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Esben Poulsson giving the keynote speech ©Nigel Draffin

IBIA ANNUAL CONVENTION 2017 IN SINGAPORE

Preparations for 2020, MFMs and ethics fuelled lively debate at our event in the world’s leading bunkering hub, Unni Einemo reports

What better place to discuss the key current and emerging themes in the bunker industry than in Singapore? As the world’s leading bunkering hub and a flagship port for progressive thinking, Singapore has experience with all elements of bunkering and is striving to maintain it top position. According to Esben Poulsson, President, Singapore Shipping Association and Chairman of the International Chamber of Shipping, who was the keynote speaker at IBIA’s Annual Convention, Singapore will probably increase its already dominant position from 2020 by focusing on the big picture and developing the right supply solutions for the future, backed up by relevant technical standards.

ulsson highlighted the positive role played by the Maritime and Port Authority of Singapore (MPA), in particular the introduction of mandatory use of mass flow metering systems (MFMs) for marine fuel oil supply to increase efficiency, transparency and minimise disputes.


He said mandatory MFMs has had a positive impact on bunkering volumes with Singapore on track to set a new record in 2017. Still, he noted, vigilance is required to prevent suppliers trying to “beat the system” as the systems become more sophisticated.
What will MFMs do for Singapore? This was the theme for a session with an impressive line-up of speakers and panellists, who broadly agreed MFMs have already done a lot. “We see buyers taking bigger parcels now,” said Md Elfian Harun, Assistant Director, Bunker Services Department at MPA. Mohamed Abdenbi of MFM manufacturer Endress + Hauser said the most positive side-effects were improved efficiency and reduction in time spent negotiating a final figure for the delivered volume after each delivery.


The MFM figure is binding and although there are still discrepancies between ship and the BDN figure, overall it seems owners have confidence in the MFM figures. He said the next step should be to use the MFMs across the supply chain, including when barges lift cargoes at terminals, as this would harmonise systems and be fairer.

Another impact of MFMs is more indirect, but equally profound. Increased transparency on delivered volumes, combined with MPA clamping down on attempts to circumvent the system is, bit by bit, weeding out operators who offer suspiciously low prices. John Phillips, Head – Bunker Credit Management Global, GP Global APAC Pte Ltd said the price spread between ex-wharf prices and delivered prices should be $5-7 per tonne to cover transportation cost, but it has been closer to $2. If this continues there won’t be many companies with deep enough pockets to survive, he said. Meanwhile, J. Stephen Simms, Principal, Simms Showers LLP, highlighted that three of the top 10 suppliers in Singapore have disappeared from the market since the MFM regulation took effect, having lost their licences.

 

Choong Zhen Mao, Executive Director, Equatorial Marine Fuel Management Services Pte Ltd, which delivers about 10% of fuels sold in Singapore, said the cost of business has gone up, and that he was pleased that MPA is proactive in rooting out malpractice. Timothy Cosulich Chief Executive Officer, Fratelli Cosulich, noted that the cost increase over the lifetime of the MFM is not that great, especially taking into account the increased efficiency, and was supportive of the transparency that the technology has brought.

Appendix VI in MARPOL Annex VI also uses 0.59xR but in a manner which disregards the inherent uncertainty of all test methods in a bid to establish MARPOL sulphur limits as “absolute”.

 

To demonstrate the difference between the IMO and ISO 4259 approaches to sulphur verification, let’s look at a parable. In football, we all agree that as long as a shot at goal enters between the goalposts, we’re OK, it is on target.

 

In fuel testing terms, if the middle of the goal represents the ‘limit value’, the goalposts represent the 95% confidence limits. A test result between the goalposts is considered as meeting the limit value.

What the IMO’s sulphur verification procedure effectively does is to say that only the left half of the goal meets the limit value, results in the right half are no OK. It does this by requiring the average of two test results from the MARPOL sample, performed in the same laboratory, to be at or below the limit. If the average of the first two tests exceeds the limit, but is within the 95% confidence margin, it requires a further two tests to be performed on the sample in a different laboratory. The average of all four test results must not exceed the limit. The drawing below illustrates what this means for a 0.10% and a 0.50% sulphur limit.

 

Implications
The most keenly felt implication of this misalignment is the fact that a ship operator with a single test result from its own testing programme showing sulphur marginally exceeding a MARPOL limit is afraid of falling foul of MARPOL Annex VI sulphur limits. But if the ship operator raises a sulphur dispute with the supplier, they have no legitimate ‘off-spec’ claim case unless the test results exceeds the specified and limit and the 95% confidence margin.

John Bassadone of Peninsula (second from left) with Port of Gibraltar officials ©Nigel Draffin
John Bassadone of Peninsula (second from left) with Port of Gibraltar officials ©Nigel Draffin

Alan Lim, Deputy Director (Port Services) at MPA outlined Singapore’s global LNG strategy, which is underway with an LNG Bunkering Pilot Programme (2017-2020), aimed at gaining experience and beefing up LNG supply capability. The first LNG bunkering operation was performed in June 2017 and the port aims to have ship-to-ship LNG bunkering capability in place from 2018 to form part of a global network of LNG bunker-ready ports. We heard about LNG bunkering drivers and challenges from Goh Tiak Boon, Head LNG New Business, Pavilion Gas, who claimed that the price of LNG vs MGO, even taking STS delivery cost into account, makes LNG a viable alternative.

Meanwhile, Capt Walter P. Purio, Chief Executive Officer, LNG Marine Fuel Institute, spoke about the nascent role of LNG as a marine fuel in Australia, where increasing environmental focus combined with plentiful local availability of LNG could drive this, especially as Australia currently relies on imports for over 90% of its total energy needs. Christopher D. Chatterton, Chief Operating Officer, Methanol Institute, explained the pros and cons of methanol as a shipping fuel. He said the seven methanol carriers that use methanol as fuel now have about 9,000 hours of operating experience between them by now, while the retrofitted passenger ship Stena Germanica has run on it for nearly a year, with good results.

 

The Bunker Buyers’ Panel gave us really good insights into owners’ thinking about 2020, credit risk post OW & Hanjin, and MFMs. Danny Chua, Senior Partner, JosephtanJudebenny LLP, set the scene explaining how the OW case had demonstrated how different jurisdictions dealt differently with interpleader cases.

The panellists, meanwhile, said they would always look into their counterparty risks, that traders still had a value-add role to play and that it isn’t all about the price, but the total package. The buyers’ panel, which had representatives from BW Group, Fratelli Cosulich, Maersk Oil Trading, Teekay and Torm A/S confirmed the positive view of mandatory MFMs in Singapore, even if it has pushed up prices a bit, because they now feel more confident that “you get what you pay for”. One of them highlighted, however, that it needs an authority like MPA to regulate it.

 

What will they do about fuel choices in 2020? Some are evaluating scrubbers, depending on age, size and the typical trading routes of the vessel, but for the most part it is VLSFO or MGO that the shipping companies on the panel were planning to use.The final session, Embracing the Ethical Challenge, discussed the ethical challenges confronting the industry today.

 

It was the first time a bunker conference dedicated a whole session to the subject of ethics, which Justin Murphy, IBIA’s Chief Executive Officer, said can be defined as doing the right thing regardless of whether or not there is a legal obligation to do so. Being in Singapore he said IBIA fully supports the MPA’s efforts to ensure that the MFM legislation is effective, noting how it is beginning to have a real impact in the market.

 

“Licenses are being revoked and, in some instances, the survival of some companies is under threat. It is regrettable that some individuals’ illegal, unethical actions end up damaging the livelihoods of others that are caught up in the ripple effect.”


However, he emphasised that there is compelling evidence that ethical businesses are more profitable than others. It pays to do the right thing, and there are numerous other benefits. This message was amplified by Michael A. Lundberg, Senior Counsel – Compliance, World Fuel Services. “Acting ethically is not only the right thing to do, it is good business,” he said. In the long run, corruption is costly and a successful business cannot be corrupt because it will eventually come out. Employees operating ‘on the edge’ can get both themselves and the company they work for in trouble.

 

Aaron Powell, Manager Ethics and Integrity, Rio Tinto Marine and Maritime Anti-Corruption Network (MACN) Steering Committee Member, explained the kind of steps that can be taken to root out corruption. The ensuing panel debate saw numerous questions, and the panellists were steadfast in their message. You have a choice in how you act and who you want to deal with. If everybody endeavours to say no to unethical practices and companies support their employees with awareness training, and setting the right kind of priorities, we can improve business practices.

 

Speaking of training, the convention also featured two highly-professional training courses, both under the leadership of IBIA board member Nigel Draffin, who is a hugely experienced bunker industry consultant, lecturer and author. There were also plenty of opportunities for networking, starting with a welcome reception, a number of coffee and lunch breaks, and the main gala reception and dinner at the Stamford Ballroom in the Raffles City Convention Centre. We hope you enjoy the pictures from our Annual Convention in 2017 and that you will be in the pictures from our next one!

Guests enjoying the Gala Dinner ©Nigel Draffin
Guests enjoying the Gala Dinner ©Nigel Draffin

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