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Photo: Hin Leong

Singapore keeps up efforts to retain bunkering crown

Singapore has boasted pole position in the bunkering industry for as long as anyone can remember, backed by competitive regional pricings and generally efficient fuel transfer operations, sustaining the port’s growing bunker sales.

Even with the bunker market leadership position firmly held, Singapore cannot afford to rest on its laurels, especially when business attitudes are changing to focus more on technological advancement, operational transparency and being environmentally friendly – factors that have historically been lacking in the bunkering market.

Simon Neo, an industry veteran who has also opened up his own bunker broking firm Piroj International, believed that sharpening operational efficiency and investing in technology are important for Singapore’s bunker market to stay ahead of global ports.

“Going forward the industry will have to invest more in technology which means players will have to invest more money into its system. This will be a big challenge as not many are ready to invest so much money into a business that has a high need for cash to purchase oil but with very low profit margin,” Neo said.

A bunker supplier typically makes only about $2-3 per tonne based on the price of around $250 per tonne of bunker fuel, translating to merely 0.8-1.2% net gain. There are times when suppliers make less than $2 per tonne depending on market conditions. The high upfront costs, low returns business model of bunkering gave rise to malpractices in the forms of supply shortchange, kickbacks and the infamous “cappuccino” effect, tarnishing the reputation of the bunkering industry.

With estimates suggesting that marine fuels consumed by the world’s fleet is going to increase to approximately 350m tonnes by 2020-2030 from around 300m tonnes today, Singapore will continue to have a sizable market share to protect and benefit from.

A breakthrough that Singapore is looking forward to is the mandatory use of mass flow meters (MFM) to carry out bunker deliveries in the port from 1 January 2017, to be enforced by Maritime and Port Authority of Singapore (MPA). The benefits of using MFM in bunkering include enhanced transparency to reduce malpractices and disputes, greater efficiency with time savings and higher productivity for quicker bunker tanker turnaround without the need to expand port capacity.

The use of MFM has been proven to reduce bunkering time by about 2-3 hours per vessel and increase bunker tanker turnarounds to 10-12 times a month from the present eight on average.

All accredited bunker suppliers and licensed bunker tanker operators in Singapore need to conduct bunker deliveries using MPA-approved MFM systems from 2017, or risk existing the business, the local port authority has affirmed. Neo believed that enough time has been given to bunker suppliers and barge operators on the regulatory requirements, and many industry dialogue sessions were held over the years to help players understand the new operating procedures.

“Those bunker tankers that are not fitted with MFM will not be able to supply bunkers for marine fuel oil but they can still supply marine gas oil if the tanks are cleaned and suited to deliver marine gas oil,” he said.

By the start of 2017, there will be around 132 fuel oil bunker tankers fitted with approved MFM to carry out bunker deliveries, allowing Singapore to continue meeting demand volumes each month. Based on a turnaround time for each bunker tanker of 10 times a month and each loading of around 3,000 tonnes, Singapore port is able to cater to 3.96m tonnes of bunker sales per month or 47.5m tonnes a year, according to Neo.

“I am not saying we will hit this volume for next year. What I mean is Singapore do have enough capacity to deliver more fuel oil going forward even after the implementation of the MFM,” he said.

In 2015, Singapore sold a record 45.2m tonnes of bunkers, an increase of 6.6% year-on-year. In the first eight months of 2016, bunker sales reached 32.7m tonnes.

The voluminous bunker sales would be supported by a shrinking number of accredited bunker suppliers in Singapore, as the supplier landscape is consolidating for the past few years. Those suppliers that have exited the market were primarily smaller companies with negligible sales volume, prompting them to resort to taking the easy way out in conducting their businesses – by “renting’ out their MPA-approved Bunker Delivery Notes (BDNs) to unlicensed companies for them to carry out bunker deliveries.

Such malpractices would blur the lines of recourse of fuel buyers and is a recipe for tainting the image of Singapore’s bunkering market, one that is fiercely protected by MPA.

Several accredited suppliers have had their bunkering licences revoked by MPA over the past few years due mainly to the misuse of BDNs. The first clamp down by MPA on such errand accredited suppliers started in mid-2012, and efforts by the authority are ongoing.

As last count shown on MPA website, there were 58 accredited bunker suppliers, compared to more than 80 some years back. Despite the decreasing number of accredited suppliers, Singapore port supplies more bunker volume today then in those years when there were more suppliers.

“I do believe that by the end of this year 2016, we will see a few more players exit the market as the market consolidate itself and there will also be those who do not want to stay or continue in this industry exiting the scene,” Neo said. “Though we have seen that there was a huge reduction of accredited bunker suppliers over the past years, this was actually good for the industry.”

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