* Threat being monitored closely
* May lead to vessels diverted and longer journey times
Jonathan Saul, Reuters 5 Mar 10;
LONDON, March 4 (Reuters) - Heightened fears of an attack on oil tankers transiting the Strait of Malacca, a key shipping lane for world trade, could lead to higher insurance costs for shippers and may lead to longer journey times, analysts say. The Singapore Navy believes a group is planning attacks on oil tankers in the Strait, a Singapore shipping body warned on Thursday. [ID:nSGE6230CO]
John Dalby, chief executive of maritime security company MRM, which provides risk assesments to companies, said ships diverting could be one of the major risks in the event of an attack.
"The damaging part is not just a potential oil spill or the loss of a crew it's the knock on effect of owners even thinking about re-routing their vessels," he said. "The economic backlash would be very, very significant."
Up to 80 percent of China's oil imports and 30 percent of its iron ore imports, and 90 percent of Japan's crude oil imports, pass through the Strait.
"Longer term, if there is a big incident, it will encourage, if not force, some of the crude shippers to use the Sunda and Banda straits in preference to Malacca Straits," Al Troner, president of Houston-based Asia Pacific Energy Consulting, said.
Sunda and Banda lie south of Malacca and passing via them would add at least 900 nautical miles or three days sailing time from the Middle East Gulf to Japan, shippers say.
Industry group Intertanko, whose members own the majority of the world's tanker fleet, on Thursday said it had advised its members to take "extra care" when passing through the area.
Shipping groups including Denmark's Maersk Tankers said they had increased vigilance on their vessels which included passing through the Strait at the maximum speed and posting more lookouts on a vessel's bridge.
"I don't think we would change the route. Basically the area is dangerous, so we have been taking precautions," a spokeswoman for Japan's second-biggest shipper Mitsui O.S.K. Lines Ltd (9104.T) said.
TERROR RIDER
One European shipping analyst said if the risks escalated insurance costs for tanker owners would rise, adding that the industry already faced tough conditions due to weak oil demand.
While daily crude tanker earnings on the benchmark Middle East Gulf to Japan route have risen from lows last year to around $37,000 this week they are still below their peak of over $200,000 a day in 2007 before the economic downturn.
"The insurance industry will certainly miss no occasion to reap a windfall profit by adding the requirement of a 'terrorism rider' much like the 'piracy rider' that has made it considerably more money than it has had to pay in ransoms off the coast of Somalia," said J. Peter Pham, an adviser on strategic matters to U.S. and European governments.
Piracy in the Malacca Strait became so serious a decade ago that in 2005 the Joint War Committee of the Lloyd's Market Association added the area to its list of war risk zones, sending premiums sharply higher. The decision was reversed in 2006 following lobbying from Singapore, Malaysia and Indonesia.
Neil Roberts, secretary of the Joint War Committee, told Reuters there was no reason for it to meet at this stage.
"In the short term there is no effect. Trade continues as normal. Underwriters are keeping a careful eye on the situation," he said.
(Additional reporting by Luke Pachymuthu in Dubai, Osamu Tsukimori and James Topham in Tokyo; Editing by Keiron Henderson)
