February 24, 2024
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OIL & GAS Politics

Gaza War: BP Halts Oil and Gas Shipments Through Red Sea After Houthi Attacks

BP, a British multinational oil and gas company has halted all shipments of oil and gas through the Red Sea after an increase in attacks on cargo ships by Houthi militants in Yemen.

The oil firm said it had paused shipping in the region indefinitely, citing a “deteriorating security situation” amid tensions in the Middle East.

BP became the first oil firm to directly halt its own tankers after a string of big shipping companies stopped their vessels passing through the waters between Asia and Africa.

Freight companies are sailing ships around Africa instead, adding costs and delays that are expected to mount in the coming weeks.

Companies have moved to secure their vessels after attacks by Houthis in protest over Israel’s war against Hamas in Gaza. They have fired on commercial ships travelling through the Bab el-Mandeb strait, a narrow channel nicknamed the Gate of Tears for its notorious difficulty to navigate, and on a US warship.

On Monday, Houthis attacked two further commercial ships with naval drones – the MSC Clara, which is a Panama-flagged vessel and the Norwegian-owned Swan Atlantic, according to TheGuardian.

The Swan Atlantic’s owner said the ship had been struck by an unidentified object and its water tank had been damaged but none of the crew were hurt.

BP said in a statement: “In our trading and shipping business, as in all BP businesses, the safety and security of our people and those working on our behalf is BP’s priority.

“In light of the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily pause all transits through the Red Sea. We will keep this precautionary pause under ongoing review, subject to circumstances as they evolve in the region.”

The US defence secretary, Lloyd Austin, announced the formation of a maritime protection force, Operation Prosperity Guardian, to defend shipping from the attacks.

Austin said the task force would include the UK, Bahrain, Canada, France, Italy, the Netherlands, Norway, Seychelles and Spain, and it would “jointly address security challenges in the southern Red Sea and the Gulf of Aden, with the goal of ensuring freedom of navigation for all countries and bolstering regional security and prosperity.”

Separately on Monday, the global container shipping firm Evergreen said it was suspending journeys in the region “until further notice” because of “rising risk and safety considerations”.

Evergreen joined five other big shipping firms that have already suspended operations: the Hong Kong-based OOCL, Denmark’s Maersk, France’s CMA CGM, Germany’s Hapag-Lloyd and the Italian-Swiss-owned Mediterranean Shipping Company.

Taiwan’s Yang Ming Marine Transport Corporation said it would divert any of its ships sailing through the Red Sea or Gulf of Aden via the Cape of Good Hope for the next two weeks.

The Norway-based oil tanker group Frontline said its vessels would also start avoiding passages through the Red Sea and the Gulf of Aden.

BP has paused all shipments it is responsible for, either through its own ships or chartered vessels. BP puts cargoes of liquified natural gas, oil and oil-based products in transit.

The price of Brent crude rose almost 4%, to $79.39.

The United Kingdom Maritime Trade Operations authority said on Monday that it had received a report of a vessel 24 nautical miles south-east of Mokha being approached by a craft with several armed personnel onboard.

Warning shots were fired from the vessel, and the craft with the armed personnel on board changed course, the authority said.

The ABN Amro analyst Albert Jan Swart said that combined, the companies that had diverted vessels controlled “about half of the global container shipping market. “Avoiding the Red Sea will lead to higher cost due to longer travel time,” he told Reuters.

In a reflection of the escalating tensions, London’s marine insurance market has widened the area in the Red Sea it deems as high risk. The decision was made by its joint war committee, which comprises syndicate members from the Lloyd’s Market Association and representatives from the London insurance company market, and influences underwriters’ decisions on insurance premiums.

The Red Sea is a key trading route for shippers of all products into Europe. In 2021, a 220,000-tonne “megaship”, the Ever Given, blocked the Suez canal, disrupting the global shipping industry.

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