% - tankers 10% - LPG carriers • largest loss of life/most serious destruction occurred when tankers were attacked at terminals [Kharg & Sirri] • Despite intensity of campaign, neither side managed to achieve disruptive strategic effect upon shipping of oil they hoped for • Despite ironic intensification of attacks following international intervention, introduction of convoys & US attacks against Iranian IRGC(N) saved vessels & ended war • IRGC Pasadran units introduced/developed excellent asymmetric maritime attack tactics – proof of concept & still in use today
  • 21. Threat Examples: Operational Level Protecting Iraqi crude export terminals [ABOT & KHAOT] following AQ-I terrorist attack • On 24 April 2004, an AQI maritime suicide attack cell detonated three WBIEDs close to Iraq’s only sea-based export terminals - Al Basra & Khor al- Amaya • 2 US Navy sailors & US Coast Guardsman were killed • No tankers berthed at the terminal or at anchorage at the time of the attack • The attacked resulted in the considerable expansion of the operation to protect the terminals – CTF-158 and later CTF-IM • Set the standard as to how this should be done – but required considerable resource • This was the first maritime terrorist attack of this kind. Though it has not been duplicated since, it proves that an attack against the industry at this level is certainly possible for a suitably capable team .
  • 22. • On 10 May 2012 the Aframax crude tanker M/V SMYRNI hijacked by Somali PAG in an SPS off coast of Oman • Pirates armed with AK-47, RPG & 12.7 DShK HMG • Value of vessel and crude approx. $170m • There was no armed security team embarked • Vessel was held off north coast of Puntland for 10 months until her release following payment of ransom • At the time of release there were some 300 pirates on board • Somali PAG skill-sets still very much alive Threat Examples: Tactical Level Terrorist attack against a VLCC Pirate hijack & release of VLCC • At approx. 0030 local time 28 July 2010, VLCC M/V M.STAR was target of a 2-boat maritime attack group in a SPS west of Strait of Hormuz (26º27' N 56º14' E) • Using WBIED, an Abdullah Azzam Brigades (AAB) cell executed exceptionally brazen & complex attack against tanker under cover of darkness & whilst full-away in approaches to world’s most vital petroleum chokepoint • Had attack succeeded it would have been most spectacular & costly maritime terrorist attack in history • Groups now of greatest concern: AQAP & LeT
  • 23. Possible Futures & Recommendations
  • 24. 2020+ Future A: Resource imbalance & overstretch Concurrent security crises 1. Resurgent piracy threat to international shipping in the HRA 2. Regular terrorist attacks against terminals & visiting tankers/VLGCs in Yemen 3. Terrorist & piracy threat to evolving offshore sector in Gulf of Aden/Somali Basin 4. Heightened inter-state tensions in PG/GOO requiring international naval deployment 5. LeT activation of its maritime cadre for offensive terrorist operations in the NW IOR Resource challenges • East African navies low on sufficient long-range patrol vessels/corvettes & MDA + lack of SAR capacity & aviation • Yemeni coastguard desperately short on numbers of suitably armed patrol vessels, trained personnel & C3I • Reduced numbers of warships available to patrol IRTC/HOA & HRA • Unspecific IOR region multi-national naval alliance/coalition • Limited number of replenishment at sea vessels within region to support expeditionary/long-term MSO • Inability to properly monitor key SPS, SLOCs as they converge towards, hubs, chokepoints & vulnerable coastlines • Lack of robust oil spill response capacity & coordination
  • 25. 2020+ Future B: Resource boost & collective security Well-established regional resource-building & assistance project • Assistance to East African navies to acquire long-range patrol vessels/corvettes & MDA [utilisation of UAV as affordable force multiplier]; estb. Of SAR & oil spill response • International support to build and train robust Yemeni coastguard & maritime C3I capacity; -UAV/MDA support from neighbouring states • Supporting multilateral provisions to ensure extra-regional naval support in times of crisis • Indian Ocean Region-led naval ,mission- specific, coalition task forces • Procurement programme by GCC for ‘shared’ replenishment at sea vessels that can be deployed to support local naval forces engaged in high-tempo MSO • Adoption of greater development and utilisation of navies in joint constabulary roles for routine MSO in E. African EEZs Concurrent security crises 1. Resurgent piracy threat to international shipping 2. Regular terrorist attacks against terminals & visiting tankers/VLGCs in Yemen 3. Terrorist & piracy threat to mature offshore sector in Gulf of Aden Somali Basin 4. Heightened inter-state tensions in PG/GOG requiring international naval deployment 5. LeT activation of its maritime cadre for offensive terrorist operations in the NW IOR
  • 26. Summary & Recommendations • Defined the features of the IOME petroleum energy systemic • Examined the considerable challenges to ensuring the security of the IOME • Considered varied threats at strategic, operational & tactical levels • Posited possible variations on future IOR security environment Recommendations • Build upon the work and fast accelerating legitimacy achieved by IONS • Encourage IORA to lead further in helping understanding of petroleum sector security requirements • Include participation and expertise of shipping & offshore industry in developing security capacity where it is limited • Embrace the regional security risk analysis and risk management approach suggested at this symposium • Encourage major power strategic dialogue & confidence-building measures at top level & bilateral ‘mission-specific’ security partnerships and secondary tier level • Understand and prepare for the addition of future target vulnerability convergences in the GOA/HOA, Somali Basin, west coast of India & Bay of Bengal