Cambodia Wants Tanker Strovolos Returned

By Florence Tan (Reuters) The Cambodian government is seeking the return of an oil tanker and its crew who have been detained in Indonesia, alleging that the ship had loaded oil illegally from an offshore oil field, a government official said on Thursday.

The Bahamas-flagged tanker MT Strovolos and its crew were detained in waters near the Anambas Islands of Indonesia on July 27, the Indonesian Navy said in a statement.

The vessel is carrying Cambodia’s first-ever oil production from an offshore oil field which began operation in December 2020. However, the cargo has been stuck onboard the tanker since May as the project developer KrisEnergy entered liquidation in June after being unable to pay debts.

“I am worried,” Cambodia’s Ministry of Mines and Energy spokesman Cheap Suor said. “We have already requested (for) a long time to send them back, the oil, the vessel, and the crew who stole it, and left without permission from the Cambodian authorities.”

Indonesia’s navy is preparing to charge the captain of the ship for loading oil illegally in Cambodia and anchoring in Indonesian waters without permission, according to local authorities and the vessel owner.

The stop followed a red notice issued by the Cambodian embassy on July 24 that asked Indonesian authorities to make an arrest on suspicion of stealing around 300,000 barrels of Cambodian crude, the Indonesian Navy said.

The vessel was taken to Batam for quarantine on July 30.

The captain of the ship, a Bangladeshi, has been named a suspect for anchoring without permission in Indonesian waters, the Navy said, adding it was working with local prosecutors on the case.

World Tankers Management, operators of MT Strovolos, confirmed the detention of the tanker and crew members.

“We regret to report that some members of the crew have been detained ashore by the Indonesian authorities and remain so detained whilst the remaining crew are stuck on board the vessel unable to disembark,” the company said in a statement late on Wednesday.

STORAGE FACILITY

World Tankers denied the oil had been loaded illegally and that the ship did not have permission to anchor in Indonesian waters.

The ship had arrived at the field in November and was used as a storage facility for the field’s production, which halted when the ship reached capacity, said a source familiar with the project who declined to be named as he is not authorized to speak to the media.

MT Strovolos loaded crude oil from the Apsara field in the Gulf of Thailand on May 21, based on the understanding that the cargo belonged to charterer Kris Energy (Apsara) Co Ltd – KrisEnergy’s Cambodian arm – World Tankers said.

However, the charterer defaulted on payment and failed to supply fuel to the ship when its fuel levels fell critically low, World Tankers said, adding that the vessel had to carry out a crew change as most of the staff had been onboard since September 2020.

Kris Energy terminated the ship’s service when the vessel had called at Thailand for crew change and refueling, but was unsuccessful, World Tankers said.

Subsequently, MT Strovolos sailed to Batam, Indonesia, to make a crew change, but was detained by local authorities, the company said.

KrisEnergy said on June 4 it was unable to pay its debts and would proceed to liquidation.

KrisEnergy has a 95% stake in the field while the Cambodian government holds the remaining 5%.

The Thai Navy, KrisEnergy, and its liquidator did not respond to requests for comment.

Cambodia’s oil export ambitions sink

When Cambodian officials commemorated the start of the country’s first oil project in June by preserving the first drops of production at a high profile ceremony, they heralded the country’s emergence as a budding oil exporter at the heart of Asia.

But instead of reaping royalties, Cambodia’s government has filed a theft complaint against the crew of the tanker that stored the crude, after they sailed away with the oil amid a payment dispute with the oil field’s developer.

Singapore-based KrisEnergy, which owns a 95% stake in the offshore Apsara field in the Gulf of Thailand, was forced into liquidation shortly after production began in December 2020. Cost overruns and poor oil yields from the project had left the company unable to repay debt.

KrisEnergy’s collapse also ended hopes of further oil sale proceeds for the Cambodian government, which owns the remaining 5% stake. All operations were halted and are deemed unlikely to resume given poor extraction rates, according to a local media report citing the Cambodian Ministry of Mines and Energy in July.

That’s likely to be a major disappointment to Cambodian authorities, who had anticipated roughly $500 million in tax and royalty revenues over the project’s lifetime.

The output stoppage means all there is left to show for Cambodia’s oil production efforts now lies in the belly of the MT Strovolos, the 300,000-barrel tanker that had stored the oil produced at the site until it was forced to divert last month in search of a fresh crew and has now been detained by the Indonesian navy.

The Cambodian energy ministry, KrisEnergy and its liquidators did not respond to requests for comment.

LEGAL DEADLOCK

With the fully-laden vessel now impounded in Batam, and KrisEnergy’s liquidation proceedings still underway, lawyers who have been tracking developments predict a lengthy dispute over who owns and can sell the oil.

“I expect that if the Cambodian Government wants to detain the cargo and have it shipped back to Cambodia, there may arise competing claimants who are saying they are lawful owners of the cargo, potentially including the liquidator of KrisEnergy,” said Peter Doraisamy, managing partner at PDLegal LLC.

“It is likely to take several years at the very minimum depending on which jurisdiction is seized of the case, and there is possibility that cases may be brought in more than one jurisdiction and by different parties.”

A key fundamental question is who actually owns the crude cargo, currently valued at around $20 million, now that KrisEnergy has become insolvent.

“The ship owner may not actually know who owns the cargo, and he’s not a party to any of those contracts, he just gets told what to do by the charterer,” said Leon Alexander, partner at Clyde & Co.

“But the shipowner owes a legal obligation to that person who is the cargo owner, he’s got to look after and care for the cargo. And he’s not allowed to deliver the cargo to the wrong person or act in a manner inconsistent with the rights of the cargo owner, or he faces a legal claim in conversion.”

Indonesian authorities have taken steps to secure the vessel and its contents for investigation, Laode Muhamad, a spokesman for the Indonesian Navy told Reuters.

“Based on the provisions of the shipping law, the ship and its documents and cargo are evidence for which approval for confiscation is requested for investigation purposes,” he said.

DIM FUTURE

While legal manoeuvring around the cargo is just getting under way, oil analysts say production at the field will likely remain stopped, even with the recovery in oil prices and demand this year.

“The poor publicity surrounding Apsara leaves the government with a Herculean task trying to attract other players into the Cambodian hydrocarbon sector,” said Rystad analyst Readul Islam.

“I suspect that the shadow of Apsara will hang over Cambodia’s hydrocarbon attempts for some time.”

(Reporting by Florence Tan and Aradhana Aravindan in Singapore, Agustinus Beo Da Costa in Jakarta, Prak Chan Thul in Phnom Penh and Panu Wongcha-um in Bangkok; Editing by Gerry Doyle and David Holmes, Reuters)