Running Dry

The sharp fall in traffic through Suez and regional tensions have made conditions tough for the Eastern Med’s bunkerers, John Rickards writes.

On top of two years of Black Sea traffic fall-off from the war in Ukraine, the eastern Med has now had to weather trade jitters and geopolitics arising from Israel’s advance into Gaza then its increased tension with Iran, and then the slump in Suez Canal transits following the Houthi attacks in the Red Sea and a warning from Ukraine that without the then-stalled US military funding package, it might not be possible to operate the country’s grain corridor on any kind of significant level.

With bunkerers at the western end of the Med enjoying a bump in sales as vessels diverted around the Cape of Good Hope stop to refuel on their way through the Strait, those at the other might be forgiven for feeling a little gloomy. But except for the Ukraine war’s ongoing effects, most of the rest should hopefully be comparatively shorter in term – and don’t directly affect the rest of the region’s vessel traffic.

So, there are reasons to be positive.

Coming into those choppy geopolitical waters, Piraeus enjoyed a good year – and this summer’s cruise season, a key component of the Greek bunker scene and broadly immune to trouble elsewhere, is (currently, at least) expected to be a strong one.

According to annual figures released this March, the port’s revenues were up 12.9% and profits up over 26%. The figures were the highest in the company’s history for both revenue and profitability. 2023’s cruise sector saw “remarkable growth” with 12.4% more vessel calls bringing in a hefty 68.6% more passengers (albeit set against an industry still on the long way out of covid restrictions). Homeport passengers surged by 110.4% to nearly 800,000, while 571 ships were homeported out of 760 in total. “Strategic choices led to this significant growth,” the port operator said, “showcasing the company’s alignment with the pursued objectives enabling the port of Piraeus to significantly bolster the country’s position by attracting high-profile tourist flows.”

Coastal ferry shipping was up, as were ship dry-dockings, and box traffic ticked up 2% to 5.1m TEU, keeping Piraeus wedged firmly in fourth place among Europe’s ports.

Piraeus Port Authority chairman Yu Zenggang, “expressed his evident satisfaction with the company’s continued upward financial trajectory, crediting the company’s employees for their crucial role in the port’s outstanding performance and emphasising the faithful execution of the company’s plan and strategy yielding significant results.”

“The company remains steadfast in its commitment to the development plan for the Port of Piraeus, executing crucial  investments aimed at its modernisation,” PPA said in a statement. “This solidifies its position as one of the most significant ports in the Mediterranean and Europe offering top-tier services across all port activities.”

Not enjoying such a strong year, but also seeing moves to expand and invest for the future, was Malta Freeport. In its latest annual figures, container handling was down around 4.5% to 2.8m TEU, although ship calls were up 12.5% to 1,803. However, work is underway on the port’s first terminal expansion in twenty years. The project will extend the north quay at the Freeport’s Terminal Two by 176 metres and the west quay by 195 metres, to handle “new and future LNG-powered mega containerships” of up to 23,000 TEU.

Freeport CEO Alex Montebello said: “The Terminal Two extension will be win-win for everyone: for our facility’s capability to handle the world’s largest container ships with maximum efficiency, for the Birzebbuga residents and for local importers and exporters, who will benefit from more services than ever before. The project will also generate more than 160 new jobs and take the investment in the facility since privatisation past the €400 million mark, making the Freeport one of the biggest ever investors in Maltese history.”

Maltese bunkering has been hit by the Red Sea crisis, with trade through Suez, along the Med and onwards to Northern Europe significantly down. However, like Greece, this has been mitigated somewhat by the continued strength of the cruise industry. Last year, Valletta Cruise Port saw nearly 900,000 passengers, up 65% on 2022 and “comparing very well” with pre-pandemic levels in 2019 – and with the same draw as Piraeus towards cruise ship repositioning and rebasing for fly-and-cruise holidays. The port added shore power for cruise vessels at the end of 2023 after €49.9m of government investment, installing electrical connections on all five of its main quays.

Port general manager Stephen Xuereb predicts a good year for 2024 as well, saying: “This industry leaves a substantial impact on the Maltese Islands in economic terms: services to ships and services to passengers; flights to and from Malta with an impact on airlines and the airport, with passengers also having the option of spending several days in our country before or after their cruise. Of note is that the industry has not only achieved full normality post-pandemic but is expanding with more than 50 brand new ships on the orderbook by cruise lines within 2028, with 11 entering the supply market during 2024. Locally prospects for 2024 are extremely positive and we believe that we will comfortably surpass the 900,000-passenger movement mark.”

Cyprus has had to confront the depth of some of the country’s financial ties to Russia in the wake of US and EU sanctions post-invasion – though the “Cyprus Confidential” document leak late last year showed just how much oligarchs’ money was being funnelled through the Cypriot economy in the run-up to the war – and is, at the time of writing, also keenly supporting Israel, with whom it has long ties.

On the bright side, the repeatedly delayed construction of a LNG import and regasification terminal, including bunkering provision, at Vasilikos is back underway. In March this year, the Cypriot government threatened to pull the plug on the €500m-plus project in a dispute between state-run gas company Etyfa, which manages the project, and the consortium building it, led by China Petroleum Pipeline Engineering and Metron Energy. The construction contract was signed back in 2019, and CPP-Metron had already pushed back completion dates three times to leave it two years late (assuming the new target of the end of this year is met) before relations deteriorated so much that work was stopped in January and the consortium took Cyprus to arbitration over €200m it claims it was owed due to cost increases and technical problems.

However, talks between the government and the consortium and the resolution of some of the key issues holding work up seem to have done the trick – not least the energy ministry seeming to take oversight of the project and sidelining Etyfa; a statement issued by the consortium after the talks made it clear that the relationship had broken down completely, and claimed Etyfa had ignored or refused previous requests to meet and resolve the dispute. At the time of writing, land infrastructure is reported to be around 50% complete, and the FSRU intended for deployment to the terminal is still in a Chinese port awaiting certification to sail. If the terminal can be completed by the end of 2024, not only would it significantly increase LNG traffic to Cyprus, but it’d also represent a first step to the wider use of the transitional fuel within the island’s shipping sector, a welcome boost for the future.

And its biggest bunker operators also seem to be firmly looking to better, cleaner times ahead. Early this year, Island Petroleum, added the 6,544 dwt M/T Astraia to its supply fleet operating in Limassol, becoming the company’s largest tanker. Island’s trading manager Elena Christodoulidou said: “This significant addition to our fleet marks an important milestone in our commitment to delivering efficient, reliable, and sustainable solutions to the global shipping community. The vessel’s size and equipment will facilitate even more efficient bunkering operations, in our bid to ensure swift and reliable delivery of marine fuel oils.”

The tanker is “sustainable” in so much as it complies with most recent environmental regulations and best practices as opposed to anything particularly revolutionary, but that’s certainly better than nothing.

However, both Island Petroleum and parent fuel trading arm Island Holdings have also attained International Sustainability and Carbon Certification (ISCC EU) for trade and storage of biofuels. The certification aims to provide proof of raw material identity and traceability and supports appropriate carbon intensity calculations along the supply chain.

Chrysostomos Papavassiliou, the group’s founder and CEO, said: “The ISCC certification reflects our unwavering commitment to sustainable and responsible practices within the marine fuel supply chain. As an experienced and socially responsible marine fuels supplier, Island Oil Holdings recognises the pivotal role that biofuels play in reducing the carbon footprint of the shipping industry. The ISCC certification of our two main subsidiaries underscores the group’s dedication to providing sustainable solutions to its global clientele.”

Island Oil narrowly beat Turkey’s Arkas Bunker to the same certification. Arkas announced in February that it had become the first Turkish bunkerer to gain the accreditation, which it said, “breaks new ground in its sustainability goals”.

“We will remain committed to keeping sustainable and environmentally friendly marine fuels at the forefront, in line with the needs of shipowners,” said the company’s general manager Seçkin Gül.

Turkey is another country that’s had to weather its middleman position in the choppy geopolitical waters of late. The Erdogan government has always opposed western sanctions on Russia, though cargo insurance rules and the like have still restricted trade, but February this year saw one of its oil import terminals stop taking Russian oil after taking on record volumes last year.

Dortyol terminal in Hatay, operated by Global Terminal Services, imported nearly 12m barrels of Russian products last year, seven times more than the year before the invasion of Ukraine, while its exports quintupled. However, GTS has decided to sever any ties to Russian products, though it stressed to Reuters that the company had always complied with all previous sanctions including the price cap.

At the same time Iraqi exports via pipeline, suspended for over a year in a dispute over financing and contracts, still haven’t resumed. Because the deal to operate the exports involves the Kurdistan Regional Government and its petroleum industry, not initially the Iraqi federal government, the supply arrangement has been frozen following an arbitration ruling that it broke treaty agreements between the two countries and would need renegotiation with Iraq. The Iraqi oil ministry claims that foreign oil firms as well as the KRG have yet to submit contracts, but at the same time Iraq owes Turkey minimum payments per day the pipeline could be operating – and moreover it’s supposed to cut its own production under OPEC plans (which Kurdistan ignores).

Assuming it can get its own cut of the money, the Iraqi government probably ultimately wants things sorted out, the KRG certainly does with the same income guarantees – and Turkey would definitely be happy to have the extra oil export trade, with all its associated benefits in servicing that traffic.

Image Caption: This year’s cruise season could be vital to Piraeus.
Image Credit: PPA

22/05/2024

Image Caption: Expansion work is underway at Malta’s main box port.
Image Credit: Malta Freeport Terminals

Image Caption: Limassol should see greener and cleaner bunkering in future.
Image Credit: Sergei Gussev/CC-BY

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