A different method to skip the red zone: Ship-to-ship (STS) transfers are starting to look less like a niche tanker operation and more like one of the market’s practical workarounds for a Strait of Hormuz that still is not back to business as usual.

The mechanics and what it solves

Splitting the voyage: If passage is costly, uncertain, or simply too risky for certain owners and crews, STS gives traders and buyers another way to keep barrels moving — it allows a ship to load one leg, transfer offshore, and let another vessel handle the rest of the voyage.

Case in point: Russia showed the logic clearly in its March trade, where sanctions, harsh weather, and a shortage of suitable ice-class tankers drove more naphtha and fuel oil cargoes through STS operations near Port Said, Togo, Al Hoceima, and Augusta.

Japan’s tankers workaround: Japan is now relying on offshore oil transfers away from the Middle East to secure crude while keeping its tankers out of a war zone that has become too risky for ships and crews.

How is Japan making STS work? The VLCC Kisogawa is now bound for Hokkaido after receiving roughly 1.2 mn barrels of Murban crude from Rio De Janeiro Energy in an offshore transfer off Linggi on Malaysia’s west coast. The move followed another Murban cargo that was transferred at sea last week and is currently bound for Japan.

The downsides are not small

It solves one problem by creating a few others: STS adds another live marine operation to the chain, with more exposure to mooring loads, fenders, hoses, environmental conditions, cargo procedures, and spill risk, according to the International Maritime Organization (pdf). It also shifts the pressure on time, cost, and liability. The method is at the charterer’srisk, cost, expense, and time, while requiring a safe area and adequate equipment.

Our take: Even as STS keeps barrels moving, it can still mean slower execution, higher costs, and more room for claims if anything goes wrong.

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