Unable to encrypt removable hard drive
The issue was with GPT partition. Somehow the disk didn't have it.

After running the next command:

diskutil partitionDisk /dev/disk2 GPT JHFS+ New 0b


disk utility started offering needed encryption options.

/dev/disk2 is the path of removable hard drive.

If you are not sure what is the path, run diskutil list - that will list all the disks and you'll be bale to pick yours.