GPCA brought a strong spotlight on the topic of Piracy at its recent Supply Chain Conference in Abu Dhabi by convening a group of leading experts, governmental agencies and industry leaders to discuss this critical issue that presents a major risk to core industrial economies of the region.
During the conference, a survey was conducted where over 83% of the participants consider piracy a real and tangible threat to their organizations that result in increased costs, customer service issues, environmental risk and crew safety challenges. Around 20% responded that they have been direct victims of an attack and 53% believe that attacks will continue to grow over time without increased intervention.
Leading international research analysts from around the world have been recording dramatic increases in the frequency of piracy in the Gulf of Arden since over the past five years. The International Maritime Organization has maintained that its frequency has continued to grow since 2005, claiming ‘explosive drastic increases’ way back in 2008. The situation has now reached unprecedented levels as pirates have extended their operating area from Africa’s east coasts outwards, reaching the mouth of the Arabian Gulf and the Indian coast. In addition to the geographical reach of their activity, the pirates are also resorting to increasingly complicated modes of attack.
“Pirates are now using hijacked vessels as mother ships for their attacks and crews have been held as hostages on these mother ships, making cases increasingly more difficult resolve,” said Dr. Abdulwahab Al-Sadoun, Secretary General of GPCA.
The Gulf of Aden – roughly 900 kilometres long and 500 kilometres wide – is an important waterway for international shipping. The Red Sea and Gulf of Aden form an important transport route between Europe and the Far East, particularly for the carriage of oil and commodities. Approximately 11 per cent of the world’s seaborne oil is transported through the region. Although numerous pirate attacks have been reported by ships and yachts in the Gulf of Aden/Red sea, of special interest is the dramatic increase in activity centered in the Gulf of Aden along the coast of Puntland, the semi-autonomous state of Somalia.
According to a recent United Nations report, piracy reached record levels last year with 445 incidents, 53 hijackings and 1,181 kidnappings. It is believed pirate gangs are operating more off the northern Somali coast in the Gulf of Aden due to its proximity to shore and quick access to the many vessels passing through the Suez Canal. Hijackings off the coast of Somalia accounted for 92 per cent of all ship seizures last year.
“Chemical and oil vessels were considered among the easiest targets for pirates as they sail from the Gulf and Red Sea, fully laden with cargo, rendering them slow and often lower to the sea’s edge making it more accessible. Today however, all ships are targeted by pirates,” said Dr. Al-Sadoun.
Apart from the obvious negative impact on any one vessel, there are also negative economic domino effects throughout the whole vertical value chain within the entire maritime sector and any industry using the Arabian Gulf as a transport route for both imports and exports.
Over 17 million barrels of oil per day are shipped through the Straits of Hormuz and nearly 30,000 vessels per year pass through the Gulf of Aden. Left unchecked, piracy growth poses a serious threat to sustaining export trade in these sectors. It can also create major risk for producers and consumer goods, threatening further an already fragile, recovering global economy.
“MENA and GCC leaders need to collaborate and engineer a workable solution to provide businesses with an alternative passage. Piracy activities, if left undeterred, have the potential to interrupt, not only MENA but also Asian-European trade routes as well. This is not only a GCC and Gulf issue, it’s a global issue,” Dr. Al-Sadoun, added.
Already the situation is driving costs through higher insurance premiums, due to substantial increases in extra war risk insurance and additional kidnap and ransom risk premiums. Practically many vessels experience waiting time of up to five days in order to join military convoy which passes through the Gulf of Aden. This not only impacts delivery schedules, which builds inherent logistical costs throughout the commercial value chain, but incurs additional costs for bunker and fuel consumption and daily hire during the waiting periods.
Shortage of tonnage availability has also been recorded, as owners are becoming increasingly apprehensive about sending their ships to the area, creating noticeable shortage of shipping capacity in the Gulf and the Red Sea. Furthermore, and against the wish of the owners, some vessels’ crews refuse to sail through the risk areas. Currently this is being mitigated by owners having to pay generous bonuses and other financial incentives to crew, adding to the already growing cost base.
Delegates at the GPCA Supply Chain Conference are highly concerned and taking actions, with 78% considering or having implemented preventive piracy measures. Yet, the membership believes that more must be done in the spirit of cooperation to protect vessels and regional economies from this threat. GPCA members reinforced their readiness to work with government authorities, marine forces, ministries of trade and industries, chambers of commerce and port authority representatives to mitigate this threat. “We would also like to reach out to petrochemical producers, oil and gas companies, ship owners and insurance companies to collaborate with the industry players, who all have a vested interest in sustaining economic GDP contributions by these critical industry sectors,” Dr. Al-Sadoun, said.
“Our goal is to continue to exchange key facts regarding the impact of measures taken to date, discuss and debate new improved solutions to deal with the situation and to affect safe passage of vessels and products,” Dr. Al-Sadoun, added.