Probably no market outside the Black Sea itself has been as affected by the ongoing war in Ukraine as the eastern Med, with traffic through the Bosphorus crashing last year in the wake of Russia’s invasion and a degree of oil cargo chaos caused by sanctions and insurers and financiers pulling support for anything connected with Russian products. A demand by the Turkish government back in December requiring ships to have P&I cover to remain in place under “any circumstances”, including breach of international sanctions; was roundly criticised and rejected by insurers. The situation in Turkey was further complicated earlier this year by the disastrous earthquake in Hatay, in the far southeast of the country.
June 1, 2023
To get a clear idea of how things stand now, World Bunkering spoke to Energy Petrol CEO Mustafa Muhtaroğlu.
WB: Turkey’s had to contend with the earthquake in the south of the country and restrictions on oil cargoes from Russia – amongst other things. How has this impacted business, or the normal running of your bunkering operations?
MM: In both the last two years we’ve faced two big issues, both in February: the war near us started on 24.02.2022 and the big disaster earthquake happened on 06.02.2023, both of course affecting us very much.
We lost a huge number of people through the earthquake affecting 10–12 cities with some 13 million people living in them and producing over 10% of Turkey’s GDP. Furthermore, we have large industry there exporting serious amounts which has been interrupted for a while. In the meantime, it will cost us over 100 billion dollars to rebuild the area. I say we have to work more to recover soon.
Turkey does not apply any sanctions but cargo flow is of course very much affected by the current situation since banks are not paying for Russian cargoes. In the meantime, many European bunker traders have stopped supplying ships coming from or going to Russia, which has of course lowered demand.
All of these have very much affected the bunker industry in Turkey.
WB: Is Black Sea traffic still as heavily impacted by the war as it was this time last year, or have things like the grain deal improved matters at all?
MM: The war and the stoppage of Ukrainian ports have affected us very seriously. There used to be over 13,500 ships loading from Ukraine per annum who were our main clients in the Istanbul bunker market. We lost all of them. Lately, some ships are coming under the grain control agreement, but they can never compensate for business we lost.
Turkey is not applying any sanctions to these countries, however it’s of course affecting business flow in the area. The bunker industry has been the most affected area by the war due to the sharp decrease in the number of ships coming from Ukraine. It has been a little bit compensated by increasing traffic from Romania, Bulgaria, the River Danube and Georgia, but it can never create the same bunker demand for Turkey.
Grain corridor ships are bringing some demand but it has its own difficulties due to JCC control so it can never help to recover the demand we lost. Traffic from other ports have gone up, supporting our business, however total volume is dramatically down to 2.25 million tonnes from 2.5 million in 2021 and 3 million in 2018, the largest volume ever.
WB: How is the Turkish sector looking in general now?
MM: It’s quite stable. The market has adapted to the new dynamics, waiting for things to normalise. We are very much looking forward to the end of war and the 2025 SECA application for the Mediterranean Sea.
WB: What do you see, or hope to see, in the coming months?
MM: No big surprises. We will try to overcome this period with minimum losses. Thankfully in the market in general margins are healthy so that we can keep surviving and looking forward to seeing the end of the war.
Meanwhile, Vitol Bunkers has announced that, through its affiliate Petrol Ofisi, it is now offering bunkering services in Turkey to its global shipping customer base. With a fleet of 16 barges, Petrol Ofisi makes more than 3,000 bunker deliveries each year. In a sign of optimism in the future of the country’s bunkering market, the two companies say they are now “working in close alignment to provide bunkering and marine decarbonisation solutions to the world largest container liners, dry bulkers, oil tankers, LNG carriers, car carriers & cruise liners in Turkey”.
Across the Aegean, Greek shipping is also very much looking forward, with many of its biggest players looking to push themselves to the front line of decarbonisation in the years ahead.
At the end of last year, the Union of Greek Shipowners came out in broad favour of the agreed form of the EU’s Emissions Trading System, as it had largely been throughout the development of the ETS, but called for the expansion of measures to cover other parts of the industry, including bunker suppliers. In a statement it said: “The UGS is firmly committed to the decarbonisation of the shipping industry. To this end, it highlights again the importance of committing all the relevant out-of-sector stakeholders to this challenging undertaking. Effective mandatory measures for the other stakeholders, such as fuel producers and suppliers, are also necessary.”
In late March this year, the UGS was similarly positive about the development of the EU Green Deal Industrial Plan, describing shipping’s role in decarbonisation of European industry as “self-evident”.
However, the UGS called for the plan to support alternative fuel development and infrastructure on an equitable basis as a matter of urgency, as well as greater consultation with the shipping industry. “The GDIP must cater for their speedy and sufficient development and supply by out of sector stakeholders. Equally, implementation of the GDIP should not lead to distortion of competition and major inequities among EU Member States,” the UGS said in a statement.
UGS president Melina Travlos continued: “Without shipping there can be neither green transition nor strategic autonomy for the EU. The path to the decarbonisation of our sector must be ambitious but also realistic. This is the absolute minimum to safeguard the international competitiveness and sustainability of EU shipping.”
The Hellenic Decarbonisation Committee, a Greek and Cypriot industry discussion forum with an obvious focus and backed strongly by Italian class society RINA, is focusing more on the immediate term, though. At its most recent meeting, aimed mostly at addressing SEEMP and CII impacts on shipowners, RINA’s deputy marine operations executive vice president Massimo Volta, said: “Decarbonization is not a theoretical exercise. We need feasible solutions in line with the feedback from shipowners, in respect to both the environment and the people involved.”
HDC chair Ioanna Procopiou, CEO of Sea Traders and founder of Prominence Maritime, echoed this in its opening session: “Alternative fuels will not be the dominant solution during the transition period. We will need to look to other solutions, including carbon capture.”
Giosuè Vezzuto, executive vice president marine at RINA concluded: “We do not know what fuels or technologies will become winning options for the future, but we need to develop now if we are going to meet targets in the future. The industry cannot stand still and, indeed, as a class society, neither can RINA. We are working proactively to support the transition and facilitate approaches to safety and risk assessments as we wait for prescriptive rules to follow developments.”
Fellow class society ABS has been touting the values of methanol as one of those winning options to Greek operators at its Methanol Forum in April. ABS’ vice president of global sustainability, Panos Koutsourakis, said: “Methanol is increasingly being recognized as a compelling alternative pathway for owners and operators. With practical benefits related to ease of storage and handling, tank-to-wake carbon intensity reduction, as well as a pathway to carbon neutrality through green methanol, methanol presents an immediate and promising solution.” ABS has been pushing methanol for a while now, and clearly sees the packed Greek shipping industry as a cornerstone of the adoption of those fuels.
The class society has at the same time also promoted drop-in biofuels as an easy way of improving a vessel’s CII rating, this time to Cypriot industry leaders. ABS Vassilios Kroustallis described them as “a powerful new tool for shipowners and operators to accelerate fleet decarbonization and improve their CII trajectory today” – though he did also note that supply and regulatory questions still need to be addressed.
If green fuels – and despite the HDC’s hedging of its bets, methanol from green hydrogen now looks like a clear front-runner – are to become a major factor of the eastern Med’s fuel picture, particularly once the SECA comes into effect in 2025, production and supply infrastructure will have to keep up.
Here, the Suez Canal Economic Zone (SCZONE) and its developments around the Mediterranean end of the canal are hoping to bridge that gap.
SCZONE has been ramping up its interest in hydrogen production in recent months. Organisation chairman Waleid Gamal El-Dien led a delegation to Japan aiming to attract Japanese business earlier this year but also took the chance to meet with the chairman of Kawasaki Heavy Industries Yoshinori Kanehana specifically to discuss green hydrogen production and supply, as KHI has experience in the field across the board, from power generation to shipping.
“SCZONE has various available investment opportunities, especially in green fuel production, where we are going to establish a global centre for the production of green fuel and exporting purposes,” El-Dien said. “We are also focusing on future needs of applications for the use of green fuel within the local market as well.”
The trip also included visits to high-capacity water pump manufacturer Torishima with a view to installation as well as longer-term maintenance.
The Egyptian government has been very keen in the last couple of years to draw investment in hydrogen production, and that shows no sign of abating. SCZONE itself used its presence at last year’s COP27 talks as a springboard for inking several agreements and ten final agreements in connection with alternative fuel production, though it’s remained a little coy as to with whom; it says it aims “to be the most important regional hub for green energy”. The two companies it did name as holding discussions with were Saudi Arabia’s ACWA Power group and India’s Acme Group for Renewable Energy, which it says aims to work with SCZONE for the production of green fuel.
“The steps and procedures which has taken by SCZONE towards the localization of green fuel industries are based on our readiness through robust infrastructure and proximity to renewable energy sources which are necessary for the industrialization process, in addition to the ports that will play a pivotal role in the Export and ships’ bunkering purposes,” El-Dein said.
SCZONE is also increasing its available port capacity. The Al-Arish port development, aimed principally at dry bulk construction and stone goods for export primarily around the eastern Med, should be up and running from Q1 next year. According to El-Dein: “The development works achieved progress of many working companies, one of them is working on implementing a project to establish 6 silos to store black and white Sinai cement with a storage capacity of 75 thousand tons. During the next year 2024, it will reach 1.5 million tons, with a total investment cost of 830 million pounds. It is expected that revenues from trading ships in this project will achieve approximately 28 million dollars.”
The organisation is also building a new multi-purpose terminal and industrial zone in East Port Said with two different consortia. No timetable has been announced for the terminal.
“The East Port Said integrated zone is witnessing several development projects in the port and the dry bulk station project for grains, in addition to the vision for industrial development,” SCZONE said, “which [will make] the East Port Said Industrial Zone a distinguished location and qualified to be one of the most important hub of heavy industries in Egypt as well as one of the most important commercial [hubs] due to the potential of the port.”
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