An alleged oil heist in Singapore that has already led to 20 arrests, the seizure of at least one tanker and allegations that thieves siphoned thousands of tons of fuel from Shell’s biggest refinery is shining a spotlight on an illegal trade worth tens of billions of dollars worldwide.
Working routes in a triangle of sea anchored by Thailand, Vietnam and Singapore and encompassing the oil facilities of Malaysia, the smugglers take advantage of a difficult-to-patrol sea and enticing black market prices, experts say.
The suspects in the latest case are accused of stealing oil from Royal Dutch Shell’s Pulau Bukom refinery, often during business hours, and distributing it around the region.
Singapore is by far the world’s biggest ship refuelling port, and Southeast Asia’s petroleum refining hub. Hundreds of vessels pass through the small city-state’s waters every day.
Security officers say the sheer amount of traffic makes checking every ship impossible, opening the door to illegal trade.
In most cases, oil is discreetly siphoned from legal storage tanks and sold into the black market. But there have also been thefts at sea and even hijackings of entire ships to steal their fuel.
Data from the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP), based in Singapore, shows more than half of the serious shipping incidents reported in the past year have occurred off the east coast of the Malaysian peninsula.
Some officials put the value of the illegal trade in Southeast Asia at $2bn to $3bn per year. But Yousuf Malik, principal at security consultancy Defence IQ, estimated about 3% of Southeast Asia’s consumed fuel is sourced illegally, worth $10bn a year.
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Bottles of gasoline are displayed for sale to motorists on a Jakarta street February 29, 2012 REUTERS
Crude oil prices have risen by more than 50% since mid-2017 to about $70 per barrel, the highest level in over three years. That increases the black market demand in poorer Southeast Asian countries, including Vietnam and Thailand.
Open sea fuel stations
Several fuel traders told Reuters that the illegal sale of fuel is common enough that companies plan for losses of 0.2-0.4% of ordered cargo volumes.
Stewart said one common method of theft involves a simple fudging of paperwork at sea: captains overstate how much fuel their ship is using, then sell the excess. Sometimes entire ships are captured for their fuel cargo.
When fuel is stolen on such a large scale, it tends to be transferred to other ships at sea.
Legal ship-to-ship transfers frequently happen between oil tankers in registered zones. In the South China Sea, however, illegal traders use purpose-built ships - with some even disguised as fishing trawlers - to take in and distribute fuel.
According to ReCAAP, the waters around the remote Natuna Islands, which sit between peninsular Malaysia and Borneo but belong to Indonesia, are a hot spot for piracy and illegal fuel transfers.
The Atlantic Council, a policy research group, said many of the region’s illegal fuel operations had links to organized crime.
Police in Thailand and Vietnam said most illegal fuel comes into the country by sea, usually transported on mid-size trawlers in unmarked drums. Smaller vessels then bring the fuel ashore for sale on the street.
“The coasts of Thailand and Vietnam are vast, and its cities big. To catch or even trace the illegal fuel in this area is virtually impossible. That’s why it happens,” said one security source, speaking on the condition of anonymity as he was not cleared to talk to media about contraband operations.