No large oil spill detected from Sanchi, but sinking still a worry

No large oil spill has been detected thus far from oil tanker Sanchi, which has been burning in the East China Sea since the evening of Saturday January 6th after colliding with bulk carrier CF Crystal. All 32 of the crew on the Sanchi – 30 Iranians and two Bangladeshis – are feared dead. One body was recovered on Monday from the water near the tanker.

China’s transport ministry said that experts at the scene believed that, given the wave conditions, no more than 1% of the condensate was on the surface of the water. Sanchi had 1m barrels on board when it collided and exploded.

A formal accident investigation involving several Chinese government departments started yesterday.

Bad weather, toxic gases and flames were making it difficult for rescue boats trying to locate the 31 missing sailors.

South Korea’s Ministry of Transport said on Tuesday January 9th that its search and rescue team had been kept up to three miles away from the tanker, Reuters reported.

There were increasing worries that the tanker might explode and sink. Sanchi (IMO 9356608) collided Saturday evening with bulk carrier CF Crystal (IMO 9497050) about 160nm off China’s coast in the East China Sea near Shanghai and the mouth of the Yangtze River Delta.

“We can’t grasp the level of oil contamination at this moment. The cargo is still on fire, so it is hard to figure out if oil is being spilled,” Park Sung-dong, an official from South Korea’s Ministry of Oceans and Fisheries, told Reuters.

CF Crystal suffered only limited damage, and its 21 Chinese-national crew members were rescued on Saturday night by a passing fishing trawler, according to Xinhua News. The trawler, from Zhejiang province, looked for survivors on the tanker, but could not get close enough because of the fire, Xinhua said.

The freighter has been taken to a port near Shanghai where investigators will start work on assessing the cause of the disaster, the Chinese government said.

China’s transport ministry warned that toxic gas from the tanker was harmful to the rescue workers and said that protective clothing and gas testing equipment were being sent to the rescue teams.

Condensate is extremely low in density, highly toxic and much more explosive than normal crude oil. Containing it could be a challenge.

Korean insurer Hanwa and China’s PICC have been named by Insurance Insider as lead insurers for various parts of the insurance associated with the accident. Skuld has confirmed its position as lead hull insurer for Sanchi and P&I Club insurer for CF Crystal. Steamship Mutual is the P&I insurer for Sanchi.

The cargo value of Sanchi was put at about $60m, and it is now thought that the event could impact the lower end of the International Group’s pool reinsurance, which attaches from $10m to $45m. The upper pool layer runs from $45m to $80m (with an individual club retention of 7.5%), and a layer from $80m to $100m is currently reinsured by group captive Hydra.

Once above $100m (to $600m) the situation becomes more complex, with GXL reinsurance making up 55%, Hydra co-insuring for 30%, and three private placements taking 5% each. However, the indications appear to be (notwithstanding the uncertainties surrounding condensate) that, even if the $100m limit is breached, it will not be by much. These levels apply to both P&I and to oil pollution. In each case there is a single per-vessel retention.

Sanchi is entered with Steamship Underwriting (Smuab), Eastern Syndicate, on behalf of Bright Shipping Ltd.

CF Crystal, owned by Changong Group HK Ltd care of manager Shanghai CP International Ship Management of Shanghai, China, is entered with Skuld on behalf of Changfeng Shipping Holdings Lim.