BPC hit with $5.4m extra freight bill

Bangladesh Petroleum Corporation (BPC) may have to incur an additional $5.4 million in shipping costs to import a 100,000-tonne crude oil cargo from Saudi Arabia and the United Arab Emirates under government-to-government (G2G) agreements for Eastern Refinery, following a route diversion caused by security risks in the Red Sea.

In a letter to BPC, Bangladesh Shipping Corporation (BSC) said the crude oil tanker MT Ninemia had been forced to avoid the Bab-el-Mandeb Strait because of security concerns and instead sail around the African continent via the Strait of Gibraltar and the Cape of Good Hope.

The revised route extends the voyage from around 4,200 nautical miles to nearly 9,000 nautical miles, increasing transit time by about 34 days and resulting in an estimated additional cost of $5.4 million (around Tk 66.63 crore).
However, BSC hopes to negotiate the additional cost down to $3.5-4 million.

The vessel departed Yanbu Port in Saudi Arabia on July 23 and is expected to reach Chattogram in the second week of September.
A BPC official said the vessel's shipping agent sought permission on July 23 to avoid the Bab-el-Mandeb Strait because of security risks. The shipowner later claimed an additional $5.396 million to cover the longer voyage.

According to the BSC letter, the claim includes about $3.39 million in additional freight charges, $1.03 million for Very Low Sulphur Fuel Oil, $452,200 for Marine Gas Oil, $520,000 in Suez Canal transit fees and other voyage-related expenses.

"Due to security
risks arising from the ongoing conflict in the Red Sea, MT Ninemia is now sailing via the Cape of Good Hope. The shipping corporation has already been informed about the additional freight costs," the official said.

BSC Managing Director Commodore Mahmudul Malek said the route change was unavoidable because of the threat of Houthi drone attacks in the Bab-el-Mandeb Strait. He said the diversion was approved with BPC's verbal consent and negotiations with the ship owner over the additional costs were continuing.

Eastern Refinery imports about 1.5 million tonnes of crude oil annually, while Bangladesh's total petroleum demand is around 7.2 million tonnes. BSC transports crude oil imported from Saudi Arabia and the UAE under G2G agreements.

According to international maritime trade rules, the final payment of the additional freight cost will be settled after the cargo is discharged at Chattogram Port and negotiations with the ship owners are completed.