Sanchi sinks a week after East China Sea collision

Iranian suezmax Sanchi exploded at around noon and sank by 17:00 local time on Sunday January 14th, eight days after it had been involved in a collision with bulk carrier CF Crystal. Chinese media said that large amounts of oil were burning in the surrounding waters. Although most of the oil on the vessel was condensate, there was also some bunker fuel. Smoke was billowing as high as 1,000 metres. China’s State Oceanic Administration said that it was monitoring the spread and drift of the overflowing oil.

A Chinese salvage team managed to recover two additional bodies from the tanker, but 29 are now missing, presumed dead. Iranian President Hassan Rouhani sent messages of condolence to the families of the crew, consisting of 30 Iranians and two Bangladeshis,  and called for an investigation into the accident.

Sanchi was carrying some 1m barrels of condensate and a smaller amount of bunker crude when it collided 160nm off the east coast of China with grain carrier CF Crystal – the latter being towed into port near Zhousan for inspection. Sanchi subsequently drifted at about 1.4 mph in a south-westerly direction.

Sanchi was sailing from Iran to South Korea when the collision occurred in waters not frequently used by large vessels like tankers, dry-bulk carriers or container ships. Most ships travel either closer to the Chinese coast in the west or more nearby to Japan in the east.

Sailors from CF Crystal were rescued by a passing Chinese fishing boat.

When liquid, most condensate is colourless and virtually odourless. Surface spills of condensate are therefore difficult to detect visually, making them hard to manage and contain. Condensate is mostly used to make vehicle fuel, such as gasoline, and is sometimes called natural gasoline. It can also be used to dilute heavier crude oils before they are used as a feedstock in oil refineries, or to make products like plastic in the petrochemical sector. Whether escaped condensate causes an oil spill or not depends on whether it has vaporized, burnt off, or escaped in liquid form. When forming a spill, its toxicity and uncontrollability makes it particularly dangerous. However, it dissipates and breaks down more easily than heavier oils.

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.