FEBRUARY 2016
LONG WAY
FROM KANSAS
SUCKED UP IN OW’S TORNADO
ONE WAY DOWN
Oil prices in freefall
FUNDAMENTALLY WEAK
Unchartered territory for US fuel oil
www.platts.com
1
Poor quality fuel
can damage ship
systems, leading
to costly repairs
and downtime
Lloyd’s Register GMT Ltd. offers comprehensive
solutions to the challenges associated with
managing fuel quantity and quality.
Our fuel oil bunker analysis and advisory service
(FOBAS) supports you through fast, ISO accredited
laboratory testing, analysis, reporting and advice.
•
•
•
•
•
•
•
•
•
Fast and precise marine fuel testing
Bunker quantity surveys
Fuel system audits
Advanced sample collection and tracking service
Easy to use customer web portal
Clear and comprehensible reporting
Global coverage
Highly skilled fuel consultants
Fuel quality alerts and industry updates
Discover more at www.lr.org/lrgmt or email [email protected]
Working together
for a safer world
2 Register and variants of it are trading names of Lloyd’s Register Group Limited, its subsidiaries and affiliates.
Lloyd’s
Copyright © Lloyd’s Register Group Limited 2016. A member of the Lloyd’s Register group.
1
February 2016
MANAGING EDITOR
Unni Einemo, +44 (0) 1753 410 941
[email protected]
PRODUCTION MANAGER
Constantina Bertsoukli
©shutterstock/Teun van den Dries
PRODUCTION OFFICE
Platts
20 Canada Square, 9th Floor
Canary Wharf, London, E14 5LH, UK ADVERTISING SALES MANAGER
Paul Davis, +44 (0) 7899 886 982
[email protected]
PLATTS
Business office:
20 Canada Square, 9th Floor
Canary Wharf, London, E14 5LH, UK President:
Imogen Dillon Hatcher
CONTENTS
VP Finance:
Hywel Thomas
COMMENTARY ������������������������������������������������������������������������������������������������������4
PLATTS NEWS & PRICING SERVICES
COMPANY NEWS ��������������������������������������������������������������������������������������������������6
Global Head of Content:
Martin Fraenkel
NO RETURN TO KANSAS ������������������������������������������������������������������������������������ 12
FEBRUARY 2016
A SAUDI-IRAN CRISIS FOR CRUDE OIL �������������������������������������������������������������� 14
Global Editorial Director, Oil:
Dave Ernsberger
Global Editorial Director, Agriculture &
Chemicals:
Simon James Thorne
Global Director, Metals Content & TSI:
Steven Randall
Global Editorial Director, Gas & Power:
Sarah Cottle
WEAK LINKS ������������������������������������������������������������������������������������������������������� 16
STRENGTH IN NUMBERS ������������������������������������������������������������������������������������ 18
SCRATCH BENEATH THE SURFACE ������������������������������������������������������������������20
STUCK IN THE STORM ����������������������������������������������������������������������������������������22
A QUESTION OF QUALITY ����������������������������������������������������������������������������������24
MAINTAINING STANDARDS ��������������������������������������������������������������������������������28
MARKET REVIEW ������������������������������������������������������������������������������������������������32
FOLLOW US
@bunkerworld
EVENTS CALENDAR ������������������������������������������������������������������������������������������42
FEATURED EVENTS ��������������������������������������������������������������������������������������������44
JOIN US
on LinkedIn
* Scan here to visit www.bunkerworld.com
Cover Photo: ©shutterstock/David Andrew Larsen
2
BUNKER BULLETIN
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.
3
COMMENTARY
COMMENTARY
THE YEAR THAT
DEFIED PREDICTIONS
was not to be, however, due to conflicts of interest regarding
political principles. Pressure to regulate CO2 emissions will
undoubtedly continue at the IMO during 2016, initially focused
on matching the EU’s monitoring, reporting and verification
(MRV) regime. While this won’t impact the bunker industry
directly, it will increase focus on accurately measuring fuel
consumption, and by association how much was supplied to
the ship. The long term signal is to reduce fossil fuel use to
cut CO2.
Expect the unexpected should be the mantra
for 2016 if last year’s market behavior is anything to go by
THE OW EFFECT
BY UNNI EINEMO
AS THE START of last year approached, the market readied
itself for two game-changing developments: the reduction
of sulfur limits in emission control areas (ECA) from 1.0%
to 0.1% and the ramifications of the collapse of leading
global supplier OW Bunker at the end of the previous year.
Both were expected to bring tough challenges and drive
major changes in 2015. In addition, ongoing oversupply
in most shipping segments meant rates, and hence the
financial health of many bunker buyers, were under severe
pressure. 2015 looked to be a year in which so much could
go wrong, not least for smaller, financially weak companies in
bunker supply and shipping.
THE EMISSIONS FACTOR
Let’s start with the anticipated ECA consequences.
Expectations were that the surge in demand for compliant
marine gasoil (MGO) would lead to product shortages and
huge price increases. Droves of ship operators would cheat
to save money, and nobody would be caught because of lax
enforcement. Short sea operators within ECAs would lose
their competitive edge over other modes of transport and
lose customers. Ships would shudder to a halt due to thermal
shock in the busy English Channel as they switched from hot,
highly viscous heavy fuel oil (HFO) to a cool, low viscosity MGO,
or engines would be starved of fuel because of filter clogging
or leaks on the fuel line.
But that isn’t what happened at all. In fact, the switch to
the 0.1% sulfur went much more smoothly than anticipated.
Supply did not seem to be an issue and compliant fuel was
much more affordable than companies had budgeted for. By
the start of 2015, MGO prices were on a par with where HFO
prices had been in mid-2014, and prices stayed low throughout
2015. On the enforcement side, several countries significantly
increased fuel spot checks in 2015, typically finding less than
4
BUNKER BULLETIN
5% of ships to be in breach of the limit. True, some loss-ofpropulsion incidents were reported in the US, but no accidents
were reported as a result. Of course, it is possible that fuelswitch related engine problems were underreported, but
overall it wasn’t the catastrophic issue that was predicted.
Meanwhile, short sea operators within ECAs appear to
have weathered the storm and at least two North European
ferry firms reported record results during 2015 due to higher
freight volumes and revenues. One stated that investments
in scrubbers and fleet efficiency played a part in its strong
financial performance. The incentive to make those
investments, however, weakened as the outlay for MGO fell.
The differential between HFO and MGO remains significant,
but has increased the payback time for scrubber installations.
Current low oil prices may have put a break on a shift to LNG, as
price advantages have been eroded and the market has been
put off by the huge investment required, both for ships to run
on LNG, and for the supporting supply infrastructure.
As we arrived at 2016, oil and hence fuel prices had fallen
even further and few think they will recover much this
year. However, lower fuel costs have now been budgeted
for and if prices unexpectedly rally, the market may be
adversely impacted.
As for ECA enforcement, it will be tightened in 2016 as
EU member states now have mandatory requirements for
checking ships for compliance. This is a huge change as in the
past only about one in 1,000 ships visiting ports inside ECAs in
Europe were subjected to fuel sulfur checks. Now EU countries
inside ECAs are required to check the sulfur content in fuels on
40 out of every 1,000 ships. In the US, the inspection regime is
less clear but US authorities have a history for coming down
hard on any attempts at falsifying records, meaning operators
calling at US ports should think hard about cheating.
There are other environment moves to watch this year as
well. The Paris climate talks at the end of 2015 were expected
to produce a global framework to limit CO2 from shipping. It
©shutterstock/Arcady
Moving onto 2015’s second game-changer, who could have
predicted that Brent crude prices would more than halve from
a peak of $115 in mid-June 2014 to below $50 by mid-January
2015. This unexpected sharp fall was a major factor in bringing
down one of the world’s largest bunker fuel trader OW, as its
risk management strategy, or oil price speculation, backfired,
causing losses totaling $175.5 million in late 2014.
The fallout from OW Bunker’s collapse was felt throughout
2015, but as yet it hasn’t led to the anticipated change in
market behavior or structure. For a short while, suppliers and
traders saw margins boosted as buyers were desperate for
suppliers that could fill the sudden vacuum left by OW, which
had won a huge market share by being very competitive. That
didn’t last, and the vacuum was quickly filled.
It was thought bunker companies would undergo considerable
consolidation, as owners would hold back from dealing with
underfunded smaller players. More bankruptcies were a
distinct possibility.
OW assets, or at least the people that worked for OW, were
snapped up by companies keen to exploit their contacts and
gain market share. It did lead to some consolidation as bigger
players bought whole units of OW, helping them set up new supply
locations and/or trading units. A year on, however, a number of
former OW employees had moved on as they found they didn’t
fit in with the company culture at their new employers.
The anticipated weeding out of smaller players didn’t occur
– mainly because selling fuel on credit became more affordable
due to low prices. With low prices, existing credit lines could
accommodate twice the fuel volume. This allowed them to
compete for more stems and clients. In fact, 2015 was a year
when the big, listed suppliers and traders reported an increase
in volumes – partly attributable to the disappearance of OW
– but reduced profitability because they accepted wafer-thin
margins by competing hard for the business.
Of course, many companies are now warier of who they
are dealing with and want to know that their counterparty is
financially sound. But there are also tales of suppliers offering
credit terms bordering on reckless to companies with poor
payment records.
For one large bunker company, failure to collect monies
due is thought to have contributed to its undoing in 2015. USbased Bunkers International and its affiliated companies filed
for Chapter 11 bankruptcy protection in August 2015, after its
primary lender cut off its funding. It had an estimated $40
million worth of debts, which may well have put further strain
on some of the bunkering companies already owed money by
OW.
The upshot of all this is that major lenders are likely to
tighten the screws on bunker players that are perceived to be
living dangerously. If and when the time comes when shipping
companies pay very late, or not at all, suppliers’ ability to
meet the terms of their own credit agreements could begin to
unravel.
HOW LOW CAN WE GO?
On the shipping side, freight rates were weak in most
segments at the start of 2015, a hangover from over-ordering
of newbuilds in previous years, causing oversupply just as
demand for shipping stagnated. Many were expecting multiple
shipping bankruptcies during 2015 due to persistent low
freight rates. In the dry bulk sector, 2015 was particularly bad
as Chinese imports of iron ore and coal slumped. The Baltic Dry
Index (BDI) plumbed new record lows on a daily basis and had
fallen below 400 by mid-January 2016.
The number of casualties in 2015 has been low, as operators
have been propped up by lower operating costs. The price of
Brent crude fell by two-thirds over the 18 months to the end
of 2015 to below $40/b, and even fell below $30/b in early
2016 as crude oil futures hit their lowest since 2003. Some
analysts predict substantial price volatility between $20 and
$40 per barrel during the first half of 2016. The question is
what impact that pricing level will have on bunker suppliers
and buyers? Will it be low enough to keep dry bulk operators
afloat? The pains already endured by dry bulk lines during 2015
will have eroded their viability; January 2016 saw average daily
earnings for panamaxes drop to $2,600, which, even at current
bunker prices, is a less than half operating cost. That is clearly
not sustainable.
Low oil prices are a mixed blessing: on the one hand, they
might help bunker buyers survive at a time when they are being
hammered by weak freight rates, but on the other hand they
are keeping old, inefficient tonnage on the water. This doesn’t
help the environment or the market, as oversupply persists. It
does allow a more diverse supply side as credit becomes more
affordable, but pressure on margins continues as competition
remains fierce. And if everyone is competing on price, what
happens to quality – both of the fuel, the service, credit
discipline and the professionalism of the industry overall?
A low oil price carries within it the seeds of its own
destruction. Some of the world’s production is unsustainable
at less than $50-60/b, but the fight for market share has
kept much of that production going. Some of the US shale oil
producers, for example, have continued to pump to service
debt, but there were dozens of bankruptcies in 2015 and more
expected in 2016. This could rein in production, but it will take a
while for the market to rebalance from the current glut.
BUNKER BULLETIN
5
COMPANYNEWS
COMPANYNEWS
©shutterstock/phloxii
BOMIN’S BID TO BUY
BANKRUPT BUNKER
PLAYER COLLAPSES
IRAN: ‘STATE-OWNED COMPANY RETURNS
TO INTERNATIONAL BUNKER MARKET’
Iran’s state-owned National Iranian Tanker Company (NITC) says it is ready to return
to international bunker markets. “NITC’s oil tankers loaded their first bunkering
consignment weighing 42,000 mt on Monday,” NITC managing director Ali Akbar
Safayee told reporters in Tehran. He said the company had been given a bunkering
certificate by the country’s oil ministry, opening the way for it to supply its own fleet
more easily and more cheaply. Quoted by Iran’s semi-official news agency Farsnews,
he said the NITC fleet alone needed 600,000 mt of bunkers a year. Safayee went on:
“Several preparations are being made for returning to the international and European
markets. Relying on our standards, our fleet can enter new markets and achieve the
planned objectives.” Iranian officials have been setting ambitious targets for the
country’s share of the regional bunker market. Some have called for a 50% share but
Farsnews report spoke only of plans for a 20% market share. The National Iranian Oil
Products Distribution Company has already reported a 28% year-on-year increase
in its bunker sales. The managing director of the Ports and Maritime Organization
of Iran, Mohammad Saeednejad, had previously confirmed that the Iranian private
sector was ready to invest $180 million in bunkering over the next 12 months. Iran
has blamed sanctions for the failure of its bunker sector to grow but world powers
in June 2015 reached a deal with Iran on its nuclear program, opening the way for
sanctions to end.
GPS TO ‘PIONEER’ MASS FLOW METER
TECHNOLOGY IN FUJAIRAH
A Fujairah bunker supplier is to install a mass flow meter (MFM) on one of its barges.
“We will be the pioneer to use MFM in Fujairah market,” Basheer Ahmed chief
commercial officer, Gulf Petrol Supplies (Bunkers) LLC (GPS), said. The MFM will be
installed on the 6,200 deadweight ton FNSA 10. It is being provided by the Switzerlandbased instrumentation and process automation company Endress+Hauser. The
installation was scheduled to be in operation from the start of the year. “We are
expecting a favorable response from ship owners and buyers,” said Ahmed.
6
BUNKER BULLETIN
A bid by the US arm of global bunker
player Bomin to buy the assets of the
bankrupt US-based bunker supplier
Bunkers International Corp (BIC) has
fallen through. Bomin Bunker Oil
Corporation’s offer of $5 million was
blocked by BIC’s major creditor, PNC
Bank, Scott Shuker - a lawyer acting as
BIC’s bankruptcy attorney - told Platts
Bunkerworld. BIC’s unsecured creditors
had already filed objections to the sale
in the US courts saying the offer was
“several million dollars less” than BIC
had originally claimed its assets were
worth. Despite the collapse of the bid
to buy all the bankrupt company’s
assets, Bomin has purchased some of
BIC’s bunker inventory.
LUKOIL BOOSTS SUPPLY AT
KEY RUSSIAN BLACK SEA PORTS
The marine fuels arm of Russian oil giant Lukoil has beefed up supply of low sulfur
marine fuels in key Russian Black Sea ports. A new bunker barge, Gelios, has begun
delivery of maximum 0.1% sulfur marine gas oil (MGO) in the region on behalf of Lukoil
Bunker OOO. The 3,000 ton capacity tanker will ship product from an inland refinery
based in Volgograd and can be used to supply vessels in the Black Sea region, a
spokesman for Lukoil Bunker told Platts Bunkerworld. During the winter season,
Lukoil Bunker is planning to use the Gelios in Russian ports Kavkaz and Novorossiisk
to supply MGO “at competitive rates” to ships calling at these ports. “This will
strengthen bunker possibilities of marine gasoil in a market that is very expensive
for this product,” the spokesman said. Lukoil Bunker has been active in Novorossiisk
for several years and claims to be the third or fourth biggest supplier by volume,
depending on the month. The new barge, Gelios, joins the barges Bellona, Aginskoe
and Neman to supply in the area. In addition to boosting MGO supply, the company
expects to start delivery of its ultra low sulfur fuel oil (ULSFO) in the Russian Black
Sea market imminently. The fuel will have the same quality parameters as the ULSFO
sold in Russian Baltic ports, where the product has received a positive response from
several owners, the spokesman said. Like MGO, the product meets the 0.10% sulfur
limit for ships operating in emission control areas (ECAs), but it is closer to a marine
residual fuel oil grade than a marine distillate grade.
CHEMOIL’S AMERICAS
BUSINESS TO BECOME
GLENCORE FROM JANUARY 1
Glencore has dropped the Chemoil
name for its Americas bunkers
business, less than two years after
having acquired the company and
taking it private. From January 1,
2016, Chemoil transacted business
under the name Glencore in the
Americas; however, the brand Chemoil
will continue to exist outside of the
Americas. “This change is intended
to consolidate and simplify the US
bunker and bulk business,” said a letter
Chemoil sent to counterparties and
provided to Platts. “We hope that this
change will enhance our commercial
relationship and we please ask for your
cooperation during the transition.”
ADANI OUTLINES INDIA
EXPANSION PLANS
Adani Bunkering, India’s largest
physical bunker supplier, has outlined
its plans for 2016. “Adani bunkering will
be soon developing bunkering facilities
at Dahej and Hazira [in Gujarat] and
in ports on the East Coast of India,”
said Vinay Prakash, chief executive
officer of the bunker company’s parent
company, Adani Enterprises. Pointing
to India’s geographical position and
“vast coastline,” he said: “I see India
as a future bunkering hub and we want
to play a major role in it. Our plan is to
develop bunkering facilities across
India with emphasis on prices, quality
of fuel, as well as improved supply
chain for faster bunker delivery.”
Prakash was speaking at an event in
Mumbai. It was organized as an official
launch of Adani Bunkering Pvt Ltd, the
name given to the supplier when the
joint venture company Chemoil-Adani
came to an end in October after the
acquisition by Adani Enterprises of
Chemoil’s 49% stake.
Profitable voyages depend on the quality, and an
accurate quantity, of bunker fuel supplied.
Intertek ShipCare can provide
bunker quantity surveys across
the world, and all your laboratory
services.
In addition to the analysis of bunker
fuel, we can test lubricants, firefighting foam and water samples.
For all your laboratory services,
contact Intertek ShipCare.
Tel: +44 1325 390180
E-Mail: [email protected]
Web: www.intertek.com/marine
BUNKER BULLETIN
7
COMPANYNEWS
EXXONMOBIL STARTS MASS FLOW METER
BUNKERING OPERATIONS IN HONG KONG
Oil major ExxonMobil has started using a mass flow meter, or MFM, for bunkering
operations in Hong Kong. The MFM system has been accredited by Lloyd’s Register
in partnership with the National Meteorology Centre of Singapore, the island’s
national agency A*STAR and bunker consultancy Metcore International. It has been
installed on the bunker tanker Anshing to deliver 380 CST and 500 CST grades of
intermediate fuel oil (IFO). “The expansion of ExxonMobil’s accredited mass flow
metering system capability will help ensure that buyers receive the fuel they pay
for,” said Deepankar Banerjee, Asia Pacific marine fuels sales manager. “ExxonMobil
continues to lead the industry in the implementation of mass flow metering systems,
bringing an accredited system to Hong Kong after its success in Singapore,” he
added. At present, all ExxonMobil bunker fuel deliveries in Singapore are supplied
by tankers equipped with MFM systems certified by the Maritime and Port Authority
of Singapore.
TOLSON LAUNCHES CONSULTANCY FOR BUNKER SECTOR
TURKISH SUPPLIER REPORTS VOLUMES UP
BY NEARLY 40%
Istanbul-based bunker supplier Energy Petrol AS has seen a sharp increase in its
annual sales volumes. “We achieved impressive growth in 2015,” chief executive
officer Mustafa Muhtaroglu told Platts Bunkerworld. “We physically supplied 347,000
mt, up 38% year-on-year.” Nevertheless, he said Energy Petrol was focused on
fuel quality and service rather than volumes. “In this respect we are very proud of
supplying our clients on time with no significant quality and quantity issues.” The
company claims a share of more than 15% in the Istanbul bunker market.
AGUNSA: MGO BUNKER TANKER STARTS OPERATIONS
Chilean maritime port services and shipping agency AGUNSA has started bunkering
operations with the arrival of an ice class bunker tanker, it says. The 1,400 cubic meter
capacity Tamina will be able to deliver marine gas oil (MGO) to vessels positioned off
Antarctic stations and the Chilean ports of Punta Arenas and Puerto Williams.
8
BUNKER BULLETIN
©shutterstock/KwansiriFoto
Adrian Tolson has launched a consultancy, 20/20 Marine Energy, to serve “the
increasingly complex” bunker sector, the company said in a statement. Tolson, who
is described as 20/20’s senior partner, said: “Our focus is on providing strategic,
practical and independent counsel.” He explained that the aim would be to help
clients “reduce financial and regulatory risk and increase profitability.” There would
also be attention to “optimizing market positioning.” Tolson has worked for over 30
years in the bunker sector, holding a series of senior positions. His most recent role
was managing director of Aegean Oil USA LLC. Before moving to Aegean he was
general manager of OW Bunker North America. Tolson has also worked as marketing
director of oil liquids for the commodity trader Noble Group. He became best known
in the bunker industry during his 25 years with the major bunker independent
Chemoil. When he left in 2011, he was the vice president of sales and marketing.
BRIGHTOIL TO
START E-COMMERCE
OPERATIONS IN JANUARY
Hong Kong-listed Brightoil Petroleum
(Holdings) Limited plans has launched
its e-commerce platform Brightoil
Online. The platform features its
CROWDOIL, CLOUDOIL, CORPOIL and
Marine Bunkering online modules.
Brightoil’s marine bunkering platform
is a business-to-business and offlineto-online service that “aims to provide
customers with a brand new oil trading
experience,” it said. Customers will be
able to access oil quotations, submit
and manage orders, perform disputes
and claims, track progress of oil supply,
and more, on the system.
EXPERIENCE THE
MXO BUNKERING
SERVICE AT SOHAR
As a joint venture between Oman Oil Marketing Company SAOG and Matrix Marine Holding of Germany,
Omanoil Matrix Marine Services is proud to be the only active bunker supplier at SOHAR Port.
Thanks to excellent relations with all stakeholders, MXO provides high-quality products
to meet all your bunkering needs, concurrent to working cargo, saving valuable time.
Prompt | Reliable | Competitive | Developing Oman
COMPANYNEWS
COMPANYNEWS
COCKETT’S CLAIM AGAINST NOVA STAR SETTLED
Dubai-based global bunker player Cockett Marine Oil DMCC has had its maritime lien
claim against the US-based ferry Nova Star “settled and discharged,” according to
a court document. The vessel’s owner will also pay “all charges of the Substitute
Custodian appointed” in the case that were “attributable or otherwise allocated to
Cockett.” “We have settled Cockett’s claim for substantially all of the amount due,
a very good result,” J. Stephen Simms of Simms Showers LLP, which handled the
case for Cockett, told Platts Bunkerworld. Each party will bear their own costs and
attorney’s fees, according to the court document showing the outcome of the case
from the US District Court of Maine. Cockett was seeking payment for outstanding
bunker bills amounting to $1,057,910.06 supplied “from at least August 31, 2015
through and including October 31,” according to the original claim filed with the
court. That document shows the plaintiffs as Portland Pilots, with Cockett Marine Oil
DMCC and McAllister Towing and Transportation Company as intervening plaintiffs.
The defendants are named as the vessel’s US-based operator Nova Star Cruises and
the owner of the vessel, Singapore Technologies Marine (ST Marine). The plaintiffs
sought to have the vessel sold to cover their claims, with interest, and legal fees.
ST Marine had already paid bunker supplier Sprague Operating Resources, Portland
Pilots and McAllister Towing respectively $147,000, $195,000, and $12,000. The court
paper showed that McAllister’s claim was $12,030. Cockett’s claim was the biggest
of the multiple claims reported against the vessel.
TURKISH SUPPLIER DEPLOYS COUNTRY’S
‘LARGEST BUNKER BARGE’
Arkas Bunkering has added a sixth barge to its bunker delivery fleet. The company
says the 4,137 deadweight ton MT Cesme will be the biggest barge operating in the
Turkish market. Like the other five vessels in the fleet, the barge is Turkish-flagged
and double-hulled. “Arkas Bunkering continues to invest in bunker barges in order to
increase its market share and strengthen its current position in the Turkish market,”
it said in a statement sent to Platts Bunkerworld.
10
BUNKER BULLETIN
A new bunker player operating from
Djibouti at the southern end of the Red
Sea has made its first offshore bunker
delivery. “We are pleased to announce
that Red Sea Bunkering (RSB) has
officially supplied its first STS (shipto-ship) customer off Djibouti waters,”
a company spokesman told Platts
Bunkerworld. RSB’s bunker tanker
Cosmic supplied 380 CST IFO to the
Vitol chartered vessel MT Nisida on
November 1. The Cosmic is a 9,300 dwt
double-hull tanker with a pumping rate
of between 300 and 500 cubic meters
an hour. RSB is Joint Venture between
Djibouti Ports and Free Zone Authority
(DPFZA) and Dubai-based UCIG (United
Capital Investments Group) a private
investment group focusing on energy
and logistics in the MENA (Middle East
North Africa) region.
DAN–BUNKERING FORMS
JOINT VENTURE
IN COLOMBIA
Dan-Bunkering has signed a partnership
with Australian Bunkers to undertake
physical supplies in Buenaventura,
Colombia. “Dan-Bunkering will handle all
sales and will provide risk management
while
Australian
Bunkers,
who
have been present in the area of
Buenaventura since 1998, will handle
the sourcing, blending, supply,
and storage of the products,” DanBunkering said in a statement. Pedro
Gomez, general manager of DanBunkering (Chile) SpA, said: “I am very
excited to present this opportunity to
offer a full range of high quality marine
products in the port of Buenaventura in
partnership with a local supplier with
more than 15 years of experience in
the market. The strategic location is
perfect and will increase our physical
network in Latin America. Moreover,
the timing is ideal.”
ECOSLOPS STARTS VOLUME PRODUCTION
OF WASTE OIL BUNKER FUEL
A marine fuel technology company that can produce bunker fuel from a ship’s waste
oil products is building up its presence in the market. With an operation based at a
refinery in the Portuguese port of Sines, the company - Ecoslops - has begun industrial
production of its recycled marine fuel, which is ISO8217 compliant. In total, 1,400 mt of
fuel products have been produced for the marine market, comprising distillates and
heavy fuel oil. Other uses include bitumen for light roofing. The company imported
3,200 mt of slops as well as collecting the material from the port’s oil terminal. Close
on all of the source material is re-used commercially, the company said. “In the
current climate, waste collectors are finding it difficult to sell unprocessed slops and
many ports do not have sufficient collection or storage infrastructure,” said Vincent
Favier, the French company’s chief executive. “For shipowners and operators, it is
highly cost-effective, efficient and sustainable to be able to take a waste product, for
which the disposal is strictly regulated, and turn it into a reusable marine fuel. Our
focus now is on accelerating production at the Port of Sinès by collecting more slops
locally and through import, as well as further developing our global infrastructure to
capitalize on the opportunities within the global slops market.”Looking ahead, the
company is developing facilities in Cote d’Ivoire, as well as looking at opportunities in
the Mediterranean and northern Europe. It is aiming for three more facilities by 2017.
MINERVA BUNKERS
BEGINS OPERATIONS
IN THE GULF OF GUINEA
Global supplier and trader Minerva
Bunkers has started physical supply
operations in West Africa, supplying
offshore in the Gulf of Guinea. It
said the physical operations would
complement its trading activity across
the region. “Minerva Bunkers’ 13,115
dwt double-hulled tanker Sea Lion I will
supply customers with the full range of
fuels. A second tanker of similar size is
due to be launched before March 2016,”
the company said. The Sea Lion I will be
fitted with a Coriolis mass flow meter in
the first quarter of 2016.
KPI BRIDGE OIL OPENS OFFICE IN GREECE
KPI Bridge Oil has opened a new office in Athens to meet an increasingly strong need
for a physical presence in the important Greek market. The Athens office is headed
by managing director Jesper D. Rasmussen. “Jesper has been with the company
for five years and successfully managed KPI Bridge Oil North America since 2012
until taking up the new opportunity in Greece,” the company said. Rasmussen
commented: “Greece has always been a very important market for anyone within
the maritime industry.” KPI Bridge Oil had been previously covering Mediterranean
ports through its Istanbul and London offices. “The new venture comes as part of the
group’s broader growth strategy and desire to further develop its key markets,” the
company said in a statement sent to Platts Bunkerworld.
MONJASA EXPANDS EUROPEAN COVERAGE
Monjasa, the Danish marine fuels company, has expanded its port and offshore
bunkering services across northern Europe through the provision of bunkering
services from its facility at the port of Portland in the UK. “It’s part of the Monjasa
Group strategy to strengthen our physical capabilities across Northern Europe,”
said managing director for Monjasa Europe, Ricky Kenbjerg. “With this move into the
English Channel, we are heightening security of supply throughout the area. When
placing an order with Monjasa, our clients will enjoy full flexibility in taking bunkers
anywhere between the English Channel and the Baltic Sea.” Kenbjerg added that
the company expects to increase its share of the north European bunker market by
around 300,000 mt/year.
©shutterstock/ Marek Szumlas
©shutterstock/Nejron Photo
RED SEA PLAYER MAKES
FIRST SHIP-TO-SHIP
BUNKER DELIVERY
BUNKER BULLETIN
11
GUESTFEATURE
GUESTFEATURE
NOT IN KANSAS
ANYMORE
TRADING INDEPENDENCE
Steve Simms believes the bunker industry
has been forever altered by its very own trip to “Oz”
IN THE CLASSIC 1939 WIZARD OF OZ MOVIE, a tornado has just
hurled Dorothy, her dog Toto and their house into the strange
land of Oz. Dorothy opens the house door to see a technicolor
world of Munchkins, at least one talking lion and a wicked
witch. Dorothy takes this in and then famously says to her dog,
“Toto, I’ve a feeling we’re not in Kansas anymore.”
In the first part of 2014, the world bunker industry lived
comfortably in its own Kansas. Crude prices were $108/barrel,
a level that supported what was one of 2014’s most significant
initial public stock offerings (IPOs) and one of Denmark’s
largest ever, for bunker trader and physical supplier OW. Just
before the IPO, OW’s apparent strength led a consortium of
lenders to extend a $700 million credit line to OW.
Then, just about 10 months later in the first part of
November, 2014, with crude prices moving to below $70/b,
OW announced that it was insolvent. The lenders consortium
had extended OW at least $650 million of their $700 million
credit line, and stopped extending OW credit, having already
restricted it weeks before. OW, as has since transpired, had
weeks before gone from extending its time for paying its trade
creditors (who were mostly petroleum suppliers) to not paying
them altogether. In doing so, OW made its trade creditors
part of its overall credit facility. Consequently, the OW Group
by vending product which it never paid for had accumulated
about $1.2 billion of receivables at the time of the insolvency.
The lenders consortium now claims all of these “receivables”
and insists they are not subject to offset from the suppliers
whose product, OW never paid for.
There now are at least 837 legal actions around the world
arising out of the worldwide OW collapse. They range from
bankruptcy proceedings, to interpleader cases (where
shipowners deposit funds in court for leading lending
consortium member ING and suppliers to fight over),
toLondon arbitrations (demanded by ING through OW’s sales
terms’ London arbitration clause), to vessel arrests and
asset attachments.
12
BUNKER BULLETIN
RUBY SLIPPERS
If you remember the Wizard of Oz, you will remember the
ruby slippers. The wicked witch wanted the slippers, and so
did Dorothy because the slippers would get their wearer back
to Kansas. One way to characterize the legal actions around
the world is that they are a struggle to get the slippers.
Developments over the 15 months since OW’s first insolvency
filing, however, show that there’s no return to Kansas for the
bunkers industry or those related to it.
The first part of the “geography” OW has changed, is that
physical suppliers now will focus on security to assure payment.
Before November, 2014, for example, there were rarely if ever
questions about whether a bunker broker or trader had, prior to
a bunker provision, actually paid its physical supplier. Physical
suppliers usually were content - particularly with an apparently
well-capitalized trader like OW - to extend traders credit with
the understanding that the supplier would be paid at about the
time the trader’s customer paid the trader. Physical suppliers
were almost never concerned about whether they would have
to arrest the vessels they supplied, or look hard at the security
that their traders (and traders’ customers) were giving them
in exchange for providing often very significant quantities of
product, on credit.
The “Oz” that physical suppliers now inhabit requires them
to have sales terms and conditions which reinforce their right
to arrest vessels if unpaid. Suppliers also must insure that
no other entity has competing claims to the suppliers being
paid. They must pay close attention to their sales terms which
allow them to retain title over the product they sell until they
are paid. Making those sales terms effective requires informed
legal advice about what law should control title retention. UK
law still gives strong title retention rights, but US law extends
some of the world’s strongest legal rights to the arrest of
vessels. Effective suppliers’ sales terms now should include
careful choices of both law, UK for title retention, and US for
vessel arrest and maritime liens.
©shutterstock/Ron Ellis
In Oz, the Munchkins, helped by the Wizard, end up regaining
their freedom from the wicked witch. Physical bunker suppliers,
of course, have not had the same hard relationship with traders,
but, in the new Oz of bunkers, more still may move to operating
independently of traders.
Interestingly enough, the regime of physical suppliers selling
through brokers and traders is relatively new (at least as it
relates to the history of shipping). It started about 1973 with
the OAPEC oil embargo. Before that, physical suppliers had
sold directly to vessel owners and charterers subject to longterm sale contracts, fixing a price for bunkers for a number of
months or longer. The 1973 embargo caused oil prices to spike
and physical suppliers to cancel their supply contracts. Vessel
owners and charterers had to buy fuel on the open market, and
brokers and traders appeared to serve them. Physical suppliers
were glad to have these brokers and traders consolidate their
sales and be concerned with taking the main risk of extending
credit to sometimes risky vessel owners and charterers.
Now, however, the riskier customers for physical suppliers
may be the brokers and traders. This is particularly so where
the brokers and traders, like OW, have in turn pledged their
receivables to secured lenders. In fact, it will be a rare broker
or trader which has not made such a pledge. In the event that
a trader or broker stops paying, the physical suppler therefore
will have to square off with the secured lender, both contending
over very few actual hard assets.
Vessel owners and charterers, on the other hand, because
of the OW insolvency now face competing claims by OW’s
claimed secured lenders - the ING-led consortium - and unpaid
physical suppliers. The defense of these claims has been very
expensive for owners and charterers. It therefore makes sense
for some owners and charterers to do business directly with
physical suppliers. If the owner or charterer doesn’t pay, the
physical supplier will have more direct recourse for payment;
if the physical supplier becomes insolvent, there should be
only one place where the owner or charterer has to pay: the
supplier’s bankruptcy estate. At least for some customers,
credit management for physical suppliers now is more
straightforward than ever. Consequently, physical suppliers
will likely now seek to establish direct customer relationships
with owners and charterers, independent of brokers and
traders.
NEW REALITY
Chasing the “ruby slippers” has been expensive for all involved,
including OW’s lenders. Before 2014, few lenders to brokers
or traders looked past the per-barrel oil price and margins
successful bunker brokers and traders were making. They
did not consider that relatively risky nature of the bunkers
business, turning on security against things that float between
different world jurisdictions, sometimes sink or disappear, and
that are worth amounts that fluctuate depending on world
commodities demand or even, the price of the fuel that the
lenders are financing. Investing in ships themselves is risky
enough for the average banker, but OW has shown financial
institutions vividly that investing in bunker brokers and traders
is probably a bridge too far.
On the one hand, the withdrawal of financial institutions
from finance for bunker brokers and traders, could be more
reassuring to physical suppliers who will be less likely to
contend with secured financing, if a broker or trader collapses.
At the same time, it will compel physical suppliers themselves
to extend more credit including likely to more financially risky
owners and charterers, who the physical suppliers before
would rather have sold to through brokers and traders. Either
that will occur or the physical suppliers will find themselves
deciding whether to extend greater credit lines to brokers
and traders, and then investing in credit management of
those brokers and traders as intensively as the banks that the
physical suppliers have replaced.
Many well-capitalized vessel owners and charterers
have, from OW, learned that there is a cost of dealing with
brokers or traders which are financially stretched. In the
new Oz of bunkering, well capitalized owners and charterers
will, therefore, seek out suppliers (which can include wellcapitalized traders and brokers) who they can be assured,
are in turn paying their customers and will not cause those
owners and charterers another “OW problem.” It therefore will
become more difficult for new traders and brokers to enter the
market, or for less known or more thinly-capitalized traders
and brokers to remain in the market. New or less-capitalized
brokers and traders will have to sell to riskier customers. But,
at the same time there may be fewer new or less-capitalized
brokers or traders, as fewer physical suppliers will extend
credit to them and less financial institutions will take a risk on
them.
When producers made the original Wizard of Oz movie,
they felt it ran too long; they cut 20 minutes from it to make
the version now considered classic. All involved can agree on
one thing, that the OW-related litigation already is over-long,
but it is likely to continue for at least several years or longer
to come. To put this into context, after the Titanic capsized in
1912, the related litigation extended into the 1920s. Observers
of maritime history mark the Titanic capsizing as an event
which pushed shipping to a new world, never to return to the
old. The OW insolvency has done the same for the bunkering
industry, as the litigation related to the insolvency plays out.
The industry is not in Kansas anymore, and will never be again.
Steve Simms is a Principal of Simms Showers LLP
Email: [email protected]
BUNKER BULLETIN
13
FEATURE
FEATURE
A SAUDI-IRAN CRISIS
FOR CRUDE OIL
upstart shale oil producers in the United States in particular—
was handed down by Saudi Arabia just over a year ago.
At that point, in late November 2014, oil prices were still in
freefall and some OPEC members wanted to cut production
in hopes of halting the plunge. Saudi Arabia, however, made
Oil supply is more likely to increase
than contract in a conflict that
could well become the front line of the
ongoing battle that not only pitches
OPEC producers against non-OPEC
suppliers but also against each other
Tensions are mounting between Saudi Arabia and Iran
as oil prices plummet to historic lows, but what’s
next for two of the region’s key producers?
BY MARGARET MCQUAILE
THE NEW YEAR GOT OFF to a turbulent start with oil prices
at 13-year lows and a deepening crisis in the Persian Gulf
involving two of the region’s key producers.
Brent crude futures in mid-January languished below $30
per barrel, the lowest level since 2003.
In theory, a major row between Saudi Arabia and Iran—
which together account for some 13 million b/d of global oil
output—should send prices soaring.
In fact, the opposite is happening as Iran and Saudi Arabia
continue to battle for market share, keeping official selling
price discounts well-below market levels.
There appears to be little concern about future supply at the
moment because of brimming stockpiles. Indeed, oil supply is
more likely to increase than contract in a conflict that could
well become the front line of the ongoing battle that not only
pitches OPEC producers against non-OPEC suppliers but also
against each other.
FRACTIOUS RELATIONS
Relations between Saudi Arabia and Iran, respectively the
leading Sunni and Shi’ite powers in the Middle East, have
been fractious for some time. The latest crisis, sparked by
Saudi Arabia’s execution of a prominent Shi’ite cleric, and the
subsequent attacks by Iranian protesters on Riyadh’s embassy
in Tehran and consulate in Mashad, comes as Iran prepares
to boost crude output and exports following the lifting of
international sanctions.
Sanctions were lifted by the United States and European
Union on January 16. Iran is now working to regain the share
of world markets it lost to other producers after tightened
14
BUNKER BULLETIN
sanctions in 2012 slashed its crude exports to just 1 million b/d
from previous levels of 2.2-2.3 million b/d.
In particular, Tehran will be looking to sell the bulk of its
extra barrels into Asia, the main source of global oil demand
growth, but also where competition between producers has
intensified alongside rising supply. Saudi Arabia has long been
the leading supplier to this key region, but its status is being
challenged by other suppliers inside and outside OPEC, such
as Iraq and Russia.
It could be argued though, that the biggest challenge
comes from Iran, with billions of barrels in untapped reserves
that could be developed in the future and, in the nearer term,
the potential to supply several hundred thousand barrels per
day of additional oil in the coming months. That challenge has
been looming since last July, when Tehran reached a deal with
six world powers to curb its nuclear program in exchange for
the removal of sanctions.
Now, in a conflict that analysts do not expect to become
a military one, Saudi Arabia’s strongest weapon against Iran
may be oil, and it may not be long, therefore, before we see
official Saudi crude output numbers turning upward again.
the point that cutting output would merely result in OPEC
relinquishing further market share to rising non-OPEC supply.
And because it can out-pump anyone else in the group, Saudi
Arabia was able to push through its market share strategy.
Ostensibly, by rubber-stamping the 30 million b/d
production target that had been in place since 2012, the
November 2014 decision maintained a notional limit on the
group’s crude output—”notional” because there were no
individual country quotas distributed under the ceiling and,
therefore, no mechanism to enforce discipline. Not that
discipline was an issue. The whole point of the market share
policy—and it appears to be working—was to drive high-cost
non-OPEC supply out of the market.
NO LIMITS
The outcome of OPEC’s most recent meeting on December 4,
was the removal of even a notional limit on output, as ministers
failed to agree on a number for the ceiling.
Only a few OPEC countries have been able to achieve what
might be seen as significant increases in output, and Saudi
Arabia has been the highest achiever in this respect, pumping
out nearly 1 million b/d in extra barrels between late 2014 and
mid-2015, according to its own official data.
Since June, when the kingdom told OPEC it produced
a record 10.564 million b/d, Saudi Arabia has scaled back
production, though it continues to produce in excess of 10
million b/d.
Saudi Arabia’s market share strategy has had a profound
impact on the economies of its fellow OPEC members and also
on its own. The kingdom has vast financial reserves but it has
been drawing them down at such a rate that the International
Monetary Fund warned in October that they would be depleted
in less than five years if oil prices remained low.
Bomin is an international company operating around
the globe, with nearly 40 years of experience in the
bunker market. Our business portfolio covers activities
ranging from cargo trading to the supply of bunker fuels, lubricants and other services. Whenever
and wherever you need us. Choose a dynamic partner: www.bomin.com
OPEC POLICIES
Iran and Saudi Arabia are founding members of OPEC, but
the most serious spat between Riyadh and Tehran since the
l980s will have little or no impact on the oil producing group’s
short term policy. That’s because OPEC doesn’t really have a
collective policy based on what each member country wants.
Its current policy—freewheeling production aimed at clawing
back market share from non-OPEC producers in general and
©shutterstock/SantiPhotoSS
BUNKER BULLETIN
15
FEATURE
LEADING SUPPLIER OF MARINE FUELS
AT FUJAIRAH AND KHORFAKKAN
WEAK LINKS
• 100% owned by Fujairah National Group
• Pioneering MFM technology at Fujairah and Khorfakkan
• Grown as reputable & reliable supplier
Patrick Burns examines
the fundamentals in the
US fuel oil market
• Your trusted partner for marine fuels and lubricants
at Indian and Sri Lankan ports
www.fng.ae/gps-bunkers
US FUEL OIL PRICES were hit hard in
2015 by weak fundamentals, as rising
stocks weighed on prompt prices, and
the fuel oil complex lost ground even
against falling crude oil prices.
Suppliers held onto product out of
both opportunity, in the hope of capturing
higher prices in the future rising with
the contango market structure, and out
of necessity due to a lack of local and
export demand.
US fuel oil stocks saw a build of
9.425 million barrels through the year
as a whole, according to US Energy
Information Administration data, coming
after annual builds of 357,000 barrels in
2014, 1.45 million barrels in 2013, and
668,000 barrels in 2012.
The primary reason for the drastic,
continued build in stocks according is
twofold, according to market sources:
most incremental barrels that normally
moved from the US to Singapore ended
up staying in the US due to a closed
arbitrage, and a contango structure in
the paper market encouraged suppliers
to hold onto barrels.
US Gulf Coast 3% sulfur fuel oil prices
in December averaged $23.04/barrel,
down from an average of $38.49/b in
January 2015.
US Atlantic Coast 1% fuel oil experienced
a slightly larger drop, averaging $24.41/b in
16
BUNKER BULLETIN
December, compared with $41.71/b in
January 2015.
USGC 3% sulfur fuel oil was at an
average discount of $15.89/b to the
front-month Brent futures contract
in December, wider than the $11.29/b
average discount in January 2015, with
the USAC 1% seeing a similar weakening
to crude.
Typically, fuel oil spreads to crude
will narrow as outright prices decrease,
so the fact that the reverse happened in
2015 highlights the bearish fundamentals
seen in the fuel oil market.
NEW RESTRICTIONS
Last year also saw the implementation
of new restrictions on low sulfur fuel oil
use in North American Emissions Control
Areas. As of January 1, 2015, ships in the
ECAs were required to burn fuel that
contained a maximum of 0.1% sulfur, or
clean their exhaust emissions to that
level, down from a previous limit of 1%
sulfur.
The change eliminated the major
end-use of the LSFO market, with the
exception of seasonal demand in the
Northeast US during winter, when
natural gas prices can go above fuel oil
due to power generation demand.
Typically, fuel oil
spreads to crude will
narrow as outright
prices decrease, so the
fact that the reverse
happened in 2015
highlights the bearish
fundamentals seen in
the fuel oil market
With demand for low sulfur fuel oil
from shipping absent, the average hilo, the spread between USAC 1% sulfur
fuel oil and USGC 3% sulfur fuel oil, was
just $1.33/b in 2015, down from $5.99/b
in 2014.
The hi-lo in 2015 even flipped to a
negative differential for most of June and
July, which had not happened since 2012.
The eroding hi-lo and lack of demand
for LSFO meant that any demand meant
that suppliers offered the product at near
parity to HSFO in the USAC, which kept
the spread narrow for most of the year.
Unseasonably warm temperatures
at the end of 2015 in the Northeast put
downward pressure on natural gas
prices in the region, and in turn caused
concerns among LSFO suppliers about
a significant drop in seasonal LSFO
demand for the winter.
©shutterstock/ajt
Gulf Petrol Supplies LLC (Bunkers), 1st Floor, Al Mina Road, Fujairah
National Group Building 2, Fujairah, UAE. PO - 121"
E: [email protected], [email protected] • T: +971-92235249
FEATURE
FEATURE
STRENGTH
IN NUMBERS
Low oil price keeps tankers
in demand and puts the sector
on a firm footing for 2016
BY EKLAVYA GUPTE, SIERRA HIGHCLOUD,
JOHN MORLEY, MAURICE GELLER
THE IMPACT of global oil supply and
demand dynamics on the tanker market
over the past year cannot be overstated.
The rising overhang of crude – due
in large part to OPEC’s market share
strategy -- has sent prices tumbling yet
substantially boosted the demand to
move, as well as store, crude oil.
In this coming year, the oil market
glut, weak price environment and strong
demand to ship crude is set to continue
after the 13-member producer group
effectively maintained its status quo
- failing to agree on an official output
level - at its December 4 meeting. This
will help to prolong the oversupply in
the world oil balance until at least until
late 2016, according to the International
Energy Agency.
Also, Iran looms on the horizon,
with the producer’s exports expected
to make an eventual full return to
world oil markets in 2016, bringing with
them not only a rise in crude supply
but also a 51-tanker strong fleet,
ultimately presenting a wild card for
the tanker trade.
18
BUNKER BULLETIN
But, while 2016 is set to see fresh
challenges for oil producers, to
shipowners, it will be a veritable boon,
specifically as the continued oversupply
in crude markets further boosts ton-mile
demand, an indication of the average
distance a ship covers to deliver every
ton of cargo.
CONTANGO OPPORTUNITIES
With oil supply outpacing demand in the
past 18 months, a contango structure
has developed in many crude and
products markets, creating a climate in
which the need for storage has grown
substantially. A contango is when the
future price of oil is above the spot
price, allowing traders to lock in profits
by buying and storing oil to then sell at a
future date.
Land-based storage is the most costeffective but with such facilities near
maximum capacity globally, traders may
have to look to more expensive floating
storage in the year ahead. In 2015,
there were several instances of floating
storage but they often came by accident
rather than design.
While crude oil storage - like the
strategic Saldanha Bay oil terminal in
South Africa - has proven invaluable,
new problems have emerged with the
rapid rise in tank capacities. Ullage
delays, caused by capacity shortages
in storage tanks, led to frequent
and lengthening discharge delays at
some of the world’s largest ports last
year and, in turn, reduced the overall
supply of tankers and pushed up spot
freight rates.
MARKET SHARE
The biggest winners in OPEC’s market
share strategy have been Saudi Arabia
and Iraq -- with the former’s production
volumes remaining consistently above
10 million b/d since March while Iraqi
exports hit a record 3.365 million b/d
in November – deepening the global oil
imbalance. In the tanker market though,
©shutterstock/Pan Xunbin
this has rather acted to increase tonmile demand, a positive for shipowners.
These two top OPEC producers have
been integral in contributing to the
market’s oversupply, and aggressively
cut their official selling prices to the
US, Europe and Asia last year in a bid
to stay competitive with a glut of
alternative grades.
The boost in Iraq’s exports, aided
by the rise in new crude grade Basrah
Heavy, has been met by a broadening
of the producer’s customer base. The
first exports of Basrah Heavy came in
June, averaging 529,000 b/d, and rising
to 808,000 b/d November, according to
shipping data obtained by Platts.
Some of these exports have been
diverted from traditional buyers in
Europe - spoilt for choice of sour crudes
- to the US, where Basrah Heavy is better
suited to Gulf Coast refiners, where
plenty of coking capacity gives them
greater flexibility.
Overall in 2016, Iraqi exports are
expected to continue rising, again
benefiting shipowners while contributing
to the global oil and supply imbalance.
ON THE HORIZON
Iran is widely expected to increase its
crude exports substantially in 2016,
assuming sanctions are lifted, having
major implications for the tanker market.
Iranian officials expect to boost
output by 500,000 b/d immediately
after sanctions are lifted and by a
further 500,000 b/d over the following
six months. While this potential rise
in supply will feed into greater tanker
demand, it will be partly offset by
the return of National Iranian Tanker
Company’s 51-strong fleet - 37 VLCCs,
nine Suezmaxes and five Aframaxes around half of which are currently idled
in floating storage.
Platts estimates that the amount of
Iranian crude oil and condensate held at
sea is currently 43-45 million barrels, a
volume expected to be quickly sold once
sanctions are lifted, leaving the fleet to
compete in the global spot market.
WEST AFRICA
West African crude flows in 2015 were
once again dominated by Europe and
Asia but there was some rise in crude
traveling to regions like South America
and the US too.
Europe has emerged as the
clearinghouse for light sweet Nigerian
crudes, while India remained the
largest buyer of Nigerian crude on a
country-specific basis. In Europe, the
key buyers of Nigerian crudes include
the Netherlands, Spain, France and the
UK. Angola and the other West African
countries remained hugely reliant on
Asia, with almost 50% of Angola’s
monthly crude exports going to China.
But 2015 saw West African crude
widen its customer base as it found
favor in South American refineries.
West African crude has become more
attractive to South American refiners
as the continent mainly produces heavy
and sour crudes. As its demand for
refined products like gasoline, gasoil
and diesel has risen, so the local refiners
have sought more, sweeter crudes.
There has also been a large rise in
flows eastwards of Latin American
crude which has resulted in some South
American refiners looking to import
more crudes, especially with current low
prices and strong refining margins.
Venezuela particularly bought large
amounts of Nigerian lightsweet crude
this last year to blend with its domestic
heavy crudes.
Brazil is the largest importer of light
sweet crude oil from West Africa, but its
imports fell slightly in 2015 as the country
worked toward self-sufficiency. Other
buyers of West African crude from this
continent included Uruguay, Argentina,
Chile, Peru and Colombia.
PRICE SPREADS
For refiners in Asia, much of their buying
activity is based on prices spreads for
various grades, namely those for Brent/
Dubai Exchange of Futures for Swaps
(EFS) and Brent/WTI.
The front-month Brent/Dubai EFS -the premium of ICE Brent crude futures
to Dubai swaps -- is a measure of
arbitrage opportunities between Europe
and Asia, as many European and West
African grades price off Dated Brent,
while many Middle Eastern and Asian
grades price on a Dubai-related basis.
A narrow Brent/Dubai EFS encourages
Asia to buy more crudes priced on
Dated Brent which will incentivize Asia
to import crudes from regions like the
North Sea and West Africa.
Since late 2014, the Brent/Dubai EFS
has narrowed significantly which saw a
lot of West African crude travel to Asia.
But from October 2015 onwards,
Brent/Dubai EFS has widened, and if
this trend continues, there could be a
reduction of purchases of Brent related
crudes from Asia this year.
Secondly, the WTI-Brent spread
which has also narrowed through
December - and has even reversed - is
an encouraging sign for US refiners to
import Brent-related crudes. A narrow
Brent-WTI spread also encourages Asia
to buy more Latin American crudes,
which are usually priced against WTI.
So with WTI/Brent close to parity
and the Brent/Dubai EFS widening, the
steady flows of crude from Latin America
to the East will likely continue and more
West Africa crude is expected to head
to Europe.
BUNKER BULLETIN
19
FEATURE
SCRATCH
BENEATH
THE SURFACE
Don’t hang too much
on rising worldscale rates
as they might be deceiving
BY JOHN DELAPP, BARBARA TRONER, JASON LINDQUIST
WORLDSCALE RATES will appear to be rising soon, but looks
can be deceiving. That’s because Worldscale rates have gone
through their annual recalculation and flat rates for 2016 have
dropped substantially from 2015.
“The Worldscale rates are changing mostly because of the
cost of bunker fuel,” a Houston-based shipbroker said. “Every
flat rate I have checked is lower than the 2015 rate because
bunkers are so cheap.”
The Worldscale Association recalculates its 320,000
worldwide flat rates annually based on the average global 380
CST bunker fuel oil prices for the year ending September 30.
According to the association, global 380 CST bunker prices
for the period from October 1, 2014 to September 30, 2015 fell
40.2% compared with the previous assessment period – or to
$367.55/mt from $614.81/mt. As such, 2016 flat rates dropped
by 20-25%.
FLAT RATES
Any drop in flat rates leads to a rise in the Worldscale numbers,
said the shipbroker. “The new Worldscale rates will be higher
than they would have been before. So, if Worldscale 115 was
done on 2016 flat rates, it would be higher than it would have
been with 2015 rates.”
Sharing the same perspective, a clean tanker broker said,
20
BUNKER BULLETIN
“Worldscale points will increase pro-rated, according to the
decrease in the flat rate, most likely during the first week of
January.” A shipowner also agreed that the Worldscale points
have to compensate for the flat rate.
The dirty tanker flat rate for the Caribbean-US Gulf Coast
route was $9.53/mt in 2015. At the start of 2016, that rate was
$8.31/mt.
Global 380 CST bunker prices for
the period from October 1, 2014 to
September 30, 2015 fell 40.2% compared
with the previous assessment period
Towards the end of 2015, the Caribbean-USGC freight rate
for Panamaxes was Worldscale 115. For a shipowner to receive
the same level of earnings in 2016, the rate would be Worldscale
131.9.
When new flat rates are adopted, there is a transition period.
A dirty tanker broker said, “At the end of the year, the owner and
the charterer need to agree on which rate scale to use, but the
loading date is the controlling date.”
The sentiment was echoed by a broker on the clean side. “It
is not like a flip of a switch,” he said. “The markets ease into
it. The 2015 flat rates are used until the end of December and
possibly into early January on a case-by-case basis.”
FEATURE
FEATURE
The Panamax and Post-Panamax fleet is projected to grow
by 3% in 2016, while the Supramax fleet is also expected
to grow by 10%. This will add further competition for cargo
as Supramaxes and Ultramaxes are likely to take market
share from Panamax tonnage on South American fronthaul business.
2016 could see little hope in terms of
freight rate recovery, as the supramax/
ultramax tonnage bracket is expected to
grow by nearly 10%. This means that an
already over-subscribed market will have
even more ships to contend with
STUCK IN THE STORM
Front-haul freight rates, which usually peak at the end of the
year, are emblematic of the weakness in the market and the
two leading grain routes are massively down on the previous
year’s levels. The grain route from New Orleans, Louisiana to
Qingdao, China, basis 60,000 mt, was valued at $38.5/mt on
December 16 2014, compared with $23.25/mt in December
2015, a fall of $15.25/mt. Likewise, the grain front-haul route
from Santos, Brazil to Qingdao, basis 60,000 mt was valued at
$31/mt on December 17 2014, compared with $15.5/mt on the
same day in 2015, a 50% fall in a year.
As hopes for a dry bulk freight market recovery
in 2016 fade, projections for a recovery
have been pushed back to 2017
BY PETER FARRELL AND KONSTANTINOS TSOLAKIS
HIGHS AND LOWS
THE ATLANTIC PANAMAX dry bulk carrier market had a difficult
end to the year, with many owners considering lay-ups due to the
volume of new-build vessels and the weak market conditions.
The Panamax dry bulk short period freight market is trading
below operating costs and some owners may be tempted to lay
up their vessels in 2016.
Many Greek owners are now willing to accept levels of
$5,000/d to fix vessels on four-to-seven-month period contracts.
Operating costs on a Panamax are approximately $5,500-6,000/d
depending on the fuel consumption and the age of the vessel.
According to a shipbroker, “they are effectively fixing a loss for
four to seven months.”
As a result of the market conditions, some owners may put
their vessels into a “warm lay-up.” This is when the vessel drops
22
BUNKER BULLETIN
anchor in a safe port and keeps the engines idling with the
crew aboard, so it is able to swiftly return to service when
market conditions improve. This typically cuts operating costs
down to $2,500-$2,750/d. Alternatively, they can put it into a
“cold lay-up,” where the vessel is anchored for a few months
to a year or more in a safe port with the engines switched off
and a skeleton crew left on board. Some Greek owners have
been evaluating this option, with costs of around $1,000/d to
anchor for a year in Piraeus, Greece.
In spite of the weak outlook for the Panamax market, the
dry bulk fleet continues to grow, as vessels ordered in 2013
are now being delivered. According to data from Bancosta, the
Italian broking house, total dry bulk fleet growth is expected to
reach 6% in 2016.
©shutterstock/Kellie L. Folkerts
The Atlantic Supramax market experienced a volatile year
in 2015, marked by a change in some key trading patterns,
a sharp decline in bunker prices and a persistent oversupply
of vessels.
Last year also saw four very distinct periods of trade, starting
with a rapid descent into a negative freight environment in
the first quarter of 2015. Freight rates during this period saw
a sharp decline, brought on not only from a contraction in
inquiry, but also by a nosedive in bunker prices. As bunkers
make up by far the biggest part of voyage costs, this drop
in bunker prices went hand in hand with softer rates. For
example, having averaged $36.8/mt in December 2014, the rate
for carrying 50,000 mt of grain from New Orleans to Kashima,
Japan, dropped to an average of $30.77/mt in January 2015
and $25.66/mt in February. Following that, there was a small
recovery, with the freight rate on this route hovering around
the $28.50/mt mark in both March and April.
Similarly, petcoke freight rates from the US Gulf to Turkey
also edged lower in the first quarter of 2015, as weaker bunker
prices were allied with Turkey beginning the year with high
stock levels. The rate for carrying a 50,000 mt petcoke stem
from Houston to Aliaga gradually fell from $19/mt at the start
of December 1, 2014, to as low as $13.50/mt by early February
2015. Market sources said Turkish demand for petcoke was also
subdued during this period because of low inquiry for Turkish
rebar, with petcoke being a key material in the production of
steel in Turkey.
FAILED EXPECTATIONS
But few market participants expected the bearish desert the
Atlantic Supramax market entered beyond this bullish summer
oasis. Traditionally, the East Coast South America grain season
tends to pass the baton of grain hot spot to the US Gulf Coast
as the third quarter of the year gives way to the fourth, but grain
flows on the USGC in the fourth quarter of 2015 fell well short of
expectations.
As a result, there was a gradual buildup of tonnage on the
USGC, with grain freight rates seeing a sharp drop in the last
three months of 2015. Another sharp decline in bunker prices
contributed to this, which saw rates fall even lower than levels
seen in the first quarter. On the grain route from New Orleans to
Kashima, the freight rate averaged $31.19/mt in September 2015,
dropping to $30.26/mt in October and $27.83/mt in November,
before falling sub-$24/mt in December.
At the same time, the US Gulf Coast saw the loss of what
was previously the very liquid petcoke route from Houston
to Qingdao, basis 50,000 mt. This was due to Beijing passing
legislation in August 2015 that forbade the import of high sulfur
content petcoke into China from January 1, 2016.
With about 75% of the petcoke China has imported in the past
few years being high sulfur petcoke shipped from the US Gulf,
the Houston-to-Qingdao petcoke route saw a dramatic decline
in liquidity in the fourth quarter of2015. This was accompanied
by a tumble in freight rates, with the rate for carrying 50,000 mt
of petcoke on this route dropping from $26.50/mt on October 1,
2015, to $21.50/mt by mid-December 2015.
The year ended with Supramax market participants saying
that 2016 could see little hope in terms of freight rate recovery, as
the Supramax/Ultramax tonnage bracket is expected to grow by
nearly 10%. This means that an already over-subscribed market
will have even more ships to contend with, but the fact that
2015 saw very few newbuilding orders, combined with a push
for more scrapping, could lead to more positive fundamentals
by 2017.
BUNKER BULLETIN
23
GUESTFEATURE
GUESTFEATURE
A QUESTION OF QUALITY
FIGURE4: ACTUAL ALUMINUM + SILICON LEVELS
BY SUPPLIER FOR LAST 12 MONTHS IN JEBEL ALI
Keith Forget takes a look
at present and future
marine fuel quality trends
The Vladivostok, Novorossiisk and St Petersburg areas
show a higher than normal tendency to deliver fuels with high
sludge levels and instability.
Used Lubricating Oil (ULO) in the fuel, while very important
from an operational perspective did not show up as a major
issue. The most frequent occurrence of detected ULO occurred
in American ports. While ISO 8217:2012 states that fuels should
be free of ULO, the inclusion of calcium, zinc and phosphorus
limits, under which a fuel is deemed free of ULO, provides a
loophole that some suppliers can exploit.
NEW ECA FUELS
JANUARY 2015 saw the introduction of the 0.1% maximum
sulfur limit in Emission Control Areas (ECAs). There is
considerable interest in how this change may have affected
fuel quality. Below we review key quality trends revealed in the
VPS database and comment on possible future changes.
For the purposes of this review we will divide marine fuels
into three categories, residual, new ECA fuels (NEFs) and
normal distillates. Residual fuels remain the largest volume
fuel products used on board by far and generate the largest
number of technical issues on ships.
Following the drop off of 1.0% residual fuels in ECAs and
associated high cat fines content, it would be reasonable
to expect the cat fines levels in mainstream fuels to have
increased. However, Figure 1 suggests this is not the case.
FIGURE 2: ACTUAL ALUMINUM + SILICON LEVELS
BY SUPPLIER FOR LAST 12 MONTHS IN ROTTERDAM
Inspired in a cleaner future, TecnoVeritas
will soon complete the construction of the
first Refinery Plant using this efficient and
innovative technology.
FIGURE 3: ACTUAL ALUMINUM + SILICON LEVELS
BY SUPPLIER FOR LAST 12 MONTHS IN SINGAPORE
24
BUNKER BULLETIN
The 0.1% m/m ECA sulfur limit was an opportunity for suppliers
who have direct contact with refineries to launch a number of
new fuels. In many cases these fuels were just heavier grades of
gasoil that have been around for a long time. However, a couple
of suppliers launched grades that appeared quite different.
The principal purpose of these new grades was to provide
TecnoVeritas once again Innovates by achieving the Reduction of Sulfur and Flash Point
Control of Heavy Fuel with Ultrasound Assisted Oxidation Technology.
FIGURE 1: GLOBAL AVERAGE
ALUMINUM + SILICON MG/KG LEVELS BY MONTH
Figures 2, 3 and 4 graph the actual aluminum and silicon
levels in three ports. These show that in two ports, Rotterdam
and Singapore, most suppliers deliver fuels that have very
high cat fines levels whereas in Jebel Ali the majority of fuels
delivered by all suppliers have low levels of cat fines.
Sludge and residual fuel instability incidents have remained
very low. Most cases appear to be random quality control
failures. There are however a couple of locations where the
risk of loading a high sludge or unstable fuel is somewhat
higher than normal.
This slop tank valorization plant (5 m3/h) is
an environment friendly technology as an
alternative to incineration, recycling a
residue into a premium fuel with high
specific energy, improved combustion
properties and resulting emissions is the
objective.
With this desulphurization technology, in
addition to reducing the Sulphur content,
the quality of fuel will also increase. Based on H2O2 addition and ultrasonic
mixing, this technology brings the following
advantages:
• Easy operation (low pressure & low
temperatures);
• Low cost;
• Nonpolluting & non strongly corrosive;
• Applied to small and middle refineries;
• Reduction to low Sulphur fuel type;
• Easy deletion of Sulphur that are
resistant against the
hydrodesulphurization;
• Reduction of flash point.
• Better fuel quality.
The plant area required is limited, and may
be supplied in skid modules as well as on
board of 40ft marine containers for fast
plant deployment.
This system recovers oily residues in the
form of sludge from oil refineries and
intermediate storage ('oil seas', 'sludge
lagoons') but also oil water mixtures from
ships, discarded lubricant oils and
emulsions or other waste water streams
containing oil that should not be
considered annoying waste.
The valorisation of the recycled product
through its improved properties, allows
a quick pay back of the investment.
BUNKER BULLETIN
25
GUESTFEATURE
a fuel that met the ECA sulfur limit but had a relatively high
viscosity, overcoming the potential risks associated with very
low viscosity gasoils. A significant characteristic of some of
these NEFs is that the cold flow properties could present a
challenge on some ships.
HDME50, manufactured by ExxonMobil, is hydro-processed
vacuum gasoil and so is not something that had been seen in
the marine market before as a distinct product.
Data on samples analyzed from late 2014 to end 2015 show
that the majority of deliveries (84%) had Pour Points of the
order 9° to 15°. Some 10% were less than 9° and 6% were
greater than 15°C, with an overall range from -3°C to 27°.
Meanwhile, the metals were all below the measurable range
and flash points were all >70°. The viscosities were mainly of
the order 30 to 40 mm2/sec at 50° with an overall range from
20 to 47 mm2/sec at 50°.
In my opinion, the quality of this grade is unlikely to change
in the future unless contaminated along the supply chain. It
is unlikely to remain in the market long-term (beyond 1520 years) as the feedstock has a higher value use in a wellbalanced refinery.
Residue thickened distillates are distillates containing
a small amount of residue; Shell was the first company to
reintroduce this type of product just before the beginning of
2015. Other suppliers launched similar products sometime
later. It tends to be sold as an ISO 8217:2015 RMD80 grade. A
significant number of samples have been analyzed over the
year and the data so far shows the material delivered is of a
good quality: very low metals, low Total Sediment Potential
(TSP) and viscosities >20 mm2/sec at 50°.
The Pour Point is the main property that deserves some
attention. Figure 5 shows the distribution of Pour Point in terms
of numbers of samples tested. It will be seen from the figure
that the majority of samples tested had Pour Points >20°. This
is not a major issue provided the ships’ staff are aware of the
Pour Point and handle the fuel appropriately.
This grade of fuel is likely to remain in the market for a
considerable time as the components have limited alternative
markets. Users should be aware that while this type of fuel,
when blended correctly is excellent, if it is not, serious
operational problems could be encountered. Complete
segregation from residual fuels along the supply chain and on
board is essential to prevent sediment formation. Mixing with
other distillates or even HDME50 should not be an issue.
While virtually all samples of NEFs we have analyzed have
looked good, some operators, however, have experienced
problems on board. As far as we can ascertain, most if not
all of these issues relate to handling on-board and not with
product non-compliance with the specification.
FIGURE 5
NEW DISTILLATES
Despite concerns over potential flash point issues, the
data indicates that only 1.5% of distillate samples analyzed
recorded flash points <60°.
With respect to viscosity only 0.1% of samples analyzed
recorded kinematic viscosities <2.00 mm2/sec at 40°. In all,
32% of samples fell within the 2-3 mm2/sec at 40° range and
36% 3-4mm2/sec at 40° range with the balance >4mm2/sec
at 40°. As yet we have not seen any operational problems
associated with low viscosity gasoils in the EU ECAs.
A more serious issue, that has the potential to cause
problems in the future, is the cold flow properties of the fuels
supplied. Our VPS database shows that some 12% of samples
recorded Pour Points >-6C, but because the ship operators
were aware of the Pour Points, no issues were reported with
these fuels.
There have, however, been serious problems caused by
wax deposition with fuels that met the Pour Point through the
use of cold flow improvers. The high cloud points resulted in
wax crystals collecting in the tank bottle, blocking outlets and
filters. Until ISO8217 is amended to include a more appropriate
cold flow test parameter these problems will continue.
In summary, residual fuels will continue to be the
mainstream fuel for most ships in the coming years and the
quality is unlikely to change much. However, cat fines will
remain a significant risk with these fuels.
The NEFs are generally high quality/performance fuels and
most are likely to be available into the foreseeable future.
Operators need to ensure they understand and can deal with
the cold flow and compatibility issues and decide if the cost
savings exceed the perceived extra effort.
Normal distillate fuels are unlikely to change a great deal
and will be the most convenient solution for many operators.
They are not, however, risk free as indicated above.
Distillate fuels are, on the whole, ‘normal’ gasoils and currently
represent the most common choice of ship operators
purchasing fuels for ECA compliance.
Keith Forget is Group Fuel Specialist at Veritas Petroleum Services.
Email: [email protected]
26
BUNKER BULLETIN
©shutterstock/Max Lindenthaler
EXCLUSIVE
MAINTAINING
STANDARDS
A new draft marine fuel standard
is up for approval, which will allow
biofuel blends to be recognised
as suitable for the marine sector
BY UNNI EINEMO
A DRAFT REVISION of the international marine fuel standard,
ISO 8217, has been circulated for comment and approval,
signaling that the sixth edition may be ready for publication
later this year.
Voting for participating countries opened in the first week
of January for the Draft International Standard (DIS) 8217,
revising ISO 8217:2012, the fifth edition. Voting closes on April
4, after which the technical committee in charge of drafting
ISO 8217 will review any comments.
Depending on the outcome of the ballot, the committee
may have to produce an amended Final Draft International
Standard (FDIS), which will be put to a vote. In the past, the
voting period for the final version has been two months, after
which the standard can be officially published.
The main change is the addition of a new set of distillate
grades that will, for the first time, allow biofuel blends to be
recognized by the standard as suitable for the marine sector.
Fatty acid methyl ester(s), or FAME, has previously been
regarded as a contaminant in all marine fuels, but the new
grades allow biofuel blends containing up to 7% FAME.
The additional grades are DFA, DFZ and DFB, essentially
corresponding to DMA, DMZ and DMB for all parameters apart
from allowing up to 7% FAME content by volume.
DMA, DMZ and DMB can still only contain “de minimis” levels
of FAME, but while in the 2010/2012 version this was indicated
as not exceeding approximately 0.1%, the new draft allows an
unspecified tolerance.
It says the DMA, DMZ, DMB and RM (residual marine)
grades “shall not include FAME other than a ‘de minimis’
level,” meaning, in the context of the standard, “an amount
28
BUNKER BULLETIN
that does not render the fuel unacceptable for use in marine
applications that are not designed or suited to handling fuels
containing FAME”.
DMX, meanwhile, must be FAME-free according to the draft.
LIMIT CHANGES
The draft says the changes regarding tolerance for biocomponents have been made in light of additional information
that has become available since 2010. It also said that the
practice of blending FAME into conventional diesel and heating
oils “makes it almost inevitable, under current supply logistics,
that some distillate fuels supplied in the marine market can
contain FAME,” and that even some residual fuels can contain
FAME as a result of cross contamination or normal blending
practices.
Limits for various parameters, including contaminants such
as cat fines and vanadium, are unchanged in residual grades
and mostly unchanged in distillate grades from ISO 8217:2010
and ISO 8217:2012, the fourth and fifth editions.
The only exception is sulfur limits for distillate grades, which
have been reduced from 2.00% to 1.50% by mass for DMB.
The bio-blend equivalent, DFB, has also been given a 1.5%
sulfur limit.
The sulfur limit for DMA and DMZ has dropped from 1.50%
to 1.00% by mass, with the same limit applied to the bioblend equivalent DFA and DFC. DMX is unchanged at 1.00%
maximum sulfur.
Unlike in previous editions, no new parameters have been
added this time around.
©shutterstock/Andrey_Kuzmin
EXCLUSIVE
SCOPE AND CONTAMINANTS
Allowing for FAME blends has contributed to the standard’s
scope and definitions of contaminants undergoing material
changes.
Previously, under ISO 8217 2010/2012, marine fuels were
required, under Clause 5 on General requirements, to be “a
homogeneous blend of hydrocarbons derived from petroleum
refining.” The standard also allowed for small amounts of
additives intended to improve some aspects of performance.
The new draft has to allow for bio-fuels, or blends with a
FAME component, but also new under its Scope (Clause 1)
is allowing fuels to include hydrocarbons “from synthetic
or renewable sources, similar in composition to petroleum
distillate fuels.”
As for unspecified contaminants, it has dropped a previous
Annex on Deleterious materials and also previous annexes on
sulfur, flash point and cat fines as information on this is now
included in the body of the standard.
Aside from specifying the new tolerance references
for FAME described above, Clause 5 on ‘General requirements’
has modified and simplified references to unspecified
contaminants.
Clause 5 on General requirements in ISO 8217 2010/2012
states that fuels “shall be free from any material that renders
the fuel unacceptable for use in marine applications” and
specifies that the fuel must not have any additive, added
substance or chemical waste that “jeopardizes the safety
of the ship or adversely affects the performance of the
machinery,” or that is harmful to personnel or contributes
overall to additional air pollution. It also states that the fuel
must be free from inorganic acids and used lubricating oils.
The draft revision drops much of that text in Clause 5, as it
is covered elsewhere in the Standard, and simply states: “The
fuel shall be free from any material at a concentration that
causes the fuel to be unacceptable for use in accordance with
the Scope of this International Standard.”
UNSPECIFIED DIFFICULTIES
Clause 5 on unspecified contaminants has always been
difficult to negotiate because there is not enough knowledge
and consensus within fuel management and testing about
exactly what constitutes harmful contaminants. When there
is consensus, contaminants have previously been added
to the standard with specific limits, as was seen with used
lubricating oil in 2005 and the addition of sodium, acid number
and hydrogen sulfide in 2010.
The draft new standard notes that it is “not straightforward”
to determine the concentration of unspecified chemicals that
will cause the fuel to be of an unacceptable quality for marine
engine use, and says better understanding is required.
It notes that “it may not be practical to require detailed
chemical analysis for each delivery of fuels” beyond the
requirement’s specific parameters listed for distillates and
residual fuels, respectively.
Indeed, standards fuel testing programs typically cover
30
BUNKER BULLETIN
only testing for limits specified in ISO 8217, and may not detect
potentially harmful contaminants. Some can be detected
through chemical screening offered by fuel testing agencies;
they have certain warning signs they look for which may lead
them to suggest more detailed analysis. Unfortunately, fuels
that have met the specified limits in ISO 8217 sometimes cause
major problems on ships, triggering investigative analysis
after the damage is done.
The marine industry is undertaking a study to identify
specific chemicals that can be present in marine fuels and
will seek to identify at what concentrations they may have
detrimental effects.
UNCONVENTIONAL FUELS
The draft new standard makes note of “a number of
unconventional fuels” that have come into the market which
do not “conform exactly” to either distillate or residual fuel
categorization.
This has been the case with a number of new products
that have come on the market as an alternative to DMA-grade
marine gasoil (MGO) to meet the 0.1% sulfur limit in emission
control areas (ECAs). Many of them are similar to distillates in
their low level of contaminants, but are more similar to residual
fuel with regards to viscosity and density.
The latest draft has not been able to consider new fuel
categories that might accommodate these “unconventional”
fuels, but recommends that buyer and seller should agree on
fuel characteristics or limits between themselves, but still
categorize them in line with an ISO 8217 grade.
The market for alternative ECA-compliant fuels has already
heeded this advice as many are sold as RMD 80 from the
residual fuel table in ISO 8217.
MARKET UPTAKE
Market uptake of ISO 8217:2010 has been slow, with most
fuel still being sold to the 2005 version of the standard. World
Fuel Services recently said about 30% of all fuel sold by the
company was supplied to ISO 8217:2010 specifications. Fuel
testing agencies have reported more variable numbers with
regards to samples they receive for testing, ranging from
as high as 42% in Europe to only about 5% being sold to the
2010/2012 revisions.
It remains to be seen if the market will be more prepared to
move to the sixth version once it is published. Suppliers may
be keen to move to it for distillates in particular, due to the
way it deals with tolerance levels for FAME. Allowing up to 7%
FAME content in DFA, DFZ and DFB distillate grades creates
opportunities for the sale of bio-fuel blends.
It also appears to allow for a less strict interpretation of “de
minimis” levels of FAME in the regular distillate grades and in
residual fuel, as it is no longer limited to 0.1% but rather at an
acceptable level. The question will be just what that acceptable
level is.
GLOBAL
MARKETREVIEW
BUNKERWORLD INDEX (BWI)
BWI
BRENT
QUALITY
Al + Si
Water
Sulphur
IFO 380
Correlation: 0.961
BWI
BW380
BRENT
>= 0 and <= 15
>= 0 and <= 0.1
>= 0 and <= 0.5
> 15 and <= 30
> 0.1 and <= 0.25
> 0.5 and <= 1
> 30 and <= 50
> 0.25 and <= 0.4
> 1 and <= 1.5
> 50 and <= 80
> 0.4 and <= 0.5
> 1.5 and <= 3.5
within 95% confidence
within 95% confidence
within 95% confidence
outside 95% confidence
outside 95% confidence
outside 95% confidence
Viscosity
Sulphur
>= -10 and < -6
outside 95% confidence
>= 0 and <= 0.05
>= -6 and <= -3
within 95% confidence
>= 0.05 and < 0.1
> -3 and <= 0
>= 1.5 and <= 2.5
> 0.1 and <= 0.5
within 95% confidence
> 2.5 and <= 3.5
> 0.5 and <= 1.5
outside 95% confidence
> 3.5 and <= 5
within 95% confidence
> 5 and <= 6
outside 95% confidence
Pour point
Correlation: 0.968
Average Price Differential: -105.833 (-153.750 to - 65.823)
GLOBAL MARKET OVERVIEW
32
BUNKER BULLETIN
All this was founded on historically low crude oil prices
that started 2016 at 13-year lows, with little hope for an uptick
as Iran’s oil returns to a market that is already oversupplied.
OPEC kingpin Saudi Arabia produced a record 10.564 million
b/d in June and while it has since scaled back production, it
continues to produce in excess of 10 million b/d.
This rollercoaster of risks and rewards has been reflected
in the Bunkerworld Index, the weighted daily index derived
from the average prices of residual and distillate bunkers in
20 key bunkering ports globally, and the price of the
benchmark crude, Brent. The BWI stayed firmly on a downward
track until 20 January 2016, when a minor rally moved it back
into the 400s for two days, only for it to fall back again the
following day.
MGO
Globally, it was a game of two halves for bunker sales in 2015.
While historically low crude oil prices kept bunker prices in
check, regional sales totals recorded both highs and lows.
Falling firmly in the latter camp was Europe, where the
key bunkering hub of Rotterdam suffered from flat sales.
Total sales in the port came in at 10,634,468 cu m, up by less
than 20,000 cu m on 2014’s figures. Sales of 380 CST fuel oil,
the bunker market’s most popular grade, were down for the
second consecutive year.
In contrast, Singapore bunker fuel sales rose 13.2% yearon-year to 4.18 million mt in December 2015 and were up
1.7% month-on-month. The port’s total 2015 bunker sales
hit a record high, surpassing 43.2 million mt in 2011, MPA
data showed.
within 95% confidence
outside 95% confidence
BUNKER BULLETIN
33
SINGAPORE
MARKETREVIEW
PRICE
QUALITY
Water
Sulphur
BW380
Correlation: 0.989
Avg. Price Differential: -8.819 (-32.000 to 29.500)
MGO
SINGAPORE 380
IFO 380
IFO 380
Al + Si
>= 0 and <= 15
>= 0 and <= 0.1
>= 0 and <= 0.5
> 15 and <= 30
> 0.1 and <= 0.25
> 0.5 and <= 1
> 30 and <= 50
> 0.25 and <= 0.4
> 1 and <= 1.5
> 50 and <= 80
> 0.4 and <= 0.5
> 1.5 and <= 3.5
within 95% confidence
within 95% confidence
within 95% confidence
outside 95% confidence
outside 95% confidence
outside 95% confidence
Viscosity
Sulphur
>= -10 and < -6
outside 95% confidence
>= 0 and <= 0.05
>= -6 and <= -3
within 95% confidence
>= 0.05 and < 0.1
> -3 and <= 0
>= 1.5 and <= 2.5
> 0.1 and <= 0.5
within 95% confidence
> 2.5 and <= 3.5
> 0.5 and <= 1.5
outside 95% confidence
> 3.5 and <= 5
within 95% confidence
> 5 and <= 6
outside 95% confidence
Pour point
SINGAPORE MGO
BWDI
Correlation: 0.982 Avg. Price Differential: 63.473 (-99.000 to -31.500)
ASIA MARKET OVERVIEW
34
BUNKER BULLETIN
arbitrage fuel oil landed in Singapore in December. But that
volume was expected to have risen to around 5 million mt
by January, before easing back down to around 4 million mt
for February.
Tight product availability led the Singapore ex-wharf 380
CST bunker premium for Mean of Platts Singapore 380 CST
HSFO to rise to a 13-month high–of $10.89/mt–at the start of
the year. A supply crunch amid steady demand also led the
premium for 380 CST grade bunker fuel delivered in Singapore
to rise to a near one-year high of $18.01/mt by mid-January.
However, bunker premiums for the mainstay 380 CST grade
inched lower towards the end of January as tight availability
eased on rising arbitrage supplies into the city-state.
MGO
Tight supply from relatively low western arbitrage fuel oil
arrivals into Singapore for December led the cash differential
for the mainstay 380 CST high sulfur fuel oil to rise to a 69
cents/mt premium on the first trading day of the year. This
marked the first time it has not traded at a discount since June
24, 2015, Platts data showed.
A supply crunch especially for prompt barrels amid steady
demand led the 380 CST HSFO cash differentials to firm up to
a near seven-month high of $1.64/mt on January 11. By midJanuary it had inched lower to trade around the $1/mt level on
talks of fresh arbitrage supplies arriving towards the end of
January.
Market sources estimate that about 3 million mt of western
within 95% confidence
outside 95% confidence
BUNKER BULLETIN
35
FUJAIRAH
MARKETREVIEW
PRICE
QUALITY
Water
Sulphur
BW380
Correlation: 0.987
Avg. Price Differential: -5.562 (-33.000 to 27.500)
MGO
FUJAIRAH 380
IFO 380
IFO 380
Al + Si
>= 0 and <= 15
>= 0 and <= 0.1
>= 0 and <= 0.5
> 15 and <= 30
> 0.1 and <= 0.25
> 0.5 and <= 1
> 30 and <= 50
> 0.25 and <= 0.4
> 1 and <= 1.5
> 50 and <= 80
> 0.4 and <= 0.5
> 1.5 and <= 3.5
within 95% confidence
within 95% confidence
within 95% confidence
outside 95% confidence
outside 95% confidence
outside 95% confidence
Viscosity
Sulphur
>= -10 and < -6
outside 95% confidence
>= 0 and <= 0.05
>= -6 and <= -3
within 95% confidence
>= 0.05 and < 0.1
> -3 and <= 0
>= 1.5 and <= 2.5
> 0.1 and <= 0.5
within 95% confidence
> 2.5 and <= 3.5
> 0.5 and <= 1.5
outside 95% confidence
> 3.5 and <= 5
within 95% confidence
> 5 and <= 6
outside 95% confidence
Pour point
FUJAIRAH MGO
BWDI
Correlation: 0.865 Avg. Price Differential: 128.064 (13.000 to 280.500)
MIDDLE EAST & AFRICA MARKET OVERVIEW
36
BUNKER BULLETIN
relatively lower demand in January and was assessed at $10/
mt on January 25.
Quality-wise, 380 CST product Fujairah has traditionally
been low in Al+Si, or cat fines, but high in sulfur. In 2015, cat
fines in samples from Fujairah averaged close to 25 ppm, in
line with the global average. Almost 40% of samples tested
met the maximum 15 ppm limit at the engine inlet required by
most engine makers, while only 0.52% tested decisively above
the 60 ppm upper limit in ISO8217:2010.
Sulfur content clearly exceeded the global 3.5% limit
in nearly 2% of samples tested, with another 1.5% testing
marginally above but within confidence limits. Sulfur content
for 380 CST samples from the port averaged 3.21% in 2015,
compared to a 2.38% global average.
MGO
In Fujairah, the premium for delivered Mean of Platts Arab Gulf
380 CST high sulfur fuel oil has progressively firmed since the
start of the year.
MOPAG 380 CST HSFO for Fujairah delivered 380 CST grade
bunker fuel rose from $15.24/mt at the start of the year to be
assessed at $27.76/mt January 25, Platts data showed.
Demand for the mainstay 380 CST bunker fuel at the middle
eastern port has remained robust despite a falling flat price on
the back of a drop in crude values.
Strong demand for 180 CST bunker fuel led the viscosity
spread, and the premium for the lower viscosity grade bunker
over 380 CST grade bunker fuel, to surge to a near 27-month
high of $47.5/mt end-December.
That spread has, however, progressively narrowed on
within 95% confidence
outside 95% confidence
BUNKER BULLETIN
37
ROTTERDAM
MARKETREVIEW
PRICE
QUALITY
Water
Sulphur
BW380
Correlation: 0.993 Avg. Price Differential: -34.257 (-59.000 to -17.500)
MGO
ROTTERDAM 380
IFO 380
IFO 380
Al + Si
>= 0 and <= 15
>= 0 and <= 0.1
>= 0 and <= 0.5
> 15 and <= 30
> 0.1 and <= 0.25
> 0.5 and <= 1
> 30 and <= 50
> 0.25 and <= 0.4
> 1 and <= 1.5
> 50 and <= 80
> 0.4 and <= 0.5
> 1.5 and <= 3.5
within 95% confidence
within 95% confidence
within 95% confidence
outside 95% confidence
outside 95% confidence
outside 95% confidence
Viscosity
Sulphur
>= -10 and < -6
outside 95% confidence
>= 0 and <= 0.05
>= -6 and <= -3
within 95% confidence
>= 0.05 and < 0.1
> -3 and <= 0
>= 1.5 and <= 2.5
> 0.1 and <= 0.5
within 95% confidence
> 2.5 and <= 3.5
> 0.5 and <= 1.5
outside 95% confidence
> 3.5 and <= 5
within 95% confidence
> 5 and <= 6
outside 95% confidence
Pour point
ROTTERDAM MGO
BWDI
Correlation: 0.974 Avg. Price Differential: -79.558 (-139.000 to -42.000)
EUROPEAN MARKET OVERVIEW
38
BUNKER BULLETIN
drive the 380 CST bunker fuel oil price down to $60/mt levels
towards the end of January, less than half the $140/mt range
at end-January 2015.
Demand-wise, the market was relatively subdued at many
ports as buyers held off in expectation of further price drops.
Shipowners said that despite the lowest bunker costs in years,
the sector was not enjoying high profitability and any savings
were being lost in depressed freight rates, especially in the dry
bulk sector.
Marine gasoil and marine diesel continued to claim a larger
chunk of the market following the imposition of the ECA zone
rules accounting for a combined 17% of total bunker sales in
Rotterdam in 2015, according to the port authority, up from 5%
in 2014.
MGO
European bunker prices continued to fall through December
and January, weighed by ample supplies and declining crude
prices. Dated Brent edged below $26/b on January 20,
according to Platts data, its lowest since 2003.
In Rotterdam, delivered 380 CST high sulfur bunker fuel
sank to $103.50/mt on January 18, a sharp drop from an
average $149.35/mt through December and compared with
levels of around $240/mt in January 2015.
In the Mediterranean, Algeciras 380 CST bunker fuel prices
were around $130/mt in January 2016, losing some $30/mt in
less than a month.
In the Russian Black Sea port of Novorossiisk, pressure on
the selling side and high stocks after a period of bad weather–
which had restricted bunkering operations–all contributed to
within 95% confidence
outside 95% confidence
BUNKER BULLETIN
39
HOUSTON
MARKETREVIEW
PRICE
QUALITY
Water
Sulphur
BW380
Correlation: 0.992 Avg. Price Differential: -27.336 (-60.500 to -1.000)
MGO
HOUSTON 380
IFO 380
IFO 380
Al + Si
>= 0 and <= 15
>= 0 and <= 0.1
>= 0 and <= 0.5
> 15 and <= 30
> 0.1 and <= 0.25
> 0.5 and <= 1
> 30 and <= 50
> 0.25 and <= 0.4
> 1 and <= 1.5
> 50 and <= 80
> 0.4 and <= 0.5
> 1.5 and <= 3.5
within 95% confidence
within 95% confidence
within 95% confidence
outside 95% confidence
outside 95% confidence
outside 95% confidence
Viscosity
Sulphur
>= -10 and < -6
outside 95% confidence
>= 0 and <= 0.05
>= -6 and <= -3
within 95% confidence
>= 0.05 and < 0.1
> -3 and <= 0
>= 1.5 and <= 2.5
> 0.1 and <= 0.5
within 95% confidence
> 2.5 and <= 3.5
> 0.5 and <= 1.5
outside 95% confidence
> 3.5 and <= 5
within 95% confidence
> 5 and <= 6
outside 95% confidence
Pour point
HOUSTON MGO
BWDI
Correlation: 0.986 Avg. Price Differential: -10.670 (-63.000 to 53.000)
AMERICAS MARKET OVERVIEW
40
BUNKER BULLETIN
The Houston bulk-to-retail spread, the difference between
Houston IFO 380 ex-wharf and USGC HSFO, averaged roughly
-$1/b in December. From 2011-2015, the typical margin between
the two products averaged about $2.20/b.
Marine distillate markets also fell dramatically last year,
which has perhaps masked the true cost of stricter Emission
Control Area compliance for shipowners. Houston MGO prices
ended 2015 around $375/mt ex-wharf, though they had neared
$350/mt in mid-December. That is less than what shipowners
had paid at the end of 2014 for ECA-compliant IFO 380 1%
sulfur, despite MGO being a higher-quality product in terms of
sulfur content.
Simply put, marine fuels market watchers must wait until
oil prices rebound to see what impact stricter ECA compliance
will have on the shipowner segment.
MGO
Americas marine fuel markets sank across the board in 2015,
as ample supplies and poor demand led to declining retail
bunker prices that outpaced falling prices in crude and residual
fuel oil markets.
Nowhere was that more true than in Houston, one of the
largest bunker markets in the US. Houston IFO 380 fell by more
than half in 2015, ending the year just shy of $130/mt, values
not seen since late 2004.
The annual decline of 57% in Houston high-sulfur bunker fuel
prices compares with a 34% decline in the front-month Brent
crude futures contract and a 50% decline in the underlying US
Gulf Coast HSFO market, which is blended to make IFO 380.
The bearish sentiment only seemed to gain strength as the
year progressed. In December, Houston bunker fuel suppliers
often faced negative margins, forced to sell product below
cost just to move barrels.
within 95% confidence
outside 95% confidence
BUNKER BULLETIN
41
CALENDAR
CALENDAR
FEBRUARY
MARCH
16-18
MAY
LNG 2016 RUSSIA CONGRESS
Moscow
www.lngrussiacongress.com
21–23
CMA SHIPPING 2016
Connecticut, USA
www.cmashipping2016.com
8
8–10
9–12
PLATTS BUNKER LUNCH
TRANSPORT WEEK 2016
BUNKER EXPERIENCE
London
Gdansk
www.transportweek.eu
8
APRIL
Vlaardingen, NL
www.bunkerexperience.com
PLATTS LONDON OIL FORUM
13–17
10–2
London
MIDDE EAST BUNKERING CONVENTION
CANADA LNG EXPORT CONFERENCE
Dubai, UAE
Vancouver
www.petrospot.com
www.canadalngexport.com
London
14–15
11–12
www.ibia.net
INTERNATIONAL LNG CONGRESS
8
IBIA ANNUAL DINNER 2016
18–19
PLATTS 15TH LNG ANNUAL LNG CONFERENCE
Houston
London
27–29
38TH MOTORSHIP PROPULSION &
EMISSIONS CONFERENCE
www.lngcongress.com/#speakers
INTERNATIONAL BUNKER CONFERENCE
Hamburg, Germany
Copenhagen
www.propulsionconference.com
15–18
ANNUAL GREEN SHIP
TECHNOLOGY CONFERENCE 2016
23–25
Copenhagen
LNG BUNKERING COURSE
www.bi.edu
23–27
MARITIME WEEK AMERICAS
Fort Lauderdale, FL, USA
www.greenshiptechnology.com
Stockholm
www.lloydsmaritimeacademy.com
24–25
PLATTS EUROPEAN
BUNKER FUEL CONFERENCE
Rotterdam
42
BUNKER BULLETIN
©shutterstock/Mike Liu
BUNKER BULLETIN
43
UPCOMINGEVENTS
PLATTS 3RD ANNUAL EUROPEAN
PETROCHEMICALS CONFERENCE
5TH ANNUAL NORTH AMERICAN
CRUDE OIL SUMMIT
9TH ANNUAL GLOBAL
CRUDE OIL SUMMIT
3–4 March, 2016
Hilton Amsterdam Hotel
Amsterdam, Netherlands
3–4 March, 2016
Hyatt Regency Houston Galleria
Houston, Texas
10–11 May, 2016
Hilton London Tower Bridge
London, UK
Platts 3rd edition of its European
Petrochemicals Conference is visiting
the picturesque surroundings of
Amsterdam for the first time in March.
This conference is specifically tailored for
the region’s leading producers/crackers,
feedstock providers, end-users and
other key industry stakeholders.
Platts has sourced the best speakers
around to meet for frank discussion and
unrivalled debate on the following areas
of discussion:
• The petrochemical big picture:
Reasons for margin improvements,
the role of shale, impacts of free
trade talks, high production costs
and future growth strategies
• Rest of the world calling and they
are coming from all sides: What can
Europe do?
• Is big brother watching you fairly?
The latest regulatory landscape
changes,
challenges
and
opportunities
• What is a fair price? Examining pricing
and benchmark evolution in the
European petrochemicals markets
today
• Business strategies to improve the
bottom line: What can we do to prosper?
Now in its fifth year, Platts North
American Crude Oil Summit welcomes
distinguished speakers to its two-day
event.
With keynote speeches from Princeton
Energy Advisors and Sutherland Asbill &
Brennan LLP, the event will discuss in
detail the challenges and opportunities
in today’s crude oil sector.
Only at Platts 5th Annual North
American Crude Oil Summit will you hear
discussions on:
• Crude oil exports — Does reversing
the ban matter?
• Canada — What will become of
stranded Canadian oil and can it find
a way out?
• Mexico — What have the auctions
accomplished? What is the outlook
for deep-water investment?
• Iran — What does the nuclear deal
and potential softening of trade
relations with the US mean for Iranian
crude supply and crude markets in
general?
• China — Economic outlook and
potential impacts on demand for
North American crude
Returning to London, Platts Annual Global
Crude Oil Summit is individually positioned
to unite senior executives from both the
upstream and oil trading communities
over two days of sessions, networking
and insight. Join keynote speakers from
across the industry as they explore and
debate the industry’s crucial issues in what
is a very interesting time for the industry.
Key topics to be explored in 2016 include:
• Will the global glut continue to grow?
• Will US shale oil development
remain dogged?
• Will prices remain weak or will we see
a surge due to upstream cutbacks?
• How will the geopolitical landscape
shape international trade flows?
• Will Asian demand growth strengthen
anytime soon?
• How quickly will Iran change the game?
• What will OPEC do next?
Register today for $1,395. Government
and team discounts are available.
Register by 4 March to save $600 and pay
just $1,399 + VAT.
Register today for $1,499 + VAT.
Contact toll free at 800-752-8878 or from
outside the US & Canada on +1 212-904-3070
or you can email us at [email protected].
Contact us at [email protected]
or call +44 (0) 207 176 6300.
For more details or to book your place visit:
www.platts.com/events/americas/crudeoil/index
For more details or to book your place visit:
www.platts.com/events/global/GlobalCrude-Oil-Summit/index
Contact us at [email protected]
or call +44 (0) 207 176 6300.
For more details or to book your place visit:
www.platts.com/OilStorage
44
BUNKER BULLETIN
Hear experts from the international trading
community discuss oil price movements,
the evolution of benchmarks, regulation
changes and risk practice development in
this volatile time.
©shutterstock/Michal Staniewski/holbox/ Marco Govel