With the 2020 changes fast approaching, World Bunkering spoke to the Chairman of the Turkish Bunker Association, Deniz Eraydin and to Energy Petrol founder and chief executive, and Turkish Chamber of Shipping Bunker Committee chair Mustafa Muhtaroglu about the preparedness of the Turkish market and their views on the country’s bunkering scene.
WB: IMO 2020 is very close now (especially by the time the magazine goes to print); how ready is the Turkish market?
DE: The Turkish bunker market has always been very dynamic in adopting new regulations. This time official government bodies like Ministry of Transport and Customs acted well in advance to facilitate highest compliance possible for 2020. For example necessary legislation, which allows blending of different petroleum products (as long as the final product is a bunker product within certain standards), were made ready and announced in August 2019. We believe these new ‘blending’ regulations will be a game changer in our area. This will enable us to produce enough of all types of compliant low sulphur bunker fuel in Turkish Ports.
WB: What do you see developing both for you and the Turkish market as a whole in the coming year aside from the sulphur cap?
DE: Quality, compatibility and contamination will be the most important issues. Shipowners who do not pay enough attention to these issues will be forced to get rid of incompatible products in their bunker tanks in order to receive enough compliant product. In my opinion debunkering services will be important and on the rise from the first quarter of 2020.
Eraydin is also general manager of major bunker supplier CYE and he outlined recent developments at his company: “At CYE we concentrated on 2020 regulations. We made investments for our infrastructure. We believe with low sulphur bunker products contamination and compatibility will be the main issues. So we undertook some construction work and improvements at our terminal and some modifications to our bunker barges. We increased our storage capacity to more than 50,000 cubic metres. As of October 2019 we will be able to store and supply HSFO, VLSFO, ULSFO, gasoil (0.50% sulphur limit compliant) and gasoil (0.10% sulphur limit compliant). Necessary developments are completed for our bunker barge fleet as well.
He explained: “Because of these investments and construction works we did not supply around 45 days during 2018. Despite that CYE still moved up to 42nd place in the Fortune 500 list. In July 2018, Fortune 500 listed CYE as the 280th biggest company (322nd in 2017), the 22nd most efficient company and 18th biggest petroleum company in Turkey. Eraydin noted that, comparing 2018 Q1 and 2019 Q1, the total volume of the Turkish Bunker market decreased by 16% and that there was more than one reason for this. Nevertheless during the same period CYE increased its volumes 6%. He added: “Q2 official figures will be released in September 2019. We expect similar figures.”
Mustafa Muhtaroglu linked a drop in bunker sales seen so far in 2019 compared to 2018 to suppliers getting ready for the 2020 changes.
WB: How has business been over the past 12 months? I know Istanbul’s annual sales were up last year; has that been reflected in your volumes?
MM: Istanbul’s bunker market reached a record highest volume in 2018, supplying about 3 million tonnes, up some 11% compared to 2017. This is a quite normal result of perfect quality and reliable service given by five well-established physical suppliers and 55 well-performing bunker barges in Istanbul.
Over the last 12 months and first half 2019 we have seen some 15–20% volume decrease, which is also a normal situation ahead of the radical changes in 2020. Suppliers are making plans for 2020, changing tanks and supply habits, decreasing the number of barges, changing them for new products etc. Some of them did not renew 3.50% contracts, so [the fall] is the expected result of preparations for 2020. Therefore we will see volumes decrease in 2019 as a preparation year for the Turkish bunker market for 2020, then we will be again going full steam ahead.
As a company we have never been a “volume concern” supplier but always a “quality concern” one. However we did very well in 2018 and kept our usual market share of about 14%. Our storage, barges, finance and manpower have been designed for such a market share so we did very well in 2018 and supplied 2,408 ships without a single quality problem or delay, which is the most important thing for us, making us different to the usual suppliers in the industry. In this concern we want to listen to our clients, understand their needs and plan for the future accordingly. We have already sold two barges and are making complete new “game plans” for 2020 and beyond.
WB: IMO 2020 is very close now. How ready is the Turkish market?
MM: The Turkish bunker market is supplying some 3m tonnes of bunker fuels annually to 10–12,000 ships which makes it the main supply centre in the area, so I am sure we will keep our position and supply the required bunker fuels in 2020 and beyond.
We are a well-established, professional, capable, reliable and successful market so we will ensure Turkey’s position is strong and keep being the most important supply centre in the area.
We have two refineries in Turkey: TÜPRAŞ and the newly-built STAR refinery. We know the STAR refinery is not going to produce fuel oil so we know they are not going to be a source for 2020 fuels for the bunker market. TÜPRAŞ has not yet officially declared their position, however if you read between the lines and analyse their stream you can see that they are not going to provide such fuels for bunker market either, so it’s very unlikely the Turkish bunker market can source 0.5% VLSFO from local refineries. However, it’s remarkable that the Turkish market has been sourcing 70% of its supply from other countries like Russia, Israel and Greece, so we have storage, finance and know-how that we will keep the bunker market well supplied and keep its position in the area. There might be some issues for availability at the beginning but it will be temporary and the market will provide required products in time. First we need to see what our clients require, which will define suppliers’ plans, and then we will see the market settled and supplying the required products.
As a company we have 17 separate tanks and 10 bunker barges, so we are able to store and supply all types of products, but as I said, buyers will define how much of which product will be required, then we will arrange accordingly. I think by the middle of 2020 we will see markets very well settled and running smoothly. I know many shipowners are willing to try new products first and decide what they will use, then we will see suppliers acting accordingly.
In this regard, I can confirm Turkey will also keep supplying 3.5% HFO for scrubber-equipped ships.
WB: Has the IstanbulBunker2020 Committee been a success in terms
of preparing for the sulphur cap?
MM: It actually started with the elections of the Turkish Chamber of Shipping on 8 April 2018 when we won and changed the chamber’s management after 15 years. I was elected as bunker committee chairman and also assembly member and reserve board member for the chamber. At the first board meeting I recommended establishing a working group for 2020, which was highly appreciated and accepted. We established it with leading suppliers Arkas Petrol, Petrol Ofisi, Socar and Energy Petrol and named it ISTANBULBUNKER2020.
We arranged regular meetings with all stakeholders in Turkey, like related ministries and authorities, refineries, shipowner associations, customs and oil executives. The first international move of ISTANBULBUNKER2020 group was to join the IBIA Convention in Copenhagen, where together we presented Istanbul among 2020-ready ports along with Panama and Singapore.
Since then, we have continued regular meetings with all the relevant authorities for preparations and arranged a seminar at the chamber in January, which some 150 people attended. We still continue regular monthly meetings and gave a second seminar in May.
With this group, we are not only working for the bunker industry but also serving Turkish shipping markets, including shipowners, operators, managers, charterers, ports, agencies, barges, service providers, and all related industries. We are preparing our country for a new era of shipping after 2020. It’s not only bunkering; a very high number of ships stop in Istanbul and take many services, so 2020 bunkering activities will help all shipping in Turkey.
WB: What do you see developing both for you and the Turkish market as a whole in the coming year aside from the sulphur cap?
MM: Turkey is a very unique country, connecting Asia to Europe and also being the door to the Black Sea countries, used by 40–45,000 ships passing through the Turkish Straits per annum. This will never change and Istanbul will always be a port for such traffic to stop and take services by nature of shipping and geography. It’s also not only bunkering, Istanbul is an important supply centre for all ships passing through, supplying lube oils, provisions, fresh water, spare parts as well as crew change, slop removal, basic repairs etc. so this will always be a main activity in Turkey. We have very well-established players, not only bunker suppliers, almost all brands of lubricants, spare parts available, some 10 fresh water and 20 slop-taking barges, over 100 motor boats, agencies, service providers working around the clock serving world shipping in the area and also supporting Turkey’s export, hard currency and employment requirements for a young population with an average age of around 30.
WB: There’s been increasing talk about establishing a 0.10% sulphur Mediterranean ECA over the past few months. As a key bunker hub, not to mention one that straddles the Mediterranean and Black Sea, do you think Turkey would be receptive to that sort of move if pressure continues to grow?
MM: Turkey fully supports this proposal, however it must be all of the Mediterranean, Aegean, Marmara and Black Sea. You can’t say only Mediterranean and ask people to accommodate and use different type bunkers in the Aegean and Black Sea, which is their main route and trading areas, so it must be 0.10% in all of them.
If you analyse traffic in the area, the average dwt of ships passing through Turkish Straits is 15,000 dwt, rather small, with average bunker requirements of about 250/300 tonnes, and the current market is already 20% gasoil with 0.10% sulphur. This may reach 50% through the new regulation starting in 2020. Many ships will switch to gasoil due to question marks about quality, availability and cost of new fuels at all ports, so switching everything to 0.10% gasoil by ECA in the whole area would be a much more fair and convenient step, also supporting fair competition. In the end, all the world must be an ECA, so the Mediterranean can be an ECA as soon as possible.
New Turkish supplier
A new player has emerged in the Turkish bunker market. Unerco Petroleum has been launched as a new physical supplier and a global trading company, with offices in Istanbul and Izmir.
The company was granted a physical supply licence in June 2019 and it says preparations are underway to start deliveries in Istanbul and surrounding ports soon. Unerco’s management team is led by its CEO Ufuk Erinc, together with his fellow shareholders, Erdem Coker (Head of Commercial) and Utku Unlu (Head of Supply), all formerly of Arkas Bunker. The trio is assisted by a team of seven.
In a statement the Ufuk Erinc said: “As a team, we have achieved the status of being the top supplier in Turkey for almost a decade. However, our motivation, ambitions and mindset is looking beyond national borders. We are proud of our achievements, but resting on the past is not our style; we want to create a global leader in bunkering out of Turkey and for that we had to establish the right platform.”
Two other former senior Arkas executives have also joined Unerco, Can Onay and Cagatay Azakli. Onay is now in the Istanbul office as Sales & Trade Manager while Azakli is based at the Izmir office as Chief Financial Officer.
Commenting on the expected changes due to the impending 0.50% sulphur limit, the company said: “Unerco Petroleum is emerging just before 2020 changes take place and is geared to be ready to supply solutions for the changing marketplace for next year. The company will have its own leased tanks and dedicated modern chartered-in tonnage. As an integrated supplier, Unerco will have total control of cargo, freight, storage and supply, complemented with strong credit risk procedures and financial management. These ‘procurement solutions’ will be available to its customer base in any port around the world and in particular in its home port of Istanbul.”
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