Business

OFAC issues warning on possible evasion of Russian oil price cap

OFAC is aware of reports ESPO and other crudes exported via Pacific ports in Russian Federation may be trading above the price cap and may be using covered services provided by U.S. persons.

Published

5 months ago

April 18, 2023

Admin

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) on Monday (17 April) issued an alert to warn U.S. persons about possible evasion of the price cap on crude oil of Russian Federation origin (Russian oil), particularly involving oil exported through the Eastern Siberia Pacific Ocean (ESPO) pipeline and ports on the eastern coast of the Russian Federation:

As explained in greater detail in OFAC Guidance on Implementation of the Price Cap Policy for Crude Oil and Petroleum Products of Russian Federation Origin (Price Cap Guidance), U.S. persons are authorized to provide certain services (covered services) related to the maritime transport of Russian oil as long as that oil was purchased at or below the relevant price cap. To implement the price cap policy, OFAC issued two determinations pursuant to Executive Order 14071, one for Russian oil and one for petroleum products (the crude determination and the petroleum products determination, or, collectively, the price cap determinations). U.S. persons providing covered services are required to reject participating in an evasive transaction or a transaction that violates the price cap determinations, and to report such a transaction to OFAC.

For ship owners, protection and indemnity clubs, and flagging registries

Deceptive Practices, Including AIS Manipulation to Disguise Russian Port Calls: OFAC is aware of reports that ESPO and other crudes exported via Pacific ports in the Russian Federation, such as Kozmino, may be trading above the price cap and may be using covered services provided by U.S. persons. These U.S. service providers may be unaware that they are providing covered services involving Russian oil purchased above the price cap, as the non-U.S. persons involved in the exports may have provided incomplete or false documentation or used other deceptive practices.

Specifically, some tankers may be manipulating their Automatic Identification Systems (AIS), a practice known as “spoofing,” to disguise the fact that they have called at the port of Kozmino or other ports on the Russian Federation’s eastern coastline. For example, basic vessel tracking data may show the tanker at one location, but more sophisticated reporting from maritime intelligence services may show that the vessel called at the port of Kozmino or another eastern port in the Russian Federation. Spoofing can also be used to mask ship-to-ship transfers carried out to disguise the origin of Russian oil. U.S. persons providing covered services to tankers should view AIS manipulation that disguises a tanker’s port of call in the Russian Federation as evidence of possible evasion of the price cap.

to provide certain services (covered services) related to the maritime transport of Russian oil as long as that oil was purchased at or below the relevant price cap. To implement the price cap policy, OFAC

issued two determinations pursuant to Executive Order 14071, one for Russian oil and one for petroleum products (the crude determination and the petroleum products determination, or, collectively, the price cap determinations). U.S. persons providing covered services are required to

reject participating in an evasive transaction or a transaction that violates the price cap determinations, and to report such a transaction to OFAC.

Recommended Measures to Ensure Price Cap Compliance: Good-faith actors, including shipowners and

other service providers, can use the recordkeeping and attestations described in the Price Cap Guidance to be afforded safe harbor from OFAC enforcement if someone causes them to inadvertently violate the price cap determinations. At the same time, U.S. service providers, especially ship owners, protection and indemnity clubs, and flagging registries, should be mindful of the risk of evasion for some ESPO and other crudes exported via Pacific ports in the Russian Federation and should take appropriate due diligence measures, such as:

Disseminating this alert to counterparties or members.
Using maritime intelligence services to improve detection of AIS manipulate

For commodities brokers/oil traders

Opaque Shipping Costs: As noted in the Price Cap Guidance, shipping, freight, customs, and insurance costs are not included in the price caps. The failure to itemize these costs can be used to obfuscate the fact that Russian oil was purchased above the price cap.

Recommended Measures to Ensure Price Cap Compliance: In order for Tier 1 actors (defined in the Price Cap Guidance as actors who regularly have direct access to price information, such as commodities traders) to be afforded the safe harbor explained in the Price Cap Guidance, they must retain documents showing that Russian oil or Russian petroleum products were purchased at or below the relevant price cap. Examples of these documents include invoices, contracts, and receipts/proof of payment. OFAC notes that such documents do not need to make any mention of the price cap in order for the Tier 1 actor to be afforded the safe harbor. However, shipping, freight, customs, and insurance costs must be invoiced separately from the purchase price of the Russian oil and must be at commercially reasonable rates. A refusal by a counterparty to provide documentation showing Russian oil or Russian petroleum products were purchased at or below the price cap (when, for example, the total price inclusive of other costs is above the cap) should be considered a red flag for possible evasion of the price cap.

Photo credit: CHUTTERSNAP from Unsplash
Published: 18 April, 2023

Methanol

Kambara Kisen orders methanol dual-fuel bulker from Tsuneishi Shipbuilding

Firm ordered a 65,700-dwt methanol dual-fuel dry bulk carrier with Tsuneishi Shipbuilding; MOL signed a basic agreement on time charter for the newbuilding that is slated to be delivered in 2027.

Published

3 days ago

September 22, 2023

Admin

Kambara Kisen orders methanol dual-fuel bulker from Tsuneishi Shipbuilding

Japanese shipowner Kambara Kisen has ordered a 65,700-dwt methanol dual-fuel dry bulk carrier newbuilding from Tsuneishi Shipbuilding Co., Ltd, according to Mitsui O.S.K. Lines (MOL) on Wednesday (20 September).

MOL said it signed a basic agreement on time charter for the newbuilding that is slated to be delivered in 2027.

The vessel will be designed to use e-methanol produced primarily by synthesising recovered CO2 and hydrogen produced using renewable energy sources, and bio-methanol derived from biogas.

The vessel's design maximises cargo space while ensuring sufficient methanol tank capacity set to allow the required navigational distance assuming various routes, at the same time maximising cargo space.

MOL added the vessel is expected to serve mainly in the transport of biomass fuels from the east coast of North America to Europe and the U.K. and within the Pacific region, as well as grain from the east coast of South America and the U.S. Gulf Coast to Europe and the Far East.

Details on the time-charter contract:

Shipowner: Kambara Kisen wholly owned subsidiary
Charterer: MOL Drybulk Ltd.
Charter period 2027: -

Details on the newbuilding methanol dual fuel bulk carrier:

LOA: About 200 m
Breadth: About 32.25 m
Draft: About 13.80 m
Deadweight: About 65,700 MT
Hold capacity: About 81,500m3
Shipyard: Tsuneishi Shipbuilding Co., Ltd.

Photo credit: Mitsui O.S.K. Lines
Published: 22 September, 2023

Methanol

Argus Media: Alternatives may drive methanol market growth

Driven by low-carbon policies and regulations, the transportation sector — especially the marine fuels industry — could be a source of heightened demand, according to Argus.

Published

3 days ago

September 22, 2023

Admin

The growth of sustainable alternatives to traditional methanol production sources likely will shape the market over the next several years, industry leaders said this week at the Argus Methanol Forum.

20 September

Driven by low-carbon policies and regulations, the transportation sector — especially the marine fuels industry — could be a source of heightened demand.

"The aim is to be net zero by 2050 but [those solutions are] expensive today and one of the main challenges to build e-methanol or bio-methanol plants is a huge queue for these pieces of equipment that aren't available," Anita Gajadhar, executive director for Swiss-based methanol producer Proman, said.

Bio-based and e-methanol plants of commercial scale, like Proman's natural gas-fed 1.9 million metric tonne/yr M5000 plant in Trinidad and Tobago, are not ready today.

"But that's not to say 10 years from now they won't be there," Gajadhar added.

Smaller projects are popping up. Dutch fuels and gas supplier OCI Global announced plans last week to double the green methanol capacity at its Beaumont, Texas, facility to 400,000 t/yr and will add e-methanol to production for the first time. Production will use feedstocks such as renewable natural gas (RNG), green hydrogen and biogas.

The globally oversupplied methanol market will not get any major supply additions starting in 2024 until 2027. But that oversupply will not last long, Gajadhar said.

Global demand has slowed this year, driven by stagnate economic growth and higher interest rates, according to industry observers.

As much as half of methanol demand is tied to GDP growth, with total methanol demand estimates at 88.9mn t globally in 2023. This is essentially flat from 2022, but up from 88.3m t in 2021 and 87.7mn t in 2020, Dave McCaskill, vice-president of methanol and derivatives for Argus Media's consulting service, said.

Demand is not expected to rebound to 2019 levels of 89.6mn t until 2024 or 2025, he added.

The period of oversupply combined with lackluster demand places methanol in a transition period, Gajadhar said, which opens the door for sustainable feedstock alternatives to shape market growth.

Danish container shipping giant Maersk and French marine logistics company CMA-CGM announced earlier this week a partnership to drive decarbonization in shipping. The partnership seeks to develop fuel and operations standards for bunkering with alternative fuels. The companies will develop net-zero solutions, including new technology and alternative fuels.

Maersk has previously ordered dual-fuel methanol-powered vessels and CMA-CGM LNG-propelled vessels.

The demand for alternative feedstock-derived fuels is there, but the ability to scale-up such production lags. Certified lower-carbon methanol produced using carbon capture and sequestration — also known as blue methanol— can ramp up much more quickly, according to Gajadhar.

By Steven McGinn

Photo credit and source: Argus Media
Published: 22 September, 2023

Biofuel

Royal Caribbean completes over 12 weeks of bio bunker fuel testing in Europe

Firm expanded its biofuel testing this summer in Europe to two additional ships — Royal Caribbean International’s “Symphony of the Seas” and Celebrity Cruises’ “Celebrity Apex”.

Published

3 days ago

September 22, 2023

Admin

Royal Caribbean completes over 12 weeks of bio bunker fuel testing in Europe

Royal Caribbean Group on Tuesday (19 September) said it successfully completed over 12 consecutive weeks of biofuel testing in Europe.

Royal Caribbean International’s Symphony of the Seas became the first ship in the maritime industry to successfully test and use a biofuel blend in Barcelona to meet part of her fuel needs.

The company confirmed onboard technical systems met operational standards, without quality or safety concerns, demonstrating the biofuel blend is a reliable “drop in” supply of lower emission energy that ships can use to set sail across Europe and beyond.

The tests across Europe also provided valuable data to understand the availability and scalability of biofuel in the region, the firm added.

Jason Liberty, president and CEO, Royal Caribbean Group, said: “This is a pivotal moment for Royal Caribbean Group’s alternative fuel journey.”

“Following our successful trial of biofuels this summer, we are one step closer to bringing our vision for net-zero cruising to life. As we strive to protect and promote the vibrant oceans we sail, we are determined to accelerate innovation and improve how we deliver vacation experiences responsibly.”

President of the Port of Barcelona, Lluís Salvadó, said: “Royal Caribbean’s success is a clear example of how commitment to innovation makes possible the development of solutions to decarbonise the maritime sector.”

“In this case, it involves the cruise sector and focuses on biofuels, an area in which the Port of Barcelona is already working to become an energy hub, producing and supplying zero carbon fuels, such as green hydrogen and ammonia, and of other almost zero-carbon alternative fuels, such as methanol, biofuels or synthetic fuels. Innovation and collaboration between ports and shipping companies is key to accelerate the decarbonisation of maritime transport.”

The company began testing biofuels last year and expanded the trail this summer in Europe to two additional ships — Royal Caribbean International’s Symphony of the Seas and Celebrity Cruises’ Celebrity Apex.

The sustainable biofuel blends tested were produced by purifying renewable raw materials like waste oils and fats and combining them with fuel oil to create an alternative fuel that is cleaner and more sustainable. The biofuel blends tested are accredited by International Sustainability and Carbon Certification (ISCC), a globally recognized organization that ensures sustainability of biofuels and verifies reductions of related emissions.

With Symphony of the Seas departing from the Port of Barcelona and Celebrity Apex departing from the Port of Rotterdam, both ships accomplished multiple sailings using biofuel and contributed critical data on the fuel’s capabilities.

“These results will help accelerate Royal Caribbean Group’s plans to continue testing the use of different types of biofuels on upcoming European sailings this fall. The company is exploring strategic partnerships with suppliers and ports to ensure the availability of biofuel and infrastructures to advance the maritime energy transition,” the firm said.

Photo credit: Royal Caribbean Group
Published: 22 September, 2023