Oil & Gas Growing ‘dark fleet’ carries sanctioned oil to China By Eva Levesque November 9, 2023 CC2.0/jezuez471 Oil tankers and other vessels moored off Singapore. An area further off Singapore is favoured by Iran's dark fleet for ship-to-ship transfers Oil from Iran and Venezuela Vessels turn off tracking Number of VLCCs up 30% More than 600 ships, often old tankers which are unsafe and whose ownership is obscure, are transporting Iranian and Venezuelan crude around the world. The numbers of vessels and cargoes are growing, industry experts told AGBI. The ships turn off their transponders – a vessel’s automatic identification system or AIS – to go ‘dark’. Geopolitical risk will shape next twist in crude oil prices Oil prices surge as conflict intensifies in Israel Opec output cuts may extend to end of next year They then disappear from tracking screens to hide their location and the origin of their cargo, most of which goes to China, the largest and nearly the only buyer of sanctioned crude. According to data and analytics company Kpler, the number of dark vessels has increased by 13 percent this year, as Iranian crude exports have risen significantly. In 2019, Kpler recorded only 166 dark tankers operating around the world. The dark fleet capacity has increased by 19 percent, as the number of VLCCs – very large crude carriers – has climbed by 30 percent. “Increased Iranian exports mainly drive the growth due to relaxed US sanctions enforcement,” said Matthew Wright, a senior analyst at Kpler in Dubai. Kpler tracks tanker movements on its platform and follows how the vessels manipulate AIS to circumvent sanctions. Some ships turn their AIS off shortly after they leave Iran’s main export terminal on Kharg island in the north of the Gulf en route to China. Some disappear further out to sea and appear in an area offshore Singapore known as eastern-outside-port-limits (EOPL), where many ship-to-ship transfers take place. Number of dark tankers per type and year 20192020202120222023VLCC (200,000-320,000 tonnes)79116186223289Suezmax (120,000-200,000 tonnes)5086114131130Aframax (80,000-120,000 tonnes)2665155154159Panamax (55,000 to 80,000 tonnes)1113273538Source: Kpler Iran is currently exporting about 1.5 million barrels per day, the highest level in more than four years. More than 80 percent is shipped to China, according to consultancies FGE, Kpler and Vortexa. The US and its allies eased sanctions against Venezuela, the country with the highest proven oil reserves in the world, in October. But much sanctioned Venezuelan crude is still at sea. The practice of going dark became more prevalent when then-president Donald Trump reintroduced sanctions on Iranian oil in November 2018. It continues under his successor, Joe Biden, whose efforts to resurrect a nuclear deal with Iran have so far been unsuccessful. As part of those efforts the Biden administration has eased enforcement of sanctions against Iran. Wright said that the clandestine tactics include ship-to-ship transfers in international waters, fake documentation, shadow ownership structures, and doubtful insurance. The owners are mostly international shell companies, often registered in India, China, Seychelles or the Marshall Islands. “They only exist to own the vessel. Generally, they own one or two tankers, that’s all,” said Wright. Interdicting the ships is difficult, although US authorities have tried to prevent the activity by seizing vessels. Wright said: “You can close them down, but as soon as you close one, another one pops up.” According to Kpler, dark vessels have also carried around 10 percent of Russian exports since the Russian invasion of Ukraine. After the G7 economies, the European Union and Australia agreed to ban the use of Western-supplied maritime insurance, finance, and brokering for sea-borne Russian oil priced above $60 per barrel, some 120 dark – or ‘grey’ – vessels transported Russian crude this year. “The grey fleet sells Russian crude over the price cap or to clients that don’t accept Russian oil.” Wright said that the behaviour of the grey tankers is similar to dark vessels, although there is less evidence of them going dark. These vessels go mainly to India and China. And as a lot of Russian fuel comes to the UAE, “Some of them come here too,” said Wright.