Singapore's bunker suppliers boost services

OW Bunker has used Coriolis flow meters on their supply vessels worldwide for the past seven years.

Singapore has indicated further tightening of its bunkering standards might be on the way, and, according to Wendy Laursen, major bunker suppliers OW Bunker and Dynamic Oil Trading are positive about the hub's continued focus on quality.

Recently a spokesperson for the Maritime and Port Authority of Singapore stated at an international conference that they expected the use of mass flow meters to be compulsory 'in due course'. This focus on protecting the interests of shipowners and operators follows on from changes to the Singapore Bunkering Standard (SS600 and SS524) in 2013 that aimed to prevent quantity and quality disputes. Key changes included the inclusion of the values of hydrogen sulphide and oxidation stability on the certificate of quality issued by the provider.

Søren Christian Meyer, vice president of the physical division of OW Bunker, one of the world's largest bunker suppliers, says any reports of fuel being frothed damage the reputation of the whole industry. 'Clearly these circumstances are based on the actions of the few, and ultimately shipowners and operators do have a choice in who they buy their fuel from. Like in any market, you get what you pay for. Nevertheless, it is vital that responsible fuel suppliers take a progressive approach to ensuring quantity and building a positive reputation for the industry,' he says.

'Clearly, technology and innovation is an example of what the industry can do to drive positive developments, and in relation to ensuring quantity, mass flow metres are currently advocated as the best solution.' OW Bunker has used Coriolis flow meters on their supply vessels worldwide for the past seven years. This technology measures the quantity as the force of the fuel oil flows through vibrating tubes. Sensors and transmitters are then used to generate a linear flow signal, which is linked to software located on the bridge to monitor the amount of fuel oil taken on board and is accurate to ±0.5%.

'From OW Bunker's perspective, the investment has certainly paid dividends. As well as ensuring the quantity of fuel delivered, using a Coriolis flow meter creates a more efficient and smoother delivery process between the bunker barge and the receiving vessel. Importantly, using the technology does not slow deliveries down and we can still pump fuel oil at speeds of a minimum of 650m³/h.'

However, Mr Meyer believes the technology needs further development. The meters are not a plug and play solution and can be sensitive to external stress, vacuum and pressure pulsations, as well as pulsations in the fuel oil that come from nearby gear pumps and engines.

Lars Møller, CEO of Dynamic Oil Trading, says that as the world's leading shipping hub Singapore must ensure that it continues to set a great example by driving progress and innovation in the bunkering sector as well as upholding quality standards and giving shipping companies the confidence to take on bunkers in Singapore.

Dynamic Oil Trading was launched in 2012. The company is headquartered in Singapore and operates globally, with plans recently unveiled for the launch of an operation in Dubai and further expansion planned in Asia, Europe and the Americas.

'In 2013 we have seen evidence of a more robust attitude towards bunker suppliers by the Singapore MPA, with a number of companies being removed from its list of accredited suppliers,' says Mr Møller. 'The revisions made by the MPA to the Singapore Bunkering Standards have been implemented for very good reasons, he says. 'Naturally it has instigated some additional information gathering and paperwork, but any steps that are taken to record more detail of the quality of fuel products as well as the quantity supplied should be welcomed.

'In terms of the impact of these amendments, anything that gives our customers greater confidence in the quality and quantity of the product that they are buying, whilst also protecting suppliers against claims, is a good thing. These measures also align the Singapore Bunkering Standards with the international ISO8217 standard which is a benefit for shipping companies trading internationally, as it provides them with a consistent quality standard. We'll judge any future amendments to Singapore Bunkering Standards on their merits, but as long as the management and operational impact on suppliers is not disproportionate and we have enough notice of any further changes, we will approach them in a positive spirit.'

The MPA recently completed an LNG bunkering technical standards and procedures study with Lloyd's Register and has agreed to harmonize procedures with the ports of Antwerp and Zeebrugge in Belgium. Mr Møller welcomes Singapore's desire for offering LNG. 'However, the financial climate has been tough on this industry, and it is too early to say what the long-term take up of LNG will be or whether it will be limited to a few, specific regions and routes.

'There is no doubt that LNG will have a role to play in the future, particularly beyond the implementation of the global 0.5% sulphur limit in 2020 or 2025. From an environmental perspective, it is certainly viable in meeting the impending regulations. However, there is much that needs to be done in terms of developing the infrastructure for LNG as well as setting standards that will ensure its safe supply.'

LNG trading and LNG supply can be a complementary offering for the bunker industry, and the specialised skillset required can sit within a larger bunkering operation and be focused on those ports and routes where LNG is viable, says Mr Møller. 'For LNG to be successful, the bunkering process must be closely aligned with the process that is used today. Many core bunkering skills are entirely transferable to the LNG sector. Bunkering companies must play a central role in developing this, and I believe it will give confidence to shipping companies if they can see that today's bunker industry is involved in the development of a future LNG bunker supply chain.'

In the short term, there is sufficient distillate to meet current demand and anticipated demand post-2015, when the sulphur content limit of bunker fuel in ECA waters falls to 0.1%, says Mr Møller. The greater unknown is the situation after 2020 or 2025, when the global sulphur limit falls from 3.5% to 0.5%. Currently, most future refinery capacity lies outside of existing ECAs. 'The greater the uncertainty over fuel stocks and the more time that passes before we have a clearer industry consensus over the preferred mix of compliance technologies, the more likely it will be that the stricter global sulphur limit will be deferred to 2025.'

Dynamic Oil Trading is finding an increasing appetite among its customers to hedge against bunker price movements during the tough economic conditions experienced by shipping at present. The company helps them determine the most suitable risk profile and risk management instruments.

Brian Thorhauge, global head of risk management at OW Bunker, agrees that there is a genuine level of uncertainty about future prices. For example, the impact of the US shale oil reserves could lower prices. However continued upturn and improvement in confidence within the global economy may see an increase in demand which will drive oil prices upwards. Additionally, there are continued geopolitical risks, specifically the unrest in the Middle East and North Africa, which can also have an impact.

'From a risk management perspective, this uncertainty on future pricing means that solutions are becoming more complex, as a number of hedging instruments are required as part of a total strategy. For example, shipowners and operators are moving beyond plain swaps which just fix the price of fuel oil for a specific period,' he says.

'We are now seeing an increased number of customers moving away from the traditional average of the month settled swap and demanding more tailor made solutions for both swap solutions and strategies with the combination of physical delivery in specific ports. This means that they don't have to worry about their paper positions and also have the assurance of supply when and where they want it, at an agreed price, which can be adjusted accordingly based on the differential at the particular port where the product is lifted. Customers can also consider strategies with a fuel cap or minimum purchase price'

Mr Thorhauge says that shipowners and operators must work closely with their fuel suppliers to implement an effective strategy. From the fuel supplier's perspective, they must have a complete understanding of their customers' business and operations, trading routes as well their appetite for risk. This enables the provision of tailor-made solutions that are right for each business.

'It is vitally important that as we move towards the 2015 0.1% ECA regulation, shipowners and operators look to develop fuel procurement strategies that deliver compliancy in the most cost-efficient way. If those that operate in ECAs are not retrofitting scrubbers or converting to LNG, distillates remain the only option. With a minimum $300 premium above heavy fuel oil, it is worth taking the time to understand their exposure and look at ways through the development of risk management solutions that can mitigate against this, and ensure that they keep as much cash and profitability in their business as possible.'

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