Bunker Bulletin Jan/Feb 2012

1bunker bulletinwww.bunkerbulletin.com

JANUARY / FEBRUARY 2012

INDUSTRY PROSPECTSUncertainties remain

SULPHUR RULESDeFininG an inDUstrY

AHEAD OF THE GAMEViGiLance is KeY

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PUBLISHERPetromedia Ltd

1st Floor, Regency House4, Clarence Road

Windsor, Berkshire SL4 5ADUnited Kingdom

MANAGING EDITORUnni Einemo

Tel: +44 (0) 1753 410 [email protected]

MAGAZINE EDITORAdam Currie

[email protected]: +1 604 692 2552

PUBLICATION MANAGERPaul Davis

Tel: +44 (0) 7899 886 982paul.davis@ petromediacorp.com

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SALES OffICESE-mail [email protected] or contact your regional representative

EUROPE, MIDDLE EAST & AfRICA

LondonRavi Kashap

[email protected] Tel: +44 (0) 1753 410 940

THE AMERICASMiami

Philip Smallcorn [email protected]

Tel: +1 954 916 2620

ASIA, PACIfICSingapore

Michael Chia [email protected]

Tel: +65 6324 0920

contents JAN/FEB 2012EDITOR’S NOTE � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 2COMMENTARy � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 5COMPANy NEWS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 6SCARy PROSPECTS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 12TOP TEN CORPORATE MOMENTS Of 2011 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 14MAERSK TAKES ON NEW SULPHUR REGULATION � � � � � � � � � � � � � � � � � � � � � � � � � � 162012: A yEAR Of DEfINITION � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 18SULPHUR RULES SET THE AGENDA � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 20AHEAD Of THE GAME � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 22INDEPENDENT COMPANIES BECOMING KEy PLAyERS � � � � � � � � � � � � � � � � � � � � � 24ASIA: A GREEN AWAKENING � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 26CALENDAR � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 30UPCOMING EvENTS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 33EvENT REvIEW � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 34MARKET REvIEW � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 36CREDIT & RISK: WORTH THE WEIGHT � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 46MARKET SECTOR REPORTS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 48PRO-fILE � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 53CLASSIfIEDS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 54THE LAST WORD � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 56

No part of this publication may be reproduced or stored in any form by any mechanical, electronic, photocopying, recording or other means without the prior written consent of the publisher. Whilst the information and articles in the Bunker Bulletin are published in good faith and every effort is made to check accuracy, readers should verify facts and statements direct with official sources before acting on them as the publisher can accept no responsibility in this respect. Any opinions expressed in this magazine should not be construed as those of the publisher.

Magazine Design : Dylan RekertCover Photo : ©shutterstock.com/Steve Skinner

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editor’snoteWelcome to the first issue of the Bunker Bulletin for 2012 in what promises to be an eventful year. The past twelve months has been a challenging period to say the least, with both shipowners and operators having had to contend with continued bunker price increases, a floundering market and increasingly stringent environmental regulations.

With market volatility and economic uncertainty still very much dominating the global marketplace, it is little surprise that many within the bunkering sector are looking to 2012 with bated breath.

Many will be asking themselves exactly how long the shipping market can compete within such a challenging realm, while those that were adequately prepared for these challenges are set to thrive.

This issue takes on a ‘Review 2011/ Preview 2012’ focus and looks back at some of the highlights and lessons of the past year, what these taught us and how these can be used moving forward. The Bunker Bulletin takes a look back at the Top Ten Corporate Moments of 2011 and exactly what effects these moments had on the global marketplace.

Lintec Testing Service’s Michael Green explains why January 2012 had been the focus of the shipping world for some time and why any adjustment to mandatory requirements prompts questions both before and after changes come into force.

The Head of Maersk Marine Technology, Bo Cerup-Simonsen, runs readers through why his company feels that most bunker suppliers are able to provide on spec marine fuel with the exception of a chosen few.

The Bunker Bulletin provides a brief overview of why Singapore and Hong Kong are pushing for greener shipping practices in an effort to align with a growing consciousness towards sustainable shipping, while Marco Tritto, Bunker Business Manager for Petrobras in Europe, explains his company’s response to the drive for low-sulphur fuels.

Eirik Andreassen, Managing Director of DNV Petroleum Services, explains why developments in Middle Eastern bunker quality, cat fine levels, and off specification cases are just some of the issues his company will be keeping a close eye on in 2012.

Be sure not to miss out on the Bunker Bulletin’s regular features that include detailed global market reviews of the bunker sector, industry event previews, as well as informative market sector reports across the entire shipping sector.

I hope you enjoy this issue and look forward to seeing you next time.

Adam CurrieMAGAZINE EDITOR Petromedia [email protected]

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Call us on 0845 6011880, or better still, come and meet the crew at IPW.Email: [email protected]

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commentary

Unni EinemoMANAGING EDITOR Petromedia [email protected]

a harD seLL

Manufacturers of exhaust gas cleaning systems, or scrubbers, have found that getting shipowners to sign up for their solutions has been a hard sell. Why? One fundamental problem may be a discrepancy between claims made by various manufacturers, and what owners actually believe. Some advertised systems just seem too good to be true. If owners took all the promised benefits at face value, you’d expect orders to be flooding in by now.

Many owners have misgivings about the maturity of existing systems and their suitability for specific ship types. In the meantime, operators whose ships sail mainly inside designated Emission Control Areas (ECAs) continue to call for a delay in introducing the 0.10% sulphur limit, saying the rise in cost of fuel as they are forced to switch from heavy fuel oil to marine gas oil will erode their ability to compete. They seem to have bought into the idea of scrubbers as a cost-effective alternative to low sulphur fuels, but have told anyone who will listen that the technology is not sufficiently developed for widespread adoption by 2015.

The case for scrubbers has not been helped by some early trials. Experiences with installations on one ferry operating in Europe showed failings in reliability, compliance and presented corrosion problems.

But the notion that scrubbers are not yet ready to reliably and effectively help owners meet strict emission limits could be about to change. DFDS has confirmed that the scrubber installed on the main engine of Tor Ficaria is now operated by the crew without assistance, and is achieving effective exhaust gas cleaning. As with all pilot projects, some adjustments were required, but after achieving continuous operation for over a year, DFDS has concluded that the technology is working. This is so far the only proven main engine scrubber in operation.

Other barriers to the uptake of scrubbers remain, such as the ‘split incentive’ whereby owners have to pay for the investment, but the charterer receives the benefits in the form of reduced fuel cost. The economic climate is also unhelpful; try to convince a bank to fund installation of a technology with an unproven track record on your ship.

Still, a few commercial orders have been confirmed recently, both for auxiliary engines and for full vessel systems. Most are for newbuilds. Some think that in the future, the question when building new ships won’t be “if” it should have a scrubber, but what type of scrubber it should have; the choice being between open loop seawater scrubbers, closed loop freshwater systems, dry scrubbers, hybrids or other systems yet to be introduced.

Despite a hostile economic environment, maybe 2012 will be the year that scrubbers have a wider breakthrough as owners seek ways to comply with tightening emission limits.

The industry will, however, continue to meet resistance from those that wish to see the end of fuel oil as a bunker fuel, either because of the pollution caused whenever fuel ends up in the sea, or because they want a better quality fuel that is easier to handle onboard.


companynews

INDIAN LOGISTICS fIRM ExPANDS INTO BUNKERINGIndian downstream logistics firm Aegis Group has launched its marine products division to provide bonded bunker fuel, lubricants and technical services.

Aegis will be offering operations and maintenance services at Oil and Natural Gas Corporation Limited (ONGC)’s Nhava supply base bunker depot, and start operations at Bharat Petroleum Corporation Limited (BPCL)’s Jawaharlal Nehru Port Trust (JNPT) international bunkering depot from February 1, 2012.

The company will be offering ISO 8217:2010 specification 380 centistokes bunker material at Mumbai and Kochi port. Intermediate fuel oil (IFO) 180 cSt product and high flash high speed diesel (HFHSD), marketed in India as marine gas oil (MGO), will also be available at these ports.

Aegis Group owns and operates India’s largest integrated bulk liquid cum liquefied petroleum gas (LPG) terminal in Mumbai port, the largest private bulk liquid terminal at Kochi port, and a pressurised LPG storage terminal at Pipavav port.

BRIGHTOIL GETS SHAREHOLDERS APPROvALShareholders of Brightoil Petroleum (Holdings) Limited have approved the acquisition of shares and debts of an investment holding firm that it says will add a “new dimension” to its growth.

At a special meeting, independent shareholders voted for the purchase of Win Business Petroleum Group Limited for HK$581.25 million ($75 million).

The resolution received 100% vote from Brightoil’s fully independent shareholders, a filing to the Hong Kong Exchange showed.

The approval will see Brightoil acquiring shares and debts of the investment holding firm from Brightoil’s chairman Dr Sit Kwong Lam in exchange for shares in the company.

It added that the acquisition will further enhance its market presence in the oil and gas development and production business.

LUKOIL-BUNKER REGISTERS 2011 GROWTHRussian company LUKOIL-BUNKER has announced that its supply volume sold in 2011 grew to 1,065 million tonnes across all fuel grades.

According to the company, the growth of sales is connected to both with an increase in supplies within the Russian market and the company’s present expansion into foreign markets.

Apart from the increase in sales volumes, the company also recorded foreign market developments where it began operations in Kladovo and Constanta.

According to a recent statement, LUKOIL-BUNKER is providing services in Russia, Bulgaria, Romania, Serbia, Italy, Turkey and the Atlantic Ocean.

It outlined aims to improve operations in the Gulf of Finland where it intends to purchase two more bunker barges.

RISE IN BUNKER COSTS HITS HAPAG-LLOyDGerman box shipping firm Hapag-Lloyd has reported operating losses for the fiscal year, blamed largely on high bunker costs.

Parent group TUI AG said that Hapag-Lloyd contributed losses of $2.6 million to its result in 2010/2011 compared to profits of $195.4 million in the corresponding period a year ago.

Losses were made even as the company reported higher average freight and an increase in volumes lifted during the year.

“This decline was mainly driven by the significant rise in bunker costs and a weaker US dollar against the euro. Moreover, the market was characterised by strong competition,” said TUI.

“As a result, the rise in transport costs could only partly be offset by higher freight rates.”

During the year, the group reduced its invested capital in Hapag-Lloyd by $1.3 billion and thus cut its net debt by around $2 billion to $1.1 billion.

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PHILIPPINE fIRM ACqUIRES BUNKER SUPPLIERIndependent oil firm Phoenix Petroleum Philippines has concluded the acquisition of bunker supplier Subic Petroleum Trading and Transport Philippines (SPTT).

Phoenix Petroleum purchased 100% of SPTT’s 2,500 equity shares from previous owners, the company said in a disclosure to the Philippine Stock Exchange.

The primary purpose of the acquisition is to enable the company to expand its operations in the northwest and Central Luzon as well as in the Bataan, Zambales, Pampanga and Tarlac provinces, it said.

MAERSK TO UPGRADE COMMUNICATION SySTEMSSwedish telecoms company Ericsson is to supply mobile and satellite communications technology for Maersk Line’s vessels.

The equipment will help the shipping giant generate real-time information about vessel operation and bunker consumption, said Michael White, head of Maersk Line in North America.

Ericsson will fit 400 Maersk Line vessels with Ericsson antennas and Global System for Mobile Communications base stations.

WfS APPOINTS NEW MEMBER TO BOARDWorld Fuel Services Corporation (WFS) has appointed Abby F. Kohnstamm to its Board of Directors.

“Abby brings to our board a wealth of experience in global marketing and the strategic use of technology in business,” said Paul Stebbins, Executive Chairman of the Board of Directors.

Kohnstamm will serve as a member of the Compensation, Technology and Operations and Governance committees.

Kohnstamm was President and founder of Abby F. Kohnstamm & Associates, Inc.


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GROUP ACqUIRES NEW DOUBLE HULL BARGE Mexican marine oil distributor Bunker’s De Mexico confirmed that it has acquired the second of two new double hull barges.

The recently acquired Golfa III, which has a storage capacity of 7,000 mt will service the ports of Lázaro Cardenas and Manzanillo.

It joins the Golfa I that started operations last June at the Port of Manzanillo. The two new barges also join the current fleet of Golfa II and Pacifica II.

“These two new barges are part of Bunker’s De Mexico’s strategy to increase the Mexican Pacific Coast infrastructure to be able to grow the bunker fuel throughput,” said CEO Luis Medina.

CHINESE BUNKER SUPPLIER CfO RESIGNSThe Andatee China Marine Fuel Services Corporation announced the resignation of its chief financial officer (CFO) Wen Tong with effect from January 12, 2012.

“Tong’s departure was not due to any disagreement with the company, but due to his intention to pursue other professional and personal opportunities,” said CEO An Fengbin in a filing to the US Securities and Exchange Commission (SEC).

“The company is thankful to him for his service and dedication and wishes his success in his future endeavours.”

It added that Wen Tong will continue to serve as a member of the company’s board.

INTERNATIONAL BUNKERING ExPANDSBunker supplier International Bunkering DMCC has expanded operations to India with the opening of a liaison office in Mumbai.

The move will see Captain Virendra N. Mishra, Purnima Mayuresh Khandke, and Anurag Surana appointed as the office’s country head and business development managers respectively.

“The aim is to establish our brand as a leading bunker and lubricant trading company in India providing a first class service to shipping companies located in the country in need of bunkers and lubricants,” said Carsten Ladekjaer, managing director and CEO of International Bunkering in Dubai.

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fUEL OIL TERMINAL TO COMMENCE OPERATIONS SHORTLyThe new Novorossiysk Fuel Oil Terminal is expected to open soon, according to a leading Russian player close to the project.

Alexander Vinokurov, first vice president of Summa Group, said building work on the project had finished.

“We will push to increase the volume of oil products there,” he said in an interview in Moscow.

The Summa Group is a shareholder in Novorossiysk Commercial Sea Port (NCSP), the entity behind the terminal.

NCSP said in September it had borrowed $110 million to meet the costs of finishing the Novorossiysk Fuel Oil Terminal.

Reports said the money had been borrowed from a subsidiary of an Austrian bank on security of NCSP’s stake in the terminal. Work on the terminal began in April last year.

The terminal is expected to be able to handle 4 million metric tonnes (mt) of product a year, making it the largest fuel oil terminal in the Black Sea.

ISLAND PETROLEUM ExPANDS OPERATIONAL CAPACITyDue to an increase in demand for marine fuels in Constanta, Island Petroleum has taken on M/T Marilena II on Time Charter (T/C).

Managing Director, Chrysostomos Papavasssiliou said: “Marilena II, was T/C in November 2011 to meet growing cargo transportation needs; a step necessary in better servicing our customers and an indication of our commitment in the Black Sea region.”

In December Island Petroleum increased its product offerings in marine lubricants delivered at Romanian ports.

The move saw an addition to existing intermediary grades of cSt-30 to cSt-180, heavy fuel cSt-380 (RMG380) and MGO (DMA with 0.1% sulphur) offered in port and at inner and outer anchorage areas of Constanta and Agigea.

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BP OPENS BUNKER STORAGE fACILITy IN PORT Of BRISBANEGlobal oil major British Petroleum (BP) has officially opened its marine fuels and bitumen import facility at the Port of Brisbane.

Construction of the multi-million dollar facility commenced in 2008 and was completed in December 2011.

The new bunker fuel terminal has tanks with a storage capacity of 30,000 metric tonnes (mt), a dedicated barge wharf and a new double-hulled bunker barge.

The facility enables BP to store and deliver three different types of bunker fuels from the port - 380 censtistokes (cSt) fuel oil, 180 cSt fuel oil and marine gas oil (MGO).

The new bitumen facility is capable of supplying more than 240,000 mt of bitumen per annum.

ROLLS-ROyCE ANNOUNCES RANGE Of fUEL-EffICIENT SHIP DESIGNSRolls-Royce and China’s Bestway Engineering have unveiled a range of designs for energy-efficient ships.

The unveiled range of designs including liquefied natural gas (LNG) carriers, container vessels and general cargo ships, all configured to comply with and exceed future emission targets.

“They are tailored specifically to meet the needs of merchant shipping, where low emissions and reduced operating costs are key drivers,” said a Rolls-Royce statement.

It quoted a senior official as saying: “As international emissions controls are progressively introduced, the marine industry is increasingly collaborating to create highly efficient vessels that reduce operating costs and environmental impacts.”

companynews


BIMCO TO PUBLISH SLOW STEAMING CLAUSEA time charter clause for slow steaming will be published by BIMCO.

The clause was earlier adopted by BIMCO’s documentary committee, after conducting a pre-publication review.

“The team met in London and made a number of improvements to the layout and structure of the clause,” said BIMCO.

“The clause will now be circulated to all documentary committee members before being published by special circular along with explanatory notes later this month.”

According to BIMCO, the clause has identified two types of slow steaming - slowing down to a level which would not require owners to make engine modifications to the engine and “ultra” slow steaming, which requires additional optional provisions to vessels.

Technical and legal issues of slow steaming for all types of vessels have been covered in the clause. The technical aspects of slow steaming have been resolved and clarified with Wärtsilä and MAN Diesel.

With the completion of the slow steaming clause, BIMCO will now focus on voyage charters with the development of a virtual arrival clause, which will have its first draft ready for review in April 2012.

AEGEAN KICKS OffMOROCCAN OPERATIONSAegean Marine Petroleum has started bunkering operations at the deepwater Fnideq anchorage off TangerMed.

“Once again Aegean expands its presence in this strategic market through another location,” it said in a statement.

TangierMed lies on the North African Coast at the Western entrance to the Straits of Gibraltar where the Mediterranean meets the Atlantic Ocean.

Fnideq anchorage is 20 miles south of Gibraltar Eastern anchorage, just below the Spanish enclave of Ceuta in Morocco.

Jean Jose Metey, a Director at Aegean, told the Bunkerworld Conference 2011 that the new anchorage offers “an excellent alternative” to lifting bunkers in Gibraltar and Algeciras.

Metey said Fnideq was a new, well sheltered “waiting for orders” anchorage in the busy Strait of Gibraltar, with no ship congestion.

Products offered are all grades of intermediate fuel oil (IFO), both high and low sulphur, and marine gas oil (MGO). Aegean said ISO 8217:2010 specifications are guaranteed.

Operations will be 24 hours a day, seven days a week.

ENIRAM AMONG fASTEST GROWING TECH fIRMSA Finnish provider of fuel saving software for the shipping and marine industry has been named as one of Europe’s fastest growing clean technology (cleantech) companies at an awards ceremony in London.

“It is fantastic that our achievements, and the value of our software, are being so widely recognised by investors and assessors of clean technology,” said Philip Padfield, CEO of Eniram Limited at Cleantech Connect.

“It makes all of our dedication and hard work worthwhile.”

Last year Eniram was ranked 13th among Cleantech Connect’s top 20 list of fastest-growing cleantech companies.

According to Eniram, revenues have grown by 6,209% over the last five years.

In 2010, Eniram recorded a 300% increase in revenues over 2009, turning over $4.38 million. The company further expects to achieve a 200% revenue growth in 2011.

Eniram, through techniques such as dynamic trim optimisation, claims savings of up to 5% in fuel consumption and related operating costs.

Bunkerworld reported the third largest German cruise ship operator, Phoenix Reisen, has extended the use of an Eniram system onboard its vessels.

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> For more news, go to www.bunkerworld.com/news

SINGAPORE fIRM TO PLACE OvERSEAS BUNKER TANKERSSingapore-based shipping firm OHC Shipmanagement (OHC) is in talks with foreign shipowners offering to arrange charter contracts for bunker tankers they might want to deploy in the republic.

“We are currently talking with several owners based in China and the Middle East who are interested in bringing vessels into Singapore to operate as bunker tankers,” said Linus Lee, MD of OHC.

Lee said Singapore was phasing out single-hulled bunker tankers, which are not allowed to operate in local waters after the age of 30.

Single-hulled bunker tankers which are above 25 years old are not allowed to carry heavy grade oil (HGO), and can only switch to carrying marine gas oil (MGO) for a further five years, he said.

Lee believed 10% to 20% of Singapore’s fleet of bunker tankers would fall above the 30 years old limit within the next five years.

SINGAPORE BUNKER SUPPLIER BOOSTS OPERATIONS WITH NEW TANKERSingapore-accredited bunker supplier Vermont UM Bunkering Pte has taken delivery of a newbuild bunker tanker to support its operations at the port.

The double-hulled, double-bottom barge has the capacity to carry up to 6,500 metric tonnes (mt) of either 380 centistokes (cSt) bunker fuel or 500 cSt product.

“We would like to strengthen our fleet to further develop our market share in Singapore port, increase our service quality for our buyer and the ship owner,” said a company representative.

The company is scheduled to accept deliveries of two more newbuild bunker tankers of similar capacity by March 2012.

companynews

SHIPBUILDER SIGNS AGREEMENT TO INSTALL WäRTSILä SCRUBBERSShipbuilding company BLRT Grupp AS has signed an agreement with Wärtsilä that enables its shipyards based in Tallinn, Klaipeda and Turku to install scrubber systems built by the manufacturer.

The cooperation agreement, which will involve installation of scrubbers on ships that regularly operate in sulphur emission control areas (SECA) zones, was concluded for a period of three years.

“This agreement is the new phase of cooperation between our concerns that will allow not only to conduct general repairs in our yards, but also to modernise ships in accordance with the new requirements of international conventions,” said Gabriel Avanesov, marketing director of BLRT’s Tallinn Shipyard.

According to BLRT, analysts believe the scrubber market may grow to $70 billion by 2025.

BOMINfLOT GROUP ExPANDS SPANISH PORTS COvERAGEBominflot Group has expanded its bunker supply operations to the Spanish port of Sagunto.

“The products that can be supplied in Sagunto are the same as in Valencia, namely intermediate fuel oil (IFO) 380 RMG 380 ISO 8217:2010 and Gasoil DMA 0.1,” the company said.

Supplies in Sagunto can be arranged for a maximum of 1,900 mt of fuel oil and 230 mt of MGO “for safety reasons,” Bominflot said.

The company holds a license to supply bunkers both inside the port and at anchorage of Sagunto, which is located an hour’s sailing north of Valencia port. Enquiries for Sagunto and Valencia are handled by the company’s Madrid office.


“PerhaPs nothing in our industry was more welcome than the end of 2010,” World Fuel Services Chairman and CEO Paul Stebbins wrote in the first issue of the Bunker Bulletin a year ago. “It was a long, difficult year,” he noted, pointing to a struggling world economy, volatile rates and bunker prices, tightening credit conditions, and falling bunker sales.

Looking back at 2011, it seems things went from bad to worse. The outlook for 2012 appears moderately optimistic at best, and downright scary at worst. Following several shipping company casualties in 2011, many fear trading conditions in 2012 will lead to further bankruptcies. Counterparty risk could get worse, especially as shipping firms now face a credit crunch without the cash reserves they had built up during the boom years prior to the global financial crisis. The tightening of credit terms on bunker purchases seen during 2011 will likely continue as large sums are involved and suppliers are wary of the financial health of buyers.

POOR RATES, HIGH BUNKER PRICES

Overcapacity has become the bugbear for shipping as fleet growth due to newbuilds has caused supply to grow faster than demand. Analysts bandied about descriptions like ‘catastrophic’ and

‘disastrous’ for rates in the container and tanker sectors during 2011; many say these pressures will continue in 2012 and also hit the dry bulk sector.

The container sector, which collectively achieved record profits of around $20 billion in 2010 could have lost as much as $5.2 billion in 2011, according to the shipping consultant Drewry. Overcapacity, poor growth and the fight for market share drove spot rates down by more than 50% on major routes by the end of 2011, despite an estimated 6.5% growth in global demand for container shipping during the year. Drewry said the sector faces similar challenges in 2012 that could signal the end of some operators. Unless rates improve relative to cost, which will require scrapping or lay-ups, carriers’ cash reserves will run out during the second half of 2012, Drewry predicted.

According to Belgian tanker operator Euronav, freight rates were below break-even levels throughout the year and frequently insufficient to cover operating expenses, while bunkers were “extremely expensive” relative to freight. Analysts have mixed views on 2012 tanker prospects. Some think slower fleet growth combined with a slight increase in global oil demand will improve rates, mainly for VLCCs, while Suezmaxes could have the worst conditions for a decade because of a capacity glut and declining

aFter a DeterioratinG bUsiness cLimate in 2011, manY Fear 2012 wiLL be eVen worse.

BY UNNI EINEMO

13bunker bulletin

demand on their key trade lanes.Refining margins in 2011 remained weak as the cost of crude oil rose faster than the value of the products, causing some capacity reduction. This might have exacerbated a long-term trend for refiners to cut low-value fuel oil output and maximise production of high-value products, in turn having an impact on bunker prices. The price of 380 centistokes (cSt) fuel oil as sold to ships has come within a whisker of the all-time highs seen in July 2008. Tightening fuel oil supply and brisk demand for this product has boosted its value relative to crude.

WTI crude reached a record $147.27 per barrel in July 2008, but traded at around $100 at the same time as bunker prices in several key ports shot up to near-record levels. In Singapore, average 380 cSt prices in January were less than 3% shy of the July 2008 all-time high of $761.50 per metric tonne (pmt).

High bunker prices were cited as a problem for shipowners during 2011. 380 cSt prices in Singapore climbed rapidly from just under $550 pmt at the start of 2011 to around $650 pmt during the first quarter, then staying above this level for most of the year with the average for 2011 around $660 pmt. With 380 cSt prices exceeding $700 in Singapore and Fujairah, and levels of $670 and above seen in Rotterdam and Houston in January, shipowners continue to face high operating costs relative to income. There are few signs that oil prices will fall in 2012 as demand is expected to grow slightly, although a weakening global economy could trip up that forecast. More worrying is Iran’s threats to block the Strait of Hormuz or halts its oil exports in protest against US and European Union sanctions. The International Monetary Fund has warned crude prices could rise 20-30% if Iran halts oil exports.

BUNKER SALES GROWTH?

Although there is no reliable global estimate for bunker sales, the general view for 2010 was that volumes shrank as a result of

slowing global trade combined with more use of slow steaming. During 2011, the practice, which had mainly been used by container ships, was increasingly adopted by tanker operators. Despite poor market conditions in 2011, there was growth in demand for seaborne freight, and even with slow steaming this might have led to an increase in bunker sales.

Singapore has set another new bunker sales record in 2011, up 5.6% from 2010 to reach 43.2 million metric tonnes (mt). Rotterdam saw annual bunker sales rise by 2.5% to 12.2 million mt in 2011, the first increase recorded since 2006.

Rotterdam sales might be a better yardstick for global developments than Singapore, which has seen annual growth in bunker sales every year for over a decade. The Rotterdam Port Authority attributed higher 2011 sales to the growing size of container ships, which accounted for three quarters of total fuel oil sales at the port. There was not enough global data available as of January 2012 to discern a clear 2011 trend. Growing sales may have helped bunker suppliers increase turnover, which combined with improved sales margins per tonne of fuel seems to have improved profitability for some of the stock-listed players, at least during parts of the year.

EMISSION fOCUS

Last year the International Maritime Organization (IMO) took the first step toward a global regime to curb carbon emissions from shipping by adding a new part to MARPOL Annex VI on mandatory energy efficiency measures. Long term, the IMO also aims to introduce market based measures to further reduce ships’ relative fuel consumption. Much of the shipping industry thinks increasing

bunker prices will offer enough incentive, and object to being treated as a ‘cash cow’ to fund climate-change offset projects outside the sector. Prices will increase as a result of MARPOL Annex VI sulphur caps even without further policy instruments.

The global sulphur limit was reduced to

3.50% at the start of 2012, which has not had an impact on cost, but the entry into force of the North American Emissions Control Area (ECA) in August 2012 is expected to put pressure on available supplies of low sulphur fuel oil with less than 1.00% sulphur content, and push prices up.

Speculation about how to handle the transition to a 0.10% sulphur limit in ECAs in 2015 is likely to become more pressing in 2012. There are signs that scrubbing technology is gaining traction, with a handful of commercial vessel installations recently announced, and there is growing acceptance of liquefied natural gas (LNG) as a viable and cost-effective option, mainly for newbuilds. Research continues into alternative cleaner fuels such as biofuels, and while these are still prohibitively expensive, this could change if large-scale production of biofuels derived from algae or seaweed, for example, take off.

It looks like 2012 will be another challenging year with some tough decisions to be made.

SPECULATION ABOUT HOW TO HANDLE THE TRANSITION TO A 0.10% SULPHUR LIMIT IN ECAS IN 2015 IS LIKELy TO BECOME MORE PRESSING IN 2012

> For more information go to www.bunkerworld.com/features

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anDatee ceo eYes acqUisition oF the companY’s shares

New York-listed Andatee China Marine Fuel announced that its CEO, An Fengbin, planned to launch a tender offer to acquire all outstanding shares of the company that he does not already own. The proposed cash offer of $4.21 per share valued the Chinese domestic bunker supplier at an estimated $40.1 million. The proposed buyout proposal is currently being considered by a special committee formed by the company’s board of directors. At least four law firms have also commenced investigations on the proposed acquisition concerning “possible breaches of fiduciary duty and other violations.”

wärtsiLä anD sheLL to promote LnG bUnKer FUeL

Engine manufacturer Wärtsilä signed a cooperation agreement with Shell Oil Company to “promote and accelerate” the use of liquefied natural gas (LNG) as a marine fuel.

According to the companies, supplies of low cost, low emissions LNG fuel will be made available to Wärtsilä natural gas-powered vessel operators and other customers by Shell. The Joint Cooperation Agreement will initially focus on supplies from the US Gulf Coast, and later expand its efforts to cover a broader geographical range, the companies said.

chemoiL DiVersiFies into aViation FUeL marKet

Chemoil diversified into the global aviation fuel supply market with the formation of Chemoil Aviation. Chemoil stated that the expansion into jet fuel offers “great growth potential” and was consistent with its existing strategy. The move would allow Chemoil to leverage its existing business platform, as well as its marketing and supply expertise, to further diversify the company and expand its presence in the global downstream fuel marketplace, said CEO Tom Reilly. It will initially focus on selling aviation fuel to midsize commercial, including passenger, cargo and charter operators, as well as corporate aviation.

cheVron cLoses LonDon bUnKer DesK

Chevron decided to close its London bunker desk after selling its refining and fuels marketing business in the UK and Ireland to Valero for a reported $1 billion. Apart from its Pembroke refinery, which is a source of marine fuels including low sulphur fuel oil, Chevron also agreed to sell ownership interests in four major product pipelines and 11 fuel terminals. The deal will give Valero, the largest refining company in the US, its first foothold in Europe. Chevron put the Pembroke refinery up for sale in 2010 to lower its exposure to the refining business.

aeGean annoUnces withDrawaL oF LawsUits

Aegean Marine Petroleum Network Inc. announced that a class action lawsuit and a separate shareholder lawsuit filed against the company had been withdrawn. The complaints alleged that Aegean failed to disclose material adverse facts related to its financial position, business and prospects between January 4, 2010 and February 3, 2011. They also alleged

IN THE BUNKERING INDUSTRy

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that Aegean “knew but failed to disclose declining demand for its products and services, particularly in the Singapore and Rotterdam ports.” In a statement, Aegean President E. Nikolas Tavlarios commented: “When these lawsuits were filed, we told our shareholders, customers, and suppliers that they were without merit. We believe the withdrawal of both suits speaks for itself.”

traFiGUra acqUires bp anD exxonmobiL FUeL bUsinesses

Independent oil trader Trafigura made headway into the marine fuel oil business during 2011 with acquisitions from BP and ExxonMobil. In September, Trafigura via its subsidiary Puma Energy, acquired interests in BP’s fuels marketing businesses in Namibia, Botswana, Zambia, Malawi and Tanzania for a total of $296 million in cash. Earlier in March, Puma Energy acquired ExxonMobil’s fuels marketing and supply businesses including two marine fuel supply businesses, 290 fuel service stations, eight fuel storage terminals and four aviation fuel supply businesses across Belize, El Salvador, Guatemala, Honduras, Nicaragua and Panama.The sale did not include the refining and marketing businesses in South Africa and Mozambique.

bUnKer hoLDinG eYes nUmber one spot

Bunker Holding said it was closing in on World Fuel Services as the global bunker market leader after increasing its market share and posting record pre-tax profit of $56 million and $9.1 billion in revenues for the fiscal year. The result confirms Bunker Holding as the largest bunker company in Denmark and the second-largest in the world. Bunker Holding has a different accounting period to WFS, which is why it did not proclaim itself as the new global bunker market leader, said Group Vice CEO Keld R. Demant.

aeGean ‘criticaL sUppLier’ to troUbLeD Genmar

The General Maritime Corporation (Genmar) defended its payment of $2.7 million to Aegean Marine Petroleum Network after disgruntled unsecured creditors said the payment was “wholly improper.” Unsecured creditors raised objections to the payment of Aegean, which they identified as an “affiliated entity” of Genmar. They asked for the payment to be “disgorged and returned” to Genmar. Genmar’s chief financial officer Jeffrey Pribor declared to a US court that the payment to Aegean was “necessary” in order to secure continued supply of bunkers and post-petition credit terms from the supplier. Aegean is Genmar’s third largest creditor with claims amounting to $3.78 million.

bp sinGapore, sinopec FUeL oiL partner

Chinese bunker supplier Sinopec Fuel Oil signed a Memorandum of Understanding (MOU) with BP Singapore to establish a “strategic partnership” in the global bunkering business. The signing of the MOU was considered a “new breakthrough” in fuel oil business cooperation between BP and Sinopec and “the first step” for Sinopec in establishing a global business strategy. BP Singapore is the largest bunker supplier by sales volume in Singapore, while Sinopec Zhoushan is the second largest bunker supplier in China. Both BP and Sinopec will jointly collaborate on supply of both straight run and cracked fuel oil along with other areas of “potential cooperation.”

German Giants merGe to ‘LeVeraGe strenGths’

German trader Mabanaft GmbH & Co. KG agreed to acquire Bominflot Bunkergesellschaft für Mineralöle mbH & Co. KG. to form the world’s fifth largest bunkering group. The combination of Bominflot and Mabanaft’s bunker unit Matrix Marine will enable both companies to “leverage their respective strengths in sustainable fashion over the long term to secure further growth.” Under the agreement, all bunkering operations of Bominflot and Matrix Marine will be combined into the Bominflot Group, which will operate under the Mabanaft umbrella. The companies will continue to operate under their existing names which are “well known” in the market.

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most bUnKer sUppLiers are abLe to proViDe on spec marine FUeL with the exception oF a chosen Few, saYs

heaD oF maersK maritime technoLoGY.

BY GABIAN CHEW

the recently imposed sulphur limit relating to marine fuels has left shipowners to source for new specification products at global ports.

The move by the International Maritime Organization (IMO), under MARPOL Annex VI, to provide a “cleaner” marine industry, may also see the emergence of some “rotten apples” which authorities should take note of, according to the Head of Maersk Maritime Technology.

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SUPPORT fOR EqUAL REGULATIONS

“In general the Maersk Group supports raising the bar with regard to environmental regulation as long as regulations are equal for all,” Bo Cerup-Simonsen told the Bunker Bulletin.

“We strongly support a ‘cleaner’ playing field while we urge the authorities to ensure it also becomes a level playing field.”

According to Cerup-Simonsen, most suppliers will be able to deliver 3.50% sulphur limit bunker fuel with the exception of some who might find it a “challenge” to provide the required specifications.

He believed “rotten apples” in the shipping industry may take advantage of the change in regulations to buy off-spec bunker fuels, which are above the sulphur limit - but priced cheaper.

“A lot more fuel oil will potentially be off-spec and sell at a discount,” he added.

“This significantly increases the incentives for the industry’s ‘rotten apples’ to burn non-compliant fuel unless the sulphur regulations are tightly enforced through strong policing and heavy penalties.”

WORKING TOGETHER fOR A CLEANER PLAyING fIELD

More regulations to enforce the use of cleaner fuels in 2020, when the global sulphur limit lowers to 0.50%, should be put in place to encourage shipowners to use compliant fuels.

“It will be a challenge for the industry, but we do support a cleaner playing field. The incentives to burn non-compliant fuel will be even stronger than the 2020 change, so that puts further emphasis on the

enforcement regime,” he said.The sulphur content of bunker fuel

sourced from different ports varies based on several factors, including suppliers blending skills, quality of cutter stock, location of the port and its sources for marine fuel.

Apart from the above factors, Cerup-Simonsen also felt that bunker fuels sourced from ports closer to high-sulphur sources, such as sour crude, will be most exposed to higher sulphur

content, along with more cases of potential debunkerings. However, suppliers can avoid debunkerings if shipowners and suppliers work together.

“In the case of off-spec fuel with a suphur content of more than 3.50%, it may be possible to blend it down to a compliance level with 1.00 to 2.00% sulphur heavy fuel oil (HFO) on a case by case basis and by agreement with the ship’s flag state,” he said.

THE fUTURE MARINE fUEL

The market for marine fuels in the future may be different due to several developments in liquified natural gas (LNG), biofuels, abatement and other forms of renewable technology.

Abatement technology, which includes the use of scrubbers to reduce sulphur emissions from ships, will allow the shipping industry to continue burning “a significant amount” of intermediate fuel oil (IFO) material even after limits are lowered to 0.50% sulphur in 2020, noted Cerup-Simonsen.

Though the use of abatement technology on vessels is promising, Maersk is still open to new ideas, should they arise.

He added: “Maersk is actively looking into a range of alternatives and we’re very open to new ideas. If someone out there needs a partner to test and develop a

potential solution, we have a lot to bring to the table.”

“For example, we have a large number of some of the industry’s most experienced and talented technicians, we have test vessels and we have strong relations to virtually all key parties in the marine fuel world.”

Research on biofuel, Maersk believes, is still in its “infancy.”

Differences between 3.50% sulphur IFOs and bio-blended IFOs could not be made certain at this stage.

“There are differences, but it is too early to conclude on many of the details. We have been storing and burning biofuel on a test vessel for some time now and have had good results,” revealed Cerup-Simonsen.

He referred to an experiment in December 2011, where Maersk Line tested an algae-based biofuel, with similar properties as marine gas oil (MGO), in one of Maersk Kalmar’s auxiliary engines during its one month long voyage from Bremerhaven, Germany to Pipavav, India.

Maersk Line’s target is, by the year 2020, to reduce its carbon dioxide (CO2) emissions output by 25% per compared to 2007.

‘ROTTEN APPLES’ IN THE SHIPPING INDUSTRy MAy TAKE ADvANTAGE Of THE CHANGE IN REGULATIONS

THOUGH THE USE Of ABATEMENT

TECHNOLOGy ON vESSELS IS PROMISING, MAERSK IS STILL OPEN TO NEW IDEAS, SHOULD

THEy ARISE


18 www.bunkerworld.com©istockphoto.com/blackred

the build uP to January 1, 2012 has been the focus of the shipping world for some time, in anticipation of the long awaited reduced global sulphur cap.

The drop from 4.50% to 3.50% is the first significant global change in sulphur levels since the introduction of MARPOL Annex VI in May 2005.

Any significant adjustment to mandatory requirements always prompts questions both before and after the change comes into force, and as we adjust to the reality of a 3.50% sulphur limit the nature of these questions moves to examine the practicalities of compliance. For all ship owners/ operators the issue of compliance is a significant one, however, ongoing concerns relating to obligations for compliance cannot be allowed to distract from future progression.

Now that the new legislation is in place we have to consider what the New Year will bring with regard to the growth of shipping and the ongoing supply of suitable fuels.

This being the case, 2012 should prove to be a pivotal year in the definition of the global bunker market.

For many, the issues surrounding the availability of fuel for use in accordance with the new global cap will be the key point of focus. The time that immediately follows any significant change always shows an increased number of “off spec” fuels as the market comes to terms with the new requirements.

However, as a fuel testing agency we would suggest that the thorough preparations conducted throughout 2011 should go so far as to limit the issues seen. If we examine the statistical data gained from the final half of 2011, we can see that the average content of a high sulphur fuel was approximately 2.4%, and around 95% of all high sulphur fuels supplied were already compliant with the new legislation.

So, beyond the concerns of immediate supply, what does 2012 hold as far as scope for development?

It would appear that 2012 provides the ideal opportunity for fuel suppliers, and purchasers, to examine their current standing and determine what is required to allow them to be fully prepared for the future.

Lintec testinG serVices’ technicaL manaGer michaeL Green FeeLs that 2012 proViDes the iDeaL opportUnitY For both sUppLiers anD pUrchasers to examine their cUrrent stanDinG anD Determine what is reqUireD to aLLow them to be FULLY prepareD For the FUtUre.

19bunker bulletin

Lintec Testing Services Ltd offers a global

marine fuel testing programme, with full

engineering comments and support in the

event of any off-specification fuels.

guestfeatureWith so many legislative requirements expected in the not too distant future, it is vital that all parties recognise the current gaps in their capabilities and address them in a manner that will allow them to continue operating as normal.

In doing this ship owners/operators must look to the upcoming legislative requirements and decide where their future lies.

The next major hurdle will prove to be the proposed 0.10% ECA requirements in 2015. The drop from 1.00% to 0.10% is probably the most significant alteration to date, as it will require a sizeable shift in policy regarding the purchase of suitable fuel. This alteration will also be significant in that it will be the first change in requirements since the implementation of the US Emission Control Area (ECA).

Previous changes have all taken place prior to the US ECA coming into force and as a result their impact had been restricted to a certain extent. However, with an area as large as the US being subjected to such a radical reduction in acceptable limits the effects are likely to be felt across the globe.

At this time, it would appear that the choice faced by all owners/operators is

whether or not to move solely to the use of distillate fuels in order to deal with reduced sulphur limits. Unfortunately this decision is not one to be taken lightly due to the overall cost implications.

There are, however, other alternatives on offer and the strongest of those would appear to be the application of abatement technology.

The continued use of high sulphur fuels in conjunction with a scrubber system would allow owners and operators a flexible solution that could deal with all legislative requirements worldwide.

A recent report issued by ExxonMobil, advising that oil, gas and coal still maintain the capability to meet with global demand of the total energy consumed by 2040, would appear to strengthen this argument.

The aspect of cost control will no doubt appeal to fuel buyers as the continued use of heavy fuel oil (HFO) would limit the inflated cost associated with exclusive application of distillate fuels. Additional costs will be incurred relating to the installation and upkeep of the scrubber system itself but these costs could be at least partially offset

by the savings made on the purchase of fuel. Another indication relating to the move

towards the use of technology is the recent link between Hamworthy Krystallon and Hyundai Heavy Industries. The signing of the first commercial “full vessel system” contract will be viewed as a springboard for other owners and operators to follow suit. Many considered that a positive approach such as this would be an essential catalyst in the decision making process, with many owners reluctant to make the first move down one particular path.

However, now that the first steps have been taken it would appear that the coming year will be the time in which significant decisions will need to be made regarding future policies. After all, 2015 is a lot closer than we think; 2012 is the time to prepare.


brazilian national oil company Petrobras started selling bunker fuel in 1972. It initially supplied products in Brazilian ports in what was a profitable outlet for surpluses of fuel oil.

Since then, Petrobras has been working step-by-step to improve and increase its

bunkering activities in Brazil and worldwide. Its first major overseas expansion was

in 2004, in Singapore, the largest bunker market in the world, where the company began selling low sulphur fuel oil (LSFO), a grade that at the time was offered by practically no other company.

One of its first contracts was with A.P.Moller-Maersk and another with Wallenius Wilhelmsen. Other grades became part of the Petrobras portfolio and today the company is active in both high sulphur (HS) and LS grades, selling ex-wharf and delivered.

TURNING POINT

A real turning point in the bunker market came in 2006 when the first Emission Control Area (ECA), then called a Sulphur Emission Control Area (SECA), became operational.

The drive behind the regulations, which set a new cap on the sulphur content of marine fuels used in the ECAs, was to protect the environment.

The first was established in Europe’s Baltic Sea, while the second became operational in 2007 in the English Channel and the North Sea.

Regulators saw the cutting of sulphur emissions from ships as a way of easing problems of “acid rain” in parts of Europe, as well as improving air quality in ports and population centres near busy shipping lanes.

The sulphur limit for marine fuel used in ECAs was set at 1.50%. It has since dropped to 1.00% and will be decreased in 2015.

LOW SULPHUR

When the second wave of European ECAs became operational, Petrobras began offering LSFO in Rotterdam.

Because of the sweet characteristics of Brazilian crude oil, Petrobras’ refineries produce a surplus of LSFO and product from Brazilian refineries that are currently used to supply the European operation.

Now, depending on circumstances, at least one or two Panamax tankers with cargoes of LSFO are brought across the Atlantic each month to meet commitments in the fuel oil and bunker markets.

With a typical sulphur content of maximum 1.0%, the product is suitable for

marco tritto, bUnKer bUsiness manaGer For the oiL Giant petrobras in eUrope, LooKs at his companY’s response to the

DriVe For Low-sULphUr FUeLs.

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blending with cutter stocks and can easily be made to ECA compliant bunker grades.

In 2009, Petrobras further expanded its Rotterdam operation and began offering HSFO, with product sourced from outside of Brazil.

At the time, sales in Rotterdam were handled from Petrobras’ company in London.

HARD TIMES

This year will see the sixth anniversary of the first ECA (or SECA) coming into operation.

Some authorities continue to enforce the strict regulations, however we are living in challenging times. Bunker prices are killing ship operators’ margins, if indeed they still have positive margins.

Low sulphur fuels come at a premium and, apart from larger companies, it is not difficult to see that some ship operators will struggle to comply with the ECA regulations.

We have to remember that in the 1980’s the cost of the bunker fuel was about 15%-20% of the total cost of the vessel; today it is approximately 50% or 60%.

Since the 2008 financial crisis a lot of new vessels arrived in the market, putting further downward pressure on freight rates.

Against this background, it is hard to believe that compliance isn’t an issue.

‘ROCK THE MARKET’

The introduction of a North American ECA in 2012 is set to rock the market.

There are a lot of uncertainties surrounding its implementation, ranging from demand and availability to issues of enforcement.

So far, Petrobras is a net exporter to Europe, with this trend set to continue, however, the company is prepared to address any additional demand that develops.

Looking further ahead, it is clear that the bunker sector will be an increasingly important part of the global fuel oil market and that the need for lower sulphur product will only grow.

How the marine fuel market will address the demand of continuously declining sulphur caps is unclear. Time will tell if the solution will be the definite adoption of scrubbers or a switch to distillate fuel or indeed, and perhaps most likely, a combination of both.

Meanwhile, Petrobras has already begun the year with a change in its European bunker structure. As a result of internal trading restructuring process, the company has transferred its bunker business from London to Rotterdam, placing it in the control of its new subsidiary Petrobras Global Trading BV (PGTBV).


The 33rd International Bunker Conference

Attend the IBC 2012: Increasing complexity – how to adapt“Increasing complexity – how to adapt” is the question raised for The 33rd International Bunker Conference.

The starting point for IBC 2012 is the paradigm shift over recent yearsfrom the Seven Sisters to Traders and Independent Suppliers - thedifferences in the responsibilities and the physical supply chain,combined with the regulations and high bunker costs have givenincreased challenges related to bunkers for not only the purchasers,owners, charterers and operators, but the whole bunker supply chain.

The agenda will focus on: • Production• Supply Chain• Operation• Regulation• Nomination to Arbitration

Using all the experience of the previous 32 conferences, with morethan 6400 people from 23 countries having previously participated,IBC 2012 is the place to be, to meet and network with bunker friends.

Read more about IBC 2012, the happenings, and the availablesponsor and exhibition opportunities at www.bunkerconference.com

Join the Bunker Professionals group on LinkedIn and The International Bunker Conference event page on Facebook!

For questions, please contact us at [email protected]

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18th – 20th April Oslo

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the global sulphur cap of 3.50%, imposed in January 2012, means suppliers must provide on spec bunker fuels for an entirely new standard.

Though most bunkering companies will see no issue with this, there has been a “surprising and positive development” regarding sulphur limit of bunker fuels witnessed in the Middle East.

Bunker fuel produced in the region was earlier thought to be more exposed to problems in meeting the new criteria, but has so far remained relatively on track since the beginning of the year, says Managing Director of DNV Petroleum Services, Eirik Andreassen.

“According to the more than 100,000 bunker samples tested by DNVPS in 2011, the global average sulphur content was 2.30%, which is lower than the MARPOL

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Annex VI 3.50% sulphur limit to be enforced in 2012,” Andreassen told the Bunker Bulletin.

“Middle Eastern ports, however, had an average sulphur content of 3.50% in 2011. This is largely due to the inherently higher sulphur content in Middle Eastern crudes compared to the ‘sweeter’ crudes in other oil producing areas.

“However, there is a very surprising and

positive development where we are seeing Middle East suppliers providing bunker fuels that meet the 3.5% sulphur limit. This development needs monitoring over a longer time to reveal if this is a trend, but still, what we are seeing now is very encouraging; suggesting that suppliers in the Middle East and other areas are quickly adjusting their deliveries to comply with the new global sulphur cap.”

AN INTERESTING CHANGE

With the exception of a 5% rate in sulphur non-compliance among IFO deliveries in Fujairah, DNVPS data indicated Middle Eastern ports generally saw compliant sulphur limit during the first week of January, with there being no further reports of bunker fuels exceeding the 3.50% global

DeVeLopments in miDDLe eastern bUnKer qUaLitY, cat Fines LeVeLs anD oFF speciFication cases are jUst some oF the issUes manaGinG Director oF DnV petroLeUm serVices, eiriK anDreassen, is KeepinG a cLose eYe on this Year.

BY GABIAN CHEW

“fUEL BUyERS AND USERS MUST BE MORE

vIGILANT TOWARDS THE qUALITy Of PRODUCTS

SUPPLIED”

23bunker bulletin

the performance over time so as to identify improvement areas or potential problems that could impact safety, maintenance, repairs and other bunker-related concerns,” he added.

“DNVPS does not foresee any improvement in overall bunker quality with increased blending to meet stricter sulphur regulations.

“The best advice we can offer ship operators would be to take a holistic

approach to managing their bunkers. The process should systematically cover fuel purchase, product delivery, onboard fuel handling and treatment, fuel consumption, and also post-consumption impact.”

PREDICTING THE fUTURE

Moving forward, DNVPS says it will not be able to forecast any specific quality problems for marine fuels in the future.

However, the organisation does predict a trend of increased fuel related problems, such as the emergence of bunkers with more cat fines.

DNVPS stated that cat fines in Singapore, the world’s busiest bunkering port, for all heavy fuel oil samples tested in 2011 was 34 mg/kg, up from 31 mg/kg in 2010 and 29 mg/kg in 2009.

“From our experience, if fuel blending is increased to produce fuels that comply with the lowering of the global sulphur cap to 3.50% and the implementation of the North American Emission Control Area – we are likely to see more fuel related problems on board ships,” noted Andreassen.

Additional issues such as unusual contaminants, poor ignition and combustion quality, as well as density and fuel stability will present safety and commercial risks to marine operations, Andreassen pointed out.

“From a regulatory perspective, it would not surprise DNVPS to see many cases of sulphur non-compliance initially as some suppliers may need to gain more experience in blending to tighter sulphur limits, while balancing the other quality considerations.”

sulphur cap in the following week.The need for increased blending by

Middle Eastern suppliers, to cope with the reduced sulphur content, was earlier believed to be a factor leading to increased issues including increased costs and quality control for bunker fuels in 2012.

“More costs could be incurred for reducing the higher sulphur content in Middle Eastern bunkers, for instance, through having to use more cutter stocks to bring down the sulphur levels. The additional costs might be passed to bunker buyers,” said Andreassen, who added “unregulated” cutter stocks could potentially compromise overall quality of bunker products.

It is thought that the increase in cat fines stems from the use of cutter stocks that had been introduced to the blending process in order to reduce overall fuel sulphur content of bunkers.

Andreassen has advised fuel buyers to also conduct their own homework and exercise caution before the purchasing of bunkers.

“Fuel buyers and users must be vigilant towards the quality of products supplied; not only in Middle Eastern ports, but whenever they are purchasing fuels,” said Andreassen.

“Individual fuel buyers should do their due diligence before committing to a purchase in a specific port, and consider other factors besides the per-tonne price, such as the supplier’s track record for complying with fuel standards and regulations.”

Further, procedures such as fuel testing, monitoring and trending of bunkers purchased from all suppliers should be practised, he added.

“Ship owners and operators should test the fuel delivered to their ships at a certified laboratory before use, monitor operations during consumption and trend


“INDIvIDUAL fUEL BUyERS SHOULD DO THEIR DUE DILIGENCE BEfORE COMMITTING A PURCHASE IN A SPECIfIC PORT, AND CONSIDER OTHER fACTORS BEyOND THE PRICE PER TONNE”

©sh

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WORLD AvERAGE SULPHUR DATAWORLDWIDE SINGAPORE HONG KONG ROTTERDAM fUJAIRAH SHANGHAI BUSAN

2.70% 2.88% 2.98% 2.71% 3.56% 2.87% 3.32%

2.74% 2.97% 3.14% 3.26% 3.35% 2.80% 3.21%

2.73% 2.93% 3.14% 2.90% 3.34% 3.38% 3.26%

20112012 Week 1

2012 Week 2

guestfeature


©istockphoto.com/LdF

russian bunker player Baltic Fuel Company (BFC), based in St. Petersburg, was formed in July 2008 as a result of the merger between Kontur Spb Ltd and JSC Perspective.

It was established to manage the assets of the two companies, as well as act as a bunker supply and trading company for both Russian and international markets.

stanisLaV KorneeV, GeneraL Director oF the baLtic FUeL companY oUtLines his companY’s

strateGY For the FUtUre.

25bunker bulletin

INvESTMENT

In September 2011, we announced a five-year, 3 billion ruble ($96 million) investment plan.

A key component of the plan is the development of our production and transport sector, as well as the upgrading of infrastructure in the Big Port at St. Petersburg. This plan includes the construction of a universal port terminal in St. Petersburg aimed at supporting all the company’s businesses.

We will also be developing environmental service complexes at ports in the Gulf of Finland and generally expanding our presence in Russia.

Our financial partner in the projects is Bank Saint-Petersburg- one of Russia’s leading financial institutions.

fLEET RENEWAL

In 2011, nine new vessels were added to BFC’s fleet with ongoing fleet renewal remaining an integral focus.

Currently, BFC has a series of four tankers under construction at the Baltiysky yard in St. Petersburg. Two tankers in the series were launched in 2011, while the rest are expected to be ready for operation by the beginning of the 2012 summer navigation season.

Over the next five years we intend to increase our fleet to 40 units. At the same time our development programme includes “fleet rejuvenation,” with the aim being to take the average age of the company vessels down to less than 15 years. Presently the company has 30 vessels.

Our fleet of environmental and bunkering vessels is based in St. Petersburg and the ports of the Leningrad region, while our river tankers operate in the Russian inland waterways during the summer navigation season.

The tanker fleet, meanwhile, is involved in the exporting of oil products to Europe throughout the year.

BFC is also currently developing its share of the oil products transportation sector based on Russia’s waterways, including the Volga and the Don. This development has the potential to open multiple opportunities for operations in the Azov-Black Sea basin.

For the moment, however, BFC is active in the St. Petersburg bunker market, waters of the River Neva and the port of Ust-Luga.

INDEPENDENT COMPANIES

St. Petersburg, Russia’s largest bunkering port in terms of volumes, remains extremely competitive, with bunker prices for 380 centistokes (cSt) product routinely undercutting the Rotterdam hub by more than $200 per metric tonne (pmt).

This is partly due to fuel oil prices at Russian refinery gates, as well as the nature of the local market. There are currently over 25

companies operating in the port’s bunker market. These include several large players, however, none are in a position to establish a monopoly, allowing opportunity for independent companies.

If we look at the Russian market as a whole, one of the main factors impeding development is that the principal bunkering companies are affiliated to the Russian oil majors. In this scenario, competitiveness is not always uppermost.

The experience of developed countries shows independent bunkering companies are key players in the bunkering market.

BFC, an independent player, manages to be amongst the market leaders by making use of instruments that are transparent and best suited to shipping companies, as well as other market participants.

The company is among the top three leaders within the local bunker market. We are confident that our strategic partnerships with some of the largest international shipping companies provide economic and business benefits for both parties moving forward.


guestfeature


as a key shiPPing region, Asia stepped up efforts significantly in 2011 to promote environmentally friendly shipping practices.

In particular Singapore, the world’s largest bunkering hub, launched a green shipping initiative geared at promoting green shipping, green ports, as well as green technology.

Since the launch of this focus in July 2011, the maritime authority has reported a positive response from the sector as a whole.

Meanwhile, Hong Kong bore witness to a shipowners’ initiative aimed at switching to the use of clean fuels while at berth in Hong Kong, under the Fair Winds Charter agreement, which became effective in January 2011.

Further to this, Hong Kong’s chief executive Donald Tsang, as well as the Hong Kong Environmental Protection Department (EPD) stepped up efforts aimed at exploring the possibilities of setting up an emissions control area (ECA) within the Pearl River Delta (PRD).

SINGAPORE’S GREEN INITIATIvE

In July 2011 Singapore implemented the Maritime Singapore Green Initiative in an effort to steer the shipping sector towards more environmentally friendly shipping practices.

The Maritime and Port Authority of Singapore (MPA) also underlined its support to the cause when it allocated up to $77.6 million towards the project

over the next five years.The programme, implemented under

categories including the Green Ship, Green Port and Green Technology, is expected to assist shipping firms to achieve standards that exceed the requirements of the International Maritime Organization (IMO).

“This initative underscores Singapore’s commitment as a responsible flag, and port state to clean and green shipping,” said Singapore’s minister for transport and second minister for foreign affairs Raymond Lim during the programme’s launch.

Through the Green Ship programme, all Singapore-flagged ships that adopt energy efficient ship designs beyond IMO’s energy efficiency design index (EEDI) are given a 50% reduction of initial registration fees (IRF), as well as a 20% rebate on annual

sinGapore anD honG KonG haVe pUsheD For Greener practices in the shippinG inDUstrY in an eFFort to aLiGn with a GrowinG GLobaL

eFFort aimeD at conscioUsness For sUstainabLe shippinG.

BY ARIANNE PEREZ

27bunker bulletin

TSANG ALSO MENTIONED PLANS TO STUDy, IN COLLABORATION WITH THE RELEvANT TRADES, WAyS TO IMPROvE THE qUALITy Of vESSEL fUELS SOLD LOCALLy TO REDUCE vESSEL EMISSIONS

tonnage tax (ATT).Meanwhile, the MPA’s Green Port

programme offers ships and vessels that use either type-approved abatement/scrubber technology, or low sulphur fuels beyond MARPOL requirements, a 15% reduction on port dues.

MPA has also set aside an initial $25 million from its maritime innovation and technology (MINT) fund as part of its Green Technology programme to help co-fund up to 50% of initiatives undertaken by local companies aimed at developing and adopting green technologies. It went on to add that it is willing to inject another $25 million into its technology programme “if the response is good.”

In a recent statement to the Bunker Bulletin the MPA said it “is very encouraged by the good response and participation from the industry since the implementation of the initiative last July.”

Additionally, it said that more maritime companies had “expressed interests to sign the green pledge, following the inaugural Maritime Singapore Green Pledge signing ceremony.”

“We look forward to more maritime companies participating in the Maritime Singapore Green initiative and coming forward to sign the pledge.”

At its launch, a total of 27 organisations had signed the pledge, while as of January 2012, 15 more organisations had committed to greener shipping within the region.

GREENER POSSIBILITIES

There are currently 15 shipping firms participating in the Fair Winds Charter. Despite this, key participants such as Maersk Line have pointed out that the initiative faces the risk of being discontinued beyond 2012 if local government does not come up with concrete measures aimed at assisting the programme.

Participating liners have also pointed out that, due to rising bunker costs, added costs for switching to cleaner fuels are now

pegged at approximately $2-$3 million per annum, opposed to the estimated additional cost of $1-$2 million per annum projected when the initiative begun.

Responding to the industry’s call for support, chief executive Tsang stated that Hong Kong would explore, along with with the governments of Guangdong, Shenzhen and Macao the possiblity of requiring ships to switch to low sulphur diesel while berthed within Hong Kong and PRD waters, as well as setting up an ECA within the region.

Tsang also mentioned plans to study, in collaboration with relevant trades ways to improve the quality of vessel fuels sold locally to reduce vessel emissions.

These plans have been echoed by the Hong Kong’s Environmental Protection Department (EPD) with its proposal for an industry-wide consultation on the possibilitiy of an ECA in PRD. The EPD also stated that it is proposing looking into the option of setting up an ECA “over the longer term.”

“To pursue designating an ECA within the PRD waters, we must seek the agreement of the Central People’s Government (CPG) to submit the proposal to IMO, under the relevant provisions of MARPOL Annex VI, by virtue of China’s status as a Party to the Convention,” said a EPD proposal in December 2011.

“It would involve in-depth studies and extensive discussions with the relevant ministries and departments in CPG and Guangdong, stakeholders as well as the

International Maritime Organization.” “Given the enormity of the task, our

immediate priority therefore would be to consider the feasibility of introducing a fuel switch by ocean going vessels (OGVs) while berthing in PRD ports, as we continue to pursue the establishment of ECA,” it added.

The EPD also highlighted the “practicability of fuel switching” while at berth in PRD ports, adding that it seeks “to ride on the voluntary act of the shipping industry and to ensure a level playing field to all OGVs.”

“The regional collaboration provides a platform for Hong Kong and other PRD cities to join hands to tackle the regional air pollution problem prevailing in the common air shed that we live under, thereby maximising the environmental benefits,” it said.

The EPD added that upgrading of the standard of marine fuel sold in Hong Kong “should be pursued to ensure no additional handling costs would be incurred from providing different types of marine fuels to different local vessels and to maximise the environmental benefits.”


©istockphoto.com/Kadir Barcin


CONQUERING NEW HEIGHTS OF BUSINESS PERFORMANCE

WORKING SOLUTIONS FOR ALL YOUR BUNKERING NEEDS

Addax Bunkering ServicesAN AFFILIATE OF THE

ADDAX AND ORYX GROUP

12, rue Michel-Servet P.O. Box 404 1211 Geneva 12 Switzerland Tel. No: (41-58) 702 90 40 Fax No: (41-58) 702 91 40 E-mail: [email protected] Website: www.addax-oryx.com

WEST & EAST AFRICA

ATLANTIC/INDIAN OCEAN

CANARY ISLANDS

GERMANY

GREECE

WORLDWIDE TRADING

Project4 24/1/12 15:22 Page 1

29bunker bulletin

CONQUERING NEW HEIGHTS OF BUSINESS PERFORMANCE

WORKING SOLUTIONS FOR ALL YOUR BUNKERING NEEDS

Addax Bunkering ServicesAN AFFILIATE OF THE

ADDAX AND ORYX GROUP

12, rue Michel-Servet P.O. Box 404 1211 Geneva 12 Switzerland Tel. No: (41-58) 702 90 40 Fax No: (41-58) 702 91 40 E-mail: [email protected] Website: www.addax-oryx.com

WEST & EAST AFRICA

ATLANTIC/INDIAN OCEAN

CANARY ISLANDS

GERMANY

GREECE

WORLDWIDE TRADING

Project4 24/1/12 15:22 Page 1


fEB

01 - 025TH BUNKER fUEL MANAGEMENT SUMMIT London www.acius.net/aci/conferences/eu-mbf5.asp

07 - 085TH ANNUAL SHIPPING fINANCE ASIA SUMMITSingapore www.shipping-finance.com

08 - 10SEATECH 2012Marina di Carrara, Italy www.sea-tec.it

08 - 11THE SHIPPING, MARINE & PORTS WORLD ExPOMumbai www.chemtech-online.com

09 - 10INTERMODAL ASIAMelbourne www.transportevents.com

15 - 16ANNUAL OffSHORE SUPPORT JOURNAL CONfERENCELondon www.rivieramm.com/events

20 - 22IP WEEKLondon www.ipweek.co.uk

20THE BUNKER LUNCHLondon www.bunkerworld.com/bunkerlunch2012

20IBIA ANNUAL DINNER 2012London www.ibia.net

21 - 22LNG SHIPPING CONfERENCE 2012London www.informaglobalevents.com

22 - 243RD ANNUAL PACIfIC PORTS CLEAN AIR COLLABORATIvE CONfERENCESan Pedro, California www.ppcac.org

23 - 24INTRODUCTION TO BUNKERING Hong Kong www.ibc-asia.com

23 - 24CHINA GREEN SHIPBUILDING TECHNOLOGy CONGRESS 2012Shanghai www.noppen.com.cn

calendar23 - 24IMAREST BALLAST WATER TECHNOLOGy CONfERENCELondon www.imarest.org

27 - 02SHIPPING HONG KONG WEEKHong Kong www.shippinghongkong.com

28 - 29RINA THE ENvIRONMENTALLy fRIENDLy SHIP CONfERENCELondon www.rina.org.uk

28 - 29BUNKERING AND INfRASTRUCTURE fOR LNG fUELLED vESSELSLondon www.informaglobalevents.com/event/LNG

28 - 01CHINA MARITIME 2012Hong Kong www.bairdmaritime.com

28 - 01BREAKBULK CHINA CONfERENCE & ExHIBITIONShanghai www.breakbulkevents.com

©istockphoto.com/Andrea Zanchi

31bunker bulletin

> For more on events go to

www.bunkerworld.com/events

MAR

01 - 023RD ANNUAL CHINA PORT TECHNOLOGy & INvESTMENT CONGRESSShanghai www.noppen.com.cn

07 - 08ANNUAL MARINE PROPULSION CONfERENCE London www.rivieramm.com

12 - 13TRADEWINDS SHIP RECyCLING fORUMSingapore www.nhstevents.com

13 - 14OCEANOLOGy INTERNATIONALLondon www.oceanologyinternational.com

13 - 15INTERSPILL LONDON 2012London www.interspill2012.com

14 - 15THE SHIP PROPULSION SUMMITSingapore www.wplgroup.com/aci

14 - 16ASIA PACIfIC MARITIME 2012Singapore www.apmaritime.com

19 - 20BUNKERING 101 TRAINING COURSESingapore www.cconnection.org

19 - 21CMA SHIPPING 2012Stamford, USA www.shipping2012.com

26 - 273RD ANNUAL EUROPEAN BUNKER fUEL Amsterdam www.platts.com

27 - 299TH ANNUAL GREEN SHIP TECHNOLOGy Copenhagen www.informaglobalevents.com

29 - 306TH INDIAN OCEAN PORTS & LOGISTICS Mauritius www.transportevents.com

APR11 - 14MTB MARINE ASIABangkok www.coplandevents.com

17 - 18GLOBAL LINER SHIPPING CONfERENCELondon www.informaglobalevents.com

18 - 20SEA JAPAN 2012Japan www.seajapan.ne.jp/en

18 - 20THE INT’L BUNKER CONfERENCEOslo www.bi.no/ibc

22 - 277TH SINGAPORE MARITIME WEEKSingapore www.smw.sg


Got the riGht tools on your belt?

The Bunkerworld App for iPhone.Another key tool to support your business

decisions and stay ahead of the competition.

Visit www.bunkerworld.com/mobileappsfor more information

Access the latest Global News, Pricing and Industry Directory - Anytime, Anywhere.

33bunker bulletin

upcomingevents

BUNKERING SINGAPORE

June 2012Singapore

THE INT’L BUNKER CONfERENCE

18 - 20 April 2012Radisson Blu Scandinavia HotelOslo, Norway

THE BUNKER LUNCH 2012

20 february 2012Thistle Marble ArchLondon, UK

Bunkerworld is delighted to announce the third annual Bunker Lunch, as part of the International Petroleum Week.

With over 2,000 influential decision makers in London for IP Week, this will be an effective and efficient opportunity to network with fellow attendees prior to the week’s events.

It is also the perfect chance to interact on an international basis, and exchange views on the challenges and opportunities of the bunker world and the petroleum industry in general, while enjoying a sumptuous buffet lunch.

Over 120 of the marine fuel industry’s leading players attended last year’s networking lunch including representatives from Aegean Marine Petroleum SA, BGK Marine Bunkering, ConocoPhillips, International Bunkering, Port of Rotterdam, Hapag-Lloyd AG, Thenamaris Ships Management and World Fuel Services.

To be held on February 20, 2012, the informal gathering from 12pm – 3pm will look to welcome some of the marine fuel industry’s leading players.

Places are limited and on a first come, first serve basis.

bunkerworld.com/bunkerlunch2012

Bunkering Singapore is a practical and comprehensive five day all-inclusive residential bunker training course.

The course is designed for newcomers, as well as existing professionals with previous experience within the sector.

A theory and practical based course that provides the opportunity to experience bunkering scenarios, while incorporating the latest developments and regulations, in a factual and creative manner.

The course is intended to sharpen skills and understanding, as well as reduce the overall cost of bunkering for your business.

A mix of theory and hands-on experience, delegates will be given a complete guide to bunkering; covering pricing and demand, understanding and compliance with the latest regulations and proficiency of sampling, analysis and fuel specifications.

Strategic purchasing skills will include price and credit risk management as well as legal issues relating to bunker contracts, quality and quantity claims, resolution of disputes and ship arrest.

The course provides real life theoretical experiences within a lab and trading room setting, while making the classroom time enjoyable and interactive.

bunkerworld.com.bunkeringsingapore2012

The 33rd International Bunker Conference (IBC) is the world’s longest running and most respected bunker conference. As organisers, BI Norwegian Business School is proud to confirm IBC is supported by the industry and has remained a proactive forum for more than a generation.

Making use of all the experience of all previous conferences, with more than 6,200 people from 20 countries having previously participated, IBC 2012 is the premier place to meet and to network with all businesses and organisations within the bunker sector and beyond.

The focal point for IBC 2012 will be the recent paradigm shift experienced by all including the Seven Sisters to Traders and Independent Suppliers.

Discussions will be aimed at how differences in the responsibilities of the physical supply chain, combined with the regulations and high bunker costs, have resulted in increasing challenges related to bunkers for not only the purchasers, owners, charterers and operators, but the entire bunker supply chain.

This year’s agenda will focus on: production, supply chain operation, regulation and nomination to arbitration.

bunkerconference.com


eventreview

the ibia Annual Convention 2011, held at Barcelona’s Hotel Rey Juan Carlos covered a wide range of topics relating to both bunker suppliers and buyers in a packed programme spread out over three days.

As delegates rose from their seats for the last time, heading towards the farewell wine tasting and lunch, International Bunker Industry Association (IBIA) Chairman Bob Lintott summed up the mood stating: “This has been a highly successful convention. I am especially pleased that there has been lively debate from the first to last sessions.”

IBIA’s event manager Charlotte Egan commented: “The IBIA

Annual Convention 2011 was a great success with

170 people attending. I would like to say a huge thank you to all the delegates and sponsors who attended and supported the event.”

Debate was evident from the event’s early stages when keynote speakers put forward conflicting views in relation to the impact of the impending 0.1% sulphur cap in emission control areas (ECAs), set to take effect in 2015.

Manuel Carlier, Director General of the Spanish Shipowners’ Association (ANAVE), and a Director of the European Community Shipowners’ Association (ECSA), voiced owners’ concerns, while Arnaud Leroy Senior Project Officer European Maritime Safety Agency (EMSA), and working with the European Commission (ECs) on Marine Fuels countered concerns stating that it would continue in its proposals, which

in some respects exceed International Maritime Organization (IMO) ECA

requirements.

Carlier commented that it was likely that bunker costs for ship operators would increase by between 70% and 100%, while operating in ECAs and that there would be a notable increase in operating costs.

Several IBIA members also voiced concerns on issues relating to the Middle East where residual fuel currently exceeds the 3.5% limit. Members argued that as none of the countries in the region are signatories to the relevant IMO regulations (Marpol Annex VI) and that there is nothing in place to force suppliers to provide IMO-compliant fuels.

The general assumption from delegates was that bunker fuel taken on in the Middle East will continue to exceed the 3.5% limit, at least until there is strong market pressure pushing for more compliant fuel grades.

During a session led by IBIA’s acting chief executive Trevor Harrison, it was agreed that IBIA would keep a close eye on developments regarding the enforcement of the 3.5% limit and that the association would be lobbying for consistent approaches to be taken by port state control authorities.

Harrison announced that IBIA’s board had also taken a formal decision to “become more closely engaged in LNG matters.” He explained to delegates that the association would also become more involved in the ongoing discussions on LNG as a viable fuel source at the IMO.

According to IBIA, in addition to the busy schedule of presentations and debates, the convention was a successful networking event, with sponsored attractions including

a reception, gala dinner at Barcelona’s stunning Arts Hotel as well as a

farewell lunch wine tasting session.

The IBIA Annual Convention 2012 will

be held from November 6-8, at the

Jumeirah Emirates Hotel, Dubai.

the Year’s ibia annUaL conVention broKe attenDance recorDs, coVerinG a wiDe arraY oF hot topics reLatinG

to the bUnKerinG inDUstrY.

©istockphoto.com/José Antonio Sánchez Poy

35bunker bulletin

Organisers: Posidonia Exhibitions SA, e-mail: [email protected]

www.posidonia-events.com

Posidonia4-8 June 2012, Metropolitan Expo, Athens Greece

The International Shipping Exhibition

A unique blend ofbusiness and social interactions

at the heart of Shipping

Be part of the great Posidonia experienceat a state of the art new venue

Bunker World 8-11-11 20:13 ™ÂÏ›‰· 1


marketreviewWORLDWIDE BUNKER FUEL PRICE AND QUALITY OVERVIEW

BUNKERWORLD INDEx (BWI)

BW380 BW180

BWI WTI

BW380 WTI

Correlation: 0.365

Correlation: 0.338Average Price Differential: -$78.33 (-$183.08 to $59.59)

Correlation: 0.337 Average Price Differential: -$54.35 (-$160.13 to $83.83)

BW180 WTI

> For more information on the Bunkerworld Index go to www.bunkerworld.com/bwi

BW

I

WTI

$/m

t

37bunker bulletin

IfO 180

IfO 380

GLOBAL

GLOBAL MARKET OvERvIEW

Global bunker prices displayed a very similar trend over 2011 with a steep rise to near record levels in the first quarter, followed by a period of range trading for the remainder of the year.

The BW380 Index, a daily average dollar value index of the 380 centistokes (cSt) grade from 20 key global bunkering ports - followed this trend and rose towards a two year high in December.

Starting the year at $516.50 per metric tonne (pmt) the index peaked at $695.50 pmt on November 9.

While the index tracked crude price surges at the beginning of the year, it traded within the $640 pmt - $700 pmt range from April until the beginning of 2012.

The BW380 price tracked the West Texas Index (WTI) price rally in the first quarter, however, showed marked resistance to the dipping trend recorded by the WTI trendline from May to October.

The BW180, which reflects 180cSt average prices, displayed a similar trend to that of the BW380 in comparison to WTI. The BW180 began the year at a low of $538 pmt and peaked at the year end at $693.50 pmt – a spread of 29%. Interestingly, the BW180

also resisted the steep price drops experienced by WTI during the mid-year.

During 2011, the BunkerWorld Index (BWI) - a weighted daily index made up of 20 key bunkering ports – displayed vast volatility in comparison to previous years. The main grades IFO380, IFO180, MDO and MGO are all included in the spread proportionate to their importance to the bunker market.

The BWI began the year at 1187 points, before climbing to a year high of 1528 in early December. As was the case with other BW indices, the BWI rose rapidly on the back of WTI price surges in the first quarter, before resisting a steep decline and holding within a set range for the remainder of the year.

WTI crude oil futures showed high volatility during 2011, peaking at $113.93 per barrel in April, before falling to $75.67 per barrel in October.

On the back of the above disparities, the annual correlation of BWI to WTI was low at 0.365 in comparison to 0.830 recorded in the last quarter of 2011.

qUALITy

Al + Si Water Sulphur


> For more information on the Bunkerworld Index go to www.bunkerworld.com/quality 37


FUJAIRAH 380 BW380PRICE

IfO

180

MGO

IfO

380

Correlation: 0.957 Avg. Price Differential: $4.82 (-$17.15 to $48.41)

fUJAIRAH

38

FUJAIRAH 180 BW180

FUJAIRAH MGO BWDI

> For more information go to www.bunkerworld.com/prices



SPONSORED BY

39bunker bulletin

IfO 180

IfO 380

MIDDLE EAST & AfRICA MARKET OvERvIEW

The Middle East/ Africa region saw a dramatic rise in costs across 380 centistokes (cSt) and 180 cSt grades during the first quarter of 2011, with prices displaying relative stability for the remainder of the year. Prices for both grades rose sharply in August, as well as November.

Prices for 380 cSt in Fujairah began the year at $515 per metric tonne (pmt), before peaking at $716 in November. This represented a significant spread of 37%. Prices for the grade dipped sharply, on the back of crude prices, during periods of African and Middle East unrest that threatened oil supply availabilities.

An indication of this uncertainty saw 380 cSt dip to $664 pmt in early October, before correcting itself to $716 pmt in mid-November - above the BW380 average at the time.

Interestingly, at the year’s peak the grade had experienced a rise of 69% from the year-low of $422 pmt recorded back in 2010.

As had been the trend for the entire year, the 180 cSt grade followed a remarkably similar movement to that of 380 cSt, rising rapidly in the first quarter and hitting an annual high in mid-

qUALITy

marketreview

November. Prices for the grade peaked at $744.50 pmt – a level not seen since August 2008.The port’s 180 cSt price remained above the BW180 trendline for the entire first quarter before intersecting this line multiple times throughout the remainder of the year.

Marine gas oil (MGO) tracked trends seen across other intermediate fuel oil (IFO) grades. MGO prices remained well above the BWDI trendline for the majority of the year, intercepting it on a single occasion in March. MGO prices peaked at $1,087.50 pmt in August 2011, in comparison to the high of $810 pmt recorded in 2010. The grade experienced less volatile price movements in 2011 in comparison to other IFO grades.

The 380cSt grade displayed the highest correlation relative to its associated BW index at 0.957, a vast improvement on the 0.79 recorded in 2010.

In Suez, the 380 cSt price trend showed a high correlation to the BW indice, intercepting the index a number of times over the recorded period. The port’s annual bunker prices showed a high correlation to its index at 0.95.


39> For more information on the Bunkerworld Index go to www.bunkerworld.com/quality 39


e n e r g y S O L U T I O N S / / w w w. o i l - m a r k e t i n g . c o m


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HOUSTON 180 BW180

HOUSTON MDO BWDI

> For more information go to www.bunkerworld.com/prices

Correlation: 0.972 Avg. Price Differential: -$18.96 (-$39.58 to $12.66)



41bunker bulletin

IfO 180

IfO 380

qUALITy

AMERICAS MARKET OvERvIEW

The Americas displayed a volatile price structure throughout 2011.Houston 380 centistokes (cSt) prices began the year at $498.50

pmt – already the highest level seen since October 2008. The grade tracked crude’s price surge in the first quarter, peaking at a year-high level of $673 pmt in May – above the BW380 Index trendline - a daily average dollar value index of 380 cSt bunker fuel from 20 key global bunkering ports. The grade fluctuated significantly from this point, however, remained within the range of $600 pmt -$650 pmt for the majority of the year.

The fluctuations in 2011 prices saw a high vs. low margin of 33% - an increase from 24% recorded in 2010. The 380 cSt price trend remained below the BW380 index for the majority of the period, intercepting it in instances where swift crude price rallied on the back of supply uncertainties.

The 180 cSt grade tracked the BW180 index rise in the first half of 2011 peaking at $739.50 pmt in May. The grade recorded a period-low of $524 pmt and traded within the range of $650 pmt -

marketreview

$700 pmt for the majority of the year. The 180 cSt price comparison between the 2010-low and 2011-high

was recorded at a spread of 75%, or $317 pmt. The grade closed out the year at $676 pmt in comparison to the BW180 average of $693 pmt.

Marine diesel oil (MDO) prices showed the most volatility throughout 2011, intercepting the BWDI continuously. MDO prices surged in the first half of the year to a high of $1062.50 pmt before closing out 2011 at $962.50 pmt. The year-low price for the grade was $775 pmt constituting a high vs. low margin of 37%.

Of the three fuel grades, 380 cSt displayed the highest correlation relative to its associated index in 2011 at 0.972 and an average differential of -$31.84 pmt.

Santos displayed larger spreads in prices for 380 cSt product, often going above the $700 pmt level throughout the year. The grade recorded a much lower correlation at 0.89 with a maximum price differential of $53.25 pmt. The annual price differential was recorded at $3.94 pmt.





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> For more information go to: www.bunkerworld.com/prices

Correlation: 0.981 Avg. Price Differential: -$31.85 (-$62.62 to -$7.45)

Correlation: 0.976 Avg. Price Differential: -$33.81 (-$67.45 to -$8.69)


43bunker bulletin

IfO 180

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EUROPEAN MARKET OvERvIEW

Rotterdam, as with most other global ports, experienced a dramatic price surge in the first quarter of 2011 on the back of a crude rally that began in mid-2010. The year also saw most grades trading at near-record highs.

Prices for 380 centistokes (cSt) began the period at $495.50 per metric tonne (pmt) which was exactly in line with the BW380 Index - a daily average dollar value index of 380 cSt bunker fuel from 20 key global bunkering ports.

The price for the grade at the port traded between the $600 pmt - $650 pmt range for the majority of the year, which was below that of the global average. It peaked at $672.50 pmt in August and entered 2012 at $620.50 pmt, in comparison to the $640 pmt recorded on the BW380 Index.

The 180 cSt grade mirrored 380 cSt price movements, peaking at $692.50 in late 2011. The grade saw a high vs. low spread of 35% - well above the 24% recorded in 2010. Overall the grade recorded a 28-day price volatility at 9%, and an increase in average

qUALITy

marketreview

price differential to -$33.81. The 180 cSt product price at the port remained below the BW180 Index for the entire year, with the peak being well below the global average high of $722 pmt.

As was evident for the grade throughout 2011, marine gas oil (MGO) displayed a volatile trend peaking at $1,064.50 pmt against a low of $769.50 pmt - a spread of 38%. From the steep drop off at its peak, prices for MGO remained below that of the BW Distillate Index (BWDI) for the remainder of the year. The grade ended the year at $925.50 pmt in comparison to the BWDI level of $984 pmt.

Pricing at the port remained in line with BW indices throughout the twelve month period. All three grades at the European hub displayed high correlations relative to their corresponding indices with 380 cSt product showing the highest correlation at 0.981. MGO displayed the lowest price differential at $28.85.

In Antwerp, 380 cSt prices displayed a similar correlation to Rotterdam at 0.98, with an average price differential of -$31.84 and maximum price differential of -$7.45





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> For more information go to: www.bunkerworld.com/prices




45bunker bulletin

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ASIA MARKET OvERvIEW

Prices at Singapore, the world’s leading bunkering hub, set the tone for global ports in 2011 tracking both crude declines and rallies. Singapore is considered a benchmark for bunker pricing, with many looking to the hub to contemplate forward fixed-contracts.

Due to the port’s stature, both the 380 centistokes (cSt) and 180 cSt grades in 2011 fell in line with the BW380 and BW180 Index - a daily average dollar value index of bunker fuels from 20 key global bunkering ports.

Singapore’s 380 cSt product began the year at $510.50 pmt which was in-line with the BW180 index. The grade peaked at $719 pmt, constituting a 41% spread between the year-high and low.

Bar the rapid price surge recorded in the first quarter of the year, 380 cSt prices traded between the $650 pmt and $700 pmt levels for the majority of the period. Prices very much tracked the crude price volatility witnessed as a result of supply availability issues relating to political instability in Africa and the Middle East.

Prices for 180 cSt tracked crude price surges in the first quarter,

qUALITy

before experiencing a second price run in November to peak at $732.50 pmt. As with other grades, prices at the port were largely in line with that of the BW180 trendline.

Marine gas oil (MGO) prices in Singapore showed a differing trend to that of other fuel grades in 2011. While it also recorded a price rise during the first quarter, MGO recorded marked volatility throughout the remainder of the year. It began the period at a low of $784.50 pmt before peaking at $1,063 pmt in April – a level not seen since late 2008.

In 2011, all three grades displayed high correlations to the BW indices. The highest occurred across both IFO380 and IFO180 at 0.966. This was further underlined in the low average price differential seen across IFO380 of only -$0.34.

Hong Kong displayed similar price trends to Singapore across its grades last year. Prices for 380 cSt at the port peaked at $725 pmt - a monumental 69% rise on the 2010-low. IFO380 recorded the port’s highest correlation to its index at 0.97.



marketreview



as many of you will know, Adam Dupré has been providing an insight into credit market issues over the past year in this publication. Adam has done an excellent job, and now, in my new role as Managing Director of Ocean Intelligence Pte Ltd, a role I maintain alongside that of owner and Managing Director of Awyr Las Pte Ltd, the responsibility falls on my shoulders. Adam is always a hard act to follow, so I’m thinking we need to look at this slightly differently, calling on some of my experience as a Credit Manager with one of the larger independent marine fuel suppliers.

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in a time oF increasinG economic UncertaintY it is essentiaL that creDit is manaGeD eFFectiVeLY,

anD bY the correct inDiViDUaL.

BY JOHN PHILLIPS

47bunker bulletin

the time has come to pull the plug. Too soon and the opportunity may be lost, too late and the ramifications both financially and in reputation can be significant.

No-one likes to make the wrong calls, but there is one simple fact in all of this. No matter how good their systems, to what degree they may utilise credit reports, market data, financial statements, internal experiences, how many ‘altman-z’ scores are run, whether they simply follow their gut or employ exotic modeling, the simple truth is, credit managers will eventually get caught. Hopefully by good management and process it is a small one, but at that point the credit manager becomes hero and villain all in one. Villain insomuch as his approval or recommendation may have put his company into a certain position of exposure, hero as he, alongside his legal department may be the clearest avenue to restitution.

And what drives this? Reputation! Let us not forget that whilst the Credit Manager is very unlikely to benefit from the bonuses secured by traders acting on his advice, the

ultimate reward for a wrong call will often see him offered as the sacrificial lamb to a disgruntled board.

So from me its certainly ‘hats off’ to the credit managers, and long may we at Ocean Intelligence, like our colleagues at other providers, be there to support them. The good ones can truly be worth their weight in gold.

The secret to all this is largely what makes the credit managers in our midst so valuable to their organisations. It is also why neither pure financial nor pure commercial people are ideally suited. It is easy enough to go to one of the mainstream providers like Ocean Intelligence, Lloyd’s List Intelligence, Dynamar or Infospectrum for a credit report, but the skill is in the interpretation of those reports, placing the valuable data contained therein into context influenced by both internal (ROI, risk appetite, availability and cost of finance, insurance parameters, securitisation etc) and external (competition, avails of product, quality of product, political restrictions etc) factors that count.

This ability to see beyond the immediate is essential, to view the risks involved in taking what is, after all, a short-term position view in the greater context of the customers’ long-term business strategy view. For example, we know there is an oversupply of VLCC’s in the market which has pressed TCEs down to levels well below operating margins for many operators. However, January 2012 has painted a rosier picture with the Winter Northern Hemisphere demand being matched with a pre-Chinese New Year rush and concerns over Iranian actions to block the Strait of Hormuz. As a consequence, the short-term outlook (those magic 30-60 days in which payment would be expected to be made) is good, thus lowering the risk profile of a customer, yet the mid-term outlook would remain worrisome given a slowing global economy and the glut of new tonnage entering the market.

The good credit manager, and this is where they really earn their accolades, will be able to quantify that risk into additional dollars per tonne to cushion the potential for default, illustrate to financiers and insurers that the risk is manageable, and most importantly tell their management when

credit&risk

John Phillips is Managing Director of Ocean Intelligence Pte Ltd, an international specialist marine credit reporting agency.

THERE IS NO DOUBT THAT 2012 IS GOING TO BE A vERy CHALLENGING ONE IN MANy SECTORS

Yes, while many of the fundamentals are unchanged, the simple truth in any deal we make to supply marine fuels remains as follows; if I give credit will I be paid? But then there is always so much more, and it is part of these additional factors that make a good credit manager such a vital

commodity and what I would like to explore further here.

There is no doubt that 2012 is going to be a very challenging one in many sectors. Across all four shipping markets there is misery: Newbuild; S&P; Freight & Demolition are all struggling. We have lost some names already and the good money suggests others will follow, especially as banks come to the realisation that they can no longer keep juggling all their balls at the same time, and that whilst the fundamentals of some businesses, together with their track record suggest continued support, others must, necessarily for the greater good, be cut free. However, with the levels of sub-chartering, re-letting and paper deals in the market, the impact could easily extend to parties that would not initially be seen as directly involved.

From all of this it is clear that whilst we may sometimes think of the shipping sector in isolation, in the credit management sphere they really do not have that luxury. For credit managers it is a matter of where the market is now, where will it be tomorrow and how about in 30 days when the invoice is due, or 60 days when it may be paid?

TOO SOON AND THE OPPORTUNITy MAy BE LOST, TOO LATE AND THE RAMIfICATIONS BOTH fINANCIALLy AND IN REPUTATION CAN BE SIGNIfICANT


DRy BULK SECTOR REPORTBY CAN BESEV

The Baltic Dry Index has plummeted to three digits - a miserly 862 points. Some sources are expecting to see further decline until the end of Chinese New Year holidays. Capesize TCE earnings were down to loss making levels below $7,000, with some vessels sailing around $5,000 - as opposed to October 2011 heights of $30,000. BCI dropped to 1,554 points on January 20 - a dip of over 2,000 points since December 2011. There are around 2,000 Capesize vessels chasing after scarce cargo, and new deliveries are still in excess of retirements despite good scrap prices of $465 ldt. Panamax earnings are better than Capesizes, with $8,000 fixtures on the spot market appearing as typical. Pacific earnings were lower than Atlantic rates and were told about vessels sailing at a loss for repositioning. Owners find it difficult to make ends meet resulting in a surge of Panamax-Capesize vessels for sale, pushing the prices down to as much as little over the scrap value. A year long contract for a modern Panamax was valued at $9,000 per day, down from earlier predictions of $12,000 for first half of 2012. Supramaxes mirrored Panamaxes on Atlantic/Pacific earnings difference with an Atlantic voyage translating to $10,000 and a Pacific journey at $7,000. Last year the segment did particularly well on Indian ore trade, however, the Indian government decision to raise the levy to 30% from 10% will discourage Chinese buyers with less Supramax traffic expected in and out of India in 2012. Typical rates for a 25,000 dwt Handysize is recorded at around $6,000. The segment is relatively stable, but is said to be beginning to lose momentum on the back of oversupply. TCE earnings for a 3,000 dwt vessel appear to have levelled off around $2,000 per day, while 6,000 dwt ships are able to earn $5,000 per day.

DIRTy TANKER SEGMENT REPORTBY JACQUELINE PHILLIPS

In December 2011, tanker freight rates increased in line with seasonal demand in the Northern Hemisphere. The Baltic Dirty Tanker Index (BDTI), climbed to an average of 844 points in December - 66 points higher than the rest of 2011. This rise in earnings was vital, as bunker prices (as at 12 January 2012) had risen by 44% in comparison to 12 months earlier, making the average spend to fill a VLCC’s fuel tanks around $6 million. During the first two weeks of 2012, benchmark VLCC TD2 spot rates between the Middle East Gulf (MEG) and Singapore rested at WS 53, down seven points from December time charter equivalents (TCEs) circa $26,000/day. Smaller tanker size ranges fared better with Suezmax TD5 at WS 83 (TCEs $23,000/day), approximately $10,000/day higher than average levels across 2011. Potential sanctions against crude oil exports from Iran and blockages of the Strait of Hormuz are also elevating dirty tanker freight rates. Tanker owners appear more optimistic about 2012 with small improvements in freight rates forecast. High operating expenses that were barely covered by

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tanker voyage revenues have also resulted in gloomy prospects. Those highly leveraged companies encountered depressed voyage revenues and had diminishing retained earnings to draw upon. Listed companies were hit particularly hard, and the voluntary filing in November 2011 by General Maritime Corporation (Genmar) for Chapter 11 bankruptcy protection, came as no surprise. As of January 2012, Genmar continues trading under court protection. Some companies sought alternative means to raise capital. John Fredriksen’s Frontline Ltd. underwent restructuring, effectively splitting into two entities, incorporating Frontline 2012 Ltd. On December 30, a private placement of 100 million shares raised $285 million for the company. Frontline 2012 Ltd. purchased assets held by Frontline Ltd. and debt was reassigned, to ease the implications of poor market conditions experienced in recent years. Frontline 2012 Ltd. took on all of Frontline Ltd’s existing $666 million debt on 15 tankers (purchased for $1,12 billion) and $325.5 million of future finance on newbuildings currently under construction.

49bunker bulletin

OffSHORE MARKET REPORT BY NIKKI CRESSWELL

The price of crude remained around $110 bbl and continued to buoy the offshore market. During November, the North Sea market - Anchor-Handling Tug Supply (AHTS) vessels - was often facing oversupply with a considerable amount of available tonnage in both Aberdeen and Norway. Platform-Supply Vessels (PSVs) were also available in abundance throughout the month as larger vessels saw margins reduced in comparison to smaller vessels. However, in late December there was a rush as charterers tried to cover requirements pre-Christmas, resulting in spot rates for PSVs rising to £8,000 per day (from £7,000 per day earlier in the month), while AHTS saw increases to around £35,000 per day from levels of £22,000 per day. Elsewhere, in West Africa there were continuing problems with the lack of suitable tonnage and heightened issues in relation to security with a higher frequency of attacks, particularly off the Nigerian coast. Over in Asia Pacific there was an increase in activity but rates remained flat due to oversupply. Nevertheless, with expectations of a rise in Exploration and Production overall, the sentiment was more positive. The US GoM market has continued to strengthen in utilisation and day rates particularly for high-spec PSVs. The market conditions also buoyed the rates for rig moves in most market segments. The recovery in the US GoM market boosted jackup rates and, in December, fixtures indicated 200 ft to 250 ft MC jackups taken at $57,000 to $61,000 per day- representing a rise from November contracts of around $52,000 to $53,000 per day and previous daily rates of $48,000.

credit&risk

continued >

CONTAINER SECTOR REPORTBY AMELIA TEO

In the final month of 2011 and the beginning of 2012, the container industry appears to have displayed somewhat of a breakthrough. Within a single month, two alliances had been announced in a desperate move to compete against Maersk Line’s Daily Service and its series of large containerships. Mediterranean Shipping Co and CMA CGM responded with an

alliance in the beginning of December, followed by a union of Grand Alliance and New World Alliance at the end of the month. To compete, liners had little choice but to regroup resources to maximise economies of scale and improve efficiency. Freight rates have shot up since December, in what is widely believed to be a temporary rally, due to pre-Chinese New Year cargoes rush. The composite index of the Shanghai Containerized Freight Index (SCFI) rallied to 975.31 points on January 6, 2012, compared to 855.54 points on December 9, 2011. On the key Asia-Europe trade route, spot freight rates rose almost 50% in a month from $490/teu on December 9, 2010 to $730/teu on January 6. Container carriers will need to continue laying up vessels to curb excess tonnages supply which resulted in freight rates declining across 2011. The number of containerships laid up has increased rapidly in the third quarter of 2011, with inactive figures reaching 210 vessels or 526,000 teu by early December 2011. Owners experienced worsening charter rates since June 2011. The Hamburg Shipbrokers’s (VHSS) New ConTex was at 401 points on January 12, 2012, compared to 417 points on January 13, 2011. Containership fleet growth is expected to increase from last year’s 7.9% to 8.3% in 2012 at a time of global economy credit crisis and uncertainty, presenting a serious challenge to the industry. More owners, who had previously refused to be locked into long-term contracts at present low rates, are beginning to back down and give in to charterers’ requests for longer term contracts.

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GAS SHIPPING SECTOR REPORTBY MALCOLM LEE

Last year was generally a healthy one for the gas (LPG) shipping sector. As in 2010, positive developments were not spread across all segments. In 2010, the gas shipping sector was the smaller (coastal) segment; whereas in 2011 the larger segments, particularly the VLGC, was positive - gaining the most attention. Nonetheless, ship owners in most segments of the sector overcame the weakness when they were surprised on the upside with robust activities and high rates during the second half of the year. The VLGC segment started the year (first quarter) with its normal seasonal weakness, with the benchmark Baltic LPG Freight Index at around $38 per metric tonne (pmt). Most of the robust activities and higher rates were recorded in the second half of the year, which witnessed the index peak at near $79 pmt. The freight index ended the year ahead at around $45 pmt. The vibrancy in this segment was fueled by the robust LPG market, which was strongly influenced by the supply side in MEG, particularly Saudi Arabia. During the last two months of the year, lower activities returned resulting in rates plummeting once more. During the year, in terms of spot charter rates for a VLGC (82,000-cbm), rates fluctuated between $335,000 (low) and $1.6 million (peak). The outlook for 2012 remains uncertain with experts forecasting a bearish scenario at least in the first quarter of the year. As at writing, the Baltic LPG index has started the new year on the downside, at around $41 pmt.

CLEAN TANKER MARKET REPORTBY APURVA MALI

Gains seen in the final week of 2011 were quickly cancelled in the first week of 2012. A buildup of tonnage, combined with closure of key arbitrage opportunities, saw a decline in demand with activity east of Suez being particularly subdued. The already grim outlook for large product tankers of between 80,000 dwt – 120,000 dwt (LR2s) is being negatively influenced by charterers using similar-sized Aframax crude tankers for the Asia-Europe gasoil trade. The Aframax carriers, arriving fresh from shipyards with clean tanks and without fear of cargo contamination, will add to the misery of product tanker owners such as Torm - which has a fleet of 30 LR2s. Increased distillate production and reduced demand for gasoline in the US has, and will, continue affecting rates in the Transatlantic gasoline route (TC2). The European market was further hit following the idling of a collective 337,300 b/d of Petroplus’ refining capacity. Ship-brokers’ reports generally suggested a drop in freight rates owing to the persistent oversupply of tonnage combined with limited cargo enquiries. Although, due to the clean product sector’s high sensitivity to global events, unforeseen events with a possible upside, can never be discounted. Navios Maritime Acquisition has clinched period charter deals for five of its newbuilding product tankers due for delivery in 2012, which have been hired out to two separate charterers at fixed daily rates, plus 50-50 profit sharing once market rates exceed the relevant index. The company’s CEO Cahi Frangou feels that by chartering out forward deliveries, Navios will continue its strategy of building long-term cash flow, while also securing upside potential through the mechanism of profit sharing. It is commonly thought that shipping sectors in 2012 face severe hardships. The product tanker sector, although not set for a dramatic turnaround, is expected to perform marginally better.

> For more information on market sector reports go to www.oceanintelligence.com

credit&risk

IT IS COMMONLy THOUGHT THAT SHIPPING SECTORS IN 2012 fACE SEvERE HARDSHIPS

51bunker bulletin

Survive.In a fast-changing world, the fittest companies are

those with the greatest insight.

We have seen a major financial crisis on a global scale, unprecedented and perhaps not yet fully appreciated or understood. It is possible that there has been a major tectonic shift in the world economy in the face of which many of the tools we are accustomed to use to predict the future

have become simply useless.

Ocean Intelligence uses innovative and interactive mechanisms to anticipate the constantly changing dynamics of the markets and of the players within them. We offer our customers the best possible insight as a

foundation for intelligent business development and robust survival.

Visit: www.oceanintelligence.com for more information.

Charles Darwin

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darwin-ad-final.pdf 1 2/11/11 4:25 PM


YOUR PERFORMANCE IN THE BUNKER MARKET DEPENDS ON INSIGHT GAINED FROM HIGH QUALITY, TIME SENSITIVE INFORMATION.

THAT THE GAME IS CHANGING FOR BUNKER PROFESSIONALS IS NO LONGER BIG NEWS. WHAT STILL ASTONISHES IS HOW COMPLEX THE MARKET IS BECOMING AND HOW HIGH THE STAKES ARE GROWING.

For information on subscription packages, prices or how to join, please visit:www.bunkerworld.com/store or contact us at [email protected]

bw tria for mag.indd 5 2/7/12 4:32:00 PM

53bunker bulletin

JOB TITLE ExECUTIVE VICE PRESIDENTCOMPANy OW BUNKERLOCATION AALBORG, DENMARKAPPOINTED 2010

pro-file

Jane dahl christensen

EDUCATIONAL AND EMPLOyMENT BACKGROUND

I was educated at the University of Aalborg in Denmark where I gained a degree in finance. On leaving university I became a state-authorised public accountant, and I worked for Ernst & Young in Denmark, as well as abroad.

I joined Wrist Group, OW Bunker’s parent company as CFO in 2002, and was then appointed Executive Vice President of OW Bunker’s global bunker supply activities in 2010.

DESCRIBE yOUR COMPANy AND ITS SUCCESSES

OW Bunker is one of the world’s largest traders and physical suppliers of marine fuel oil. We have offices in over 24 countries around the world in Europe, the Middle East, Africa and Asia Pacific. We have a global fleet of over 30 vessels, and we also purchase and sell entire oil cargos.

I believe our greatest success has been to continue to grow and produce strong financial results despite the global economic turbulence and volatility within the market.

We put in place a robust business model based on controlled growth, getting close to our customers by putting them at the heart of our business, and ensuring agility and flexibility in meeting their demands and seizing opportunities for further expansion. What is crucial though, is that our success and the stability and infrastructure that we have created have become central to helping and supporting our customers through these tough times.

TOP ISSUES fACING THE MARINE fUELS SECTOR

Clearly, the economic volatility and the impact that this is having on ship owners and operators in terms of high fuel prices, a lack of liquidity and the stress that it is putting on their supply chains is causing significant challenges. In conjunction with this, environmental regulatory changes will serve to transform the industry as we know it.

However, I believe that these challenges also present significant opportunity. Firstly, fuel suppliers that don’t have the business model, scale or infrastructure to weather the storm will create further consolidation within the market. Secondly, the issues that our customers face provide the opportunity to build better, closer, partnership-based relationships with them. As fuel

suppliers, we must play a central role in helping ship owners and operators overcome the challenges that they face from helping them implement fuel procurement solutions that minimise cost and improve operational efficiencies, to helping them manage and adapt to environmental regulatory changes.

BEST THING ABOUT THE BUNKER MARKET

The way the bunkering industry has transformed itself, particularly over the past five years, in setting new standards for professionalism. The work that has been done has had a significant impact on the status and reputation of bunkering within the wider shipping industry. We have closer relationships with customers than ever before, where the products and services that we provide are seen as a critical element of their overall commercial success.

WORST THING ABOUT THE BUNKER MARKET

While progress has been made, there is still some way to go. There is polarisation within the market of suppliers who act with integrity and professionalism, and those that are stuck in the past. However, as regulations and new benchmarks continue to be introduced, we will only see a continuation of the progress that has been made, where there is no room for cutting corners. Fundamentally, ship owners and operators are under increasing pressure to improve efficiencies within their operations, and fuel suppliers have to be at the top of their game in order to play a role in helping them meet these challenges.

WHAT DO yOU DO WHEN yOU ARE NOT WORKING?

We’re so busy at the moment, it’s hard to find the time! However, as well as spending time with my family, I like to take part in activities such as sea kayaking and running.


Position as senior gasoil buyer provides a unique opportunity to be part of an international trading environment.

Main responsibility will be to advance the desk into a world class purchasing unit covering the entire gasoil spend of the A.P. Moller-Maersk Group.

Tasks include developing performance management, exploring opportunities to deliver to third parties in select locations and building relationships with customers and suppliers.

Requirements include at least three years of exposure to the gasoil markets, strong personal drive and a proven track record for quick learning and excellent interpersonal skills. Candidates will likely hold a master’s degree.

For more information about the recruitment process contact Therese Buhl Worm. Tel: +45 33 63 51 44

TO ADVERTISE ON THIS PAGE

PLEASE CONTACT:

Ravi Kashap for rates & availability

[email protected]

+44 1753 272252

Leading broker dealer is seeking to expand in the shipping fuel brokering business.

Candidate will be part of team developing new supply sources and further penetrating business with existing customers and suppliers. Broker will regularly interact with customers, suppliers and the internal sales and credit personnel.

Applicants must have an establhed client base to be considered.

To apply for this position please [email protected] Tel: +1 212 682 9300

BUNKER BROKERSNew York

Multi-national trading office with plans to expand in other US and foreign markets.

Successful candidate to manage existing customer order requirements and related operational matters, lead new marketing efforts and business development and collect industry data used in our industry reports and market insight.

He/she must be willing to travel to meet with business contacts, attend conferences and other industry related events, as needed. Degree from a maritime academy required, as well as two years of experience within the oil or maritime business. Knowledge of global environmental regulations and specifications preferred

For more information please contactLeigh [email protected] Tel: (954) 467-9611

BUNKER BROKERHouston

Role will see candidate as part of team responsible for maintaining long term business relationships with current and potential clients around the world.

He/ she will become familiar with all the company systems and the operating processes to support Integra’s customer base and understand basic bunkering purchasing process and terms commonly used. Candidate should have 1-3 years of experience of sales within the bunker, shipping or commodity sectors and a proven sales and customer service track record.

To apply, send your CV and application to [email protected]

BUNKER TRADERS INTEGRA FUEL GLOBALLondon, Singapore & Westport

Dan-Bunkering is continuing to expand and is looking for further experienced bunker traders to strengthen its team.

Company expects candidates to have at least three years of experience within bunker trading market and be have excellent communication skills.

Candidate must also be independent, performance oriented, and speak fluent English. He/ she is expected to undertake a high degree of travel activity.

Company can offer an attractive and challenging position with a high level of freedom and responsibilities, as well as a competitive salary package.

Please send your application by email to [email protected]

BUNKER TRADERDAN BUNKERING International

SENIOR GASOIL BUyERMAERSK OIL TRADINGCopenhagen

Merlin Petroleum is seeking a dynamic bunker/broker to develop the company’s growth.

Candidate must have minimum 3 years experience with a proven track record. Knowledge of bunkering essential and fluent in English. He/she must have marketing/sales experience, be highly organised and detail oriented.

All inquiries will be treated in the strictest confidence.

Please send your CV, cover letter and an essay stating what added value you can bring to our company to [email protected]

BUNKER BROKER/ TRADERMERLIN PETROLEUMConneticut

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classifieds

We supply from stock and for order, Fuel Flow Meters with mechanical account device or electric account device.

Flow Meters offer the measurement for custody transfer of petroleum, diesel products, aviation fuels, shipping fuels MDO, MGO, IFO and a broad range of industrial liquids.

For more information contactFeniks Tranzit PiterTel: +7-981-7543621 Fax: +7-812-7273260 [email protected] www.flow-meter.narod.ru

BUNKER fUEL fLOW METER

Transformers oil conditioners, purification and reclamation addresses the higher cost for oils and ever increasing environmental regulation and liability.

It is no longer economical to replace electrical insulating oils to renew dielectric strength. Restoring oils to their original strength through purification is now a necessity.

For more information please contact Cathy Huang Tel: [email protected]

HIGH vOLTAGE TRANSfORMER OIL PURIfIER/ DOUBLE STAGE vACUUM OIL fILTRATION

We specialise in providing loss control, blending, expediting and quality control services for custody transfer on loading or discharging operations in terminals and ship transfer operations across Asia.

We pride ourselves on cost effective and value added technical assistance to the petrochemical industry.

For more information contact: xavier Joseph Operations ManagerOris Petroleum [email protected]: +656396 9101 Fax : +65 6396 9102

PETROLEUM LOSS CONTROL AND BLENDING


BY PAUL MILLAR

I must admit I did not wake up one day and dream of being a credit manager for a huge bunkering group. But here I am! You could argue that being a credit manager is not as exciting as being an astronaut or train driver, or whatever else you dream of as a child, but it keeps me fully entertained! And why? Well, first and foremost, I get to work with, and for, some of the nicest people in the bunker industry. Secondly, the bunker industry is wonderfully dynamic and to be part of that is a privilege. Thirdly, 2012 is set to be a truly exciting time for a bunker credit manager. It will be a rollercoaster.

I say “exciting” because we are witnessing some unprecedented events in the shipping world, which are fascinating to see unfold. You simply cannot take anything for granted nowadays. Some of

the last word

STEP ONTO THE ROLLERCOASTER

the biggest names in shipping are now in a very uncomfortable place. Earnings are insufficient across most of the core sectors in shipping and, to make matters worse, costs have spiralled and access to finance has diminished. With depleted cash reserves, shareholders unwilling or unable to inject new funds and banks being frankly unsupportive or inflexible, some owners have no option other than to sell assets, often at a substantial loss. It is hardly surprising that so many companies are running out of cash, some are scaling back activities or sheepishly withdrawing, some are seeking court protection and others are simply going bust.

The shipping media has been almost gleeful in the way it has presented news to the market, possibly over-stepping the mark at times with the impact of making a bad situation worse for some companies. I don’t know about you, but if I read a sensational headline, I want a sensational article to follow it!

I refuse to believe that “exciting” automatically means “frightening.” If you know your customer and understand the markets in which they operate, what is there to be frightened of? We all take risks in this industry but, with a measured and controlled approach, it is normally hard to go wrong. More and more, we can expect the unexpected in 2012. It could become very frightening for some: companies that have always paid might suddenly deteriorate as the cash runs out. I am convinced that at some point this year a big name in the shipping sector will collapse and there could be very little advance warning – just watch the fallout then! Suddenly, there will be ships with no employment and only the miserable prospect of arrest at the next port of call! And if that is not enough to stimulate the imagination of a credit manager, what about the future of the Euro, or indeed the Eurozone?

As it stands, Bominflot will see 2011 out without a single bad debt and we are proud of this achievement. But 2012

is certain to be a trickier year for the following reasons:

We can expect poor results in the liner sector and, at the very least, there will be some new alliances or mergers. We will be keeping a very close eye on tanker operators in 2012 as there are now too many owners on thin ice. At least earnings in the chemical tanker sector are expected to recover later this year. It is hard to believe that the dry bulk sector will make a strong recovery in 2012, but I sense just a little more optimism nowadays.

As ever, in any sector, those ship owners with high financing costs and those charterers who fix at the wrong time at the wrong rate will suffer in the year ahead and for some it will be terminal.

I cannot imagine that the bunker price will fall to a level that will benefit the shipping community. This era of high cost will continue. It is inevitable that more companies will collapse in 2012 and bunker suppliers/traders to these ill-fated companies who are not credit insured, or have insufficient working capital, may well collapse themselves. It may be that more shipping companies will ask for extended credit terms – at a time when bunker traders and suppliers will be considering the exact opposite because both the risks and costs of financing are too great. I don’t honestly expect many suppliers or traders will look to reduce payment terms, as has been the case in certain parts of the world. This is a competitive world and, for bunkers, 30 days is here to stay whether we like it or not.

2012 will be a rollercoaster of a year. Rollercoasters are exciting. But buckle up tight because we are in for a bumpy ride...

Paul Millar is Managing Director for Bominflot Ltd, UK, and the Head of Global Credit for the Bominflot [email protected]

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ROSNEFT MARINE UK SUPPLIES HIGH QUALITY1% LOW SULPHUR FUEL IN RUSSIAN PORTS

COMMITTED TO QUALITYEVERY STEP OF THE WAY

Arkhangelsk / Kozmino / MurmanskNakhodka / St. Petersburg / Tuapse

Vladivostok / Vostochny

www.rosneftmarine.com

Address: One Kingdom Street / Paddington Central / London, W2 6BDTel. +44 (0) 203 402 3633 Fax. +44 (0) 203 402 3501

Bunker Bulletin Jan/Feb 2012

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