staring into the abyss? survival strategies in 2012 · intertek shipcare provides fast, accurate...

Inside:• Market Predictions• Carbon Regulations• Energy Efficiency• Health and Safety• News and Events

INDEPENDENT INTELLIGENCE FOR THE GLOBAL BUNKER INDUSTRY

STARING INTO THE ABYSS?Survival strategies in 2012

www.bunkerspot.com Volume 9 Number 1 February / March 2012

bunkerspot February / March 2012 www.bunkerspot.com 3

FEATURES

HEALTH & SAFETYKevin P. Gilheany asks how the Costa Concordia incident could have been prevented 20

FUEL HOMOGENISERSAlbert Leyson of Drew Marine looks at how fuel homogenisers can help with marine fuel issues 22

CARBON REGULATIONSKatia Kardash reports that DK Group’s clean technology is ready to help the shipping industry comply with carbon regulations 26

BUNKERSPOT WORLD MAPGlobal prices and news at a glance 28

SHIP ENERGY EFFICIENCYSEAaT’s John Aitken argues that shipping must embrace SEEMP to reduce emissions 30

Esa Henttinen examines how, through an innovative new software suite, SEEMP can lead to real reductions in emissions and operating costs 32

COMMERCIAL ISSUESChris Thorpe takes stock of the world energy markets 36

John Phillips looks at some of the issues facing the maritime sector in 2012, especially in respect of customer and counter-party risk, and tries to avoid saying ‘I told you so’ 40

Félix Yamasato considers what lies ahead for the shipping markets 44

Søren Christian Meyer of OW Bunker argues that fuel suppliers’ responsibility, in conjunction with mutual, cross-industry collaboration, is central to creating stability within a volatile market 48

EVENTSLlewellyn Bankes-Hughes looks at some of the opportunities presented by Africa 51

Events and training course diary 52

NETWORKINGBunker people on the move 54

Contents

0706 bunkerspot v6i6.indd 2 02/12/2009 16:05

Bunkerspot is an integrated news and intelligence service for the international bunker industry. The bi-monthly magazine and 24/7 electronic news service, www.bunkerspot.com, both provide highly-specific information on all aspects of the marine fuels industry. Bunkerspot Magazine (published in February, April, June, August, October and December) annual subscription rate, including unlimited

access to the website www.bunkerspot.com, is UK£250/€280/US$400. ISSN 1741-6981. Copyright Petrospot Limited © 2012. All rights reserved. Published by Petrospot Limited, a dynamic independent publishing, training and events organisation, focused on providing information resources for the transportation, energy and maritime industries. Disclaimer: Bunkerspot is an editorially independent magazine and electronic news information service. The information contained in the magazine and website is presented in good faith. Opinions expressed are not necessarily those of Petrospot Limited, which does not guarantee the accuracy of the information contained in Bunkerspot. Nor does Petrospot accept responsibility for errors or omissions or their consequences. No part of Bunkerspot may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photographic, recorded or otherwise, without the prior written permission of the publisher. Visit www.petrospot.com

HEAD OFFICEPetrospot Limited · Petrospot House Somerville Court · Trinity Way · Adderbury Oxfordshire OX17 3SN · England +44 1295 81 44 55 +44 1295 81 44 66 [email protected] www.bunkerspot.com

DIRECTOR - PUBLISHING / EDITORIan Taylor +44 7876 70 45 41 [email protected]

MANAGING DIRECTOR / PUBLISHERLlewellyn Bankes-Hughes +44 7768 57 44 30 [email protected]

ASSOCIATE EDITORLesley Bankes-Hughes +44 7815 57 86 43 [email protected]

ADVERTISING SALES MANAGERSteve Simpson +44 7800 75 52 78 [email protected]

DIRECTOR - EVENTSLuci Llewellyn-Jones +44 7775 92 42 24 [email protected]

EVENTS MANAGERStacey Smith [email protected]

CONFERENCE AND EVENTS PRODUCERJoanne Wright [email protected]

EVENTS & MARKETING ASSISTANTHannah Whitty [email protected]

SALES & MARKETING MANAGERLouise McKee +44 7951 70 31 03 [email protected]

EVENTS SALES Elena Melis +44 7975 89 52 03 [email protected] Mitchell +44 7789 20 20 10 [email protected] Leader +44 7771 54 03 82 [email protected] Matthew Conisbee +44 7500 68 88 70 [email protected]

ACCOUNTSHelen Wilkins [email protected]

NORTH AMERICA REPRESENTATIVEJackie Hoo Bryant (Miami, United States) +1 305 456 1838 +1 786 302 7667 [email protected]

LATIN AMERICA REPRESENTATIVEChristophe Cahen (Bogotá, Colombia) +57 1 866 1171 +57 317 501 6944 [email protected]

AFRICA REPRESENTATIVEMaria Tierney (Cape Town, South Africa) +27 22 448 1726 +27 72 804 9569 [email protected]

MAGAZINE LAYOUT & PRODUCTIONAlison Design and Marketing Ltd [email protected] www.alison.co.uk

NEWS Bunker Overview 4Europe 8Americas 12Asia Pacific 16Africa and Mideast 19

February / March 2012 bunkerspotwww.bunkerspot.com4

Bunker Overview

In today’s competitive global shipping industry, staying in business means staying on schedule. Poor-quality bunker fuel represents one of the biggest threats to keeping your schedule and profitability intact.

Intertek ShipCare provides fast, accurate testing for bunker fuel quality through our Lintec operation, helping avoid costly repairs and downtime.

Intertek has provided testing services to the marine industry for over 125 years, with the expertise and industry knowledge needed to protect your valuable assets.

Every profitable voyage depends on bunker fuel quality

USA +1 713 407 3695ASIA +65 6777 3944UK +44 1325 390180E-MAIL [email protected] www.intertek.com/marine

The changing economics of the marine fuels industryThe debt crisis and sanctions against Iran. These have been the key drivers that have been influencing the oil markets recently. We flagged up both these concerns in our last Bunker Overview, but the international community does seem to have ramped up its response to the perceived threat of nuclear-armed Iran since then.

The United States, for example, has imposed sanctions on a number of multinational traders on the grounds that they are large suppliers of Iranian refined petroleum products (see page 12). And as Bunkerspot was going to press, the US Senate’s Banking, Housing & Urban Affairs Committee was set to vote on new Iranian sanctions legislation which aims to broaden the list of available sanctions and require firms traded on US stock exchanges to disclose Iran-related activity to the Securities and Exchange Commission.

European Union (EU) leaders, meanwhile, have decided to impose their own ban on Iranian oil – although the President of the EU

12 month rolling price charts

Council, Herman van Rompuy, added that ‘the door is open to Iran to engage in serious and meaningful negotiations, and I confirm the EU’s commitment to continue to work for a diplomatic solution, in accordance with the dual-track approach’.

Iran is not, however, a complete pariah. India and China have both declared that they will continue to import Iranian crude, shrugging off the opprobrium from the United States and Europe. Together, the two Asian countries accounted for more than a third of Iran’s oil exports in the first nine months of 2011, so their continuing support is an important lifeline for Tehran. Some industry observers believe that India and China are maintaining the Iranian connection to buy time while they look for new sources of product to feed their voracious refining sectors.

Both India and China have been expanding their refining bases significantly over the past few years. Because they came to the game a bit later than their international competitors,

they have been able to take advantage of the latest technology and gear their new greenfield plants towards outputting the products which are currently in demand.

In a report on India’s downstream petroleum sector in 2010, the International Energy Agency (IEA) predicted: ‘Indian refiners are likely to fare significantly better than competitor refineries in other Asian countries. Firstly, the large-scale and world-leading complexity of India’s new greenfield refineries mean marginal costs of production are significantly less than [they are in the] older, less complex facilities, thereby increasing refining margins. Secondly, India’s new refinery capacity is equipped to process heavier and cheaper crude grades. Finally, Indian refineries are configured to produce complex, high-end products that will retail in international markets at a premium.’

It is not just India’s more cumbersome Asian competitors who are suffering from the absence of these advantages. Many of the

400

500

600

700Houston 380

Singapore 380

Fujairah 380

Rotterdam 380

F M A M J J A S O N D J

600

700

800

900

1000

1100Houston MDO

Singapore MDO

Fujairah MDO

Rotterdam MDO


Marine Diesel Oil

PRIC

E $/

tonn

e

380 CST Fuel Oil

PRIC

E $/

tonn

e

400

500

600

700Houston 380

Singapore 380

Fujairah 380

Rotterdam 380


600

700

800

900

1000

1100Houston MDO

Singapore MDO

Fujairah MDO

Rotterdam MDO



Bunker Overview

C

M

Y

CM

MY

CY

CMY

K

ANUNCI TRAZ.pdf 1 03/03/11 12:09

older refineries across Europe and the United States have long been struggling to turn a profit, and some of them have had to give up the fight.

In announcing that the 350,000 barrels-a-day (b/d) HOVENSA LLC refinery in St. Croix, US Virgin Islands, will soon be converted to an oil terminal, Hess Oil didn’t mince its words: ‘Losses at the refinery totalled $1.3 billion in the past three years and were projected to continue.’

Hess and HOVENSA – a joint venture with Petroleos de Venezuela SA (PDVSA) – said that the losses were ‘caused primarily by weakness in demand for refined petroleum products amid the global economic slowdown and the addition of new refining capacity in emerging markets’. The companies hammered the point home by adding: ‘In the past three years, these factors have caused the closure of approximately 18 refineries in the United States and Europe with capacity totalling more than two million barrels of oil per day. In addition, the low price of natural gas in the United States has put HOVENSA, an oil-fueled refinery, at a competitive disadvantage.’

In Europe, independent refiner Petroplus slid into insolvency at the end of January. A few years ago, the company was widely admired for its ability to pick up older refineries for a song from the more pernickety oil majors. The applause has faded now.

The power-shift in world refining – and the disappearance of the older plants (particularly the less profitable ones which produced a higher volume of residual fuel) – will surely have a knock-on effect for bunker fuel availability and pricing. And that final sentence in the Hess/HOVENSA statement about the ‘low price of natural gas’ was a telling comment. Just a couple of years ago, many in the bunker industry would have thought that this could have no direct relevance to them. Not any more! As the news pages of Bunkerspot will attest, the maritime world is awash with feasibility studies and pilot projects for using liquefied natural gas (LNG) as a marine fuel. The environmental arguments for LNG are persuasive, but it seems that the commercial benefits could be compelling.

380 IFO December January28-02 05-09 12-16 19-23 26-30 02-06 09-13 16-20 23-27

Rotterdam d 636 634 611 618 623 658 684 678 670Gibraltar d 653 650 630 636 644 672 696 694 685Piraeus d 652 648 623 626 631 657 687 682 675

Suez d 695 694 695 689 690 696 706 710 714Fujairah d 689 695 674 673 680 709 725 730 732Durban w n/a n/a n/a n/a n/a n/a n/a n/a n/a

Tokyo d 722 727 723 730 730 753 758 759 742Busan d 729 724 716 714 727 742 753 752 752Hong Kong d 692 689 674 692 707 734 759 757 764Singapore d 676 676 650 665 682 713 731 732 739

Los Angeles w 695 682 671 669 694 701 710 725 744Houston w 644 637 623 627 638 657 673 674 672New York w 657 649 631 635 641 660 676 678 679

Panama w 709 689 662 661 676 689 694 695 695Santos d 633 653 652 636 642 646 695 713 705Buenos Aires d 661 649 640 635 661 659 664 672 673

180 IFO December January28-02 05-09 12-16 19-23 26-30 02-06 09-13 16-20 23-27


Suez d 735 736 726 722 730 730 727 735 733Fujairah d 706 720 697 698 707 728 746 750 754Durban w 747 747 719 703 708 739 816 851 830




MDO December January28-02 05-09 12-16 19-23 26-30 02-06 09-13 16-20 23-27


Suez d 1130 1169 1174 1177 1149 1213 1196 1195 1168Fujairah d 1051 1053 1046 1040 1043 1050 1055 1051 1050Durban w 1127 1112 1066 1070 1068 1081 1151 1155 1182




KEY: d – delivered • w – ex-wharf • n/a – not available • mdo – marine diesel oil

GLANDER

Bunkerspot prices are compiled from the reports of the four brokers whose market reports have consistently proved the most reliable and accurate: Cockett Marine Oil Limited, LQM, Glander International Inc., and KPI Bridge Oil. Bunkerspot welcomes market reports from other sources for inclusion on its website www.bunkerspot.com


‘Writing policies and procedures is only the first step. The difficult part is getting ships’ officers to follow them’

It is hard to believe that a modern cruise ship, in this age of technology, could end up on its side on the rocks,

only a few hours after leaving port. Was it a bizarre one-time event, or could it happen again? There is no way to fully eliminate the risk of human error or lapses in judgement. But it is the responsibility of all industry stakeholders to use the tools already established to minimise the risk of the next disaster.

On the evening of 13 January 2012, the cruise ship Costa Concordia departed the port of Citiavecchia, Italy bound for her homeport of Savona with 4,200 passengers and crew. A few hours later, she lay on her side, wrecked on the rocks on the shore of Giglio Island. If early reporting is accurate, the answer as to why it happened is the same as in many disasters in the maritime industry: the human factor.

In 1987, the ferry Herald of Free Enterprise got underway with its bow doors open and quickly sank within sight of the dock with many lives lost. There had been a miscommunication between crew members and assumptions were made regarding who would close the bow doors. The cause was human error. As a result of this disaster and some others, the International Maritime Organization (IMO) produced the International Safety Management (ISM) Code, in part to address human factors in accidents. The ISM Code has been mandatory for passenger vessels since 1 July 1998. Section 7 of the Code refers to ‘shipboard operations’ and this section includes navigation. So why did the Costa Concordia run into the rocks if the ISM Code has been in place for many years?

The ISM Code is a performance-based system. That is, it is not prescriptive, but focuses on outcomes and provides flexibility in compliance. While this is the genius of the Code, it is also its Achilles’ heel. In order to implement a safety management system as intended by the Code, one must understand the intent, have bought into the philosophy, and be willing to do the considerable work to do it correctly.

Shipboard operationsThe Code states: ‘The Company should establish procedures, plans and instructions,

including checklists as appropriate, for key shipboard operations concerning the safety of the personnel, ship and protection of the environment. The various tasks should be defined and assigned to qualified personnel.’

It is up to the flag state of the vessel, or its recognised organisation, to provide guidance on proper implementation and enforcement of the ISM Code. Vessel companies often purchase ‘off-the-shelf ’ safety management manuals, a practice which has been essentially outlawed for offshore operators in the United States in the wake of the BP Deepwater Horizon disaster. Therefore, ISM manuals may, or may not, contain specific navigation standards. Enforcement authorities, perhaps not wanting to assume a dictatorial role, often accept what the company has put forth as its shipboard operations policies and procedures. However, once an accident occurs, the questions are often asked by investigators and attorneys regarding why the policies were lacking. Perhaps there is a better way.

It is not practical to think there should be written procedures for every shipboard evolution. But in order to have an effective safety management system, a risk assessment must be conducted to determine the highest risk operations for a particular vessel. If this is done correctly, then certainly a cruise ship or oil tanker would determine that navigation of the vessel is one of the highest risk operations.

Procedures should be developed for those high risk operations which represent the best practices as determined by the most experienced and respected individuals available to the company.

So how could these types of procedures

Kevin P. Gilheany asks how the Costa

Concordia incident could have been prevented

The human factorHealth & Safety

‘Vessels should be assigned a navigational

draft based on their design. The company, after determining the minimum depth under keel allowed, should assign a minimum

sounding curve as a matter of policy’

Kevin P. Gilheany is the owner of Maritime Compliance International. He is a retired US Coast Guard (USCG) marine inspector, certified auditor, marine surveyor and crew endurance management expert.

Contact: Kevin P. Gilheany Maritime Compliance International Tel: +1 504 319 3229 Email: [email protected] Web: www.maritimecomplianceinternational.com


and contributed to the causative factors in an accident.

So what should a vessel company do to prevent such accidents in the future?

● ask what is the minimum depth company vessels are allowed to navigate as a matter of policy

● ask what is the minimum range from potential hazards to navigation company vessels are allowed to transit.

If the answer to these questions is unknown or inadequate, ensure these requirements are added to the ‘Shipboard Operations’ of the ISM manual, with the input from the most senior and respected personnel available. Then make sure all ships’ officers are aware and comply with the requirements.

The ISM Code is intended to minimise risk, not eliminate it. The company must do its due diligence to make sure the policies and procedures are adequate and fully implemented.

have prevented a disaster such as the Costa Concordia? Vessels should be assigned a navigational draft based on their design. The company, after determining the minimum depth under keel allowed, should assign a minimum sounding curve as a matter of policy. Furthermore, in the case of steep underwater ledges, the company can assign a minimum distance to keep away from potential hazards to navigation, such as the rocks off Giglio Island.

Of course, writing policies and procedures is only the first step. The difficult part is getting ships’ officers to follow them. This is no easy task, as it is not in the nature of seafarers to be governed by written policies and procedures. Full implementation of a safety management system requires strong leadership on the part of the company, captains and crews.

Enforcement also pays a critical role in ensuring conformance. Some inspectors and auditors assume a non-confrontational

role for many different reasons, including following current interpretations and traditionally accepted methods and policies. But cursory enforcement can lead to a false sense of security on behalf of the company which, after passing an inspection or audit, believes that everything is as it should be. It is only when an accident occurs that the company finds out that its policies, procedures or implementation were lacking

Health & Safety

‘The ISM Code is intended to minimise risk, not eliminate

it. The company must do its due diligence to make

sure the policies and procedures are adequate and fully implemented’

globalvisionbunkers.com

LOCAL KNOWLEDGEGLOBAL VISION

GLOBAL VISION BUNKERSPRICE OPTIMISATION BUNKERS & LUBES RELIABILITY 24/7

adv global vision 2011.indd 1 19-01-11 23:25


Dynamic fuel homogenisers have been around for many decades. When first introduced to the

marine market, fuel homogenisers were marketed as mechanical fuel shredders that had the ability to shear large asphaltic fuel particles into smaller sized ones, thereby homogenising the fuel. This generally benefitted engine operators using residual fuel oil in three major areas of application: sludge reduction, combustion improvement, and waste oil handling. Drew Marine has offered Fuel Mill homogenisers to augment poor quality residual fuel oil used in slow and medium-speed diesel engines and auxiliary boilers since the 1990s and, to date, has installed well over a thousand units.

When exhaust emissions reduction gained attention in the marine industry in early 2000, engine manufacturers such as MAN B&W partnered with Drew Marine to create part of the Invisible Smoke (IS) engine series to incorporate fuel water emulsification technology. At that time, the fuel water emulsion (FWE) module was designed to inject up to 15% water into the suction side of the Fuel Mill to create a stable water-in-fuel emulsion. With no significant design changes needed or detrimental effect on reliability, engines using FWE netted a decrease in nitrogen oxide (NOx) and improved overall combustion, visibly represented with the elimination of smoke and particulate matter (PM) emissions for engine loads from as low as 20% to 100% engine load.

With the increased popularity of slow steaming, where propulsion engines are intentionally operated at low load to conserve fuel, Drew Marine launched in early 2010 its own Fuel Mill FM-FWE fuel water emulsion system. Capable of injecting up to 30% water, the FM-FWE has a low specific water consumption compared to other wet NOx reduction methods (i.e., humidification of intake air, direct water injection, etc.). Suitable for retrofit, the FM-FWE provides operators of Tier I commissioned engines achieve Tier II NOx levels, allowing its operators a greener shipping profile. Designed to be installed in the fuel oil circulation loop,

the FM-FWE variable water injection allows precise water percentage control versus engine load (see Figure 1).

In January 2012, the introduction of a global sulphur cap of 3.5% maximum for marine fuels by the International Maritime Organization (IMO) introduced another application for the Fuel Mill and that is merely homogenising incompletely blended fuel oils. It is fairly common knowledge that marine fuel blenders and bunker suppliers created specific residual fuel oil grades by blending bottom-of-the-barrel residuum with sufficient diluent or cutter stock to first meet a maximum density specification, followed with the grade’s maximum viscosity allowable. Density often was used as the

Albert Leyson of Drew Marine looks at how fuel homogenisers can help with marine fuel issues

Fuel Homogenisers

‘To permanently avoid the risk of non-homogenous fuels brought on by the new 3.5% sulphur cap,

Drew Marine recommends the Fuel Mill homogeniser as a mechanical means to combat the poorly-blended

fuel onboard’

Albert Leyson is the Marketing Manager with Drew Marine USA Inc.

Contact: Albert Leyson Drew Marine USA Inc. Tel: +1 973 526 5738 Fax: +1 973 887 1426 Email: [email protected] Web: www.drew-marine.com Figure 1: Principal layout of Fuel Mill FM-FWE Fuel Water

Emulsion system

Quality control


containing maximum 3.5% sulphur, without the addition of unwanted chemical waste and used lubricating oil or even bio-derived materials. Clause 5 from the International Organization for Standardization’s ISO 8127:2010 specifically prohibits the inclusion of such deleterious materials, citing that only homogeneous blends of hydrocarbons derived from petroleum refining would be suitable for marine bunkers. This implies two things: first, that the cutter stock used to blend down to 3.5% sulphur would need to come from marine distillate fuel oil; and second, the bunker supplier is capable of creating homogeneous blends.

Considering an annual consumption round figure of 500 million metric tonnes (mt) for the marine bunker market, it can be estimated that between 5% and 10% or up to 50 million additional mt of distillate fuel would be required to convert the 15% to 20% of residual fuel that had exceeded 3.5% in 2011. In recent months, many bunker suppliers have claimed that they have the ability to supply compliant fuel. However, operators that do not routinely analyse their fuel oil with onboard test kits or a shore-based laboratory would be unable to ascertain regulatory compliance. Furthermore, should these same operators bunker non-homogenous fuel and not technically know about it, associated problems that ensue would be untenable in any bunker claim.

Blocked centrifugesIn addition to poor stability (which often leads to sludging in storage tanks), incompletely blended fuels when mixed with other fuels during fuel switch-over can lead to overloaded or blocked centrifuges, choked filters and pipes resulting in engine starvation and vessel blackout. Port state control from areas that required the use of low sulphur fuel have reported in recent years an increase of incidents where vessels lost power and manoeuvring capability due to problems encountered during fuel switch-over. Considering that some of these occurrences may be attributed to lack of experience of handling fuel switch-over onboard, it is possible that these types of incident will rise this year simply due to the increased likelihood of bunkering non-homogeneous fuel oil.

Poorly blended fuels in prolonged storage may stratify or separate into distinct layers in the tank. This can result in poor combustion due to unpredictable ignition quality from varying viscosity and density properties of each layer. The engine ignition characteristic as determined by the Calculated Carbon

Aromaticity Index (CCAI) was specifically added to ISO 8217 to exclude fuels with uncharacteristic density-viscosity relationships from being bunkered. Large differences in viscosity also challenge auto-viscosity regulators in finding equilibrium when compensating for adjustments to the fuel oil heater. Inadequate heating would raise viscosity and result in high injection pressure and poor atomisation that increases cylinder liner and piston ring wear. Too low a viscosity from excessive heating may lead to fuel system leakage and fuel injection equipment seizures. In addition, low viscosity components when heated may cause gasification and cavitation in the fuel system.

In-line viscosity controlTo permanently avoid the risk of non-homogenous fuels brought on by the new 3.5% sulphur cap, Drew Marine recommends the Fuel Mill homogeniser as a mechanical means to combat the poorly-blended fuel onboard. Designed to be installed within the fuel oil system’s high pressure circulation loop, the Fuel Mill completely blends and eliminates the disparate viscosities and densities originating from non-homogeneous fuels as well as the different grades of fuel oil used during fuel switch-over. The Fuel Mill improves in-line viscosity control to avoid fuel heating and injection related problems, as well improving the effectiveness of the final fuel filters to capture any extremely fine abrasive contaminants and deposits not removed by centrifuging. The Fuel Mill homogeniser optimises the handling and combustion of residual fuel oil including low sulphur fuel oil and improves overall engine reliability.

Drew Marine also offers a complete line of onboard test kits to accurately test for key fuel parameters that can help determine the severity of problems faced with incompletely blended fuel oil, such as density, viscosity, stability, compatibility, and CCAI. With partner Oiltest Marine Services providing analytical services, Drew Marine’s global network of warehouses supply fuel samplers, sampling containers and bottles to ensure that with each fuel delivery, a MARPOL retained sample is taken and where applicable a separate sample bound for the laboratory is sent.

Whether their fuel is analysed onboard or ashore, customers can rely on Drew Marine’s network of service engineers and technical managers to provide technical support onboard as well in their home office in interpreting the results and in recommending any needed action.

defining parameter because cutter stocks had more value as middle distillate feedstock for generating refined distillates (i.e., jet fuel, kerosene, gas oil, etc.) which commanded a significant price premium over residual fuel oil.

Defining parameterHowever, for today’s bunker market, sulphur content may have superseded density as the defining parameter for blending residual fuel oil grades. Looking at the 380 centistoke (cst) fuels analysed by Oiltest Marine Services in 2011, more than 10% exceeded 3.5% sulphur content and the average viscosities for each of the sulphur ranges were well below 380 mm2/s, suggesting that sulphur has overtaken density as the dominant blending parameter. For 180 cst fuels, the percentage that exceeded the 3.5% sulphur limit was lower at 7%. However, the average viscosities were closer to the 180 mm2/s maximum, suggesting that viscosity was the blending parameter of choice. In both sets, however, density was no longer relevant and became purely a consequence of the blending equation (see Figures 2 and 3).

S% range % total RM380

Average Density

kg/m3

Average Viscosity

mm2/s

Average Energy MJ/kg

> 3.50 10.8% 987.1 341 39.973.00 - 3.50 17.9% 986.1 335 40.142.25 - 3.00 31.6% 981.0 294 40.411.50 - 2.25 16.7% 985.1 330 40.851.00 - 1.50 7.9% 979.3 317 40.920.50 - 1.00 14.5% 978.0 342 41.11< 0.5 0.4% 957.4 348 41.50

Figure 2: 2011 Oiltest Marine Services 380 cst fuel samples breakdown by sulphur content

S% range % total RM380

Average Density

kg/m3

Average Viscosity

mm2/s

Average Energy MJ/kg

> 3.50 7.0% 976.3 176 40.143.00 - 3.50 14.5% 979.2 169 40.252.25 - 3.00 31.1% 980.5 177 40.441.50 - 2.25 19.9% 976.6 169 40.701.00 - 1.50 7.0% 965.7 176 41.060.50 - 1.00 12.9% 970.5 158 41.14< 0.5 0.4% 936.4 175 41.74

Figure 3: 2011 Oiltest Marine Services 180 cst fuel samples breakdown by sulphur content

Time (and fuel analyses) will tell how well marine fuel blenders and bunker suppliers conform this year in creating residual fuel

Fuel Homogenisers

CONQUERING NEW HEIGHTS OF BUSINESS PERFORMANCE

WORKING SOLUTIONS FOR ALL YOUR BUNKERING NEEDS

Addax Bunkering ServicesAN AFFILIATE OF THE

ADDAX AND ORYX GROUP

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

WEST & EAST AFRICA

ATLANTIC/INDIAN OCEAN

CANARY ISLANDS

GERMANY

GREECE

WORLDWIDE TRADING

12807_Bunker Spot Full Page.qxd 24/1/12 13:52 Page 1


‘Reducing carbon emissions also means reducing fuel costs, which now account for on average 70% of all shipping company costs’

the existing global fleet must be included in this index and this debate will be a firm fixture at MEPC 63. Although in 2007 the IMO stated that new vessels could be built up to 40% more efficiently – which EEDI will help to ensure – by 2030, in the same report, it states that at least 10% additional efficiency could be gained from the existing fleet. Det Norske Veritas (DNV) claims as much as 15% more efficiency is possible, beyond the obvious benefits of slow steaming. So, shipping clearly has a great opportunity to significantly reduce emissions from the current fleet, using solutions that are proven, viable and available now.

The demand for compliance with EEDI will provide new pressure for naval architects and shipyards, as they must act to combine engineering innovation with regulation for the first time, placing shipbuilding technology at the forefront of the industry. This is an exciting time for clean technology within shipping, and the market is growing with increasingly viable and verifiable options coming on-line. The fuel reductions that these technologies provide are attracting attention from proactive shipowners, with products such as the Air Cavity System (ACS), a form of air lubrication technology, offering up to 10% cost savings within 18 months to three years, depending on vessel type.

Sustainability and cost efficienciesReducing carbon emissions also means reducing fuel costs, which now account for on average 70% of all shipping company costs. The link between sustainability and cost efficiencies is set to grow even stronger as shipping prepares for a challenging year, and this pressure is proving to be a catalyst for proactive shipowners that are increasingly choosing eco-efficiency technologies to stay competitive in a tough market.

Many shipowners realise that aside from reducing carbon, becoming more

Regulating carbon dioxide (CO2) has provoked strong reactions from shipping, primarily founded

in fears of the costs of compliance and its impact throughout the supply chain – ending with the consumer – amidst a period of austerity. However, in reality the benefits of green shipping and the fuel and cost efficiencies that it brings can balance out clean technology investment.

The International Maritime Organization’s (IMO) recent report for the 17th Conference of the Parties (COP17) in Durban stated that shipping is ‘firmly committed to reducing its CO2 emissions by 20% by 2020, with significant further reductions thereafter’, demonstrating that pressure from the European Union (EU) is set to continue as it strives to deliver against emission reduction targets of 20% by 2020 versus 1990 levels – without complete dependence upon achieving a global agreement incorporating all emitting industries.

A good startThe IMO Marine Environment Protection Committee’s (MEPC) adoption of the Energy Efficiency Design Index (EEDI) in July 2011 was a good start but it could take decades before any significant emissions reductions are achieved, based on the current index, which is applicable only to newbuilds.

The EEDI aims to achieve an improvement for each new vessel built from 2013 of 10% every five years from 2015 based on averages for each vessel category, although these baselines are still being worked on and final figures are due from IMO during 2012. The current age profile of the global fleet and the large existing order book will mean that emissions reductions delivered by this regulation in particular may take time. However, no prudent shipowner would place an order for a vessel today without a compliant EEDI, and risk being burdened with ordering ‘yesterday’s model’. Stepwise increased efficiency, starting in 2015 with 10% and peaking at a target of 30% in 2025, requires shipowners to take action now, and technologies that can tick all of these boxes, by being suitable for newbuild and existing vessels, will prove the most popular.

To achieve swifter emissions reductions,

Katia Kardash reports that DK Group’s clean technology is ready to

help the shipping industry comply with carbon

regulations

Carbon Regulations

Cleaning up‘No prudent shipowner

would place an order for a vessel today without a compliant EEDI, and risk

being burdened with ordering “yesterday’s model”’

Katia Kardash is the Managing Director of DK Group.

Contact: Katia Kardash Tel: +31 20 708 4555 Email: [email protected] Web: www.dkgroup.eu


CO2 data, so the industry needs to understand and evaluate the figures now in preparation, particularly if an emissions trading system is introduced, which is one option on the table. Setting an inaccurate baseline here could lead to significant costs and see shipping getting caught up in legislation. Commitment to and investment in this now will only inspire more innovative technologies and greater profitability for the future.

Commercial benefitsAs shipowners look to remain competitive during these tough times, retrofit technology is coming to the fore as a solution to free up the resource currently trapped in the industry and tick boxes for both EEDI and potential market-based measures. It is the commercial benefits that will continue to open the eyes of shipowners and operators to the potential for significant fuel cost savings at a critical time for the industry.

efficient can significantly benefit the bottom line, particularly as forthcoming sulphur regulations will serve to significantly increase the operational costs of powering vessels, as owners and operators are forced to use expensive distillates, with a premium of at least $300 over heavy fuel oil, when operating in Emission Control Areas (ECAs).

Initial investment costsAs with the adoption of any new technology, there will be an initial investment cost, but achieving the potential 10% efficiency that is possible with the likes of ACS is an attractive return. The cost and exact saving depends on the individual vessel. However, as an example, applying ACS Retrofit to an Aframax tanker would bring a payback period of around three years. For container ships, payback time is typically below two years. As impending environmental legislation drives shipowners to use significantly more expensive distillate

products, this payback period will reduce further.

Looking ahead to future CO2 regulation, updating shipping’s overall CO2 figures must be considered a priority. Although the consensus figure quoted stands at 1 billion tonnes of CO2, this is based on data that is several years old. Transparency will be essential but realistic targets for emission reduction cannot be set without accurate

Carbon Regulations

‘Shipping clearly has a great opportunity to significantly reduce

emissions from the current fleet, using solutions that

are proven, viable and available now’


‘To obtain agreement about the mandatory application of the EEDI and the voluntary implementation of a SEEMP was an outcome only

few had dared to believe possible at the start of MEPC 62’

The scope of possible efficiency improvement measures for shipping is widening constantly, but it would be a mistake to only consider measures that apply to aspects of a vessel. Maritime shipping is a process of which a ship is the hardware. An examination of how a vessel is used within the context of the supply chain will also produce valuable results.

Slow steamingHardly a day passes without some mention of ‘slow steaming’. The fuel consumption benefits of this practice are obvious, but it is not suitable for all trades. Perhaps a more helpful term would be ‘optimum steaming’ – which involves all stakeholders in a maritime supply chain agreeing the optimum speed for a vessel to discharge its cargo where it is needed when it is needed. This would remove the current emphasis from port arrival time to cargo discharge time (not always the same thing).

The initiative promoted by the Oil Companies International Marine Forum (OCIMF) and the International Association of Independent Tanker Owners (INTERTANKO) called ‘Virtual Arrival’ is a prime example of how good planning and communication can lead to significant fuel savings. The benefits are then shared by the stakeholders. A basic outline of this scheme is that delays in cargo discharge are identified well in advance and a vessel’s voyage is then actively managed (generally speed reduced) to ensure arrival when the cargo can be discharged. INTERTANKO or OCIMF outline well how the scheme can work and although this was originally

Whilst the introduction of both the Energy Efficiency Design Index (EEDI) and the Ship

Energy Efficiency Management Plan (SEEMP) regulations will have positive effects in reducing shipping’s emissions to air, it is SEEMP that holds the greatest potential for the short and medium term. This is, of course, only true if a SEEMP is actually followed. One criticism of this regulation is that although it is mandatory to have a SEEMP onboard a vessel, it is not mandatory to actually use it. However, it would seem perverse to go to the trouble of developing one and not using it to its full advantage.

The main strength of having a SEEMP and using it is it allows planned improvements to be systematically managed. The trusted precepts of the ‘Deming Cycle’ are perfect for this. The management practice advocated by Dr Deming of ‘Plan-Do-Check-Act’ when rigorously applied, will demonstrate which of the measures in a SEEMP are effective and which are less so.

Check pleaseIn all management systems, the area where most failures occur is in the ‘check’ part of the cycle. Planning, doing and acting are activities that come very naturally, but checking always seems to be a problem. The old adage of ‘you can’t properly manage what is not properly measured’ is of particular relevance. It is difficult to determine whether an efficiency measure is actually working as it should if the basis for measuring improvement is not sound in the first place. How is it possible to be sure whether an improvement measure purported to bring about a 2% fuel saving is effective when the uncertainty in the fuel consumption measurement process is no better than 10%? The saving is liable to get lost in the ‘noise’, making it almost impossible to demonstrate improvement and therefore value for effort.

A good place to start when developing and implementing a SEEMP is to conduct a review of the fuel consumption data process and use this information to make the process as robust as possible. Any evaluation should not just focus on the measuring end element but should look at how data is handled all the way through from generation to reporting.

SEAaT’s John Aitken argues that shipping

must embrace SEEMP to reduce emissions

Ship Energy Efficiency

John Aitken is the Secretary General of the Shipping Emissions Abatement and Trading industry group (SEAaT).SEAaT is a cross-industry and self-funded group whose mission is to encourage and facilitate efficient reduction of harmful emissions to air from shipping.

Contact: John Aitken SEAaT Web: www.seaat.org

Embrace change‘How is it possible to be sure whether an

improvement measure purported to bring about a 2% fuel saving is effective

when the uncertainty in the fuel consumption

measurement process is no better than 10%?’


possible that is also interesting. Both the EEDI and SEEMP instruments

have been adopted under MARPOL Annex VI, the regulation for the prevention of pollution from ships. MARPOL Annex VI does not deal with carbon dioxide (CO2), whilst both the EEDI and SEEMP were primarily devised to reduce the CO2 emissions from international shipping. The reason why MARPOL Annex VI now encompasses these measures is the linkage between energy efficiency, fuel consumption and the reduction in the pollutants covered by the regulations resulting from a reduction in fuel burn. It is fair to say that MEPC 62 set a precedent whereby proposed measures to reduce or assist in reducing fuel consumption, providing there is sufficient support, can also be included in MARPOL Annex VI. It will be interesting to see whether any papers at the next MEPC meeting make use of this precedent.

designed for the oil tanker trade, it should be possible to adopt it for other trades such as dry bulk.

When it comes to technological improvements, there is certainly no shortage of providers within the shipping industry. The main problem is deciding which technology is best suited to a particular vessel and its operational profile. This important decision is not aided by a rapidly evolving regulatory landscape, making a good understanding of current legislation and the likely direction of future legislation one of the most important tasks when developing a SEEMP strategy to be rolled out across an operation.

As with all projects, paying attention to the ‘upfront’ phase pays dividends as the cost of changes accelerates almost exponentially as a project progress. The implementation of a SEEMP is no different.

The requirement for vessels to have a SEEMP should provide shipowners

and operators with the opportunity to make efficiency improvements that both reduces emissions and reduces cost. The International Maritime Organization (IMO) should be applauded for introducing a regulation that will be good for business as well as the environment.

And finally…Since the 62nd meeting of the IMO Marine Environment Protection Committee (MEPC), many column inches have been devoted to this issue, but it is difficult to overstate how important the result was. To obtain agreement about the mandatory application of the EEDI and the voluntary implementation of a SEEMP was an outcome only few had dared to believe possible at the start of the meeting. The importance of the work at MEPC 62 runs deeper than the agreement on energy efficiency instruments; it is the manner in which progress was made


EXPERIENCED BUNKER SUPPLIER IN PANAMA

TRITON ENERGY OF PANAMAPlaza Obarrio | Avenida Samuel LewisOfi cina 208 | Panama, Rep de PanamaOffi ce: +507 264 5948Fax: +507 264 9456Email: [email protected]

FOR BUNKER ENQUIRIES CONTACT:Gaston Arellano

Offi ce: +1 305 864 6004Mobile: +1 305 282 2602

Email: [email protected]


‘A company CEO will see a top-line overview of the fleet’s data, whereas superintendents will receive a more holistic and comprehensive information set, reflecting their responsibilities

and needs’

Having a Ship Energy Efficiency Management Plan (SEEMP) onboard international vessels

will be mandatory in less than a year’s time when ship operators and owners will be required to collect and record the efficiency data of their vessels and compile reports based upon that data. For some in the shipping industry, SEEMP is viewed as time-consuming for officers and an exercise in paper pushing that will have no real world implications for the efficiency and management of the vessels. However, if applied using a suite of software designed to simplify measuring and monitoring procedures and enable ‘real time’ response, SEEMP can be a vital technology for improving efficiency and realising profitability.

Unlike using traditional paper methods to record SEEMP, the NAPA software suite enables both crew and office-situated employees to view operational efficiency data in ‘real time’. This technology is ready now; it is effective, viable and when used properly – and matched with sound management systems – operational software can achieve savings of as much as 15%-20% in fuel economy, depending on the vessel type.

NAPA began developing this system in 2005 when cruise vessel owners were looking for a way to find out the real-time energy usage on their vessels and it soon became apparent that they could more effectively manage their own efficiencies when they were aware of the baseline consumptions. This system is not about the implementation of new technologies or fundamental changes to the vessel, it is about optimising the technologies and equipment already installed and how the vessel travels in whatever environmental conditions it is facing to discover and exploit latent efficiencies aboard.

There are three key areas for this proactive operational management: the reporting system; voyage optimisation incorporating weather routeing and speed optimisation; and what SEEMP would designate as Propulsion Resistance Management. To be able to identify areas of the vessel for efficiency improvement and to set targets, creating awareness and evaluating operational status is crucial. With NAPA, this information

is available through a web portal in the form of tailored reports for each level of responsibility. For example, a company CEO will see a top-line overview of the fleet’s data, whereas superintendents will receive a more holistic and comprehensive information set, reflecting their responsibilities and needs.

Crucially, NAPA has developed a normalisation method that allows true comparisons between sister vessels, despite the fact they may be operating in different areas with very different environmental conditions. Naturally, when operating under varying conditions, even sister vessels have very different energy usage depending on the needs presented by the environment. If these environmental considerations are stripped away, the pure performance of the vessel can be analysed side-by-side with other vessels to get a true picture of how efficiently they are operating, rather than how much energy they are consuming. This allows immediate identification of inefficiencies should one vessel be performing sub-optimally compared to its sisters.

Taking this one step further, the reports utilise ‘traffic light’ indicators to give clear visual clues on how efficiently or otherwise a vessel class or even a specific vessel is operating compared to baseline measurements.

Once these reports are enacted and any underperforming vessels have been identified, software users can then drill down to find the technical issues impeding efficient operation – such as incorrect settings on the engine, for example – and amend them. These normalised measurements also identify where more than usual resistance is impacting the vessel. This can be anything from wind to waves, drift to shallow water, but it also uncovers the resistance added by hull and

Esa Henttinen examines how,

through an innovative new software suite,

SEEMP can lead to real reductions in emissions

and operating costs


Plan ahead

Esa Henttinen is the Vice President of Business Development for NAPA Group, a software house that supplies eco-efficient solutions for ship design and operation.

Contact: Esa Henttinen NAPA Group Tel: +358 9 22 8131 Email: [email protected] Web: www.napa.fi

‘Speed optimisation is based upon an accurate estimate of the time of

arrival for a vessel, which then enables the voyage to be carried out at a constant speed to arrive at that time’

SingaporePremium Bunkering Hub

Searights Maritime Services Pte LtdCertificate of Accreditation: MPA/AS 04 00180 Marine Parade Road#13-05/06 Parkway ParadeSingapore 449269

Tel: +65 6344 1108 Fax: +65 6344 1128email: [email protected]

Searights Add 2011.indd 1 1/26/11 12:25 PM


destination on time was to start the voyage at a higher than usual speed, reducing speed when the destination was closer to ensure timely arrival. This is not the most efficient way of conducting a voyage, however.

To enable a new approach in the face of changing environmental conditions and circumstances, a reliable tool is required that constantly updates the ETA based on current speed and projected conditions. This means small alterations to speed can be made rather than having to accelerate or decelerate to a large extent at the beginning or end of a voyage, improving fuel consumption needed to complete the voyage.

The International Association of Independent Tanker Owners (INTERTANKO), the Oil Companies International Marine Forum (OCIMF) and the Baltic and International Maritime Council (BIMCO) are all supportive of this type of operational accuracy and have launched their ‘just in time’ scheme to create cooperation between vessels and ports and to put a halt to the early arrival of vessels that then need to wait offshore. They would instead incentivise vessels entering the port only when scheduled.

Players such as BP Shipping are already implementing this scheme, named ‘Virtual Arrival’, as a clause in shipping contracts. And should it be enacted across the global fleet, it would achieve considerable emissions savings and, more importantly, would translate into monetary savings for owners and charterers.

With bunker prices at record highs, just a 1% fuel cost saving on a Handymax could equate to $50,000 saved for the operator, and this increases to as much as $500,000 for large container vessels. These savings could make all the difference to a company’s bottom line across a fleet of vessels, especially when savings of 15%-20% are considered.

Whether or not companies take action to reduce costs and emissions now, SEEMP will be mandatory this time next year. Owners and operators have less than 12 months to implement the measures they believe will serve them best in meeting this regulation.

Some may choose to go the route of paper-based reporting, adding extra time-consuming duties to the already busy schedules of officers on board. Others may choose to take an innovative step forward, to not only measure the energy efficiency of their vessels, in line with SEEMP legislation, but to also proactively engage with setting targets and making changes that can have a real and immediate impact upon their bottom line.

‘Whether or not companies take action to reduce

costs and emissions now, SEEMP will be mandatory

this time next year. Owners and operators

have less than 12 months to implement the measures

they believe will serve them best in meeting

this regulation’

propeller fouling. This allows the enacting of Propulsion Resistance Management, planned anti-fouling and cleaning of hulls and propellers through awareness of when fouling or roughness impedes efficient operation of the vessel. The other opportunity that stems from using software to manage SEEMP is the active measurement of the performance of new technologies used along the hull, such as anti-fouling paint, by comparing historical data to new data collected after the coating is applied and allowing the real time assessment of technology-specific efficiency data.

In addition to optimising the technical workings of the vessel, the NAPA suite also facilitates voyage optimisation – incorporating weather routeing, route optimisation and speed optimisation. By combining these effectively a vessel can pass along the most efficient route in the most efficient way.

Weather routeing is a key element to improving efficiencies. As with normalisation and resistance management, wind, waves and

other environmental conditions have a huge impact on the resistance faced, and therefore the efficiency achieved. With accurate and up-to-date weather forecasts and NAPA’s approach, avoiding weather systems that may impede progress is possible whilst also taking advantage of any beneficial weather systems. For example, ocean currents and other atmospheric conditions may assist the vessel along its way, such as gaining speed by sailing with a gulf stream.

This gained speed should not be treated as an addition to the current speed of the vessel, however. Where speed optimisation has been enacted, speed gained with such a current can be counter-balanced by a reduced need for thrust from the propulsion system – meaning less fuel burn and cost.

Speed optimisation is based upon an accurate estimate of the time of arrival for a vessel, which then enables the voyage to be carried out at a constant speed to arrive at that time. The traditional method of arriving at a


‘NAPA has developed a normalisation method that allows true comparisons between sister vessels,

despite the fact they may be operating in different areas with very different

environmental conditions’

REGISTER BEFORE 30

MARCH & SAVE UP TO $600*

Quote PC279BSP Contact Simon Kears

for more detailsT: +44 20 7176 6273

E: [email protected]

“Excellent with professional

speakers”OMV R&M GmbH

“Informative, deals with current

issues”Ernst & Young LLP

Adapting to overcapacity; remaining competitiveAdapting to overcapacity; remaining competitiveAdapting to overcapacity; remaining competitive

European Oil Storage Conference

2012 speakers include: • Hennie Standaar, Secretary General, FETSA – Federation of European Tank Storage Associations• Hari Dattatreya, Global Oil Director, Vopak• Peter Weijland, CEO, Nedstore Terminals• Gert van Meijeren, Managing Director, CTS Tank• Mark F. Lewis, Managing Director for Europe, FACTS Global Energy Group• Alexey Kornienkov, Head of Strategic Planning and Business Development Department,

Gazprom Neft Trading Gmbh• Chris Hunt, Director General, UK Petroleum Industry Association (UKPIA)• Arjen Schneiders, Managing Director, Euro Tank Terminal• Kevin Myers, Deputy Chief Executive, Heath and Safety Executive (HSE)• Marco Puglisi, Manager Process & Product Development, Vapour Control Systems, John Zink International

5th Annual Register by 30 March 2012 and SAVE UP TO $600*

10–11 May 2012 • Hilton Amsterdam • Amsterdam, The Netherlandswww.europeanoilstorage.platts.com

Principal media partners:

Supporting organisation:

Building on the success of previous years, Platts 5th Annual European Oil Storage conference will once again bring together leading terminal operators, EPCs, logistics and distribution companies, suppliers and service providers, regulatory bodies, and oil gas and petrochemical companies to discuss the most pressing challenges facing the industry.

Platts 5th Annual European Oil Storage conference provides and unrivalled opportunity for delegates to network, share best practice and learn what others in the storage industry are currently doing to maximize profitability in today’s challenging marketplace

Sponsored by:

Media partners:

* Saving based on credit card discount using early bird offer

Key areas to be explored:• Gain a strategic and up to date overview of the European oil storage industry and the challenges and

opportunities that lie ahead• Understand what the industry can, and is doing, to maintain profitability, despite current levels

of storage over capacity • Obtain the latest information on major European storage facilities, updates on new and

ongoing storage projects, new investment opportunities and case studies from Europe’s leading storage companies

• Sessions on maximising operational excellence and tank storage health and safety

European Oil Storage Advert.indd 1 27/01/2012 16:34


‘Demand is lower as refineries have struggled to remain profitable. In the Atlantic Basin alone, 1.8 million barrels a day of

refining capacity is scheduled for shutdown’

Not a day will pass without talk of volatility in the markets. It could be the ‘new norm’, or

just the result of after-shocks following a tumultuous financial crisis. Whatever the reason, market gyrations made for difficult hedging and trading in 2011.

Currently, the oil price ranges tend to be large and without a clear trend. Not that trading within wide price ranges is unusual. But typically these ranges are smaller and expectations of significant price changes are less common. Traders label this kind of market ‘range bound’, which often indicates that directionally biased trading decisions are even more difficult and risky. But the current market is a little different since price ranges appear to be very wide by historical standards. The market now expects extremely large price changes in all the commodity markets, and especially oil. And there is a more consistent fear of a ‘Black Swan’ event or extreme move higher or lower similar to that experienced in 2008.

How do we know that oils have been particularly affected? Of particular note is the increasing demand for protection against extreme moves in market prices. Hedgers and financial managers want to buy options to protect them against prices either drifting very low or spiking very high.

Tail riskThese extreme outcomes are often referred to as ‘tail risk’ which describes the low probability data points in statistical distribution curves. Like it or not, investors, fuel buyers and even producers have become accustomed to wide price dispersion. Range bound markets thus have a new meaning. Whereas ‘range bound’ would typically connote a narrow trading range, the term now suggests wide trading ranges. This is not to be confused with implied volatility which, at high price levels, can actually decrease in periods of wide trading ranges. In periods of high nominal prices, the percentage change is actually lower for the same range of prices. For example, a 10% move from $100 a barrel is $10, whereas a 10% move from $50 a barrel is only $5. Therefore, the same volatility at $100 has a much larger impact on the markets that it would at $50. In these wide ranging markets, implied volatility changes from high

to low, but it is not persistently high in the options market as one might expect.

No one likes a bearGiven a lacklustre global economy, it could be argued that oil prices should be much lower. Demand is lower as refineries have struggled to remain profitable. In the Atlantic Basin alone, 1.8 million barrels a day of refining capacity is scheduled for shutdown. In the United States, gasoline sales at the pump are down 3.5% versus a year ago and demand has not even recovered to pre-2008 crisis levels. European economic conditions are no better under the weight of the sovereign debt crisis and a weakening Euro. Furthermore, the market should remain well supplied (at least in the short run) as Libyan and Iraqi oil production increases and Saudi Arabia remains reluctant to scale back production brought on-line to compensate for Libya’s production losses earlier in 2011. Overall, the Organization of Petroleum Exporting Countries’ (OPEC) production has increased to a three-year high of 30.9 million barrels a day. Although these conditions should lead to weakening markets, the price of oil in Euros is actually higher now than it was near the peak of the commodity markets in 2008. If it weren’t for Iran and the threat of an embargo on Iranian oil, we would likely see $80 a barrel oil in a matter of weeks. But it is folly to become myopically focused on fundamental supply and demand. It may even

Chris Thorpe takes stock of the world

energy markets

Commercial Issues

Sting in the tail?‘Hedgers and financial managers want to buy

options to protect them against prices either drifting very low or

spiking very high. These extremes outcomes are often referred to as “tail risk” which describes

the low probability data points in statistical distribution curves’

Chris Thorpe is Executive Director, Global Energy Derivatives, with INTL FCStone Inc.

Contact: Chris Thorpe INTL FCStone Inc. Tel: +1 212 774 5963 Web: www.hcenergy.com


to the next bidder at a higher price. These economic theories can cause volatility in the market especially when liquidity or a sufficient number of buyers and sellers are unable find a fair value to transact. When the markets cannot clear, price volatility ensues and the resulting price ranges can be dramatic. Commodity markets are very dependent upon a floor price where there is a strong belief that products are ‘cheap’ or below the cost of producing them.

What make commodities special and different are their various forms of storage. Some commodities like gold can be stockpiled in warehouses for years, where others like natural gas have a finite storage capacity. Still other commodities like orange juice or milk are perishable. When storage capacity is ample and inventory levels are low, commodities tend to perform well. Conversely, if the market is over supplied and storage is full prices plummet as is evident in the US natural gas market today. However, the market has a miraculous way of finding innovative ways to store or transport commodities when it becomes economical. The liquid fuels market has entered an era with very high potential levels of inventory due to floating storage, which is the use of idle tankers for storage rather than transportation. Weak shipping markets have created low cost floating storage options. The various factors around storage make price volatility and price ranges difficult to predict.

Though oil markets may not yet be in any trend higher or lower, we should expect wide price ranges for the foreseeable future. Given that weak demand is persistent, 2012 should provide some fuel price respite from the lofty levels traded in 2011. But oil supply is always subject to dramatic interruptions so the upside range must also be respected. The Libyan conflict in 2011 took as much as 500,000 barrels per day of light sweet crude oil off the market very quickly. Nigerian production is halted from time to time due to strikes or terrorism. And, of course, Iranian supply is not only under the limits of a western embargo but could be further curtailed by a conflict in the Straits of Hormuz. These kinds of supply disruptions will create wide price swings that are impossible to predict with any certainty. Lastly, the market hates to be bearish, and the demand for commodities as an asset class continues to have strong support despite weakening short term fundamentals. Herein lays the entire reason to hedge fuel prices: unpredictability. Now more than ever, protecting against price spikes and preparing for wide price ranges is a necessity.

be a waste of time to depend on fundamental research when trading behaviour is so fickle.

Who likes a bear market anyway? You don’t gain much by being overly pessimistic. In part, optimists know that the bears are often wrong. Nobel laureate Paul Samuelson claimed: ‘The markets had predicted nine of the last five recessions.’ When it comes to oil or any commodity markets, typically the bulls are the producers, including OPEC members. They are continually optimistic about future prices because they need new investors or depend on high oil prices for their income. Investors and lenders would never commit capital to bearish commodity plays. Even The Economist, which in 1999 suggested that a $10 a barrel oil price may be ‘too optimistic’ and may be ‘heading for $5’, was criticised by its readers for being overly bearish. With behavioural economics supporting high prices, even very bearish fundamentals can be overcome by enough optimists. In 2011, a bearish global economic picture helped pull the oil markets below $80 a barrel only for them to rebound well above $100 a barrel by the year end. Even during the depths of a recession, one only has to look to investment bank economists and sell side analysts for more positive news.

Paid to be positiveMost bank economists are paid to be positive about the future, or at least create an outlook for clients that is positive in some sense. It just does not sell to be a bear, or suggest that companies will fail. For example, most brokerage houses offer products that are based on buying assets that are undervalued, versus selling products that are overvalued. The ‘long’ versus ‘short’ strategy is typically only employed by hedge funds, which are a less common investment product for the average investor. Furthermore, many investors use commodity products as a hedge against inflation. Investors are dissuaded from selling anyway since the sale of assets often triggers capital gains taxes. Therefore, markets are often buoyed by long only investment strategies which tolerate any range of outcomes. This time, the ranges are just wider, plus or minus 10%-20% in either direction. For the oil markets, those are big ranges.

Winner’s curseMarkets in any case will be subject to winner’s curse. That is to say that among those bidding in any auction, the winner will likely have overvalued the asset at the high end of the potential range. The same can be said for markets that depend on a ‘greater fool’ where investors hold assets only in hopes of selling

Commercial Issues

‘It is folly to become myopically focused on

fundamental supply and demand. It may even be a waste of time to depend on fundamental research when trading behaviour

is so fickle’


‘It is the financial institutions that have, in many instances, supported and facilitated this cycle of boom and bust. With so

much of their own house to get in order, they may be able to help by adopting a more balanced view to future shipbuilding demand’

I recently read a great headline in Lloyd’s List (27 January 2012), it went: ‘“Stupid ship owners” must

stop ordering “stupid ships”’, and is perhaps the most succinct statement on the matter I have seen for quite some time.

Anyone who has attended any of the managing credit risk in the maritime sector courses that have been run by Petrospot in recent years will know that I, together with other speakers, have been bleating on about an over supply of tonnage across most sectors and segments since the courses began in October 2007. This was something as easily apparent to the untrained as the trained eye as early as 2005.

The sad thing is that whilst many of us in the maritime analyst sphere were doubting the ability of ‘The China Factor’ to adequately compensate for this influx, the financial institutions, buoyed by several years of positive growth and ‘forward curves’ that presented an ever-upward market, continued to support owners’ ambitions to renew fleets.

The result was the placing of ever more extravagant numbers of newbuilds at established and even green-field yards. It seemed that few were immune, even the Sanko group, which had itself suffered the effects of an over-ordering spree in the 1980s, was back and ordering in volume. Raft upon raft of public offerings ensured that new money was also able to flow into the sector, yet no-one seemed to be looking at the other side of the equation. Owners were disposing of their excess tonnage into a vibrant sale and purchase (S&P) market, which was only too ready to take tonnage it could immediately float into a growing freight market.

So, what was happening to the over-age tonnage? Well, as a rule of thumb, older tonnage was being run ever longer on the basis of then current demand, and, unsurprisingly given finance costs of newbuilds, usually on lower overheads than the new tonnage entering the market. Surely that was okay because a charterer will always pay a premium for new tonnage? Is this true? My experience suggests that unless there is a political or environmental requirement to do so, charterers and traders will take

John Phillips looks at some of the issues facing

the maritime sector in 2012, especially in

respect of customer and counter-party risk, and

tries to avoid saying ‘I told you so’

the cheaper option. After all, a trader will view transportation (ships) as an additional cost per unit on his product, so if he wants to take market share he will look for lower cost transportation (in this instance we are ignoring insurance premiums and other variables which may impact what is the true cost). What I am saying is that it is a fallacy that a trader will take a more expensive option, he just will not, unless he is obliged to by factors already highlighted. Thus with more expensive tonnage the option is to fix at a loss or to not fix at all.

So where does that leave us? Lots of ships entering a market and, because of the traders preference to cost control, in many instances no pressure on owners of older tonnage to strike it from the market. Even with scrap prices that neared $1,000 a tonne in 2007, ships were not being committed as they could generate returns on the freight market for their owners (when modern vessels were often losing money). This was certainly true of the bulk carrier sector, but for tankers surely phase out was the saving grace? Alas no. Again, over ordering caused an over supply of tonnage despite withdrawals (for conversion to bulk carriers or for scrap and/or storage). However, there was some light for the owners of very large crude carriers (VLCCs): demand from China continued to grow and thus a period of hardship followed by a period of plenty promised. Well, that was until China decided that to maintain

Commercial Issues

‘With commodity markets structured as they are and with the growth of derivatives softening any spikes, coupled

with political issues in the Middle East Gulf

that could drive up oil prices substantially, the likelihood of lower fuel

costs seems to be ever receding’

Doom and gloom?

John Phillips is the Managing Director of Ocean Intelligence Pte Ltd, a provider of credit reports in the maritime sector. He is also Managing Director of Awyr Las Pte Ltd which provides credit management advice, and structured processes, including credit consultancy and specialist services to customers. Both are based in Singapore. Phillips was formerly Global Credit Manager at Chemoil Energy Ltd and before that Operations Manager with Lloyd’s MIU. His career stretches back to 1982 when he entered the shipping sector as a Boarding Clerk for a Ship Agency business.

Contact: John Phillips Tel: +65 6601 9196 Mob: +65 9451 4098 Emails: [email protected] [email protected]


activity at its yards it would assist owners with a reported 70 vessel order to vertically integrate its supply chain and thus cut market for third party operators, thus condemning the market to additional years of woe.

For the container market, the metrics differ slightly – as much of the new ordering has been focused upon ever-larger tonnage. However, in many instances the lines, instead of acting responsibly (for themselves as much as the market), disposed of tonnage into the S&P market. Some, like Mediterranean Shipping Company (MSC), bucked the trend, committing some 22 vessels to the cutter’s torch in 2010 alone. Operators took advantage of ‘economical steaming’ and low charter rates to increase numbers of vessels on a service despite ‘slow steaming’ and thus sought market share. However, many preferred to lay-up tonnage awaiting market improvements, which, when they came, have been dogged by tonnage returning to trade, ensuring rates could not adequately recover. Improved rates in 2010 encouraged another bout of ordering mega-carriers, led by Maersk. Add to this the economical troubles in Europe reducing demand on the key East-West routes and a recipe for potential disaster began to loom. This has culminated in the much publicised restructuring at Compañía Sud Americana de Vapores (CSAV), the merger of some CMA CGM and MSC services, the scheduled withdrawal of players like Malaysia International Shipping Corp. (MISC), and concerns over almost each and every line as it enters 2012. Now we see Alphaliner reporting an increased number of containerships entering lay-up again, as lines struggle to match capacity and demand.

So, what is out there that could help our industry? Regulation perhaps, such as bringing in a maximum age for a vessel. Certainly, a lower fuel cost might help. But the problem here is that – with commodity markets structured as they are and with the growth of derivatives softening any spikes, coupled with political issues in the Middle East Gulf that could drive up oil prices substantially – the likelihood of lower fuel

costs seems to be ever receding. How about subsidies for scrapping (more politically described as recycling) of tonnage? Scrap prices are currently lingering at between $450 and $500 per light displacement tonne (ldt). While this is an improvement on the mid-$200 per ltd seen in 2008/2009, it is still lagging and hardly encouraging of owners to commit tonnage, especially where debt-free and capable of producing profits in this dire market.

On 20 January, Tradewinds carried an item suggesting that ‘Greed hurts us but helps us too’, and this also serves as a reminder that it is the financial institutions that have, in many instances, supported and facilitated this cycle of boom and bust and that they, with so much of their own house to get in order, may be able to help by adopting a more balanced view to future shipbuilding demand. Of

course, this assumes a level playing field, and this is not what we have now. Nor indeed have we seldom had one in the past. Certainly, it seems likely that China’s requirements to maintain its hard-built shipbuilding sector as an active element of its export focused economy will grow its financial support for orders at its yards and thus stymie anything the financial institutions can offer.

All in all, the best that this analyst can offer is that if you must build, then do not build stupidly. Build a vessel for your requirements, fulfill those requirements and, by financial means, depreciate the asset over this need and then recycle it. That way, we can start to get back some balance in the market. The shame is that we should have been taking a more responsible approach to our industry at least a decade ago, when markets started rising in late-2002.

Now, it is perhaps too late and we must prepare ourselves for another decade of hurt. Indeed, the future may be that this is the norm and that we will never recover the closer balances we had enjoyed in the past and the reasonable stability of regular shipping cycles seen over the last 100 years. This was generally highlighted in the courses we promoted in the past, but I shall really resist saying ‘I told you so’.

Commercial Issues

‘We should have been taking a more responsible

approach to our industry at least a decade ago, when

markets started rising in late-2002’


‘It is obvious that the already beaten-up balance sheets should take further and potentially deadly hits in 2012’

Commercial Issues

The question that many in the industry are now asking is: ‘How long until tanker and dry bulk

companies have to write-down the value of their vessels?’

Financial woesFrontline Ltd seems to have pre-empted great financial woes by selling 10 of its tankers and newbuilding commitments to a new company capitalised largely by Frontline Ltd’s founder, John Fredriksen.

When Lloyd’s List Intelligence (LLI) asked what exactly ‘fair market value’ meant, we found that the appraisers of the tankers were brokers and ‘current’ market values were used in the calculations.

Book valueMoreover, LLI asked what would the impact of this ‘fair market value’ be on the book value of the respectively tankers. The company spokesman did not have a figure to disclose, but when LLI probed further, it was conceded that the fair market value was ‘considerably lower than the book value’ and respectively write-downs or impairments ‘were a reasonable assumption’.

Reviewed filingsWell, LLI reviewed filings from tanker and dry bulk companies in order to see how much had been written-down already by 30 September 2011. The six publicly-quoted tanker companies are the same as those which LLI has used in the past: Frontline Ltd, Overseas Shipholdings Group Inc (OSG), Teekay Corp., General Maritime Corp. (GenMar), Nordic American Tanker Shipping Ltd (NAT), Torm A/S and Tsakos Energy Navigation Ltd (TEN).

Massive lossesInterestingly, the massive losses already reported do not include, for the most part, impairments or write-downs related to the values of the tankers on their balance sheets.

Only Frontline and Teekay included such charges to the tune of $121.44 million and $101.21 million, respectively, with OSG, NAT and TEN not taking any charges at all and GenMar and Torm taking much smaller or negligible charges.

Even though Frontline and Teekay took

Félix Yamasato considers what lies ahead for the

shipping markets

large charges, they relate to tankers that they had either sold or placed as assets to be sold. In Frontline Ltd’s case, the charges only equalled 4.53% of the net book value of its vessels as of 30 September 2011, while Teekay’s charges only amounted to 1.46%. The charges were felt much more when measured against the remaining equity at the end of the third quarter: 22.3% for Frontline and 7.55% for Teekay.

In the dry bulk side, the publicly-quoted companies are: Genco Shipping & Trading, Eagle Bulk Shipping, Navios Maritime Holdings, Paragon Shipping, Excel Maritime Carriers and Diana Shipping. Like tanker companies, the losses already reported do not include, with the exception of Paragon Shipping ($5.74 million), impairments or write-downs related to the values of the vessels on their balance sheets. Paragon’s impairment was solely related to one vessel, so still subject to massive charges.

Historical valuesAs it stood, tanker or dry bulk companies did not have to write down values because vessels are evaluated for impairment only whenever events or changes in circumstances of a particular vessel arises (e.g. selling it). In the meantime, they have been using historical averages as part of their undiscounted future cash flow calculations.

Is it reasonable to assume this can continue? Are auditors going to allow them to continue to do so when their full audits are complete in the next couple of months?

Losing valueBetween 2007 and 2011, five-year old tankers lost 50% of their value, while dry bulk vessels lost 66% of their value in the same period. Taking into consideration Morgan Stanley’s value projections, the value of five-year old tankers is expected to decline by a modest 4% in 2012, with very large crude

Félix Yamasato is Regional Manager, Americas Analyst Team with Lloyd’s List Intelligence.

Contact: Félix K. Yamasato Lloyd’s List Intelligence Tel: +1 646 957 8971 Mob: +1 203 667 1082 Email: [email protected] Web: www.lloydslistintelligence.com

Write down‘Between 2007 and 2011, five-year old tankers lost 50% of their value, while

dry bulk vessels lost 66% of their value’

Your safe haven - www.dan-bunkering.com

BETTER SAFE THAN SORRY

Is your bunker supplier insured? We are, and with our financial strength, we offer you the best combination.


Scrapping activity has been helping, with 23.4 million deadweight tonnes (DWT) in dry bulk tonnage removed during 2011, or an increase of 277% in scrapping activity. Dry bulk scrapping in 2012 is expected to grow to 31.7 million DWT, or 36% higher than in 2011. However, tanker scrapping (over 80,000 DWT) slowed down by 38% in 2011 to 10.5 million DWT and is expected to slow down to 7.5 million DWT in 2012. This data suggests that more and more dry bulk companies will be exiting the market during 2012, but fewer tanker companies will face extinction in 2012 than in 2011.

All in all, and assuming scrapping activity does not slow down, this seems to indicate that the markets will not show much improvement until late 2013 or into 2014. Credit managers at bunker companies worldwide may not get to sleep very well any time soon… LLI and its competitors will not either.

Commercial Issues

carriers (VLCCs), Suezmaxes and Aframaxes expected to lose value by 6% or more. Asset values are expected to recover in 2013, but they will only recover some of the losses of 2012.

Beaten-up balance sheetsIt is obvious that the already beaten-up balance sheets should take further and potentially deadly hits in 2012. Frontline’s move appears brilliant on the face of this, but how many other tanker companies have founders or shareholders who can actually structure a ‘rescue’ of a similar fashion. Is Chapter XI the only option (e.g. GenMar)? If so, how much longer or sooner will this ‘protected reorganisation’ delay a return to a profitable equilibrium of supply and demand in the tanker market? Could it be that the latter will speed up scrapping amongst smaller owners unable to seek refuge under Chapter XI or similar regimes?

‘More and more dry bulk companies will be exiting

the market during 2012, but fewer tanker companies

will face extinction in 2012 than in 2011’

Reiter Petroleum Inc.Reiter Petroleum Inc.Reiter Petroleum Inc.Les Pétroles Reiter Inc.Les Pétroles Reiter Inc.Les Pétroles Reiter Inc..................................................................................................................................................................................Reliability. Professionalism. Integrity.Reliability. Professionalism. Integrity.Reliability. Professionalism. Integrity..................................................................................................................................................................................

Make the ‘REITER’ choiceMake the ‘REITER’ choiceMake the ‘REITER’ choice

Your

Prin

cipal

Wor

ldwid

e Bun

ker S

uppli

ers

CONTACT US WITH YOUR INQUIRIES

625 du President Kennedy AveSuite 900, Montreal, Quebec H3A 1K2

Tel: (514) 878-2563 Fax: (514) 878-3463

Email: [email protected]

www.reiterpet.com

QuinnOil®

Panama Canal

Physical supplier at the Panama CanalAlso available ex pipe Rodman Naval Station

Our new executive offices in Panama City:

Molon Tower Building, 7th FloorAquilino de la Guardia StreetPanama City, Rep. of Panama

Telephone: (507) 265 2634 (507) 265 1277Fax: (507) 265 3727

Email: [email protected]: www.quinnoil.com

Conference speakers include:

Bookyour place

now!

13–15 March 2012HKCEC, Hong Kong

The port-centric container supply chain event

Intra- Asia: The Road Ahead

www.tocevents–asia.com

Headline Sponsor: Supported by: Industry Supporter:

Port Tour:Sponsors:

� High-level Conference

� Free Trade Exhibition

� Free Seminars

� Port Tour

� Networking

TOC Asia12 ad full page_CS.indd 1 09/01/2012 15:35


Clearly there needs to be a mutual collaboration between both parties, based on transparency and trust, which will provide the foundation to build closer, more partnership-based, relationships that will reap rewards for the long-term. Not every fuel supplier will be able to achieve this. Clearly, it requires a stable and robust business model, as well as a strong financial infrastructure and good relationships with the banking community. It requires a detailed global strategy and effectively managed risk management systems and processes. It also requires a fundamental understanding of a customer’s organisation, their business strategy and growth prospects, as well as financial circumstances. Transparency is not an easy concept for some to accept, but it is necessary. And it is something that must be done if we, as fuel suppliers, are to help our customers weather the storm.

Of course, this concept must be conducted within the wider context of implementing a wider fuel procurement strategy for customers; a total bunkering solution that maximises both efficiencies and profitability.

In developing better and more advanced relationships that are founded on understanding customers’ organisational and operational objectives, contracts can be developed that meet the real needs of their businesses. It’s a win/win situation: the customer has more cash and a better operation, and as a supplier, we have a contract, which provides the opportunity for a long-term relationship. With the current volatility of fuel prices, there are a number of options that can be developed depending on a particular shipowner’s or operator’s appetite for risk and how they see the market developing.

At OW Bunker, we have developed a number of contract solutions that can be tailored to correlate with a customer’s business strategy and their assessment of future prices. Products that include fuel optimisation with a guaranteed minimum or maximum price, products that limit volatility, as well as fuel optimisation with a floating guaranteed price. Depending on the chosen product, customers can take volatility out of the market and stabilise cash flow, they can lock in savings depending on the direction of the fuel market, and they can provide the maximum protection for their business. The most important aspect is that they have choice. Yes, fuel prices are high, but by having a close relationship with their fuel supplier, they can put in place a strategy that limits their exposure to this volatility.

In an industry that has seen such change

2012 will be a trying year for the shipping industry; many sectors continue to face the challenges of

low rates due to overcapacity, which has impacted profitability in container and tanker markets, with analysts now also predicting potential loss making conditions in the dry bulk sector. The insolvencies that we saw in 2011 will inevitably continue, as will alliances and further consolidation as owners and operators look to deliver some form of return on investment for their shareholders. Of course, it is not just shipowners and operators that will suffer, as there will also be consolidation within the bunker market, as suppliers, particularly the smaller ones, become increasingly squeezed as their customers look to reduce margins.

However, with fuel costs hitting record highs, the current economic volatility presents a significant opportunity for fuel suppliers to show their true worth, and play an important role in helping to alleviate some of the pressures that their customers face.

All aspects of the supply chain, and the total cost of ownership within it, will come under scrutiny as shipowners and operators forensically analyse where costs can be reduced and efficiencies gained. With fuel oil accounting for a large proportion of operational expenditure, it is here where attention must first be focused.

Credit, or rather lack of it, will be the biggest challenge for 2012. With banks reluctant to dip into their liquidity, shipowners face significant issues. From the perspective of the supplier, this isn’t about being commercially naïve, but rather taking a balanced approach to managing credit lines with customers, in a responsible, and where possible, accommodating way that is empathetic to the challenges that they face.

In doing this, there must also be an understanding from shipowners and operators of the risk that fuel suppliers face in doing this. Within some factions of the industry there is a feeling that it is the bunker market that drives high prices. Clearly, this is not the case. Indeed, there needs to be recognition for the financial exposure that fuel suppliers face in taking a more favourable approach to credit. While it is necessary, it is a brave stance to take with a market that is in financial turmoil. This is why it is only right that a fair and appropriate margin is taken. Profitability for both suppliers and owners/operators is central to the future success of the market, as well as survival within the current economic climate.

Søren Christian Meyer of OW Bunker argues

that fuel suppliers’ responsibility, in conjunction with

mutual, cross-industry collaboration, is central to creating stability within a

volatile market

Commercial Issues

True colours

Søren Christian Meyer is the Global Sales Director of OW Bunker & Trading A/S.

Contact: Søren Christian Meyer Email: [email protected] Web: www.owbunker.dk


over the past few years, and with further transformation on the horizon, it is vital that we create as much stability as possible. Traditionally, the relationship between the shipowner and fuel supplier has often been seen as strained. Bunker companies were not viewed in a professional light, a reputation that in some cases was justified. But we have seen improvements in the last few years and continue to drive a new era of professionalism. New standards have been set. From guidelines that ensure the correct formulation of fuel oil, to innovations that significantly advance the way that fuel is delivered and monitored, to generic expectations of how business should be conducted properly.

Ultimately, these new benchmarks have been driven by the transformation of the shipping industry, and our customers’ need to respond to their customers’ demands; increasing efficiencies, reducing costs and limiting their environmental impact. It is a

paradox, because this hardship is serving to create a better industry.

Understandably for many, this is a bitter pill to swallow. But it is the global economic uncertainty and increased environmental pressures that have forced the level of scrutiny on the way that business is conducted. And within this, it has become clear that fuel suppliers play a critical role in helping ship owners and operators adapt and redefine themselves in line with the changing dynamic

Commercial Issues

SPOT BUNKER MARKETMABUX MARINE DIRECTORY

OIL FUTURES ONLINE

Register now - Two weeks free trial

Mabux Marine Directory features Suppliers, Traders and Brokers Worldwide

Real-Time & DelayedICE: Gas Oil, Brent Crude OilNYMEX: Light Crude Oil (WTI), Heating Oil

Our Spot Bunker Market Offers more than 350 ports and counting, with indications daily updated

Notice:

SPOT BUNKER MARKETMABUX MARINE DIRECTORY

OIL FUTURES ONLINE

Register now - Two weeks free trial

Mabux Marine Directory features Suppliers, Traders and Brokers Worldwide

Real-Time & DelayedICE: Gas Oil, Brent Crude OilNYMEX: Light Crude Oil (WTI), Heating Oil

Our Spot Bunker Market Offers more than 350 ports and counting, with indications daily updated

Notice:

Notice:

1. Rotterdam shows the usual Market once a day indications.

2. Rotterdam is connected to the ICE’s price variations as published on our website.

Your ONE-STOP Website for Your Bunker Dealswww.mabux.com

‘Credit, or rather lack of it, will be the biggest challenge for 2012. With

banks reluctant to dip into their liquidity, shipowners

face significant issues’

of the industry; there is recognition of the value that we can deliver to a shipowner’s business and operation.

So, while there is inevitable concern over the future of the industry and the economic uncertainty that exists, we must look positively for the opportunities that change – which in many industries is seen as the ‘norm’ – inevitably brings. For fuel suppliers, the focus must be on ensuring strength in our business models, ensuring that they exemplify stability, and are robust enough to support shipowners and operators through these trying times. Growth is still achievable through controlled expansion, focusing on areas where customers need us and providing them with products and services that meet the demands of the new age that we now operate within. Undoubtedly it is a challenge, but it is one that can be met, and will provide significant rewards for those that are successful.


To learn more about Petrospot’s African conferences and training courses at Oil & Shipping Africa and Maritime Week Africa, please visit www.petrospot.com/eventsTo order copies of Essays In Admiralty by Jean Chiazor Anishere, or to order a downloadable e-book, please visit www.petrospot.com/books

Contact: Llewellyn Bankes-Hughes Managing Director Petrospot Limited Tel: +44 1295 814455 Mob: +44 7768 574 430 Email: [email protected] Web: www.petrospot.com

Events

Llewellyn Bankes-Hughes looks at some of the

opportunities presented by Africa

The continent of Africa is booming. And as the economies of many of its individual countries continue

to expand, numerous opportunities are being created for those willing and able to develop new businesses in many areas, including oil and gas, commodities, shipping and ultimately, bunkering. This growth is creating the need for more information, more training and more international networking as local businesses seek to reach out to new markets and non-Africans start to recognise the myriad opportunities that are presenting themselves there.

According to a recent issue of The Economist, over the past decade, ‘six of the world’s fastest-growing countries were African. In eight of the past 10 years, Africa has grown faster than East Asia, including Japan’. The International Monetary Fund (IMF) expects Africa to grow by almost 6% in 2012, about the same as Asia, and by all accounts, the continent’s rapid growth is expected to continue. The Economist points out that ‘trade between Africa and the rest of the world has increased by 200% since 2000’, while the World Bank last year proclaimed that ‘Africa could be on the brink of an economic take-off, much like China was 30 years ago and India 20 years ago.’

While some countries, such as Ghana and Mozambique, are enjoying petroleum-fuelled bonanzas and leading Africa’s economic upturn, other countries, often bogged down with rampant corruption and poor management, may wait to feel the impact of higher growth elsewhere. However, there is little doubt that higher growth will boost shipping activity and that will have an impact on bunkering throughout the continent.

Against this background, Petrospot initiated a series of training courses and conferences in Africa, aimed at educating local businesses about international standards in bunkering, and introducing them to foreign companies eager to find new partners, new markets and new revenue streams. Petrospot created Oil & Shipping Africa, a combination of an advanced training course followed by a two-day conference, running the event in Accra, Ghana in 2009 and 2010, where the focus was on bunkering in West Africa and in particular, the possible future creation of a West African bunkering protocol.

In June 2012, Oil & Shipping Africa will return to Ghana to re-examine the idea of a bunkering protocol and to help tackle the urgent need for better training among those working in the West African bunker industry.

In December last year, the event was run in Cape Town, South Africa, where attention focused on refuelling Africa’s rapidly-expanding offshore oil and gas industry. Cape Town has become one of Africa’s leading centres for the offshore oil and gas industry and for the many services that supply it. The Cape Town event examined the delivery of gasoil to the oil rigs, drill ships, floating storage, survey vessels and supply ships that ply their trade offshore sub Saharan Africa, and looked at shore support from regional ports and offshore bases. It also covered important regional issues such as local regulations in South Africa.

As a result of the success of the Cape Town event, and the enthusiasm of the 150-plus African and international participants, Petrospot will now run the Refuelling Africa’s Offshore Oil & Gas Industry event every second year in Cape Town, starting in 2013. This will come under the auspices of a brand new event entitled Maritime Week Africa, a week-long series of maritime conferences, courses and workshops that will alternate between Cape Town (in odd years) and Durban (in even years, starting in 2012). The focus for the first Maritime Week Africa, on 1-5 October, will be on the heavy lift and project cargo shipping industry, for which Durban, Africa’s largest port and best equipped to handle heavy lift cargoes, is the perfect location. Both Oil & Shipping Africa and Maritime Week Africa will feature advanced bunker courses in response to the growing demand for high-level training.

New book on AfricaHowever, to supplement its training and conference activities in Africa and to provide a handy survey of important shipping issues, particularly in Nigeria, Petrospot has also published a new book, Essays in Admiralty: An Introduction to Legal Issues in Shipping from a West African Perspective, by well-known Nigerian lawyer Jean Chiazor Anishere.

The book is based upon a collection of speeches, essays and articles on shipping and trading in Nigeria and elsewhere in West Africa and provides useful background for anyone involved or interested in that region. It tackles a range of maritime-related subjects, from shipping logistics to multimodal transport, container depots and bonded terminals, cabotage, marine insurance and ship finance, as well as dispute resolution and various aspects of shipping law. The book also looks at bunkering and at oil and gas investments in Nigeria. It includes a comprehensive glossary of international shipping and trading terms.

New frontiers


Report Writing for Marine Surveyors, published in 2011 by Petrospot, its author, the highly experienced consultant and surveyor, Mike Wall, will lead this unique two-day course. Contact: Matthew Conisbee, Petrospot Tel: +44 1295 81 44 55 Email: [email protected] Web: www.petrospot.com/asia2012

SINGAPORE: The Oxford Bunker Course (Advanced)24-26 April, SingaporeContact: Elena Melis, Petrospot Tel: +44 1295 814455 Fax: +44 1295 814466 Email: [email protected] Web: www.petrospot.com/asia2012

SINGAPORE: Seatrade Offshore Marine Asia25-27 April, SingaporeContact: Seatrade-Asia Tel: +65 6294 2280 Web: www.seatrade-offshoreasia.com

GERMANY: LNG Fuelled Shipping25-26 April, HamburgContact: Hanson Wade Tel: +44 20 3141 8700 Email: [email protected] Web: www.hansonwade.com

MAY

NETHERLANDS: BunkerExperience7-10 May, Rotterdam-VlaardingenContact: Goris Vermeulen Tel: +32 484 168 780 Email: [email protected] Web: www.bunkerexperience.com

UNITED KINGDOM: LNG9-10 May, London Contact: SMi Tel: +44 20 7827 6000 Fax: +44 20 7827 6001 Web: www.smi-online.co.uk

NETHERLANDS: European Oil Storage 10-11 May, AmsterdamContact: Platts Tel: +44 20 7176 6300 Email: [email protected] Web: www.platts.com

UNITED KINGDOM: The Oxford Bunker Course14-18 May, OxfordThe Oxford Bunker Course is a highly intensive five-day residential training course covering technical, operational, commercial, financial and legal aspects of bunkering. Designed for newcomers to the business and for those who may already have some experience, it is often oversubscribed, so early booking is essential.It is widely acknowledged as the best bunker course in the world and is renowned for its social activities.Contact: The Petrospot Events Team Tel: +44 1295 814455 Fax: +44 1295 814466 Email: [email protected]

Events

Events Diary FEBRUARY

UNITED KINGDOM: IBIA Annual Dinner20 February, LondonContact: IBIA Email: [email protected] Web: www.ibia.net

SINGAPORE: INTL FCStone International Asia-Pacific Outlook Conference22-23 February, SingaporeContact: Erin Olson, INTL FCStone Tel: +1 515 273 4051 Email: [email protected] Web: www.intlfcstone.com

UNITED KINGDOM: Bunkering and Infrastructure for LNG Fuelled Vessels28-29 February, LondonContact: Informa Events Web: www.informaglobalevents.com

MARCH

UNITED KINGDOM: The Oxford Bunker Course (Advanced)5-7 March, London This course covers every aspect of bunkering and integrates operations, technical, commercial, environmental and legal issues so that students learn how these are all inter-related in the real world. Contact: Nicholas Leader or Matthew Conisbee, Petrospot Tel: +44 1295 81 44 55 Email: [email protected] Web: www.petrospot.com/london

HONG KONG: TOC Asia13-15 March, Hong KongContact: TOC Events Tel: +44 20 7017 4394 Web: www.tocevents-asia.com

SINGAPORE: Asia Pacific Maritime14-16 March, Singapore Contact: Yeow Huileng, Reed Tel: +65 6780 4639 Email: [email protected] Web: www.apmaritime.com

UNITED STATES: Shipping 201219-21 March, StamfordContact: Lorraine Parsons, CMA Events Director Tel: +1 203 406 0109 ext 3717 Fax: +1 203 406 0110 Email: [email protected] Web: www.shipping2012.com

NETHERLANDS: European Bunker Fuel Conference26-27 March, AmsterdamContact: Platts Tel: +44 20 7176 6300 Email: [email protected] Web: www.platts.com

DENMARK: Green Ship Technology Conference27-29 March, Copenhagen Contact: Informa Maritime Events Tel: +44 20 7017 5510 Email: [email protected] Web: www.informaglobalevents.com

APRIL

UNITED ARAB EMIRATES: World Ports &Trade Summit2-4 April, Abu DhabiContact: Turret Seatrade Events Tel: +44 1206 545 121 Email: [email protected] Web: www.worldportsandtrade.com

NORWAY: The 33rd International Bunker Conference18-20 April, OsloContact Hilde Spæren, BI Norwegian Business School Tel: +47 46 41 02 17 Email: [email protected] Web: www.bi.edu/ibc

SINGAPORE: Singapore Maritime Week23-27 April, SingaporeDriven by the Maritime and Port Authority of Singapore (MPA), SMW gathers the international maritime community in Singapore for a week of conferences, dialogues, exhibitions and social events in celebration of all things maritime. Contact The MPA Email: [email protected] Web: www.smw.sg

SINGAPORE: Refuelling the Asia Pacific Offshore Oil and Gas Industry23 April, SingaporeThe conference covers offshore supply bases and the refuelling requirements of the many types of ships involved. It also looks at the supporting roles of shipyards, agents, and – importantly – the bunker supply industry. Contact Osei Mitchell or Maria Tierney, Petrospot Tel: +44 1295 81 44 55 Email [email protected] Web: www.petrospot.com/asia2012

SINGAPORE: Bunkerspot LNG Asia – The Future Fuel for Shipping?23 April, SingaporeAs LNG is increasingly seen as a viable – and green – option as a marine fuel, this highly focused conference investigates what the industry needs to do to take this idea forward, examining the supply chain requirements and market preparedness for this ‘new’ bunker fuel.Contact: Nicholas Leader, Petrospot Tel: +44 1295 814455 Fax: +44 1295 814466 Email: [email protected] Web: www.petrospot.com/asia2012

SINGAPORE: Petrospot Marine Surveying23-24 April, SingaporeIn response to the overwhelming success of


Web: www.petrospot.com/oxford

PANAMA: Maritime Week Americas 201221-25 May, PanamaA week-long series of key maritime events, including MWA Bunkers (the largest annual bunker conference in the Americas); MWA Ports – Intermodal (a major conference on port logistics, investment and developments); MWA Shipping (a one-day conference on ship registries), plus one and two-day bunker training courses, technical and commercial workshops, port-related seminars and a world-class exhibition.Contact: Elena Melis Tel: +44 1295 814455 Fax: +44 1295 814466 Email: [email protected] Web: www.maritimeweekamercias.com

SWEDEN: RORO 201222-24 May, GothenburgContact: Sophie Ahmed, IIR Exhibitions Tel: +44 20 7017 5112 Fax: +44 20 7017 7818 Web: www.roroex.com

JUNE

GREECE: Posidonia4-8 June, AthensContact: Posidonia Exhibitions SA Tel: +30 210 4283608 Fax: +30 210 4283610

Email: [email protected] Web: www.posidonia-events.com

GHANA: Oil & Shipping Africa25-29 June, AccraContact Osei Mitchell or Maria Tierney, Petrospot Tel: +44 1295 81 44 55 Email [email protected] Web: www.petrospot.com

SEPTEMBER

UNITED KINGDOM: The Oxford Bunker Course10-14 September, OxfordContact: The Petrospot Events Team Tel: +44 1295 814455 Fax: +44 1295 814466 Email: [email protected] Web: www.petrospot.com/oxford

OCTOBER

SOUTH AFRICA: Maritime Week Africa1-5 October, DurbanContact Osei Mitchell or Maria Tierney, Petrospot Tel: +44 1295 81 44 55 Email [email protected] Web: www.petrospot.com

UNITED ARAB EMIRATES: TOC Middle East2-4 October, Dubai

Events

Contact: TOC Events Tel: +44 20 7017 7019 Fax: +44 20 7017 4987 Web: www.tocevents-me.com

SINGAPORE: SIBCON17-19 October, SingaporeContact: The MPA Web: www.mpa.gov.sg

NOVEMBER

UNITED ARAB EMIRATES: The Oxford Bunker Course (Advanced)4-6 November, Dubai Contact: Matthew Conisbee, Petrospot Tel: +44 1295 81 44 55 Email: [email protected] Web: www.petrospot.com

UNITED ARAB EMIRATES: IBIA Annual Convention6-8 November, DubaiContact: Charlotte Egan, IBIA Email: [email protected] Web: www.ibia.net

BELGIUM: The Bunkering Symposium28-30 November, AntwerpContact: Elena Melis, Petrospot Tel: +44 1295 814455 Fax: +44 1295 814466 Email: [email protected] Web: www.petrospot.com


Networking

On the move... EuropeTom Coffey has left LQM Petroleum Services to join Cockett Marine Oil Ltd as a bunker trader at its UK office in Petts Wood. Tel: +44 1689 883 446; Email: [email protected].

Anthony Mollet has transferred from GAC Bunker Fuels in the UK to become Commercial Director - Shipping (GAC UK). Tel: +44 1753 440 629; email: [email protected].

Eileen Speer has left Bunkers International to join the UK team of Global Vision Bunkers as Group Business Development Manager with responsibility for Asia and the US. Tel: +44 1895 446 240; Mob: +44 7760 661 336; Email: [email protected]. David Price has been appointed as Group General Manager with special responsibilities for corporate compliance and credit control.

Martin Grenfell has joined the Global Vision Bunkers Group as its Baltic Exchange Representative. He spent 35 years in dry cargo broking in the Baltic Exchange before moving into bunkers with North End Oil and then Cockett Marine Oil Ltd, where he worked for 14 years. Mob: +44 77 1011 0733.

John Wishart, previously President of GL Noble Denton (GLDN), has joined Lloyd’s Register in London as Energy Director. Tel: +44 20 7423 2468; Fax: +44 20 7423 1525; Email: [email protected].

Nils Flemming Rasmussen has joined Cockett Marine Oil Scandinavia Aps as General Manager of its new office in Copenhagen, Denmark. He worked previously at Maritime Agency Bunker Copenhagen, WFS Denmark and the Eitzen Group. Anders Falck Kobbernagel, previously at Shell Denmark and the Eitzen Group, has also joined as a bunker trader. Contact: Strandvejen 100, 3rd Floor, 2100 Hellerup, Denmark. Tel: +45 7025 8250; Fax: +45 7025 8250; Email: [email protected].

Stella Skjoldborg has joined the sales team at A/S Dan-Bunkering Ltd in Copenhagen as an office assistant. Tel: +45 3345 5410; Direct: +45 3345 5437; Fax: +45 3345 5411; Email: [email protected].

A/S Global Risk Management Ltd has moved to Strandvejen 7, DK-5500 Middelfart, Denmark. Contact details are unchanged. Tel: +45 8838 0000; Fax: +45 8838 0009.

Christian Freiherr von Oldershausen, previously of Deutsche Seewert, Hellespont Group, HCI Capital AG and MAN Ferrostaal AG, has been appointed Senior Vice President Global Sales at Germanischer Lloyd in Hamburg. Tel: +49 40 36149-0; Email: [email protected].

Lodewijk Duyvendak, previously a senior shipping analyst at Dutch consultancy and credit reporting agency Dynamar B.V., has left to take up a position at ABN AMRO Bank in Amsterdam. Email: [email protected].

Bunkers International Corp. has opened Bunkers International Greece in Piraeus, headed by Katerina Kontou. Mob: +30 6947 202511; Email: [email protected].

Mideast & AfricaGAC Bunker Fuels is to relocate the headquarters of its global bunker fuel services to Dubai in August under the new company name, GAC Bunker Fuels Ltd, headed by Nicholas Browne who has been appointed the new Global Director of GAC Bunker Fuels.

Sahar Zarghamian has rejoined OW Bunker Middle East as a trader on its Fujairah desk. Direct: +971 444 89126; Mob: + 971 55498 7306; Email: [email protected].

Asia Pacific Mabel Loh, previously with Chemoil, has joined and Andrew Lim and Nick Ganas at Noble Resources International Pte Ltd in Singapore. Tel: +65 6305 4888; Direct: +65 6571 5013; Mob: +65 9111 4722; Email: [email protected].

Charlotte Rojgaard has taken over from Dag Olav Halle as the Global Technical Manager DNV Petroleum Services (DNVPS), based in Singapore. Previously with MAN B&W and MAN Diesel, she joined DNVPS in 2010 and is actively involved in industry committees, including CIMAC WG Fuels, CIMAC WG Lubricants and ISO 8217/TC 28/SC 4/WG6. She is now the secretary for CIMAC WG Lubricants. Tel: +65 6887 6031; Mob: +65

The Caribbean Seahas more energy than you can imagine.

We commercialize the highest quality of fuel and lubricantsin the Caribbean Sea industry from Colombia and Panamathrough pipelines, trucks and barges.

www.terpel.com

marinos.pdf 1 5/10/11 10:17 AM

9235 1220; Email: [email protected].

Bunkers International Corp. has appointed Gigi Tsang as manager of Bunkers International Hong Kong Ltd. She worked previously at Seven Seas and Titan Petrochemicals. Tel: +852 3602 3078; Fax: +852 3602 3111; Email: [email protected].

Hong Kong-based Bomin Bunker Oil Ltd has relocated to Room 1503, 15/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong. Tel: +852 2891 7799; Fax: +852 2893 1636; Email: [email protected].

AmericasKeith Richardson has joined Noble Americas to work with Stamford, Connecticut-based Michael Samaritano (ex-BP) and his former Chemoil colleague, Adrian Tolson. Tel: +1 203 326 8461; Mob: +1 203 253 2803; Email: [email protected].

Bob Burke has joined e-commerce yacht fuel brokerage MarineFuel.com as Sales Manager in Stuart, Florida. Tel: +1 888 431 0708.

Bunkers International Corp. has opened a new office at 4040 Civic Center Drive, Suite 200, San Rafael, California 94903, United States, headed by Raymund Bacani, formerly of Chemoil Corp. Tel: +1 415 259 6681 / 6682; Fax: +1 415 492 2810; Email: [email protected].

George Pence, previously with Chemoil in San Francisco, has joined World Fuel Services Inc. at its San Rafael, California office. Tel: +1 415 925 1995; Mob: +1 415 755 7000; Fax: +1 415 925 1998; Email: [email protected].

Abby F. Konstamm, formerly with American Express and IBM, has been appointed to the Board of Directors of World Fuel Services Inc. in Miami. Tel: +1 305 428 8000.

Dr Rudolph Kassinger, a Senior Technical Consultant for DNV Petroleum Services (DNVPS), has left to form Kassinger Consulting LLC. Dr Kassinger has been in the industry for more than 50 years – 27 of which were spent at Esso/Exxon and then 26 at DNVPS. Contact: PO Box 862, Westfield, NJ 07091, United States. Tel: +1 908 654 3419; Mob: +1 908 917 3617; Email: [email protected].

staring into the abyss? survival strategies in 2012 · intertek shipcare provides fast, accurate...

Documents