Banks behind the arrest of Brightoil Petroleum's 15-strong fleet are suffering the expense of keeping the vessels in warm lay-up in high-cost jurisdictions amid tightening emissions rules.
Five of the large tankers in the troubled company's fleet are under arrest in Hong Kong waters, where the cost of low-sulphur fuel and other environmental protection regulations are eating into the final sum they will recover in a court-ordered auction.
At the beginning of February, Brightoil's five VLCCs and six bunkering tankers were arrested. The remaining four aframax tankers in the fleet are understood to have been seized not long after.
First auction soon
Chinese financial sources said the first of the ships to be auctioned very soon will likely be the 318,000-dwt Brightoil Glory (built 2012), at the instigation of secured lender Nord/LB.
A public invitation to tender is to be advertised on 13 March with two weeks to submit a bid, accompanied by a Hong Kong bank draft for 10% of the offer price. The High Court of Hong Kong-ordered sale is due to close on 4 April.
A Nord/LB official did not immediately respond to telephone enquiries.
But one bank official complained about mounting costs.
"The bill for the ship we arrested last month at Hong Kong came due at the end of the month. The garbage handling fee comes to HKD 11,000 ($1,400) each time. Ships in Hong Kong harbour can only burn low-sulphur fuel and a single refuelling costs $110,000," the official wrote in a communication.
The 319,700-dwt VLCC Brightoil Galaxy (built 2012) is idling nearby in Hong Kong's dangerous goods anchorage south-west of Lamma Island.
Three aframaxes — the Hanjin-built, 115,600-dwt Brightoil League and 115,000-dwt Brightoil Lucky and the Tadotsu Tsuneishi-built, 107,500-dwt Brightoil Legend (all built 2009) — are also idling there.
All six bunkering tankers are under arrest in Singapore, as are two more of the larger ships, the 319,800-dwt Brightoil Grace (built 2013) and 107,500-dwt Brightoil Lion (built 2010). TradeWinds has previously reported that the Brightoil Grace was seized by Credit Suisse.
The 319,800-dwt Brightoil Gem and 319,900-dwt Brightoil Gravity (both built 2012) are under detention, in Daesan, South Korea, and off Yangpu, in Hainan, China, respectively.
Hong Kong-listed Brightoil is controlled by Dr Sit Kwong Lam.
The ships, all understood to have been employed long-term by Shell, are described as well maintained.
The five Hyundai Heavy Industries-built VLCCs were in the news late last year as their enbloc sale-and-leaseback deals were reportedly negotiated and then repudiated by the seller. Sources close to the arrest speculated that the court is likely to receive a better price than the one Dr Sit refused just a few months ago.
Somebody needs to write a book about how you can get every ship in your fleet arrested in the middle of the best tanker market in years
Captain Keith Martin
"Somebody needs to write a book about how you can get every ship in your fleet arrested in the middle of the best tanker market in years," said Captain Keith Martin, a veteran ship seizure expert and owner of Hong Kong-based ship arrest consultancy Sunscot & Co.
Efficient jurisdiction
Martin, who formerly handled ship arrests worldwide, said his adopted home of Hong Kong remains the most efficient jurisdiction in the world to arrest a vessel because of low port fees and efficient courts.
However, he advises clients to make sure their ships are bunkered before heading for Hong Kong.
"There's no low-sulphur fuel oil available here, so you have to burn gasoil," he said.
He puts the cost difference at about $1,000 per day for a large vessel, based on a price difference in the area of $200 per tonne.
Martin is involved with one of the arrested vessels but declines to identify it or to name the mortgagees who are driving the court auctions.
Calls to Brightoil's Singapore headquarters were not answered.
