Australian LNG and oil shipments under terrorist threat

Feb 20, 2015

Australia’s multi-billion dollar export earning oil and gas industry is under increased threat from terrorists and pirates according to a leading maritime security specialist.

Andy Harris from London-based March Security said that the maritime security threat is forecast to increase significantly for Australia and its major maritime trade routes in the coming years with the operational start-up of a number of major new the LNG projects.

2015 has already seen the first cargo of LNG shipped off to Asia from the Queensland Curtis LNG (QCLNG) facility on Curtis Island in Gladstone harbour.  Other major LNG projects set to come on stream later this year and in the next few years include Australia Pacific LNG and Santos’ GLNG project in Queensland and the Gorgon, Prelude, Wheatstone and Ichthys projects on the western and northern sides of the country.

“The threat is more pointed towards terrorism than piracy, and it is no doubt a threat that the maritime security sector is keeping a close watch on,” Mr Harris said.

Mr Harris cited an article published in late 2014 in an Al Qaeda English-language magazine that highlighted LNG tankers as attractive targets. The article urged jihadists to “conduct attacks on US and foreign oil tankers and strategic sea lanes in a new global campaign of economic warfare”.  Within the article an Al Qaeda member said that “even if a single super tanker (or even west bound cargo-vessel) were to be attacked in one of the chokepoints or hijacked and scuttled in one of these narrow sea lanes, the consequences would be phenomenal”.

Currently on-site off the coast of West Africa monitoring piracy activity and providing specialist maritime security advice to the oil and gas industry in the region, Mr Harris said that a number of other issues have lifted the potential threat level against Australian petroleum assets.

“The protection of Australia’s import market must raise even greater concerns than its export market,” Mr Harris said.

“Australia now relies on imports to supply 91% of its annual consumption in refined oil, a figure that is up 30% from 15 years ago. Approximately 50% of this imported product travels through either the Straits of Hormuz or Malacca Strait, two maritime routes considered high risk for terrorist or piracy attacks.

“Highlighting the threat to Australia that is the fact that the country is currently reported to have very low stockpiles of refined oil – estimated at less than six weeks’ worth of supply given Australia’s current consumption rate. This has been further exacerbated by the significant reduction of refinery facilities currently in Australia.”

In 2003, Australia had eight working refineries and that number has now reduced to four, over the last 12 years. Mr Harris said this reduction was down to factors including the strength of the Australian dollar over the last decade, the rising costs for Australian refineries related to upgrades to meet more stringent environmental guidelines. At the same time new refinery capabilities have developed in Asia allowing the processing of much larger amounts of product at a far more cost effective price, leaving oil companies no choice but to close their ever decreasing refinery assets in Australia.

“So we have a situation now where at least half of this product, which is essential to the Australian economy, is travelling through the most ‘at risk sea lanes’ in the world,” Mr Harris said.

He says that the threat is not just from Al Qaeda, stating that global terrorism is extremely evident at present with a number of new extremist groups in the headlines, whilst also noting that terrorism activity has increased in the South East Asian region.

“Given that already over one third of world trade passes through South East Asian waters, the threat of a major terrorist attack must not be ruled out. Region specific terror groups such as the Mindanao based Abu Sayyaff Group have caused much disruption over the last few years.”

Piracy activity has also risen in the maritime areas where many of Australia’s import and export shipments will be travelling.

“In 2014 the South East Asia region accounted for 75% of the world’s pirate attacks (with 141 recorded attacks), and it is on the increase again,” he said.

“While piracy has mainly targeted petty theft opportunities, including vessel stores, cash held in the Master’s safe, crew personal belongings, etc., recently there has been a significant rise in bunker piracy for small product tankers departing Singapore.”

Another area for concern is the collapsing of relationships and potential hostilities between Asian nations. Potential sea lane restrictions imposed by Asian countries in disputes could significantly disrupt the flow of product being both exported from and imported into Australia.

“This is something that is beyond the individual control of Australia and leaves Australia somewhat reliant on Asian relations being managed carefully by others,” Mr Harris said.

Mr Harris said that is critical that Australia retains close working relationships with its maritime neighbours and that it has strong policy in place to ensure protection of its vulnerable oil and gas assets.

“Just one sunken oil tanker could cause serious disruptions to Australia’s oil supply,” he said.

The issue also goes to the heart of Australia’s future submarine debate, currently gaining attention and headlines around the country. The six Collins class submarines now in service are due to be replaced in a rolling build programme of new submarines from the mid-2020s. Australia’s unique geographic conditions require long range submarines able to monitor and protect trade routes up to 3000 nautical miles from home base.

Submarine Institute of Australia Executive Director Mike Deeks said submarines played a vital role in ensuring Australia’s trade routes remained safe and open, and protecting offshore oil and gas assets from the risk of terrorism.

“Our national prosperity depends on our ability to trade by sea,” Commodore Deeks, Submarine Force Commander (RAN Ret.) said. “Each year, more than $130 billion of Australia’s bulk food, minerals and petroleum exports to East Asia rely on an assumption of the safety of our shipping corridors. This assumption is built largely on the deterrent value of our submarine force.

Maintaining such a deterrent capability is a vital hedging strategy as Australia moves into the more uncertain security environment ahead. A strong and credible submarine force demonstrates our ability to influence events throughout the region.

“Being able to protect offshore assets in an effective and efficient manner is absolutely critical. This is where submarines will continue to play a central role in Australia’s defence. So the priority now is to secure the future submarine program and the right number of vessels to ensure we avoid a capability gap as the Collins class fleet nears its end of life.

“It’s vital we act sooner rather than later because our nation’s economic prosperity in the 21 Century depends on it, and LNG projects will be significant contributors to this.”









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