Unsurprisingly the dispute around the tanker Strovolos (IMO 9178056) and its oil cargo, which began the development into the current complex legal situation in June when charterer Kris Energy, which also owned 95% of Cambodia’s nascent oil production facility, went into liquidation.
The Cambodian government, which had put a lot of effort and publicity into becoming an oil producer, is seeking the return of the Strovolos, having requested Indonesia to arrest the ship. Cambodia alleges that the ship loaded oil illegally from an offshore oil field, a Cambodian government official said last Thursday August 26th.
Strovolos and its crew were detained in waters near the Anambas Islands of Indonesia on July 27th, the Indonesian Navy revealed last week.
The vessel has on board Cambodia’s first-ever oil production from an offshore oil field, which only began operation in December 2020. The cargo has been stuck onboard the tanker since May because KrisEnergy entered liquidation in June after being unable to pay debts.
Cambodia’s Ministry of Mines and Energy spokesman Cheap Suor said that “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.
A red notice issued by the Cambodian embassy on July 24th 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.
As is often the case with bankruptcies, the situation is not as cut-and-dried as Cambodia seems to think. World Tankers Management, the operator 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”. World Tankers has denied that the oil had been loaded illegally and that the ship did not have permission to anchor in Indonesian waters.
The ship, chartered by KrisEnergy, 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, reported Reuters,citing an unnamed source familiar with the project.
World Tankers said that Strovolos loaded crude oil from the Psara field in the Gulf of Thailand on May 21st based on the understanding that the cargo belonged to charterer Kris Energy (Apsara) Co Ltd, which was KrisEnergy’s Cambodian arm.
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 refuelling. However, the attempts to refuel and change crew were unsuccessful, World Tankers said.
Strovolos then sailed to Batam, Indonesia, to make a crew change, but was then detained by local authorities.
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, claiming that it heralded the country’s emergence as a budding oil exporter at the heart of Asia. Unfortunately the reality was different, and this has left the Strovolos at the heart of what is also a political controversy. Two reasons that 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, were cost overruns and poor oil yields from the project. The yields were reportedly little more than a third of the levels required to make it viable.
All operations were halted and were unlikely to resume, given poor extraction rates, according to a local media report citing the Cambodian Ministry of Mines and Energy in July.
That has left the Cambodian authorities in a position of some embarrassment, given the high profile it had allocated the project. It had predicted about $500m in tax and royalty revenues over the project’s lifetime. All that is left to show for it is the cargo of the Strovolos. With several parties, including, presumably, World Tankers, owed money by KrisEnergy, possession of the assets of the liquidated firm is often nine-tenths of the law.
Lawyers who have been tracking developments have predicted a lengthy dispute over who owns and can sell the oil.
Peter Doraisamy, managing partner at PDLegal LLC, said that “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”. He warned that it was “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.”
The cargo is currently valued at around $20m, and who owns it will be a matter of some importance.
Leon Alexander, partner at Clyde & Co, told Reuters that “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. But the shipowner owes a legal obligation to that person who is the cargo owner. He has 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, said.
“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.
1999-built, Bahamas-flagged, 28,546 gt Strovolos is owned by Strovolos Shipping Co Ltd care of manager World Tankers Management Pte of Singapore. It is entered with London Club on behalf of Strovolos Shipping Co Ltd.