Market News

 March 25, 2020
Breaking bad: Uncovering the oil industry's dirty secret

 Every year hundreds of ships and oil rigs are sold to shipbreaking yards in south Asia where they are cut apart by low-paid migrants.

We followed a trail from the north coast of Scotland to the beaches of India to reveal how wealthy companies profit from an industry which destroys lives and damages the environment.

Alang is a graveyard for ships.

Its coastline was once filled with fishing boats --- but today the rusting hulks of oil tankers and ocean liners stretch for miles along the shores of this town in north west India.

The premium prices paid for steel make it a lucrative place to dismantle ships.

Alang's high tides and sloping coastline also create the ideal natural conditions for the work.

Its shipbreaking yards are the busiest in the world and oil companies are among their biggest customers.

About a third of all vessels which are sold for scrap will end their days there.

But it comes at a cost to men like Javesh and Naveen, who work in the searing heat and pollution of the yards.

"We do not have human rights," said Naveen.

"Sometimes we feel like we're animals. We're treated like insects by these people."

Javesh and Naveen agreed to speak to Mark Daly from the BBC's Disclosure team on condition of anonymity.

We have changed their names to protect them and their families.

Workers in the yards dismantle ships by hand with blowtorches and sledgehammers so the valuable metals they contain can be salvaged.

Little goes to waste.

Steel and wood are recycled at workshops which surround the shipyards and everything else finds its way to open-air markets in Alang where you can buy boxes of lightbulbs from oil tankers or cutlery from cruise ships.

Like most of the workforce, Javesh and Naveen are migrants from Uttar Pradesh, one of the poorest parts of India.

They live on the outskirts of the yards in shanties without running water, toilets or electricity.

"We buy scrap wood which comes out of ships and we build these places ourselves," said Javesh.

"The company doesn't take responsibility for the labourers at all.

"All they care about is the work."

Shipbreaking is dangerous and dirty work and men like Javesh and Naveen are in constant danger, according to Ingvild Jenssen.

She is the founder and director of Shipbreaking Platform, an organisation which monitors the industry.

"They risk gas explosions, falling from heights, being crushed by massive steel plates that fall down --- those are the main causes of the fatal accidents," she explained.

Workers often lack basic safety gear and at least 137 lost their lives between 2009 and 2019, according to Shipbreaking Platform.

The organisation believes that number is probably only the tip of the iceberg because shipyard owners refuse to discuss accidents.

More than half of shipyard workers say they have been injured on the job, according to a survey last year by the Tata Institute in Mumbai.

During their interview, Javesh and Naveen showed our team numerous scars and burns on their legs and arms.

There is only one small clinic in Alang and more seriously injured workers have to travel to the city hospital in Bhavnagar -- a 30-mile journey on unpaved roads which takes more than an hour.

Workers are also at risk from hazardous waste like asbestos and mercury contained in many of the vessels sold to the scrapyards.

"Many more workers succumb to occupational diseases and cancers years after they've worked at the yards because they are exposed on a daily basis to toxic fumes and materials at the yards," Ms Jenssen added.

Wealthy companies can make millions selling ships for demolition, but Javesh and Naveen are only paid about 35p an hour.

They send whatever money they can home to their families, who they may not see for months.

"If we get scared, our families would starve," said Naveen.

"This is what it comes down to - the labourers have to do the work... safety or no safety."

Despite the conditions in the shipyards, workers are too afraid to speak out.

"If we say anything we are thrown out of the company," said Javesh.

"If someone speaks they will be fired so no-one speaks.

"We are not treated as humans should be.

"Basically we are helpless and because we are helpless we keep working."

The industry has also taken a toll on the environment in Alang.

The way ships are dismantled makes it almost impossible to contain pollution.

There are no docks or harbours --- instead ships are beached and sit in the open water as they are cut apart, allowing waste to wash in and out with the tide. Many yards use the "gravity method", where chunks of metal are allowed to fall onto the beach as they are cut away.

Oil rigs are more difficult to beach so they are dumped on tidal flats up to a mile and a half away, where pieces are cut from them until they are light enough to be dragged ashore to finish the work.

It usually only takes a few weeks for a vessel to disappear, although the largest of them, like the Schiehallion --- an 86,000 tonne floating factory from the North Sea which was dumped in Alang in 2017 --- can take more than a year to dismantle.

Scientific studies have identified unsafe levels of poisonous heavy metals in the waters around the town, including iron, mercury, copper, zinc and lead.

Shipbreaking Platform describes the yards as "toxic hotspots".

"When you have hundreds of vessels ramped up one beside the other... releasing toxic fumes, air pollution and heavy metals... into the sea, that pollutes the sea, the soil, and also the groundwater," said Ms Jenssen.

"So the environmental impact... is massive."

Fishing was once the most important business in Alang, but nets have grown empty since shipbreaking took over in the 1980s.

"In the last 20 years the size of the catch has gone down," said Dinesh Gulab Bivagar, a community leader from Ghogha, a small town a few miles north of the shipyards.

"Before, our fisherman brought back full boats of fish.

"Now they don't bring back as much, there aren't as many fish in the sea."

He estimates the catch in Ghogha has fallen by 75% in the last two decades but he is wary of blaming shipbreaking.

Few local people are prepared to be critical of an industry which is so vital to the economy in Alang.

The fish that are left may not even be safe to eat --- one study from 2010 found they contained dangerously high concentrations of poisonous metals.

And new tests show the impact of shipbreaking is not limited to the marine environment.

Sediment samples collected by the BBC from one stretch of the breaking beach in Alang were analysed by experts at the Scottish Environmental Protection Agency (Sepa).

They found the sediment was more than 50% metal - which they demonstrated by placing a magnet over one of the samples.

Sammi Mallin, a scientist at Sepa, believes this is a result of the shipbreaking process.

"When we looked at the metal content of the sample under high magnification, we were able to pick out little metal spheres," she explained.

"They're produced when something like a high-temperature acetylene torch is used for cutting steel and they fuse to the gravel they land on.

"We would not expect to find these in a natural environment."

Alang has a global reputation as a centre for shipbreaking, but it is illegal for companies in the UK, the United States and Europe to send ships there without removing hazardous waste from them first --- a costly and time-consuming process.

"Developing countries should not be the dumping ground of hazardous materials from the developed world," says Ingvild Jenssen, from Shipbreaking Platform.

"A vessel containing asbestos and other toxic materials should not be exported to India or Bangladesh or Pakistan for breaking, but recycled in a facility that can handle and properly dispose of these hazardous materials."

So how did 200 vessels - many formerly owned by European companies - end up in Alang last year?

Oliver Holland is a lawyer at Leigh Day, a law firm which specialises in human rights cases.

He says the answer is companies known as cash buyers who act as middle-men between ship owners and shipbreakers.

"The cash buyer is simply an intermediary, and is there, we believe, to try and avoid liability. To put something between the seller and the beach," said Mr Holland.

He says this is a common system which is used across the South Asian ship recycling industry. Ship owners sell their vessels to cash buyers, who sell them on to scrapyards.

"The cash buyer changes the name and the ... registered owner, which is usually a postbox company in the Caribbean or whatever other tax haven," he explained.

"They are literally just there as a sort of a loophole to get around any regulation ... or legal liability."

Cash buyers often change the flags of the ships they purchase, which can make it difficult to enforce regulations saying where and how ships should be dismantled.

"You can reflag a vessel [to change] the country of ownership and the flag that it flies, which is important because it determines ... which laws it comes under," explained Mr Holland.

So-called "end-of-life" flags often belong to countries with lower taxes and fewer regulations, like The Comoros and St Kitts and Nevis.

They are rarely seen on working ships, but about half of the vessels sold to scrapyards in South Asia last year began flying them before they were beached.

Global Marketing Systems (GMS) describes itself as the world's largest cash buyer and has close ties to the shipbreaking industry.

In 2017, it signed what it called the biggest deal in the history of offshore recycling when it bought five oil rigs from Diamond Offshore, a leading offshore drilling company with offices in the UK and the US.

A short time later, two of the rigs --- the Ocean Alliance and the Ocean Baroness --- were sold to shipbreaking yards in Alang.

They arrived there in late 2018 after a long journey from the Gulf of Mexico.

Javesh and Naveen work for the Hariyana Group, which bought the Ocean Alliance.

"From the very beginning, I have been working on the ship," said Naveen.

"That ship has not been cleaned of waste."

Hariyana calls itself a "green ship recycling company" and says it follows "the best industry practices".

Its website is filled with promotional images of workers wearing head-to-toe safety gear.

But footage filmed at the shipyard tells a different story.

Workers can be seen cutting up a section of the Ocean Alliance wearing jeans and shirts.

Most of them are wearing hard hats but none are masked.

"I have difficulty breathing, I feel like I'm suffocating," said Javesh.

"The ships are very old; there's paint and all sorts of waste accumulated there," added Naveen.

"When we light the torch and begin to cut, different kinds of gasses rise which we can smell and we really find it awful.

"We want to avoid it but... we are helpless."

Javesh said workers at the Hariyana yard were not given masks to protect them from the fumes.

"We buy a thin towel using our own money... and we wrap this scarf or towel around our mouths," he explained.

One photograph shows workers clambering up an anchor chain without climbing equipment.

"Shipyard owners give safety," added Naveen. "But they give it in a bit of paper, in a video --- in reality we get nothing."

There is a facility in Alang for the disposal of hazardous waste.

But watchdog organisations and the workers we spoke to say not all of it goes where it is supposed to.

Naveen said "garbage" like leftover oil and clothing is often dumped in the sea or burned.

The BBC had intended to ask the owners of the Hariyana shipyard about the conditions -- but instead our team was detained by officers from the Gujarat Maritime Board (GMB), which controls the port in Alang.

Despite having visas from the Indian government giving them permission to film a story about the ship recycling industry, the officers insisted that they needed specific permission to film near the breaking yards.

While the team were told they were not under arrest, roadblocks were set up and the officers demanded that they hand over their footage - which they refused to do.

After initially being questioned for about four hours, the local police arrived and asked them to drive to a nearby station, where the questions continued.

None of the officers explained on what legal grounds they had been detained, and the GMB did not respond to the BBC's requests for comment. However, it was clear that journalists asking difficult questions about the shipbreaking industry were not welcome in Alang.

The Cromarty Firth, near Inverness on the north coast of Scotland, is a world away from the heat and pollution of Alang.

Its cold, clear water is home to dolphins and porpoises, and its rugged coastline is surrounded by mountains capped with snow for most of the year.

But even there, the oil industry has made its mark.

For 40 years, the Cromarty Firth has been used as a place to keep out-of-work oil rigs waiting to be scrapped or put back to sea.

There are 11 rigs in the Firth today --- and the Ocean Nomad, Ocean Vanguard and the Ocean Princess are among them.

Diamond Offshore was paid $3.8m for the Ocean Nomad and Ocean Princess, but never disclosed how much it received for the other three vessels it sold to GMS in November 2017.

After the purchase, GMS hired two Chinese heavy-lifting ships to carry the three rigs to their final destination.

But just days before they were due to be removed from the Cromarty Firth, Sepa stepped in.

It believed GMS intended to take the rigs to India in breach of laws banning the international shipment of hazardous waste.

"Our preference is that waste stays in Scotland and gets dealt with," said Terry A'Hearn, Sepa's chief executive.

"If it's going to move somewhere else, we need to make sure that it's going to the right place, where it can be handled properly.

"We got some intelligence that wasn't necessarily the case... so we stopped the rigs moving."

Documents filed by GMS show significant amounts of waste aboard all three vessels, including the poisonous heavy metals cadmium and mercury.

The Ocean Princess alone contains an estimated 428 tonnes of waste, including about a tonne of asbestos.

An inventory for the Ocean Vanguard lists PCB, a highly toxic chemical which was used as an electrical coolant and insulator until its production was banned worldwide.

After being bought by GMS, the names of the rigs and their flags were changed.

They were also transferred into the ownership of three postbox companies connected to legal firms in Caribbean tax havens.

Two of those companies had already been involved in the sale of ships to scrapyards in Alang.

Throughout its dealings with Sepa and the BBC, GMS denied it was the owner of any of the vessels it bought from Diamond Offshore - insisting it was only acting as an agent for other, unnamed companies.

But in January 2018, Sepa issued a warrant ordering GMS to leave the rigs in the Firth until it could prove they would be disposed of correctly.

Over the next few months, GMS repeatedly pressured Sepa to let it move the rigs from the Cromarty Firth, complaining that it was too expensive to keep them there. More than two years later, they still have not left.

"We're not here to interfere in people's economic activities on a whim, but those rigs will stay there until we're convinced they're going to the right place," added Mr A'Hearn.

The BBC understands they are now owned by a postbox company registered in Liberia and that GMS intends to have them dismantled in Turkey, where there are a handful of EU-approved yards and conditions are generally better than in India.

So could Diamond Offshore have done more to ensure their vessels were disposed of responsibly in the first place?

Ingvild Jenssen, from Shipbreaking Platform, says yes. "Western shipping companies are earning millions of dollars... exploiting poor practices in South Asia.

"I think Diamond Offshore is completely aware of where these platforms would be heading.

"They sold them to one of the largest scrap dealers, well known to have close links to the beaching yards in South Asia.

"The price that Diamond Offshore got for these platforms is also a clear indicator of the scrap destination, because the higher the price, the more likely it will end up in South Asia."

Mr A'Hearn, from Sepa, says Diamond has a legal duty to ensure that the rigs are recycled properly.

"There's what's called a 'general duty of care' in these sorts of environmental laws, where anybody in a chain is supposed to make sure that they're giving their material to someone who's going to be doing the right thing with it," he said.

One of the largest vessels ever broken in India, the Schiehallion, also had links to the North Sea.

It was named after the oil field where it worked for 15 years, processing millions of barrels of oil for BP every month.

In 2014, BP sold the Schiehallion to a company called Bumi Armada on the understanding that it would be put back to work -- but in 2017 it was sold again to a cash buyer. Eight months later, it was beached in Alang.

BP said it had "carried out due diligence" before selling to Bumi Armada.

"We also built specific provisions into the sale and purchase agreement which went beyond the market standard contract terms... covering the future of the vessel and imposing conditions which required that in the event it was to be scrapped or recycled, it would be done in accordance with best industry practice," a spokesman added.

Bumi Armada told the BBC its deal with the cash buyer was "contingent on the vessel being scrapped in compliance with green regulations".

Diamond Offshore declined to be interviewed by the BBC.

In a statement, the company said its sales contracts require "those that we contract with to comply with all applicable laws", including in the "preparation, transport and recycling of rigs".

"The rigs ceased to be part of the Diamond fleet more than two years ago and we are therefore not in a position to comment on the current status or future plans for these rigs," the statement added.

The BBC also put a series of questions to GMS about the company and the shipbreaking industry's practices.

GMS declined to be interviewed and described the allegations as "sensationalist".

GMS denied it intended to flout international laws by removing the rigs from the Cromarty Firth.

"The owners had obtained the relevant legal permissions, customs clearances and consents from the relevant local authorities," it said.

GMS also said it had not committed to scrapping the rigs before Sepa intervened, saying: "While the rigs were purchased at their residual (scrap) values... the owners were still evaluating various commercial options."

It said claims about poor conditions at the Hariyana shipyard were "false".

GMS added: "We... appreciate the opportunity to clear up any misconceptions and biased views often driven by well-funded, self-serving individuals and groups that are responsible for misrepresenting the true state of affairs.

"GMS has historically and proudly played an active role in bringing about positive developments and changes."

The Hariyana Group did not respond to the BBC's requests for comment.

South Asia remains the most popular destination for ships at the end of their lives, but a growing number of shipyards in Europe are applying for EU accreditation to dismantle ships.

This ensures that the work is carried out under strict conditions.

A handful of Indian yards have also applied, although none have been approved.

Michael Milne is managing director of Dales Marine Services in Edinburgh, which is one of the 41 EU-accredited yards.

"Ships and oil rigs have to be decommissioned in an environmentally-friendly fashion, which is what we hope to do here," he said.

Dales aims to recycle up to 95% of the vessels it scraps and, like in Alang, most of the work is done by hand.

But at Dales, cutters wear at least six separate pieces of safety gear, including fire-retardant overalls and breathing masks to protect against the toxic fumes released during the cutting process.

Vessels are dismantled in a dry dock to prevent pollution escaping.

"Health and safety is paramount for us," Mr Milne added.

"Everybody's kitted out properly, everybody gets what they need... we want to do it in a proper fashion, let everybody go home safe at night."

While three of Diamond Offshore's rigs did not reach India, hundreds of vessels like them are still being sold to shipyards in Alang every year.

Chris Pålsson is the head of Lloyd's List Intelligence Consulting, a company which forecasts trends in the shipping business.

He says the way the shipbreaking industry operates makes it difficult to hold companies accountable.

"This is the darker side of the industry, but there are parts of this business who don't really care about anything but money," he said.

"Because the ship is moveable you can register it anywhere... and it's sometimes very hard to find the ownership of ships if somebody tries hard to not be seen. It's difficult to find a binding legal case if you can't even find them."

But there are signs this may be changing.

In 2018, a UK shipping company called Zodiac Maritime was sued on behalf of a worker who lost a leg dismantling a ship it used to own on a shipbreaking beach in Bangladesh.

The law firm Leigh Day alleged that by selling to the cash buyer GMS, Zodiac was aware of the conditions under which its ship would be dismantled.

The company denied any responsibility, but in 2018 it settled out of court for an undisclosed sum.

Oliver Holland, who brought the case, said: "It's very significant we're able to represent workers in these cases.

"It's... one of the only avenues of legal liability for these companies.

"We hope... it will ensure there is some legal liability for these companies and that the workers get some retribution for what's happened to them."

New legislation may also make it more difficult for companies to avoid their responsibilities.

In December, the Basel Amendment --- a global ban on exporting hazardous waste to developing countries --- became law.

"Price is important but an increasing number of ship owners are putting a value against the image of the company as well," Mr Palsson added.

"They're quite frightened of being connected to anything that is deemed unsustainable, so I think there's a slow process of things changing for the better."

While living conditions for the workforce in Alang have changed little over the last decade, there have been some improvements at the yards.

Work still begins in the tidal zone, but concrete-bottomed areas have been built at a number of yards for secondary cutting.

The Hong Kong Convention, a basic set of rules and regulations for the ship recycling industry, was adopted in 2009 and more than half of the yards in Alang claim they are now compliant.

It says they must put together a plan showing how each vessel will be recycled, and maintain a list of hazardous materials aboard.

Shipyard worker Naveen had a final message for European companies deciding how to dispose of their vessels.

"First you need to ensure that your ships are in a safe condition," he said.

"Ensure that they are not harming the labour and the local environment.

"Once you have made sure, only then should you send your ships here."