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Bunkering – prices, finance and LNG

Photo: AET AETLNGbunkering.jpg
AET tanker bunkering LNG in the US
The question as to whether party will continue for the bunkering sector and array of challenges that lie ahead were considered by a panel on day two of CMA Shipping 2023.

The session moderator, Adrian Tolson, presently a Board member of International Bunker Industry Association (IBIA), used his multiple decades experience in the fuel supply business to bring out a deep perspective on issues facing the sector, which- as noted by multiple panelists, had an outstanding year in 2022.

The panel session, titled “Bunkering in Focus: A look at infrastructure, strategy, and the future”, first considered the prospects for ongoing strength in 2023  and whether “the party will continue on.”

Panel member Roger Dekkers, General Manager- North America for fuel supplier Monjasa, suggested that last year’s prosperity might ease, saying: “We still see a lot of volatility…we see inflation kicking in, we don’t see the margins continuing.”  

A related part of the discussion, later on, touched on the impacts of the emerging banking crisis on the LNG suppliers. Dekkers talked about the cash buildup from 2022 aiding with liquidity in the events that the banks severely tighten the screws, noting some bank pressure already to pull back from the energy sector. As a former banker bringing his financial expertise into his remarks, he pointed out that: “What we have seen is an enormous slowdown in various oil activities on long term projects” However, he distinguished the bunker sector, saying that such pressures did not exist because “we work with 30 day credit.  Liquidity is available today and it’s very solid.” He also pointed out that “Oil today is at $75 [per barrel for Brent] we’ve dealt w much higher.”

Viktor Eriksson, Bunker Trader, at Stena Oil, AB, took a practical tone, saying: “At the end of the day, on extending credit lines, we will be creative on who has cheaper money.” In concluding this part of the discussion,  Dekkers said: “Bunkering companies today should be in good shape.”

The subject of infrastructure loomed large in the discussions. Megan McCurdy, Trading Manager for Peninsula Petroleum, a fuel supplier with a heavy European presence, emphasized that strong cash flows experienced provide a way for companies to put money into assets while agreeing that volatility would likely still exist.

Peninsula is building a barge for LNG deliveries with delivery expected in Summer, 2023. In discussing the barge, which she said would take advantage of Spain’s supply network, for supplying customers in the Mediterranean, she said, “The demand is yet to come…we are still working to get commitment from customers.”

Fellow panelist John Lindquist, who heads up LNG bunkering at GAC Bunker Fuels, stressed the enormous opportunity for investment in new infrastructure, saying that: “LNG barges have to be built,” acknowledging that  2022 had been difficult for LNG, with the market upheavals following the hostilities in Ukraine.

He added: “There is a great case to be made due to strengthening emission requirements. We need commitment from all parties- include support from customers.” Stena’s Eriksson said that the company was looking build out its infrastructure for delivering liquid fuels, saying that shore assets were being refurbished to handle biofuels. He highlighted the fueling of vessels in the fleet of sister company Stena Line with methanol, including the ferry operator’s recent initiatives in ship-to-ship bunkering of methanol.

A different form of  financial challenges, surrounding the  deployment of alternative fuel delivery capabilities were noted, along with successes. GAC Bunker Fuels’ Lindquist stressed the high capex required for building new  LNG fueling facilities, and explained his company’s successes in the past few years, emphasizing the firm gaining a familiarity with LNG and then engaging  with stakeholders.

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In talking about facilities in the southeastern US [in Jacksonville, Florida] he said,  “We started partnering with suppliers in 2016,” adding: “I think that we’ll see further development in the Gulf over the next several years. Maybe the large terminals not the best to serve bunker industry- so new smaller terminals will need to be built.” He did acknowledge uncertainty concerning LNG fuel’s potential along the US West Coast.

Still another investment issue discussed by the panel, that of “Mass flow meters”, where infrastructure meets technology, drew mixed responses from the panelists. Unni Einemo, also an International Bunker Industry Association (IABA) Board member, said that IABA has a working group looking at the issue and said that they could be useful for ports valuing quality. She stressed that the devices, where calculations incorporate factors incorporated manually into bunker delivery notes, would assist in reducing human errors. She said that the devices were: “A way of creating trust...making the process more accurate…and getting a digital record”. She added that the mass flow meters would be: “Most useful in the big hubs”

Not all the panelists agreed. Dekkers, from Monjasa, offered that his firm was “not the biggest advocate” for the devices”, citing very few irregular quantity disputes, and suggested that investments could be significant, and that: “we think that investments would be better spent on health and safety.”

McCurdy, from Peninsula, said that she did not know whether the benefits would warrant the investment in the technology. “Enforcement is really the key,” she said.

Einemo, from IBIA, talked about the impact of regulatory developments on the bunker suppliers, saying: “The most obvious thing IMO expected to revise its Initial Strategy at MEPC 80,” emphasizing the pressure for tightening targets- including for the move to a 100% reduction in emissions by 2050. She also mentioned the European Union’s Emissions Trading Scheme (ETS), opining that: “If the carbon price stays at $100, that will push shipowners alternative fuels”.

For bunker suppliers, she mentioned discussions underway regarding CO2 certifications on bunker delivery notes, highlighting the “well-to-wake” measurements linked to the FuelEU initiative that is gaining traction. She said that the idea is figuring into discussions underway at the IMO.