‘End the licences’: Vanuatu oil rig registry sparks concern amid climate advocacy
Thousands of kilometres away from the Pacific, an oil rig in the North Sea operates under the flag of Vanuatu. In the Black Sea, a drilling rig hired by Canada’s Trillion Energy as part of its natural gas campaign is also flagged by Vanuatu.
Offshore supply vessels sailing the Gulf of Mexico, West Africa and the Oman Gulf have Vanuatu’s capital, Port Vila, displayed across their hulls.
According to maritime law, all ships – including oil drilling rigs, pipe laying ships and associated offshore vessels – must be registered by a country. That country is responsible for inspections, safety and enforcing regulations on board.
For decades, the tiny Pacific island nation of Vanuatu has provided this service for dozens of major oil rigs and offshore support vessels. Data compiled by S&P Global Commodity Insights ranks Vanuatu sixth in the world in terms of number of oil rigs flagged. The practice is legal but as the country gains global prominence for its climate change advocacy – Vanuatu is spearheading a global fossil fuel nonproliferation treaty and recently led a campaign to get international legal consensus on obligations to prevent harm caused by climate change – its shipping registry has been questioned.
Bob Deans from US-based environmental advocacy group Natural Resources Defense Council said offshore drilling “locks us into a deepening dependence on oil and gas for decades, just when we need to be replacing these fuels with cleaner, more sustainable ways to power our future.”
Lavetanalagi Seru, the regional coordinator of the Pacific Islands Climate Action Network, said the inclusion of oil rigs in Vanuatu’s registry was a “cause for concern for civil society” and his group was looking into the practice by Pacific countries.
“We hope that all Pacific governments will take the necessary action to end the issuing of licences to offshore vessels and oil rigs,” Seru said.
‘World leader’ in flagging oil rigs
The registration of oil rigs and other vesselsis done by Vanuatu Maritime Services Limited (VMSL), a New Yorkbased company that has been contracted by the Vanuatu government since 1993 to oversee its national shipping registry. VMSL receives annual fees from shipowners to register vessels under the Pacific nation and splits its profits with the Vanuatu government.
At just over 600 vessels, Vanuatu registers a mere fraction of the thousands of ships sailing worldwide. But VMSL’s president, Robert Bohn, said under his leadership Vanuatu had become a “world leader” in flagging oil rigs and other offshore vessels.
“The administration offices are based in the United States and a lot of the offshore industry is in the Gulf [of Mexico], and we’ve developed expertise in that area,” Bohn, a US national and a naturalised Vanuatu citizen, said.
“I’ve been involved for the last 30 years and pushing that.”
After the US, Vanuatu has the highest number of offshore vessels flagged in the Gulf of Mexico, a 2010 US congressional hearing found. Major oil rig and offshore supply vessel operators like Transocean, Tidewater and Borr Drilling have owned or operated ships flagged by Vanuatu. These companies did not respond to questions on why they had chosen Vanuatu for their registration.
‘It’s free money’
The International Maritime Organization says there should be “genuine link” between a ship and its registering country, but the rule is rarely enforced.As a result, countries with low tax rates, like Vanuatu – which doesn’t have company, capital gains or income tax – have become attractive places for ship registration.
John Less Napuati, the head of Vanuatu’s Maritime Safety Commission, which oversees the VMSL, said his country’s “tax haven” status means many cargo ships, yachts, offshore support vessels and oil rig companies “really like Vanuatu”.
He also said the registry has become a valuable income source for the government – though Napuati declined to say exactly how much. In 2013, the government received approximately $1.2m from the shipping registry, according to an article by local newspaper Daily Post.
“Compared with other income that other departments bring in, it’s quite a bit of money,” he said. “It’s free money that comes to the government. They don’t have to work for it.”
Despite its value to developing nations like Vanuatu, the unregulated registration of oil rigs under a “flag of convenience” system has drawn criticism. In 2010, the registration of the BP oil rig Deepwater Horizon, responsible for the biggest oil spill in US history, by Pacific nation the Marshall Islands, raised concern in the US Congress, with some members suggesting companies sought to avoid safety regulations by flagging the vessel in the Pacific.
VMSL says it regularly inspects its vessels around the world to ensure they meet Vanuatu’s and international standards.
Registry review uncertain
Last month, Vanuatu’s government, under the then prime minister, Ishmael Kalsakau, authorised a technical taskforce to investigate the shipping registry and ensure its maritime contracts aligned with Vanuatu’s climate change objectives. This included considering a ban on the registration of offshore vessels and oil rigs. But a change of government in early September prompted by a vote of no confidence against Kalsakau, has made it unclear if this work will continue.
Just weeks after coming into power, the new government appointed Bohn as special envoy for Vanuatu’s International Shipping and Maritime Affairs, charged with “promoting Vanuatu’s interests on expansion of national maritime and shipping”.
The office of the prime minister, Sato Kilman, and the minister of climate change, Ulrich Sumptoh, did not respond to questions about whether
the shipping registry review would go ahead.
Seru from the Pacific Islands Climate Action Network welcomed discussion of shipping registries “so that Pacific governments can act … and ensure that they are not enabling the expansion of the fossil fuel infrastructure”.
He added that Vanuatu and other Pacific nation were “punching above their weight in the global climate arena to push for higher ambition”.
The Oil Change International campaign manager, David Tong, also emphasised Vanuatu’s leading role in calling for a fossil fuel-free Pacific.
“The reality is that small island developing states have relatively limited avenues to bring in international revenue, particularly compared to the rich nations driving most of the world’s fossil fuel expansion.”
Tong said Oil Change International’s concern was with wealthier nations and companies driving oil and gas expansion, adding that his organisation was “confident” Vanuatu would reform its shipping registry in line with its climate goals.