‘Dark’ tanker crash exposes dangers of China’s thirst for cheap oil

Maybe America should get its oil from Russia the same way

‘Dark’ tanker crash exposes dangers of China’s thirst for cheap oil

By Rebecca Tan

Pei-Lin Wu

and

Júlia Ledur

September 2, 2024 at 1:00 a.m. EDT

SINGAPORE — A crude oil tanker traveling from Iran made a delivery to the Chinese port city of Ningbo two months ago before heading back toward the Middle East. The Ceres I had made this round trip several times in the past year, according to ship tracking data. But it didn’t complete this voyage.

The Ceres I and another tanker collided off Malaysia in the South China Sea on July 19, causing significant damage to both vessels. Malaysian authorities said the Ceres I had experienced “technical difficulties.” But shipping and energy analysts say the pattern of the vessel’s movements before the collision suggest another explanation: The Ceres I had been broadcasting a fake location on ship locator channels.

Among groups that track ship movements, the Ceres I was widely known to be part of a “dark” fleet of tankers operating outside international regulations to feed China’s appetite for sanctioned crude oil. China, the world’s biggest importer of oil, is one of the few remaining customers of crude from countries such as Iran, Venezuela and Russia, which are subject to heavy sanctions by the United States.

China needs this fuel, which is discounted from international benchmarks, to supply its manufacturing sector and prop up its flagging oil refineries. To bypass Western financial systems and shipping services, China relies on a fleet of aging, substandard tankers that operate illicitly and increasingly threaten the safety of international sea lanes, say analysts.

A collision involving ships like the Ceres I was “not a matter of if but a matter of when,” said Ian Ralby, a senior fellow for maritime governance at the Yokosuka Council on Asia-Pacific Studies. Crew members from both vessels in the crash were injured but none died. If the Ceres I hadn’t just offloaded its cargo of oil, Ralby said, “we’d be looking at catastrophe.”

The Chinese owners of the Ceres I did not respond to inquiries for this story.

Last year, over objections from Iran and Russia, the International Maritime Organization (IMO), the United Nations shipping agency, issued a resolution expressing grave concern over the prevalence of “dark” tankers, adding that there as many as 600 tankers servicing this shadow trade — vessels that had unclear ownership, were not compliant with safety standards and lacked adequate insurance.

Tankers are required to broadcast their location on their Automatic Identification System (AIS) so they can be detected by other vessels. But “dark” tankers were masking or falsifying their locations on AIS — a process called “spoofing” — to travel illicitly, said the IMO. The safety risks, the agency warned, were “real and high.”

China does not officially acknowledge that it imports sanctioned oil but defends its trade with countries like Iran. “China conducts normal energy cooperation with other countries under international law, which is legitimate and lawful,” Liu Pengyu, a spokesperson for China’s Embassy in D.C., said in a statement.

Secretive transfers at sea

The Ceres I was an archetype of the “dark” fleet, analysts say.

Launched in 2001, it had been operating past the 15- to 20-year limit that tanker operators impose for safety reasons. In the last five years, it has operated under four different flags, most recently under São Tomé and Príncipe, an African island country known for having low registration fees and lax oversight.

Data provided to The Post by the space-based data firm Spire Global, which uses satellites to track and validate the location of vessels, shows that in the two years before the Ceres I’s collision, it had been traveling predominantly between China and Iran, with regular pit stops in the waters off eastern Malaysia in the South China Sea.

According to the U.S. Energy Information Administration, nearly 90 percent of China’s oil shipments pass through the South China Sea, a highly disputed waterway that is claimed in part by seven governments and thus difficult to police.

In recent years, a stretch of the South China Sea near Malaysia has become a hot spot for the ship-to-ship transfer of oil, which is when tankers mix sanctioned oil with oil from elsewhere to deliver as “blends,” said Muyu Xu, a China oil analyst at the maritime analysis group Kpler. This maneuver increases the risks of collision and pollution, especially when done hastily or when ships are not broadcasting their accurate locations.

Since last August, Kpler has detected more than 1,005 unique vessels participating in ship-to-ship transfers here, at least 30 percent of which Kpler estimates were doing so illicitly.

This stretch of sea was also where the Ceres I arrived in mid-July after leaving port in Singapore, according to Spire’s data.

In mid-June, the Ceres I arrived in Singapore from China. It then took a trip to the eastern coast of Malaysia and returned to Singapore, where it anchored on July 8.

The Ceres I sailed north for three days before stopping again in eastern Malaysia, where it stayed for a week.

At 3:55AM on July 19, the Ceres I stopped transmitting its location via AIS and soon after collided with Singapore-flagged Hafnia Nile.

On the evening of July 18, the Ceres I broadcast via AIS that it was “at anchor” there, although Spire’s data shows it was moving northward. At 3:55 a.m. on July 19, the Ceres I stopped transmitting its location via AIS and did not begin again until 26 hours later. During this period, the Ceres I crashed into another tanker, the Singapore-flagged Hafnia Nile, bound for Japan. Spire was not able to pinpoint the exact point of the collision.

After the crash, the fire-damaged Hafnia Nile was towed back to home port by a Singaporean naval vessel. The Ceres I went missing for two days and then was intercepted by Malaysia’s coast guard, which found the tanker being pulled deeper into the South China Sea by two tugboats.

A collision in the South China Sea

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Two oil tankers collided in the South China Sea on July 19, raising questions about the costs of China's demand for for sanctioned oil. (The Malaysia Maritime Enforcement Agency)

Unanswered questions

Malaysian authorities said based on preliminary findings the Ceres I had dropped anchor because it was experiencing technical difficulties and the Hafnia Nile had tried to avoid it but failed.

Three shipping analysts who studied the movement of the Ceres I said that this account raises major questions.

It’s unclear why the Hafnia Nile would have had problems avoiding the Ceres I, a 1,000-foot-long supertanker if the latter vessel had been anchored and transmitting its authentic location, said Michelle Wiese Bockmann, a principal analyst at the maritime-trade research firm Lloyd’s List Intelligence. Leading up to the crash, the Hafnia Nile had been traveling at 14 knots, near its maximum speed, suggesting it did not detect another vessel in its way, said Bockmann.

Hafnia, the company that owns the Hafnia Nile, declined to respond to questions, saying it was still investigating.

Dimitris Ampatzidis, a risk and compliance analyst at Kpler, said he thinks it’s likely the Ceres I had been “spoofing” its location, preventing the Hafnia Nile from detecting it. AIS data transmitted by the Ceres I in the days before it went dark has unusual gaps and shows “erratic and overlapping movements in a concentrated area, followed by sudden, sharp turns and long, straight paths” — patterns consistent with spoofing, he said.

Ampatzidis, who leads Kpler’s monitoring of suspicious vessels, said he has identified activity suggesting the Ceres I carried out ship-to-ship transfers on multiple occasions this year, including at least three times in Malaysian waters. “What we’re talking about is a vessel that has been connected to illicit activities for an extensive period of time,” he said.

From 2019 to 2021, the Ceres I was operated by a Shanghai-based company, Shanghai Prosperity Ship Management, which shares contact details with another shipping business whose owners were placed under sanctions by the United States for oil transactions with Iran, according to corporate records. More recently, the Ceres I has been owned and operated by a Hong Kong-based company, Ceres Shipping Limited.

Shanghai Prosperity Ship Management did not respond to inquiries. Ceres Shipping Limited does not have public contact information. A listed agent of the company did not respond to inquiries over email or to calls, and the Hong Kong Shipowners Association, the main trade group for shipowners in the Chinese territory, said it was not aware of the company.

In August last year, customs officials in Ningbo warned in an essay in a state-owned outlet that Western sanctions were going to drive more Russian oil toward China’s shores in “black fleets” that “pose a threat to our country’s maritime entry and exit order.” Around the same time, authorities in Shandong province began detaining tankers with safety lapses.

While these efforts suggest that Chinese officials, at least on the local level, have concerns over the substandard tankers arriving at their ports, they have not made a dent in curbing the trade of sanctioned oil, say analysts. In 2023, oil from Iran, Venezuela and Russia made up 26 percent of China’s oil imports, up from 20 percent in 2021, according to data from Kpler. In the first seven months of 2024, this figure was up to 28 percent.

“As long as Iran continues being sanctioned and as long as China continues to buy, this trade will continue,” said Emma Li, a China oil analyst at Vortexa, an energy analytics firm.

Wu reported from Taipei, Taiwan.

The Washington Post