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Monjasa seems confident of recovery in the WAF market ©Monjasa
Monjasa seems confident of recovery in the WAF market ©Monjasa

Opportunities for Growth

Despite a slide in volumes due to the pandemic, suppliers serving most African markets are showing signs of optimism, John Rickards reports

Despite the challenges and reduced volumes faced by most suppliers worldwide across the past year, Monjasa, for so long the dominant force in the West African market, saw annual group volumes up 9% to 4.9 million tonnes. The West African operations of the group contributed 1,050,000 tonnes to that total, second only to the Americas despite being down markedly from the 1.4 million tonnes it supplied in the region in 2019. HSFO demand, as expected, fell sharply, with VLSFO making up 59% of volumes and MGO 22%. In December 2020, the company replaced its floating storage tanker serving its fleet in the region with the 119,456 dwt SKS Dokka positioned off Lomé, Togo.

All told, the company seems pleased to have weathered the year well. In its annual report, group CEO Anders Østergaard said: “During a year of unseen events, Monjasa’s highest priority was to ensure health and safety for our employees and uninterrupted supply of marine fuels to the shipping industry. We succeeded in providing a safe working environment and despite the disrupted maritime trade flows, we recorded an increasing demand for our services and products.

 

“Monjasa’s response to these challenges reflects our organisational and maritime capabilities in matching supply and demand no matter the circumstances. Together with our strong financial results, Monjasa is in a very solid position to face future industry challenges and financial requirements.” Looking ahead to the rest of 2021 and a – hopefully – less turbulent year with IMO 2020 now well-established and Covid’s economic and human effects at least a known quantity, a Monjasa spokesperson told World Bunkering:

 

“Regarding West Africa, the market has surely been affected by the disrupted trade flows and lower activity levels, however, we are confident that the market will regain strength as global trade slowly returns to pre-pandemic levels. Monjasa is maintaining a strong fleet of approximately 10 fixed tankers throughout the region from the Gulf of Guinea to Namibia.”

 

Positive signs, then, and we all have to take as many of those as we can get. Similarly, the move in March by Oryx Energies subsidiary Addax Energy to launch bunker operations in Mauritania can only be a positive one that hopefully speaks well of the company’s expectations for WAF trades to recover from Covid’s impact reasonably soon. Addax has deployed two tankers offering VLSFO and MGO to the Nouadhibou anchorage and is evaluating extending its offering to Nouakchott.


“This is a great opportunity to provide an efficient solution for the growing energy demands of the West African region and to contribute to its economic growth,” the company said in a statement. Addax has a long-standing relationship with Mauritania, having been awarded petroleum products supply tenders to the country under World Bank funding three times in a row, most recently covering the height of the pandemic last year.

 

There have been additional challenges in the region this year. The Gulf of Guinea has seen a surge in piracy going into 2021 which has seen Italy and the UK involved in aiding coastal states like Ghana in improving security for ships transiting the area or anchoring offshore.

 

Ensuring ready availability of VLSFO has likewise been, if not an issue, then certainly something that many people involved in the sector have wanted to keep an eye on.

 

In April, the Nigerian Maritime Administration and Safety Agency (NIMASA) held a two-day event with refiners and bunker suppliers aimed at ensuring the continued availability of VLSFO in the country. NIMASA director-general Dr Bashir Jamoh said: “As the country’s shipping regulator, we have had interfaces with the relevant stakeholders on how to reach a win-win agreement on Nigeria’s compliance with the IMO sulphur content cap. We are happy to announce that the coast is clear for us to achieve this mandate.

 

“Nigeria has an advantage ab initio, because we produce low sulphur crude. The challenge for us now is conversion of this advantage to availability of bunker fuels that meet the IMO mandate.

 

“I make bold to say that we have all it takes to be the bunker fuel hub for Sub-Saharan Africa. There is a US$2 billion bunker fuel market in Sub-Saharan Africa waiting to be harnessed by our businessmen and women.

“Our refineries are not working at full-capacity, and this is an opportunity for the modular and other private refineries to come in to fill a vital gap in the marine fuel supply chain. Bunker fuel is a critical element in the shipping business.

 

“With the coming into effect of IMO 2020, we assure you as an Agency that the country’s shipping community will be galvanised to ensure availability, supply, and, in fact, self-sufficiency in 0.5% sulphur content fuels in line with the IMO standard.”

 

Self-sufficiency and broadening the country’s refining base to supply VLSFO is certainly no bad idea on the face of it. South Africa’s Engen refinery in Durban has seen running shutdowns – alongside other South African refineries – and as
a result the company, come April, was having to import VLSFO to meet demand. The Durban refinery, like Astron Energy’s Milnerton plant in Cape Town, suffered fires in 2020 and press speculation had suggested both would be out of action until 2022.

 

In late April, though, Engen announced that it was ending refining altogether and converting the Durban refinery – which had accounted for 17% of production in South Africa – to a fuel import terminal.

 

“This considered decision was not taken lightly and follows an extensive strategic evaluation of Engen’s refining business, in which every facet of the refinery was scrutinised and assessed against market demand, future growth potential and the ability to contribute sustainably,” the company said in a statement. “The substantive cost of investment for upgrades required to bring the refinery in line with evolving quality and emissions regulation were also part of the strategic review considerations.”

 

Engen MD and CEO Yusa’ Hassan said: “The conclusion of the strategic assessment is that the Engen refinery is unsustainable in the longer-term. This is primarily due to the challenging refining environment as a result of a global product supply surplus and depressed demand, resulting in low refining margins, and placing the Engen refinery in financial distress. Furthermore, unaffordable capital costs to meet future CF2 regulations compliance continues to be a challenge for the long-term sustainability of the refinery.


“The investment in new infrastructure to create a world-class import terminal as well as repurposing of the refinery site will generate much needed economic activity in KwaZulu-Natal. In the current economic climate, this should contribute not just in terms of capital, but also in terms of job creation and skills transfer, something that will support South Africa’s post Covid-19 economic recovery. The RTT will also strengthen South Africa’s long-term security of fuel supply.”

 

The terminal conversion is slated to be complete in Q3, 2023. Astron Energy has yet to reveal a confirmed date for the restart of its Milnerton refinery, which accounts – or accounted, considering Engen’s decision – for around a quarter of South Africa’s capacity. Coming on the back of the pandemic’s impacts on the local bunker market, a significant loss of local refining capacity is hardly good news.

 

There are bright spots, though. This year, Amsol added a bunker tanker supplying Durban after signing a multi-year fuel distribution contract with Shell. The company already operated a fleet of 18 service vessels of various types, but said its “growth strategy has had as one of its focus areas the expansion of its marine services portfolio into the operation and management of seagoing product tankers; building on its reputation as the premier bunker barge operator in the region.”

Ghana and other countries on the Gulf of Guinea are taking steps to dissuade piracy ©Ben Sutherland/CC-BY
Ghana and other countries on the Gulf of Guinea are taking steps to dissuade piracy ©Ben Sutherland/CC-BY

CEO Paul Maclons said: “With a changing requirement for the transportation and delivery of multiple grades of marine fuel, Shell has partnered with AMSOL to provide a world class service in the Port of Durban. This partnership has resulted in AMSOL acquiring a product tanker, representing a multimillion-rand investment, and will provide sustainable employment for South Africans in the specialised niche of tanker operations.”

 

And in the port of Coega, Algoa Bay, Transnet National Port Authority has given DNG Energy a license to establish an LNG bunkering facility. The company, already involved in promoting the use of LNG in South Africa for shoreside applications, expects the project – including an FSU, an 8,000 dwt LNG barge being built by South African Shipyards and all the associated support infrastructure – to cost around US$150 million and it hopes to begin operation in September. DNG says its fuel will be competitively priced despite South Africa’s lack of local gas production as infrastructure and operating costs will be spread across both marine and shore power applications.

 

While there have been other potential LNG bunkering facilities proposed as part of gas projects further north, Algoa Bay’s position on the main trades could make it an attractive option for vessels bound for the Cape.

 

Tanzania was one of those potential locations, with a mammoth US$30 billion gas export facility originally planned for Lindi to handle LNG produced by Exxon, Equinor and Shell from the country’s offshore fields. The project, which in one form or another has been mooted since 2014, was suspended in 2019 by the Tanzanian government over concerns about the terms of the production sharing agreement signed by the previous president, and in January this year Equinor said it was writing down the book value of its share in the Tanzania LNG project by almost US$1 billion, citing “overall project economics [that] have not yet improved sufficiently to justify keeping it on the balance sheet”.

 

However, in a May budget presentation, Tanzania’s energy minister Medard Kalemani announced that construction work was expected to begin in 2022. The terminal isn’t expected to be completed until 2028, so it will be a while before exports – and any associated bunkering – begin, but with a production capacity given by Kalemani of up to 10 million tonnes per annum, the Lindi facility has vast potential. Talks over a new host government agreement with the companies involved had begun in April, he said. “We instructed the government negotiation team to hold separate talks with each individual investor, instead of the previous arrangement of holding joint talks with all the investors,” he said. “We expect these talks to be completed within seven months.”

If successful, the start of the project would be a significant boost for the region.
The East African coastal states have had a tougher time in fuel economics terms than those on the West, with national lockdowns and plunging demand seriously affecting fuel volumes.

 

North of the Horn, though, the Ever Given’s blockage of the Suez Canal in March temporarily threw a spotlight on Djibouti as a potential bunker hub.

 

Red Sea Bunkering, the country’s sole bunker supplier since 2015, had only the month before acquired an 80,000 dwt products tanker to act as floating storage – not quite operational in time for the Canal’s blockage. As ships built up, or diverted, the company reportedly saw weekly fuel sales 25% higher than usual.

 

Last year, the company signed a deal with China’s Chimbusco to provide floating fuel production as well, suggesting that Red Sea Bunkering sees ongoing potential longer-term growth than that offered by a single Canal blockage. Djibouti could offer serious competition to other ports serving ships en route to and from Suez as well as benefiting from its current role as the main port of entry for goods bound in and out of Ethiopia. And maybe that’s no bad thing; the latter is increasingly in question, despite Djibouti’s infrastructural advantage, as Ethiopia has looked to diversify its sea access through deals with Eritrea and Somaliland in recent years.

 

In May, Djibouti was ranked the top port in Africa and the 61st globally in the latest global Container Port Performance Index, published by the World Bank and IHS Markit, on the basis of its efficiency, scale and service offerings across different ship sizes and levels of containers moved. The port’s container terminal has
a throughput capacity of 1.6 million TEU. If it could use its increasing bunker profile to become a significant fuelling point for ships transiting Suez, in addition to the simple financial gains this would bring, it would also allow the port to be less exposed to the economic inclinations of its landlocked neighbour.

If Djibouti can capitalise on its position, it could draw more Suez-bound bunker traffic ©USN/Therea Mullis
If Djibouti can capitalise on its position, it could draw more Suez-bound bunker traffic ©USN/Therea Mullis

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