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INDEPENDENT INTELLIGENCE FOR THE GLOBAL BUNKER INDUSTRYwww.bunkerspot.com Volume 9 Number 6 December 2012/ January 2013

Inside:• LNG Bunkering• Fuel Sampling• Energy Security• Marine Lubes• Regulatory Issues• News & Events

OIL SUPPLY OUTLOOK: Refining Trends & Strategic Reserves

bunkerspot December 2012 / January 2013 www.bunkerspot.com 3

FEATURES

FOCUS ON OIL RESERVESLesley Bankes-Hughes reviews progress on the transposition of a new European directive on emergency oil stocks 24

SPOTLIGHT ON REFININGGemma Parker of Facts Global Energy gives an insight into the evolving US refining sector 26Nick Vandervell of the UKPIA looks at the factors impacting the viability of the UK’s refining sector 30

FUEL OIL MARKETSNed Molloy and Marko Trtica of Platts argue that the global fuel oil market is changing forever 32

COMMERCIAL ISSUESChris Thorpe looks at the effect of liquidity on the shipping market 34

REGULATORY ISSUESFONASBA President Marygrace Collins discusses the impact of European sulphur reduction limits on the shipping sector 36

LNG BUNKERINGMartin Wernli of Wärtsilä discusses how new two-stroke, dual-fuel engines will open up the prospect of LNG to the whole shipping industry 38

FUEL QUALITYDr Vis argues that the bunker industry should support the efforts of the Dutch police to prevent chemical waste entering the bunker supply chain 42

FUEL SAMPLINGJon Moreau of Cameron Measurement Systems asks just how representative most bunker samples are 44

MARINE LUBESSteve Dye from Parker Kittiwake considers how lube oil feed rates can be optimised without compromising the ship’s engine 46

ENERGY SECURITYExclusive Analysis looks at how ‘illegal bunkering’ is affecting the oil business in the Niger Delta region 50

BUNKER TECHNOLOGYDamien King unveils the FIS Bunker Screen platform 52

NETWORKINGBunker people on the move 54

EVENTSFathom Shipping’s recent Ship Efficiency conference looked at how companies can reconcile the twin drivers of profitability and sustainability. Alison Jarabo-Martin reports 56Events and training course diary 58

Contents

HEAD OFFICEPetrospot Limited · Petrospot House Somerville Court ·Trinity Way ·Adderbury Oxfordshire OX17 3SN · England +44 1295 81 44 55 +44 1295 81 44 66 [email protected] www.cargosecurityinternational.com

DIRECTOR - PUBLISHING / EDITORIan Taylor +44 7876 70 45 41 [email protected]

MANAGING DIRECTOR / PUBLISHERLlewellyn Bankes-Hughes +44 7768 57 44 30 [email protected]

ASSOCIATE EDITORLesley Bankes-Hughes +44 7815 57 86 43 [email protected]

ADVERTISING SALES MANAGERSteve Simpson +44 7800 75 52 78 [email protected]

TRAINEE SALES EXECUTIVEJames Clack [email protected]

MAGAZINE LAYOUT & PRODUCTIONCheryl Marshall [email protected]

DIRECTOR - EVENTSLuci Llewellyn-Jones +44 7775 92 42 24 [email protected]

EVENTS COORDINATOREsther Ramos [email protected]

EVENTS & MARKETING ASSISTANTHannah Whitty [email protected]

ADMINISTRATIVE ASSISTANTBradley Fowler [email protected]

MARKETING MANAGERMelody Aguero [email protected]

EVENTS & SALES Osei Mitchell +44 7789 20 20 10 [email protected] Leader +44 7771 54 03 82 [email protected] Camila Ocampo [email protected]

ACCOUNTSHelen Wilkins [email protected]

NORTH AMERICA REPRESENTATIVEJackie Hoo Bryant (Miami, United States) +1 305 456 1838 +1 786 302 7667 [email protected]

NEWS Bunker Overview 4

Europe 8

Americas 14

Asia Pacific 18

Africa and Mideast 22

Bunkerspot is an integrated news and intelligence service for the international bunker industry. The bi-monthly magazine and 24/7 electronic news service, www.bunkerspot.com, both provide highly-specific information on all aspects of the marine fuels industry. Bunkerspot Magazine (published in February, April, June, August, October and December) annual subscription rate, including unlimitedaccess to the website www.bunkerspot.com, is UK£250/€280/US$400. ISSN 1741-6981. Copyright Petrospot Limited © 2012. All rights reserved. Published by Petrospot Limited, a dynamic independent publishing, training and events organisation, focused on providing information resources for the transportation, energy and maritime industries. Disclaimer: Bunkerspot is an editorially independent magazine and electronic news information service. The information contained in the magazine and website is presented in good faith. Opinions expressed are not necessarily those of Petrospot Limited, which does not guarantee the accuracy of the information contained in Bunkerspot. Nor does Petrospot accept responsibility for errors or omissions or their consequences. No part of Bunkerspot may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photographic, recorded or otherwise, without the prior written permission of the publisher. Visit www.petrospot.com

December 2012 / January 2013 bunkerspotwww.bunkerspot.com4

Bunker Overview

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Refining economics loom large over bunkeringAfter all the hullabaloo about the US presidential election being ‘too close to call’, Barack Obama secured another four-year tenure in the White House with comparative ease. In Europe, concerns about the credit crisis and the floundering Euro seem to rumble on without end. In the Middle East, the sanctions on Iranian oil are continuing – although there are mutterings that product is being moved ‘under the radar’ into various markets, including the fuel oil sector.

So far, so normal. The energy markets – and indeed markets in general – always seem to get agitated before the US elections, and then discover that future of global capitalism was not balanced on a knife edge after all.

There are some trends that Bunkerspot believes will have a profound effect on the oil and bunkering industries – and we have invited some key industry watchers to tease out the significance of these developments in this issue of the magazine.

Firstly, we are seeing a major shake-up of

12 month rolling price charts

the global refining sector. As Gemma Parker of Facts Global Energy points out on page 26: ‘There are pressures across the refining sector in all the mature oil markets, leading to significant closures of capacity in Europe, Japan, and, more recently, Australia.’

Parker goes on to focus on the changes taking place in the refining sector in the United States, and her conclusions may make depressing reading for some. Specifically, she believes that US refiners have been ‘shielded from the chronic overcapacity that has plagued their competitors in other developed markets over the last four years’ – but warns that this is about to change.

‘US refiners,’ says Parker, ‘are likely to become increasingly exposed to the realities of fighting for survival in a declining market faced with increasing competition from abroad. Refinery closures are then expected to re-emerge, especially post-2015.’

On page 32, Ned Molloy and Marko Trtica of Platts predict ‘drastic changes’ ahead for

the global fuel oil market – and they focus on the evolution of Russia’s energy sector. As Molloy and Trtica point out, Russia is the world’s largest exporter of residual fuel oil and so the future direction of its refining sector will have a huge impact on the bunker market.

One of the reasons that Russia produces so much residual fuel is that – in the words of Molloy and Trtica – ‘many of the country’s refineries were built before the 1970s and were geared to cater for the Union of Soviet Socialist Republics’ (USSR) colossal military and industrial complex’. Now, however, Russian oil companies are competing in a capitalist world. They need to produce more light end products, both for exports and to feed Russia’s domestic market, where there has been a 50% increase in demand for gasoline over the last decade. Consequently, the long-delayed upgrading of Russia’s refineries is finally gathering pace. This means more high-end products, and significantly less fuel oil.

Given this scenario, Molloy and Trtica

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believe that ‘the biggest question facing the European fuel oil market is whether demand will fall faster or slower than production, and the consequent impact on prices’. They believe that the answer depends on the shipping industry’s response to environmental regulations, i.e. will ships invest in scrubbers (and continue to use fuel oil), or will there be more of a move towards alternative fuels such as liquefied natural gas (LNG).

Writing on page 36, Marygrace Collins, the new President of the Federation of National Associations of Ship Brokers and Agents (FONASBA), suggests that there will have to be compromise on the part of both governments and the shipping industry in order to make the new environmental regulations work. In Europe, for example, this could include schemes whereby European Union (EU) Member States may provide aid for innovation and retrofitting. On page 38, Martin Wernli outlines how Wärtsilä’s new dual-fuel engines are opening the prospect for more LNG bunkering and he also believes that the supply infrastructure is starting to come together, at least in Northern Europe. Nevertheless, Collins’ words rings true: ‘We know that whether the answer is in the fitting of scrubbers, making compliant fuel available or developing an LNG fuel distribution system, these solutions will take many years to achieve and are seriously long term investments.’

Indeed, the investment required is simply too big for the shipping industry to manage on its own – and nor should it have to do so. Governments have to recognise that there are important long-term environmental and social benefits to maintaining a healthy shipping sector. There is no denying that ships do emit SOx and NOx, but the environment will not be best served if there is a mass migration of cargo from container ships to road trucks.

As Collins points out, shipping needs to make its concerns ‘heard loud and clear at the highest levels’. It is about maintaining a dialogue with governments and the wider public and not just outlining shipping’s worries, but also achievements and contribution to society. And this neatly leads us to a major new event – London Shipping Week – which Shipping Innovation (a joint venture between Petrospot and Elaborate) will be running in September (see page 58). There will be a host of industry functions, seminars and receptions, giving you the opportunity to meet and influence decision makers from both within and outside the shipping community. We hope to see you there.

Bunkerspot prices are compiled from the reports of the four brokers whose market reports have consistently proved the most reliable and accurate: Cockett Marine Oil Limited, LQM, Glander International Inc., and KPI Bridge Oil. Bunkerspot welcomes market reports from other sources for inclusion on its website www.bunkerspot.com

380 IFO October November01-05 08-12 15-19 22-26 29-02 05-09 12-16 19-23

Rotterdam d 631 624 624 611 599 585 592 596Gibraltar d 663 665 660 643 630 611 611 612Piraeus d 652 651 652 636 624 609 611 612

Suez d 698 700 706 717 726 716 714 719Fujairah d 655 653 648 636 625 608 609 617Durban w n/a n/a n/a n/a n/a n/a n/a n/a

Tokyo d 701 691 699 701 695 672 663 664Busan d 694 676 678 667 656 657 668 656Hong Kong d 665 655 661 647 637 617 621 627Singapore d 651 645 645 633 623 600 607 617

Los Angeles w 663 674 691 679 700 673 682 686Houston w 643 635 633 622 615 603 608 612New York w 654 645 643 630 629 623 628 635

Panama w 674 666 664 641 644 630 636 650Santos d 640 640 648 645 635 625 601 586Buenos Aires d 652 648 651 645 622 614 601 607

180 IFO October November01-05 08-12 15-19 22-26 29-02 05-09 12-16 19-23


Suez d 721 721 723 733 745 737 730 744Fujairah d 680 674 671 659 647 627 633 636Durban w 676 668 680 671 649 629 623 633




MDO October November01-05 08-12 15-19 22-26 29-02 05-09 12-16 19-23


Suez d 1079 1090 1166 1188 1190 1172 1140 1163Fujairah d 1034 1036 1035 1028 1019 998 1016 1030Durban w 1114 1121 1127 1126 1120 1099 1105 1111




KEY: d – delivered • w – ex-wharf • n/a – not available • mdo – marine diesel oil


China, secured six-month exemptions. On 1 July, Europe imposed a blanket ban on the purchase and movement of Iranian crude oil – a move which effectively froze the export of around 20% of Iranian oil.

From September onwards, market jitters about supply availability were further whipped up and swept along by a tidal flood of political point scoring as the Republicans and Democrats used the high price of oil as part of their final, largely unedifying scramble to secure a White House term of office. Running at an unsustainably high pitch, the Washington rumour mill fed into the market’s anticipation of an imminent release of US oil stocks. There were also suggestions that the IEA was preparing to step up to the mark with strong support from the United States and France.

Hurricane Sandy disrupted the last days of electioneering in the United States, and its ravages prompted the first ever release of stocks (2 million gallons of ultra low sulphur diesel) from the Northeast Home Heating Oil Reserve, which forms part of the SPR.

Now we are safely in the post-election hinterland, it seems clear that the release of emergency reserves is being increasingly viewed as a potential option for price manipulation – although the United States, for example, has yet to turn the clamour of the lobbyists into decisive action. While Organization of Petroleum Exporting Countries (OPEC) nations influence the price of crude through quotas, price ‘management’ through stock releases would surely nudge the oil market further down a slippery political slope?

Significantly, a key tenet of the new EC Directive 2009/119/EC is that a stock drawdown is prohibited for purposes of price control. The directive, intended to replace the EC Directive 2006/67/EC which will be repealed on 31 December, can only be used to alleviate supply disruption. Its introduction is also intended to improve transparency in the way European countries hold and report on their stock levels. Prior to the drafting of the new directive, there had been a perception that some countries had been perhaps less than conscientious in maintaining their mandated stock levels, and that there had been a less than clear differentiation between the holding of emergency, rather than commercial, stocks. Initial discussions suggested the establishment of a European agency to oversee the meeting of national obligations, but the final directive has devolved responsibility for this to national governments. The directive is set to be transposed into Member States’ national

As 2012 draws to a close, speculation about the release of emergency oil stocks to alleviate

high oil prices appears to have quietened down – a situation that some may say has much to do with the inevitable calm after the fevered political storm which surrounded the most expensive US presidential campaign in history.

It has been a year for political mind-games over the drawdown of national oil stocks, although Hurricane Sandy dramatically weighed into the debate in November when the havoc it wreaked on the US East Coast prompted a limited release of heating oil on the grounds of humanitarian need.

The International Energy Agency (IEA) and EC Member States have also been much preoccupied with the ‘will we, won’t we’ issue of oil stock release throughout the summer of 2012, but the more pressing deadline of the transposition into national law of a new European Commission (EC) oil reserves directive on 31 December is fast approaching with little apparent political fanfare. However, the directive, which is designed to bring EC Member State emergency stock levels into alignment with the methodology used by the IEA for national emergency reserves, is set to task some European countries, and particularly the countries termed as Contracting Parties, with a substantial financial and political commitment.

When Bunkerspot last reviewed emergency oil reserves, the oil market was holding its nerve over developments in Libya (Bunkerspot April/May 2011). However, as events unfolded in the country, the IEA Secretariat implemented the Libya Collective Action on 23 June 2011 which mandated the release of 60 million barrels of oil to meet an anticipated supply disruption of Libyan light sweet crude. In support of this initiative, the United States made available 50% of the total from its Strategic Petroleum Reserve (SPR). The US emergency oil coffers continue to remain comfortably full at well in excess of 700 million barrels. However, a provision in the Energy Policy Act of 2005 to increase the SPR to 1 billion barrels was finally shelved in September 2011 when the US Department of Energy rescinded prior appropriated funds and terminated the project.

The implementation of oil sanctions against Iran has fuelled talk over stock drawdowns throughout the summer of 2012 and into early autumn. In June, the United States banned financial institutions from engaging in oil transactions with Iranian banks, although a number of countries, including

Focus on Oil Reserves

Lesley Bankes-Hughes reviews progress on the

transposition of a new European directive on emergency oil stocks

Salting it away


will be a difficult and expensive one. Many of these countries have historically little or no strategic reserves and only a rudimentary storage infrastructure. Although the more ‘senior’ Member States are required to transpose the directive into national legislation by the year end, the Contacting Parties have a reasonable breathing space to achieve compliance but the difficulties should not be under-estimated.

As Bunkerspot went to press, the December deadline was only a month away, but, as is so often the way with EC directives, there has been only minimal progress on transposition.

At a meeting of the 4th Oil Forum of the Energy Community in Belgrade in late November, Zsolt Tasnadi, DG Energy, acknowledged that the department had received many enquiries from Member States about the interpretation of the directive’s provisions but most Member States have not finalised transposition. Indeed, only Austria, Denmark, France, Germany and Latvia have notified the EC of measures taken to adopt the directive and even these notifications may not necessarily imply full compliance.

The Contracting Parties have been given until 2023 to reach the required level of reserves. While some are ahead of the game, others have only just left base position. At the 4th Oil Forum, it was pointed out that in Bosnia & Herzegovina preparations for an emergency stocks policy are still at a very early stage. Moldova presents an even bleaker story; it holds no emergency stocks and no steps have been taken to establish a regulatory framework. At the other end of the scale, Croatia has made enormous progress. It achieved a stockholding of 90 days consumption by July this year and intends to hold all stocks on Croatian territory by the close of 2014.

It is clearly imperative that each Contracting Party has a firm road-map in place for reaching logistical and legal milestones, but the question of how to attract public financing for such large-scale national projects remains. At first glance, the new directive would seem to differ little from its predecessor but in practice it requires a significant shake-up and re-evaluation of national stockholding practices. The geopolitical landscape of Europe in 2013 is also very different terrain to that which existed when Eurocrats first drafted the EC Directive 2006/67/EC. From a European perspective, the US model of holding its vast emergency reserves in the underground salt caverns of Texas and Louisiana may be (deceptively) enviable in its simplicity.

legislation by 31 December, but this deadline seems unlikely to be met.

Directive 2009/119/EC will bring EC calculation methodology into line with the IEA’s process. The European stockholding obligation is based on 90 days of net imports or 61 days of consumption (whichever is the higher). This compares with the soon to be retired directive which called for 90 days of consumption for each of three product categories. The ‘old’ obligation could be reduced by up to 25% for member states with indigenous oil production but the new directive allows for a 10% deduction.

Member States will also be obligated to hold a third of their emergency stockholdings as products to reflect consumption patterns, and those products must cover at least 75% consumption of inland consumption. Those European member states who also participate in the IEA’s stockholding should have no problems with compliance but may find that overall stock levels will need to be kept a little higher than before. Oil stocks which can be counted towards the mandated levels can be held in a number of locations including barges, inland ship bunkers, and intercoastal tankers as well as in larger facilities such as bulk terminals and refineries. Oil products to be used for bunkers on international trades will be excluded from the obligation.

Stockholding obligations can be higher than those required by the new directive, but 2013 will be used as the baseline year for stock calculations. From 1 January to 31 March next year, the obligation will be based on net imports (or consumption) in 2011, while in the period from 1 April to the end of 2013 the obligation will be based on net import and consumption patterns in 2012.

Should the IEA order a drawdown, its members who are also European Member States can go ahead without requesting EC approval (although notification must be made to the Commission). However, if the EC decides to release stocks to remedy a supply hiatus, it can do so without a parallel IEA mandate. However, individual member states can mandate a partial release of their stocks to cope with local crisis situations.

All emergency stocks must be held within the EC but Member States can hold part of their obligations in other EC countries. Under the ‘old’ directive, reserves could be held in government-controlled storage or by industry (as compulsory stocks or as commercial stocks). The new directive also includes a provision for the establishment of one Central Stockholding Entity (CSE) in each member state. The CSE can take the form of a government agency

or a commercial organisation but it must be a not-for-profit entity. If a member state chooses the CER option, it may well be that this agency will also assume responsibility for the reporting of oil stocks held by other commercial operators in that country.

Most Member States have chosen to store their stocks over the full range of storage options, although Germany, Belgium, Hungary, Ireland and Slovenia have opted for agency storage alone. In the run-up to the entry into force of the new directive, a number of countries have reorganised their stockholding infrastructure. In Belgium, for example, APETRA assumed responsibility for the country’s strategic stocks from April this year. Its product stocks are largely held in Belgium, but there are also bilateral storage agreements with the Netherlands, Luxembourg, Germany, France, the United Kingdom and Ireland. Crude oil bought by APETRA is stored in salt caverns in northern Germany.

In France, the country’s strategic reserves have for many years been jointly handled by SAGESS and the Comité Professionel des Stocks Stratégiques Pétroliers (CPSSP). However, in an organisational shift, the status of SAGESS has been changed this year to that of a CER. In a statement issued in July, SAGESS noted that its oil reserve obligations (as referenced by the new directive) had risen from 28.5% to 29.5% of 2011’s inland consumption.

In late summer, the Reuters news agency reported that a number of European stockholders were issuing crude and product tenders for delivery towards the end of the year in a bid to boost their reserves ahead of the 31 December deadline. As noted earlier, for those countries with IEA obligations fufilling the new stockholding requirement should only require a minor readjustment of their oil ‘portfolios’ but nevertheless they are having to go to the market to buy crude and products at high prices. A spokesman for APETRA acknowledged to Bunkerspot that its stock levels have still to be increased and it does not expect to meet its obligations until 2013.

There is no doubt that meeting the stipulations of the new directive will come at a cost to all European Member States. In addition to extra fuel tenders, countries are having to finance new storage arrangements and put more stringent reporting procedures in place. For some states, particularly the nine Contracting Parties to the directive (Albania, Bosnia & Herzegovina, Croatia, FYR Macedonia, Moldova, Montenegro, Serbia, Ukraine and Kosovo) the road to compliance

Focus on Oil Reserves


Whilst there are pressures across the refining sector in all the mature oil markets, leading

to significant closures of capacity in Europe, Japan and, more recently, Australia, it seems that the United States has managed to weather the storm much more effectively, to the point that it is now the largest exporter of refined products in the world.

One factor underlying this has been that US demand for refined products has fallen by 10% since 2007 (January-September), totalling a hefty 2.1 million barrels a day (mmb/d). Take into account the rise in ethanol consumption and non-refinery liquefied petroleum gas (LPG), and this becomes a 13.6% decline in demand for refinery output (2.8 mmb/d). Yet refinery throughput is down a mere 360,000 barrels a day (kb/d) (2.4%). This extraordinary dichotomy shows that US refiners are, to a large extent, being shielded from the chronic overcapacity that has plagued their competitors in other developed markets over the last four years. While worldwide there have been 4.5 mmb/d of refinery closures confirmed up until the end of Q1 2013, the United States and Canada have only seen 840 kb/d closed.

The first effect of the slump in domestic demand was a slashing of product imports, from 2.4 mmb/d in 2007 to just 1.3 mmb/d in the last 12 months data. There is limited potential for further reductions, as the remaining imports are mainly structural.

The East Coast typically takes around 1.1 mmb/d and, despite capacity closures there, the product pipeline capacity from the Gulf Coast is already maxed out, and the Jones Act effectively prevents significant domestic seaborne trade (except during emergency situations such as Hurricane Sandy).

On a smaller scale, the West Coast takes around 110 kb/d from Asia and elsewhere, due to its limited infrastructure linkage to the Gulf Coast. Unless the Jones Act is permanently laid to rest, imports are not likely to reduce much further, particularly as the swathe of new investment in rail freight and pipeline capacity is aimed at transporting domestic crude (of which more later).

Gross exports from the United States have averaged 3 mmb/d so far this year, outstripping the 2.7 mmb/d averaged by Russia and other Baltic states, for the first time. The leap in exports (from 1.4 mmb/d in 2007) has been made possible by two key factors unique to the United States.

Output of crude oil in the United States and Canada has surged by 1.6 mmb/d since 2008, largely due to the new shale plays. Crucially for the infrastructure and refining sectors, this increase is not from the traditional offshore rigs in the Gulf of Mexico, but from onshore drilling in the Midwest (primarily North Dakota) and Texas, as well as Western Canada. This is severely overloading the existing pipeline network, preventing most of these supplies from getting to the giant coastal refineries on the US Gulf Coast.

The main bottleneck is at Cushing,

Gemma Parker of Facts Global Energy gives an insight into the evolving

US refining sector

Spotlight on Refining

On trend

Gemma Parker leads Facts Global Energy’s global refinery modelling and product supply forecasting, using the company’s proprietary global refinery model to forecast product imbalances by region and the implications for product trade in the long and short-term. She also edits the company’s West of Suez refining capacity database, as well as analysing short-term developments in product markets and refinery operations.

Contact:Gemma ParkerTel: +44 20 7726 9570Email: [email protected]: www.fgenergy.com

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the oversupplied mid-continent to refineries and coastal areas. Railcar capacity has already doubled to over 400 kb/d in the last year, and similar growth is expected in 2013. Although re-tooling by several inland refineries is worsening the glut of light crude by replacing intake with heavy Canadian volumes, the net balance of pipeline crude is not affected. More pipeline projects are planned for the following two years, and, in the longer term, pipelines to Canada’s West coast are planned, to divert large volumes of crude to the Asian market (not likely before 2018). The bottom line is that the crude advantage has peaked for US refiners and will wane in future.

With Brazil’s initially ambitious refinery construction programme (five world-scale sites by 2020) getting more modest by the year (we now expect only three to materialise in this period, mostly in the latter part of the decade), and limited investment in other countries, we expect Central and South America to remain a significant importer of refined products. However, with domestic demand growth also slowing down under pressure from the less buoyant global economic prospects, we do not see a significant rise in import potential.

Conclusion: With US imports already near their realistic minimum, and the closest export market approaching a peak, any further reduction in US demand is likely to require US refiners to finally throttle back their operations. US refiners are thus likely to become increasingly exposed to the realities of fighting for survival in a declining market faced with increasing competition from abroad. Refinery closures are then expected to re-emerge, especially post-2015, driving down exports and leading to a rebound in imports. This will herald the next structural shift in global product trade flows, altering dynamics yet again.

Oklahoma, which is the pricing point for deliveries made against NYMEX, the future exchange, which in turn has resulted in much of the onshore crude supply becoming dislocated from the international market. Refiners fortunate enough to be linked to these supplies have enjoyed discounts on their feedstock of as much as $30/bbl (25%) compared to domestic and foreign competitors, resulting, unsurprisingly, in utilisation rates in those areas of up to 98%. Some Gulf Coast refiners were able to get inland crude into their plants, enabling higher runs there as well. In total, imported crude (excluding Canada) made up just 42% of US refinery input so far this year, compared to 54% in 2007. With many inland refineries running flat out over the summer, this backed out product from coastal refineries, forcing them to seek markets elsewhere.

Latin America has also thrown them a lifeline in the form of an unexpected and resilient shortfall in products, which US refiners have readily met. This is the result of a combination of robust demand growth, frequent outages (mainly Venezuela and Mexico), delays to new projects (particularly in Brazil and Mexico), and, crucially, the closure of two large (as well as two smaller) Caribbean export refineries. Hovensa (one of the 10 largest refineries in the world in 2010, at 500 kb/d), and Aruba (250 kb/d) were both essentially offshore US refineries but with the handicap of higher costs, and a high yield of unfinished products. US product exports to Central and South America have averaged 1.5 mmb/d so far this year (more than double the 2007 level), with Europe also being the destination for 580 kb/d (also over double the flow five years ago).

Large US Gulf Coast refineries have displayed the capability for huge swings in their yields between gasoline and diesel. This is a result of three key factors: sophisticated equipment; relatively heavy crude (allowing different options in how the heavy fractions are ‘cracked’); and a default set-up that had previously been extremely skewed towards gasoline – meaning there was a lot of scope to swing the other way towards diesel.

Not all US refiners have benefitted in this way with those on the East Coast being largely unable to take advantage of cheap domestic and Canadian crude oils, through the absence of pipeline links, and as a result, having to buy crude oil at international market prices. Products from these plants, however, compete directly with the flood of 1.4 million b/d of products brought by pipeline from the Gulf, as well as 1.1 mmb/d from abroad. It is therefore no surprise that

half the North American refinery closures have been on the East Coast (400 kb/d). The West Coast refineries on the other hand run a mixture of domestic crude and imported Latin American grades, but the domestic crude there is in decline and there is no infrastructure bringing the new inland production. Refining capacity of 360 kb/d has closed in this region since the downturn began.

Although the refinery closures have so far been limited, there is a significant underlying shift in ownership trends. Almost 1 mmb/d has been sold by the large independent refiners to financial investment groups (plus Delta Airlines). Instead, these independents (such as Valero, Tesoro and Marathon) have acquired 1 mmb/d of arguably higher grade refining assets from the majors, with BP alone disposing of 740 kb/d. This upgrading of the asset portfolio of the independent refiners stands them in good stead for the future, although there are still plenty of less competitive assets remaining.

Outlook for US refining and tradeA further 2 million b/d (11%) of demand for refinery output is expected to disappear by 2020 in the United States and Canada, with gasoline seeing the largest reduction due to a combination of high pump prices, enforced efficiency improvements in new vehicles, and a re-tooling by Detroit to make European-sized, all-American vehicles.

We expect the price advantage for landlocked domestic crudes in 2013 to be around half what is has been in 2012, as pipeline reversals, inaugurations and expanding railcar capacity reduce the mid-continent bottleneck. For 2013 alone, around 1.6 mmb/d of additional pipeline capacity is due to become available to take crude from


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2006 2007 2008 2009 2010 2011 2012

Exports

Imports

US trade of refined products (million b/d)

Gasoline (left axis)

Diesel (right axis)


‘Clearly, government cannot change the

commercial conditions affecting refining but it can

address policy aspects that act as a disincentive to

investment’

The UK Petroleum Industry Association (UKPIA), the trade association representing the main

oil refining companies in the UK, has recently launched its latest publication, A Perfect Storm, which highlights the combination of factors – commercial, legislative and structural – that threaten the future of the oil refining industry.

With the closure of two UK refineries between 2009 and 2012 (the most recent being Coryton in June), the loss of further UK refining capability poses a serious risk to energy security of supply and resilience. It could also jeopardise other industrial sectors dependent upon feedstocks from refineries and make the UK highly dependent upon imported middle distillate fuels such as diesel and aviation kerosene. Further refinery closures potentially could give rise to a substantial loss to the economy, on both national and regional levels, in terms of income, employment and skills generated by refineries.

The combination of factors that could impact on the UK oil refining sector are: low margins on the refining of crude oil and weak demand for oil products; the cost impacts of meeting European Union (EU) and UK legislation, thereby creating a less than level playing field in comparison with competing non-EU refineries and supply sources; an increasing misalignment between refinery output and product demand; and demand destruction, partly due to legislative impacts to reduce carbon emissions.

LegislationLegislative changes associated with carbon reduction and air quality, such as the EU

Nick Vandervell is Communications Director with the UKPIA. He has worked in the oil industry – upstream and downstream – for over 20 years.

Contact:Nick VandervellUK Petroleum Industry Association LtdTel: +44 207 269 7604Web: www.ukpia.com


Nick Vandervell of the UKPIA looks at the

factors impacting the viability of the UK’s

refining sector

Under pressure

Crude cost and income from products

Product income

Crude cost

Hydrocarbon margin

Refinery energy cost

Other operating costs – maintenance, salaries etc.

Net margin

less new costs

0.25 p/l

Refinery operating cost

EU ETS Phase III cost

New costs imposed by UK only legislation

Net margin

0.6 p/l

IED Compliance cost

1.65 p/l

Margins shown are indicative, obtained under favourable market conditions

Source: CONCAWE/Wood Mackenzie/UKPIA

Environmental legislation challenges margins that are already slim

Source: Wood Mackenzie/UKPIA

Emissions Trading System Phase III (EU ETS) and the Industrial Emissions Directive (IED), will add to these pressures with the risk that UK and EU refineries are competitively disadvantaged versus overseas refineries that do not have to meet the same standards. In addition, UK-only legislation, such as the CRC Energy Efficiency Scheme (CRC) and reform of Climate Change Levy (CCL) legislation to introduce Carbon Floor Pricing, will add substantially to the industry’s costs.

The UK refining sector works on a very narrow differential between the cost of crude oil and the value of products produced – typically (even in more favourable conditions) equivalent to around 1.65 pence per litre (2.6 cents). After energy and other operating costs, this reduces to 0.6 pence per litre (1 cent)(Source: Wood Mackenzie/UKPIA). The UKPIA calculates that new legislative impacts could add a further 0.35 pence (0.56 cents) per litre of costs, leaving close to zero return on capital employed, which is unsustainable. Furthermore, with capital investment being largely focused upon meeting legislative requirements, this


UK will also be examined – for example, employment benefits and integration with the chemical industry.

The study will seek to inform strategic conclusions concerning the sector, the importance the government should attach to it and consider policy areas, approaches and mechanisms that government can take to ensure consideration is given to the sector. Combined with the EU-level dialogue opened up with the Director General Energy via the EU Refining Roundtable, this study presents an opportunity to review policy.

The UKPIA and its members are committed to working with the government to help develop a policy framework for the industry but urgent action is required before it is too late. The association will be pressing for positive actions to address the policy issues likely to be identified in the study, which is due to be completed by the end of 2012.

leaves little scope for investment to address some of the imbalances in refinery output, even if an investment case could be made in the current uncertain climate.

The proposed changes to the sulphur content of marine fuel under IMO MARPOL Annex VI could also have a significant impact. Meeting the 0.1% sulphur limit in Emission Control Areas (ECAs) in 2015 implies that marine fuel demand in the EU will be predominantly gasoil, unless onboard ship abatement technology is employed. A move to gasoil will further increase the middle distillate deficit of EU refineries.

Clearly, government cannot change the commercial conditions affecting refining but it can address policy aspects that act as a disincentive to investment. Examples include CRC and reform of the Climate Change Levy to introduce Carbon Floor Pricing that, as presently drafted, hits efficient power generation plants at refineries. These changes

could be made with no impact upon the UK government’s main policy objectives on carbon reduction and energy efficiency. The UKPIA is not asking for measures to protect UK oil refining from competition but seeks a level playing field with competitors within the EU and elsewhere.

The association will be lobbying the government and politicians at Westminster, Cardiff, Edinburgh and Brussels to highlight these areas of concern, as well as EU ETS Phase III and the EU Industrial Emissions Directive which will also have a major impact.

The Department of Energy & Climate Change (DECC) is currently conducting a study, with some outside analytical input, to better understand development scenarios for the refining sector and the impact that different policies are having, and are likely to have, on these scenarios. The wider socio-economic benefits of retaining a refining sector in the


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‘Following the collapse of the USSR, little investment

was made in refinery upgrades, resulting in

a product imbalance as Russian demand for lighter

products began to grow’

At the same time as fuel oil supply decreases, global demand for fuel oil is expected to remain flat, according to the International Energy Agency (IEA) – a bullish scenario for what was once considered the unwanted by-product of the refining business.

With Russian fuel oil production set to decline dramatically over the next decade, the biggest question facing the European fuel oil market is whether demand will fall faster or slower than production, and the consequent impact on prices. The answer depends on the shipping industry’s response to increasingly stringent environmental regulation.

The global framework governing shipping emissions comes from the International Maritime Organization (IMO), a specialist United Nations (UN) agency. It adopted the International Convention for the Prevention of Pollution from Ships (MARPOL) in 1973, and Annex VI, Prevention of Air Pollution from Ships, entered into force on 19 May 2005, and was revised in 2008, setting limits on nitrogen oxide and sulphur oxide emissions from ship exhausts. This set a global sulphur cap of 4.5%, lowered to 3.5% from the beginning of 2012, and to be reduced to 0.5% by 2020.

Additionally, Emission Control Areas (ECAs) were set up in the Baltic Sea, and North Sea and English Channel, limiting sulphur emissions to 1.5%. The limit was lowered to 1% from 1 July 2010 (or ships can use exhaust gas cleaning systems to get the same results).

The United States joined in from 1 August 2012, when the North American ECA came into force, also at 1%. The impact on fuel oil prices was dramatic, continuing an upward trend in the low sulphur fuel oil market that was already supported on increased buying from Japan post-Fukushima.

On 11 September, the European Parliament approved the adoption of an amendment of Directive 1999/32 on sulphur content of marine fuels. This aligned

Both supply and demand for residual fuel oil are set to significantly fall over the next

decade, as refineries, especially in Russia, adapt to increased demand for middle distillate and light end products, and increasingly stringent environmental bunker fuel regulation kicks in. The next few years will see drastic changes to the fuel oil market, a product which has powered world trade for nearly a century.

Russia, the world’s largest exporter of residual fuel oil, has seen a 50% increase in demand for gasoline over the last decade. Many of the country’s refineries were built before the 1970s and were geared to cater for the Union of Soviet Socialist Republics’ (USSR) colossal military and industrial complex, thus limiting their ability to produce high quality middle distillate products that Europe is now so hungry for. Following the collapse of the USSR in the early 1990s, little investment was made in refinery upgrades, resulting in a growing product imbalance as Russian demand for lighter products, particularly high octane gasoline, began to grow.

Since 2003, the Russian government has introduced a number of changes to the domestic oil export tax system designed to encourage investment in refinery upgrades. The export tariff on heavy products like vacuum gasoil and fuel oil increased to bring them in line with the tariff on lighter products. The tax on fuel oil exports was boosted to 66% from 46.7% of the crude rate in October 2011, and by 2015 is expected to rise to 100% of the crude export tax.

The biggest Russian oil companies with refining operations, such as Lukoil, Rosneft, TNK-BP and Gazprom Neft made commitments to the government that included specific deadlines for plant upgrades or new unit launches, as well as pledging the volumes and technical characteristics of the fuel that would then be supplied to the domestic market.

Refinery operators now have a strong fiscal incentive to make significant upgrades by 2015, but some projects have been slow to get off the ground and are at risk of not being completed within the government’s envisaged timescale. The current consensus is the vast majority of upgrades will be completed by 2020. This time-frame is startling for the fuel oil industry; Russia’s total fuel oil production of 76 million metric tonnes (mt) in 2011 (and exports of 55 million mt) is expected to fall to just 12 million mt by 2020, leaving exports at just 4 million mt.

Ned Molloy and Marko Trtica of Platts argue that the global fuel oil market

is changing – forever

Fuel Oil Markets

Ned Molloy and Marko Trtica are fuel oil editors with Platts.

Contact: Platts EMEA Dirty Products TeamWeb: www.platts.com

Fuel for thought


Balearic islands, Greek islands, Malta and Cyprus. But projects to connect these islands to mainland power sources, and a natural gas discovery offshore Cyprus, look set to destroy the last outposts of utility fuel oil demand in Europe.

In the medium term until 2015, reduced high sulphur fuel oil (HSFO) demand in Continental Europe and the United Kingdom is likely to be overshadowed by reduction in exports from Russia, creating a bullish outlook for fuel oil traders, and further hardship for shipowners. But from 2015 the 0.1% sulphur ECA cap could start to balance the market, albeit at a lower total consumption level.

Regardless of developments in Europe and the United States, future fuel oil demand, and hence prices, will depend hugely on whether China and other booming Asian economies follow the regulatory path of Europe and the United States.

European Union (EU) legislation with the stricter IMO standards of 0.1% within ECA areas by 2015. All other areas of the EU, such as the Mediterranean, will have to meet a 0.5% cap by the later date of 2020. This matches the IMO’s global sulphur cap by that date, but while the IMO has left open the possibility of delaying implementation of the 0.5% cap by five years, depending on the outcome of a study on low sulphur fuel oil (LSFO) availability to be completed by 2018, the EU has decided to go ahead regardless by 2020.

These measures have led to an increase in demand for low sulphur fuel oil, at the expense of high sulphur fuel oil. The vast majority of Russian fuel oil output is high sulphur, with only the Omsk refinery a significant LSFO producer. So effectively, sulphur regulation has already reduced demand for Russian fuel oil. Beyond that, in 2015 when the ECAs move to 0.1% maximum sulphur, fuel oil

use within the ECAs will largely cease. Low sulphur straight run fuel oils can reach lower than 0.1% sulphur, but marine gasoil is more widely available.

Alternative fuels are also on the horizon; the ports of Rotterdam and Gothenburg are teaming up on developing the infrastructure for supplying liquefied natural gas (LNG) as a marine fuel by 2014. Singapore also targets LNG bunkering operations by 2014.

Faced with soaring outright prices in recent years, shipowners are watching developments in solar and wind energy, biofuels and hydrogen cells with interest, as alternatives to residual fuel.

The use of fuel oil in power generation is also tailing off. Northern Europe has all but abandoned the product due to its higher cost and greater carbon emissions than gas and coal, although some keep small stockpiles for times of peak demand. The main users are now in the Mediterranean, such as the

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‘For the savvy investor that can bear an illiquid investment, the lumpy market of ships may be the perfect opportunity’

‘The market for ships is interesting in that

secondary market sales, or “re-sales”, can often have higher value than newbuild

ships’

cents per barrel. Of course, size cannot be ignored since

larger transactions are often associated with lower expected liquidity and higher costs. For those who have liquidity constraints, it is always preferable to have the option to buy or sell in smaller pieces and on short notice. Depending on the business, remaining ‘liquid’ could be the most important tenet.

Investor mandatesTraders and investors that demand liquidity have many potential reasons to justify the principle. The most common requirement for liquidity is driven by investor mandates. Some funds are required to hold a minimum proportion of assets in highly liquid instruments as directed by their owners or boards. This is often driven by investors’ needs to access immediate cash or fund investment horizons that must eventually wind down or return capital. In some cases, funds do not allow investors to withdraw cash without a minimum notice period, sometimes up to one year. This minimises, or at least limits, the need for liquid instruments and allows the fund managers to invest in more attractive opportunities.

It may be the surprise element of potential cash demand that is feared most. One frequently overlooked factor that supports owning liquid instruments is the risk of ‘margin call’. This is the demand for cash or liquid securities posted as collateral asked by the banks or clearing houses to their clients. Regardless of position, collateral demand can be adjusted due to changes in price volatility – often daily or intraday.

Some of the most dramatic market crashes have been spurred by the demand for margin collateral. In 1998, the now infamous firm Long Term Capital Management (LTCM) fell into this trap. Following the default of Russian government bonds,

As October 2012 marked four years since the financial liquidity crisis of 2008, we are

reminded of how important liquidity is in all markets. When the largest global financial institutions were on a more stable footing, liquidity may have not been so critical to business or even individuals. But times have changed and global investors are willing to settle for zero or negative interest return as long as they retain their liquidity in the form of cash – a phenomenon known as the ‘liquidity trap’ by some economists.

Safe investmentsAs Barack Obama enters his second term as US President, we are witnessing the markets selling equities and commodities to raise cash that promises the potential of low or zero return in safe investments such as highly rated corporate bonds or federal government securities. Such a scenario provides tremendous opportunities in cyclical parts of the economy including global shipping and vessel trade – perhaps one of the least liquid asset classes. It is indeed valuable to have a liquid instrument available to sell and raise cash instantaneously, but does the lower return justify the luxury?

Defining liquidityLet us start by defining liquidity in markets, which is the ability to buy or sell something without causing a significant change in the price of the item. One can quantify liquidity by the difference between the bid, or buyer’s desired price, and the offer, or seller’s desired price. A wider spread between the bid and offer would be considered more ‘illiquid’.

Dramatic spreadThe most dramatic spread difference is often in real estate when the bid and offer may be unusually wide, reflecting the differing value beliefs between the buyer and the seller. Transactions for less liquid assets are often hampered by costly due diligence, imperfect information and burdensome fees that can have material impact on overall investment economics.

On the other end of the liquidity spectrum are financial products like crude oil futures which can trade virtually any time of day or night with a bid-ask spread of a few

Chris Thorpe looks at the effect of liquidity on the

shipping market

Commercial Issues

Liquidity trap

Chris Thorpe is Executive Director, Global Energy Derivatives, with INTL FCStone Inc.

Contact: Chris Thorpe INTL FCStone Inc. Tel: +1 212 774 5963 Web: www.intlfcstone.com


LTCM’s large arbitrage bond positions suffered losses that triggered margin capital calls by their counterparties. Although the trades would have likely netted gains if they were held to maturity, the immediate cash required to fund the margin call induced the LTCM to unwind its positions and perpetuate its losses.

Dubious pretencesMore recently, New York-based broker and exchange clearing firm MF Global suffered a similar fate under more dubious pretences. MF Global CEO and former New Jersey Governor John Corzine allegedly used client funds to capitalise margin requirements needed to take bets on European sovereign debt. Instead of tapping the equity or bond market for fresh capital, Corzine and his team chose to use the cash in client accounts that would have normally been held for position against the exchange. In this case, he had hoped to return client funds before auditors had spotted the unusual accounting entries. When regulators checked for the availability of required capital, they were unable to account for some funds and the scheme was unearthed. Having flagged wrongdoing, the investors liquidated the stock and MF Global filed for bankruptcy soon after.

Clearly, liquidity has its value. However, the potential to make money in illiquid investments could be far more attractive than conventional purchase of stocks and bonds. Real estate is a very good example of illiquid properties. These investments can take several months to change hands and often their value can change through the process of a sale. Yet another case of illiquidity and profit potential is in the markets for ships, which have long lead times and high capital requirements to build.

Secondary market salesThe market for ships is interesting in that secondary market sales, or ‘re-sales’, can often have higher value than newbuild ships. This is rationalised when high spot charter rates produce the ability to finance purchases at higher values versus a commitment to build a vessel to be delivered three years hence.

Of course, arguments exist that would put a premium on a new build vessel with the latest environmental upgrades, efficient engines and other technology. HSBC Shipping Services pointed out in its 19 October 2012 Weekly Commentary that ‘despite the fact that… ships may contain five-year old technology, at the right price some can be put to work at breakeven or better even in today’s poor market’.

If previously owned vessels are so sharply discounted to new options that there is no incentive to build a new ship, then why wait? Prices and liquidity may be the issue since the trading of ships is ‘lumpy’ – meaning it can be irregular with respect to age, size and specifications. Since vessels trade in large capital size, less liquidity is normal despite a well supplied market. For the savvy investor that can bear an illiquid investment, the lumpy market of ships may be the perfect opportunity.

The same can be said for buying and selling entire shipping companies in the public markets in the form of shares. In this case, the most astute buyer may be the financial statement analyst rather than the ship building expert.

For many shipping companies and banks that lend to them, the book value of shipping assets is currently above market value. The argument goes something like this: if ship values were written down to their liquid sale value (or the bid that could reasonably be fetched in today’s market) by a few large bank clients, other banks may be forced to follow suit by the credit rating agencies.

Waterfall effectThis waterfall effect could have drastic consequences for some banks that fear additional capital requirements against the value of their loan portfolios. Though no one seems to reject the market conditions and the impact on the price of ships on offer for sale, few have taken to write down the value of their assets using a mark-to-market method. This accounting abnormality can only be supported in illiquid markets that are not traded daily or listed in regularly traded and visible venues. Banks may be thankful.

Investing in markets at the bottom of their business cycles can yield attractive returns. As markets become less liquid, great profits may be possible for those who can balance risk and the probability of high return. In this case it may not be the market for oil or Apple stock, but more likely the lumpy offering of tankers and freighters, both new and old. Clearly western government monetary policy is influencing liquidity in markets resulting in historically low interest rates. In the current economic environment, financial buyers (investment funds) who have lower liquidity constraints may be replacing traditional strategic owners. Those that can tolerate the risk of illiquidity will reap the benefits. Yet, if another financial crisis occurs, neophyte vessel owners could face a lack of market liquidity and find themselves adrift in uncharted waters.

‘Investing in markets at the bottom of their business

cycles can yield attractive returns. As markets

become less liquid, great profits may be possible for those who can balance risk and the probability of high

return’

Commercial Issues


‘The problem is that neither the International Maritime Organization nor the European Union has undertaken any account of the wider

consequences of their decision’

‘The modal shift from ship to road which will undoubtedly happen in Europe is not likely to happen in the United

States as the infrastructure is not there to support it’

the level of modal backshift could reach 50% of the total cargo currently carried by short sea shipping, and another indicated that approximately 1 million containers and 600,000 trailers would be added to German roads alone.

So, while the plan to mandate the use of low sulphur fuel will reduce sulphur dioxide (SOx) emissions in these regions, it may potentially increase carbon dioxide (CO2) emissions and particulate matter (PM), overall fuel consumption, place significantly more strain on the available road network, raise the number of road accidents and otherwise adversely affect the quality of life of millions of European citizens living along the main transport routes. Yes, SOx causes serious health problems, but have the unintended consequences of pushing this laudable goal of improving the European environment really been fully considered?

Unfortunately, at this stage, arguing that the EU and IMO haven’t really thought this legislation through properly isn’t going to change anything. The shipping industry will face the reality of low sulphur fuel by 2015 in restricted areas and a limit of 0.5% across all EU waters in 2020.

I’m an American shipbroker and we are already seeing the impact of the North American ECA which came into effect on 1 August this year. The area covered by the North American ECA includes almost all the continental coastal waters of the United States and Canada. Initially, it has been necessary for the US Coast Guard to make exceptions, simply because the fuel is not always available. The difference in the cost of high/low sulphur fuel is quite large and additional bunker surcharges have been levied by liner shipper companies. Vessels employed in international

With European Union (EU) environment ministers now having backed legislation to

bring a limit of 0.1% sulphur to bunkers in designated Emission Control Areas (ECAs) (which include some of Europe’s busiest waters), the move – which has been fought tooth and nail by shipping organisations – will definitely happen. The question is what will the practical implications of this decision be? Will vessels trading in the Baltic, English Channel and North Sea introduce scrubbers to the fleet; will there be enough refining capacity to meet the demand for ultra low sulphur fuels or will a liquefied natural gas (LNG) powered fleet emerge? The simple answer is that no-one really knows.

The Federation of National Associations of Ship Brokers and Agents (FONASBA), through our European committee, the European Community Association of Ship Brokers and Agents (ECASBA), has previously warned legislators that the impact of these measures would be to reduce efficient European short sea shipping and greatly increase road traffic across Europe. Together with bodies such as the International Chamber of Shipping (ICS) and the European Community Shipowners Association (ECSA), we explained that the overall effect of this initiative would actually be detrimental, as road traffic volumes balloon in the face of rising sea transport costs. Will a Spanish orange grower with a Danish customer who normally moves his produce by sea now pay for the inevitable increase in freight caused by the shipowner’s need to cover increased operating costs? It is more likely he will simply put his oranges on a truck for half the price and send them 2,000 miles by road.

The problem is that neither the International Maritime Organization (IMO) nor the EU has undertaken any account of the wider consequences of their decision. No official impact assessment has been made by the legislators, but a number of independent assessments made by member states and at least two European universities have clearly shown that the cost burden of using ultra low sulphur fuel will force cargo movements back from short sea shipping to road transport. One study indicated that

Regulatory Issues

FONASBA President Marygrace Collins

discusses the impact of European sulphur

reduction limits on the shipping sector

Impact statement

Contact:FONASBATel: +44 2076 233 113Email: [email protected]: www.fonasba.com


trade in the Caribbean are choosing to totally replace high sulphur fuel with the more expensive grade rather than deal with the headache of maintaining separate grades, or lose time with multiple bunkering calls. The modal shift from ship to road which will undoubtedly happen in Europe is not likely to happen in the United States as the infrastructure is not there to support it. The option of going via Mexico may be short-lived, as regulation is being considered there as well. Currently exempt, the regulations will take effect in the US Caribbean in January 2014. Europe, however, is a very different matter.

What will have to happen in Europe is a mitigation of the consequences of the tough legislation. We have already seen a compromise agreement reached under the Danish Presidency which reflects to a large extent MARPOL Annex VI. Under the trilogue agreement, Member States may provide shipowners with financial aid for innovation

‘Unfortunately, at this stage, arguing that the

EU and IMO haven’t really thought this legislation through properly isn’t

going to change anything’

and retrofitting; there will be a Europe Commission (EC) report on reducing air pollution across the EU in 2013 and crucially the article gives the possibility for including changes and exemptions agreed in the IMO to the application of the sulphur emission control area (SECA) limits in MARPOL Annex VI. We know that whether the answer is in the fitting of scrubbers, making compliant fuel available or developing an LNG fuel distribution system, these solutions will take many years to achieve and are seriously large long term investments.

FONASBA, which represents the world’s ship brokers and agents, is a practical organisation whose members are at the sharp end of the shipping industry. We will continue to support the shipping industry’s efforts to reach a practical compromise with the EU and IMO. Through ECASBA we will ensure that the concerns of our principals are heard loud and clear at the highest levels. The solution to this problem lies in compromise.

Regulatory Issues

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‘It is easy to see why LNG is being heralded as the

super fuel of the shipping industry’s future’

and becomes a necessity and not just ‘nice to have’, solutions to these supply issues are likely to abound.

Those keen to use LNG as a fuel are waiting for the supply infrastructure to improve and those tackling LNG bunkering provision are citing a lack of demand as limiting progress – a classic chicken and egg scenario. Post-2015, when the industry starts to face the increased costs that distillates will undoubtedly bring, it is expected that both demand and supply will accelerate, as illustrated by new LNG bunkering stations being championed across northern Europe by Aarhus, Helsingborg, Helsinki, Malmö-Copenhagen, Tallinn, Turku, Stockholm and Riga, amoung others.

Despite all the promise of LNG as a fuel its use to date has been largely focused on medium speed engines, with Wärtsilä the leading provider of dual-fuel, four-stroke engines since 2005, selling more than 2,000 – which collectively have exceeded seven million operational running hours in both land-based and marine applications. Wärtsilä now aims to extend these benefits across the industry by applying its extensive experience in dual-fuel power to two-stroke engines.

Installed in March 2011 at the Trieste engine laboratory in Italy, a new low pressure two-stroke dual-fuel test engine, the RTX-5, has successfully demonstrated that low-speed engine performance can fully comply with the Tier III NOx limits when operating on gas. This low pressure gas engine technology will be available for commercial use in 2014, being incorporated into the full portfolio of engine types during 2015/2016.

The ‘fit for ship’ ethos is at the core of the development and design of these engines. As such, the RTX-5 system is designed to be user-friendly, without requiring ships’ engineers to have any special additional skills, and to be a safe, simple-to-install solution delivering low costs from order to operation. Indeed, while running on gas, Wärtsilä’s dual-fuel low pressure engines require no additional equipment, such as exhaust gas after treatment, to meet the Tier III NOx regulations.

It is for these reasons that gas and dual-fuel engines are becoming the propulsion

Engine for changeThe operating cost of a vessel is as

high as it has ever been. It grew by 2.1% over the last year, according

to Moore Stephens, and is projected to continue rising. Currently, bunker fuel represents up to 70% of those costs. And with United States and European Emission Control Areas (ECAs) of 0.1% sulphur coming into force in 2015, vessels choosing to operate on distillate fuels within those areas could see costs skyrocket; with a current 45% premium for distillates compared to conventional high sulphur fuel oil (HSFO).

With this in mind, owners and operators are taking decisions now on how they will meet these financial and compliance challenges, weighing up the benefits of the only two viable alternatives to costly distillates: exhaust gas cleaning systems (EGCSs) or liquefied natural gas (LNG) power. Moreover, from 2020 or 2025, all vessels will be required to burn 0.5% sulphur fuel, according to International Maritime Organization (IMO) plans.

Great potentialNatural gas is an alternative fuel offering the shipping market great potential. Not only does it offer compliance with upcoming ECA regulation through its inherent sulphur oxide (SOx) emission reduction of 99%, it also emits 85% less nitrogen oxide (NOx) than HSFO, ensuring that the IMO Tier III NOx regulation would be met from 2016. LNG could also provide ongoing compliance for a range of potential future legislation, as – compared to HSFO – it emits 99% less harmful particulates and provides a 20% reduction in greenhouse gases (GHGs). With all this on its CV, it is easy to see why LNG is being heralded as the super fuel of the shipping industry’s future.

Wärtsilä began development work with dual-fuel gas engines in 1987, the first concept being the gas-diesel (GD) engine with high-pressure gas injection. This was followed by the second generation of gas engines in the early 1990s, when the company introduced spark-ignited (SG) pure gas engines utilising low pressure gas. The real breakthrough, however, came when the dual-fuel (DF) engine was introduced by Wärtsilä in 1995. This third generation of gas engine development resulted in the ability to combine fuel flexibility and efficiency with environmental performance.

As a solution in its relative infancy, the infrastructure for LNG bunkering is still very much under development. However, as LNG begins to fulfil its longer term potential

Martin Wernli of Wärtsilä discusses how new two-stroke, dual-fuel engines will open up the prospect

of LNG to the whole shipping industry

LNG Bunkering

Martin Wernli is Vice President Ship Power Two-stroke at Wärtsilä.

Contact:Martin WernliWärtsiläWeb: www.wartsila.com


‘This third generation of gas engine development

resulted in the ability to combine fuel

flexibility and efficiency with environmental

performance’

the global fleet – especially, in the near term, for those that spend some operational time in ECAs. Successfully navigating the challenges presented by regulatory changes in 2015 relies upon taking informed decisions; selecting the most effective approach when considering compliance, operational flexibility, availability and cost. When faced with climbing operational costs, what shipowners and operators really need now is the commercial imperative of choice and the assurance that – whichever solution best fits their individual needs – they will be expertly supported throughout the full lifecycle of that decision.

of choice throughout all segments of the shipping industry, particularly chemical tankers and LNG carriers, as well as vessels such as tugs, ferries and cruise liners, which are frequently operating in ECAs. Also, offshore oil and gas industry vessels such as floating production storage & offloading (FPSO) ships and platform supply vessels (PSVs), which have a need for flexibility, fuel efficiency, and compliance with stricter environmental legislation, are increasingly being fitted with dual-fuel engines.

With the impending availability of the new low pressure two-stroke, dual-fuel engines, this solution becomes a very real option for

LNG Bunkering


‘The people who attempt this malpractice are those

who are looking for a large gain in the short term. Those who are in this business to make a reasonable profit in the

long term should support the effort of the Dutch

police’

‘The problem is not as intractable or formidable as it may seem. It is a question of isolating the less than 5% who, out of greed, play

with the lives and properties at sea’

airline flights take place. Would we accept that about 2,500 flights will experience major machinery problems with possibility of loss of life and property? We do say that even one accident is one too many. Will this logic also apply for ships?

It is mostly true that the people who write the regulations and control the bunker industry have themselves never travelled on ships and never experienced the lives of the mariners. If they did, there would be more sympathy and understanding with the plight of a stranded ship in rough seas and heavy traffic. Since almost every one of them has flown on planes, they understand the hazards which are palpable for them. This may explain why there is greater enforcement of safety regulations on aircraft, while similar standards are not there, or not enforced, for the merchant fleet.

The problem is not as intractable or formidable as it may seem. It is a question of isolating the less than 5% who, out of greed, play with the lives and properties at sea. It becomes incumbent on the silent majority, perhaps through regulators such as the Dutch police, to educate the small minority on what is right and what is not.

To argue that styrene, dicyclopentadiene (DCPD) and indene (byproducts from ethylene manufacturing plants) are not chemical waste is incorrect. If the addition of the waste did not result in any problem, there may be some small substance to this argument. Machinery damages and problems occur, labs are asked to identify the causes; this leads to identification and quantification

Claims of ‘criminals dumping chemical waste in bunker fuel’ have made sensational news in

the Dutch press. Even more sensational was the report that an elite Dutch detective squad belonging to Dutch national police was launching a criminal investigation after the tests indicated that this was a well organised criminal activity.

The entire bunker industry in the Amsterdam – Rotterdam – Antwerp (ARA) area is affected by this action of the Dutch police. Is this fair? After all, over 95% of bunker fuels do not carry chemical waste. Most of the suppliers do not resort to any adulteration. Every right thinking bunker industry player should welcome the initiative of the Dutch harbour police, who are treating the addition of chemical waste to bunker fuel as a criminal activity. Why should the offenders be defended? Is it correct to say that all the players on the bunker industry supply side are united in opposing the Dutch police while only less than 5% are guilty of this unethical practice?

It is important to isolate those who are indulging in wrong practices that have resulted in a very high number of very serious fuel-related machinery problems. These are not merely problems of damage to a vessel’s machinery, but the more horrendous outcome where ships drift in busy traffic channels with every prospect of collision. Apart from the serious consequences of collision, what if the ship sinks or runs aground in a narrow end of a busy traffic passage, bringing the whole movement of ships to a halt? The economic and environmental consequences can be mind boggling.

Let us look at some statistics. Gard, the Norwegian P&I club, noted that 31% of total claims are machinery related and of this, 80% of the machinery problems are related to the fuels and lubes in use.

Out of 90,000 ships plying the waters all over the world, the number of claims on machinery (extrapolated from Swedish P&I figures) comes to 5,400 incidents a year. Of these, 55% are main engine and auxiliary engine related. This comes to 2,970 incidents. And of these 2,970 incidents, 80% are fuel and lube related. This comes to 2,376 incidents. Can we apply this logic to aircraft flying? On any given day, 90,000 to 100,000

Fuel Quality

Dr Vis argues that the bunker industry should

support the efforts of the Dutch police to prevent

chemical waste entering the bunker supply chain

Waste away!

Dr Vis founded Viswa Lab in 1991. The company is now an established provider of materials testing and bunker fuels analysis.

Contact:Viswa LabTel: +1 713 842 1985Fax: +1 713 842 1981Email: [email protected]: www.viswalab.com


minority whom the Dutch police term as criminals. It should be in the interest of all the players in the bunker industry that such practices are eliminated and the bunker fuel does not become the repository of chemical waste.

The people who attempt this malpractice are those who are looking for a large gain in the short term. Those who are in this business to make a reasonable profit in the long term should support the effort of the Dutch police. If the police come to catch your neighbour who is a thief, you should not come to defend your neighbour and fight with the police. The police are only protecting your long term safety and long term interests.

Viswa Lab would be happy to share its information on problem fuels, so that the interests of the over 95% of the fuel suppliers who are clean and do honest business are protected.

driven suppliers. A question that is sometimes asked is:

‘Why not allow a small quantity of chemical waste to be added to the bunker fuel?’ This sounds simple and harmless, but who is to contain human greed? Once the gate is opened, how much of the chemical waste rushes through it can never be controlled. The police go after those who carry heavy drugs like cocaine. Even if the person is carrying only 1 gramme of the drug, the punishment is severe.

Our aim, and the aim of the International Maritime Organization (IMO), is to protect the men and property of the marine industry. We want to ensure that not even one incident takes place. Regulations and enforcement should be such as to ensure this outcome. When less than 5% are resorting to this wrong practice, the remaining bunker industry stakeholders should not get upset and defend this small

Fuel Quality

of the adulterant through techniques such as gas chromatography–mass spectrometry (GC-MS) and Fourier transform infrared (FT-IR) spectroscopy. In every case where the adulteration has taken place, there have been problems such as complete choking of filters/purifiers, seizure of fuel pumps (bringing the engine to a sudden halt), very high wear of rubbing parts (leading to breakage of piston rings), very high wear of fuel pumps (which fail to build up pressure in the fuel line). In all these cases, the problems/damage experienced by the ships led to investigations which established the presence of chemical waste in the fuel.

There is an argument that chemical waste has always been added, and that this has been the standard operating procedure of the bunker supply industry. As a testing lab, we beg to disagree. We do not find chemical waste in most of the fuels supplied. This is a tribute to the right minded and ethically

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‘Laboratory analysis results can only ever be as good as the representivity

of the sample analysed’

must be met: ● homogeneity (mixing) of pipeline

contents ● representative sampling of the batch ● correct sample handling and mixing ● correct laboratory analysis.

Both the sampling standards include a calculation to assess if there is sufficient mixing of the pipeline contents to allow a sample to be taken. This can be used to validate the suitability of a selected sampling location across the process operating range of a barge or pipeline.

Ideally, the sampling location should be close to the point of delivery. However, this should not be an overriding factor if a sampling location limits the representivity by restricting the type of sampler that can be used. Similarly, the sampler location should not affect the ability to effectively operate and maintain the equipment or create potential environmental risk. For example, in the case of crude oil marine transfers, sampling at the delivery manifold or from the onshore pipeline has largely superseded sampling at a ship’s receiving manifold. This is, in part, due to the practical challenges presented by installing and operating a suitable sampler at a ship’s receiving manifold and the environmental risk of a spill. However, a major reason that samplers are not installed in this location is that it is extremely difficult to confirm the homogeneity and hence representivity of the sample extracted.

This might seem at odds with the current IMO Annex VI guidance note MEPC 182(59) which suggests: ‘A sample of the fuel

The objective of bunker sampling is to enable a fuel’s properties to be determined to an acceptable

uncertainty. This is beneficial to all parties involved as it ensures a fair transaction as well as provides validation of quality for technical and regulatory purposes including the International Convention for the Prevention of Pollution from Ships (MARPOL) Annex VI. With a high-cost product such as blended bunker fuel, it also assures all parties of the properties of the product supplied at the time of sale and in the event of a later dispute.

To accurately determine the properties of bunker fuel, the sample analysed must be representative of the entire batch delivered. This is recognised, for example, in MARPOL regulation 18.8.1 of Annex VI, which states: ‘The bunker delivery note shall be accompanied by a representative sample of the fuel oil delivered, taking into account guidelines developed by the Organization…’

‘Representative’ is a key word in this clause. This ensures the validity of any subsequent analysis. Laboratory analysis results can only ever be as good as the representivity of the sample analysed. It should be remembered that sampling for quality analysis is a very different process from quantity measurement (such as metering). When determining quantity all of a batch is measured, but with sampling only a small proportion is drawn and an even smaller proportion is analysed

in the laboratory. This tiny quantity is then used to validate the properties of the entire delivery, which highlights the importance of the extracted sample being representative of the whole batch, every step of the way.

The sampling of liquid hydrocarbons in pipelines, such as during bunker fuel delivery, is generally covered by the International Organization for Standardization’s ISO 3171 and the American Petroleum Institute’s API 8.2 standards. To ensure representative sampling the following steps

Fuel Sampling

Jon Moreau of Cameron Measurement Systems asks just how

representative most bunker samples are

The true measure?

Jon Moreau is Director, Business Development with Cameron Measurement Systems.

Contact:Jon MoreauCameron Measurement SystemsTel: +44 1892 518 000Email: [email protected]: www.c-a-m.com


‘In the case of crude oil marine transfers, sampling at the delivery manifold or from the onshore pipeline

has largely superseded sampling at a ship’s receiving manifold’

to ensure that laboratory procedures are in accordance with the correct standards and that sample integrity is maintained up to the point of analysis. Fortunately, this is generally well controlled and the market is serviced by a number of companies, all with a good reputation for this service.

In conclusion, both automatic and manual samplers can legitimately be used to extract samples for commercial and MARPOL validation although, as the cost of fuel increases and its precise content becomes ever more important for commercial, technical and regulatory reasons, the author predicts that the market will recognise the need for more accurate, representative sampling practices.

When you read your next laboratory report ask yourself: ‘Although I am confident that the analysis of the sample is correct, how confident am I that the sample was truly representative?’

In addition, samples extracted using a drip sampler are normally collected in a single sample receiver. After batch sampling is completed, this single sample has to be sub-divided into the necessary buyer, seller, retention and MARPOL samples. Great care is needed to ensure that the primary sample is divided accurately. The volume of each must be correct and each of the sub-samples must remain representative. Unless this is carried out in a controlled laboratory environment,

the repeatability and consistency of these sub-samples may be called into question.

Whilst manual samplers are still widely used, it is self-evident, for the above reasons, that a well-designed automatic sampler can more easily and simultaneously extract a number of independent and fully representative batch samples.

The final step in the sampling process is

delivered to the ship should be obtained at the receiving ship’s inlet bunker manifold...’

This guidance appears to present a challenge, not only in terms of possible representivity, but also as it is normally the supplier’s responsibility to provide the samples of the delivered bunkers (including the MARPOL sample). In practice, the likelihood of the sample being drawn at the receiving ship’s manifold (where the supplier may have limited access during the bunkering operation) is low. From my discussions with bunker suppliers, it appears that there are many instances where the supplier’s samples, including the MARPOL sample, are drawn from the barge manifold or even from the barge’s tanks or shore tanks/manifolds.

Interestingly, the practical difficulties inherent in sampling at the receiving ship’s manifold have been recognised in ISO 13739:2010 and in a UK Maritime and Coastguard Agency (MCA) Merchant Shipping Notice, MSN 1819 (outlining the UK implementation of Annex VI). These both allow for the sample to be obtained at either the delivery or receiving manifold.

Precision technology Clearly, the use of precision technology to ensure a representative sample is extracted at the barge manifold is preferable to a less reliable representative sample extracted at the ship’s manifold, the actual product flowing through the delivery hose being the same at either end.

The next step in the sampling standards is to consider representative sampling of the batch and sample handling. Here, the design and method of the sampling equipment can have a significant effect on the result.

MARPOL Annex VI allows both automatic and manual (drip) samplers. It has been widely recognised that the ‘sampling rate’ of a drip sampler is influenced by process variables such as line pressure, flow rate and viscosity. It is also known that both viscosity and process pressure can fluctuate dramatically during a transfer.

Fuel Sampling


‘Over-lubrication of cylinder lubricating oil in

slow speed two-stroke marine diesel engines

can cost shipowners and managers over $100,000

per year per ship’

to determine its sensitivity to particular parameters, optimise lube oil feed rate, and improve the maintenance management and extension of overhaul periods.

Used by nearly 500 ships worldwide, the service from Flame Marine is perhaps the best-known independent provider of detailed diagnostics. The company estimates that over-lubrication of cylinder lubricating oil in slow speed two-stroke marine diesel engines can cost shipowners and managers over $100,000 per year per ship. To address this, Flame Marine’s service reduces feed rates by monitoring the performance characteristics of the engine and the chemical composition of the cylinder drain oil, analysing this information to provide a comprehensive report covering the combustion process, cylinder oil feed rates, fuel bunkered as well as identification of potential issues such as piston and liner wear, incomplete combustion, piston misalignment, reliability of the assessments as well as the fuel system and crankcase system oil.

The main challenges of adopting this approach in isolation are two-fold. Firstly,

Marine Lubes

Steve Dye from Parker Kittiwake considers how

lube oil feed rates can be optimised without

compromising the ship’s engine

Artful science

Steve Dye is the business development manager of Parker Kittiwake.

Contact:Steve DyeParker KittiwakeTel: +44 1903 731 470Fax: +44 1903 731 480Web: www.kittiwake.com

Representing up to 70% of a vessel’s operating costs, fuel costs present one of the shipping

industry’s greatest challenges. However, while the charterer pays for

the fuel oil, the shipowner/operator is responsible for the lube oil, which is critical to reliable, consistent operations and requires significant investment. Indeed, as one of the engine’s largest overheads, lubricants consume between 50% and 60% of the technical budget.

In an era where everyone is firmly focused on realising efficiencies, minimising both fuel and lube oil consumption is high on the agenda. Even a 0.1 gramme per kilowatt hour (g/kWh) reduction in the cylinder oil dosage represents a significant yearly saving for the owner. However, although optimising cylinder lubricant usage can provide significant commercial – and environmental – advantage, there is a point where savings can be eroded by increased maintenance costs. So successful feed rate optimisation relies upon identifying exactly how much cylinder lube oil injection can be acceptably reduced to achieve the optimum operating conditions.

Laboratory analysisLaboratory testing of the scrapedown oils has been the primary method used to inform the adjustment of lubrication levels. Each of the oil majors provides a drain oil analysis programme. ExxonMobil, for example, has its Signum Oil Analysis and Total Lubmarine has DIAGOMAR CARE, which is designed to provide savings to the customer by monitoring the engine in order


cylinder liner damage and are able to react quickly to

changes.Not only can

LinerSCAN be used to optimise lubricant feed rate, it also minimises liner wear, improves maintenance

scheduling, decreases sampling and testing costs, and detects ingress of catalyst

fines. With fuel testing agencies continuing to correlate declining sulphur levels, increasing levels of catalyst fines and subsequent engine damage, online testing to safeguard vessels from costly engine damage has never been more important.

By monitoring the scrapedown oil for ferrous wear, LinerSCAN can continuously and automatically provide complete sets of trend data showing levels of wear in all critical equipment and machinery, enabling immediate action. This allows the application of corrective measures to avoid the damage of the liner, including checking the fuel cleaning system, preventative maintenance during the ship’s passage to the next port, or even a route change if necessary, and ultimately

useful results depend entirely upon testing a representative sample. In today’s shipping industry, skilled, reliable and experienced engineers who understand how and where to draw a sample are no longer the norm. The second disadvantage of intermittently monitoring wear levels is that although comprehensive and detailed information is collected, it comes with an inherent delay, which means a critical and costly repair opportunity could be inadvertently missed.

Electronic controlElectronically-controlled lubricating systems provide the next step in meeting demands for lower cylinder oil feed rates. The MAN Alpha Lubricator, Wärtsilä’s Pulse Lubricating System (PLS) and the Hans Jensen SIP system all aim to inject the cylinder oil into the cylinder at the exact position and time where the effect is optimal. These systems have achieved significant savings, for example the guide feed rate for Wärtsilä RTA and RT-flex engines equipped with the PLS as original equipment is 0.7-0.8 g/kWh of cylinder lubricating oil when previously the average would have been 1-1.2 g/kWh.

Employing an electronic lubrication system enables significant reductions in cylinder oil consumption, but it is an open loop system and therefore does not provide feedback on the impact of this reduction. As it is not an exact science, sensibly, a safety buffer is often applied. This is because without a reliable feedback system to accurately monitor the effect on the engine, changing feed rates solely based on original equipment manufacturers’ (OEMs) recommendations could increase the associated wear caused by lack of lubrication and seriously harm the engine. Further savings could likely be secured depending on load, temperature and humidity for example, but to penetrate the lubrication safety buffer, safely achieve the true optimum feed rate and realise maximum savings, offline or online tools are available to closely monitor lubrication conditions.

Offline toolsAn example of an offline tool that enables the optimisation of lubricant feed rate is the Shell ANALEXAlert; a portable device that helps monitor cylinder liner wear by providing onboard measurement and recording of metallic iron content in the scrape down oil (along with the additional capability to measure grease from gearboxes, bearings and other ancillary plant). Used on a daily basis, a standard sample bottle containing the oil for analysis is placed on the unit and, using a simple touch screen menu, engineers can

Marine Lubes

obtain a reading within seconds. The ExxonMobil Scrapedown Analyser is

operated in a very similar way. The device stores up to 90 sets of results for samples taken from the main engine, together with details of cylinder hours run, sample number, maximum cylinder pressure, exhaust temperature and lubrication feed rate. Up to 500 sets of results for auxiliary equipment can also be stored, t o g e t h e r with details of cylinder hours run and sample number. Results can be viewed either as a graph or in a table format on the unit’s display screen, with the warning limit clearly shown. The unit can be connected to a PC and the readings imported into a spreadsheet for further examination and graphing.

Reducing lubrication impacts the quantity of additives designed to neutralise the sulphur products in the fuel oil. Although wear rate is monitored with the measurement of magnetic iron particles, these devices do not monitor corrosive iron oxide particles. So to manage this, Total Base Number (TBN) should be measured after switching to a new fuel, ensuring sufficient additive content.

Online toolsDependent upon trade, load, running hours and other factors, constant real-time monitoring is the ultimate tool for safely optimising cylinder lube oil feed rate and, as a result, improving efficiency, decreasing lubricant costs and avoiding issues related with over and under lubrication.

Kittiwake’s LinerSCAN is being used by companies such as A.P. Möller-Maersk Group, Hapag Lloyd, Ernst Russ and Reederei F. Laeisz to inform feed rate reduction and achieve maximum penetration of the lubrication safety buffer.

Using magnetometry to quantify the iron in used cylinder oil, the LinerSCAN sensors are fitted to each cylinder of the vessel engine and report changes caused by abrasive wear, highlighting periods of increased physical or thermal stress. This provides a better understanding of the factors influencing cylinder liner wear, to monitor change trends and see wear developing. Importantly, by monitoring wear particles in real time, engineers are alerted to escalating


‘Employing an electronic lubrication system enables

significant reductions in cylinder oil consumption,

but it is an open loop system and therefore

does not provide feedback on the impact of this

reduction’

Therefore, if you want to get as close to the optimum feed rate as possible without harming the engine, combining traditional methods with a reliable, real time feedback system is the safest way to make the transition from art to science.

Marine Lubes

insures against costly ship downtime.The LinerSCAN system is particularly

useful for reducing the risk of high wear in unfamiliar environments or situations. An example of this would be areas of high humidity where water enters the combustion chamber with the air from the turbo charger, disturbs the oil film and leads to wear and scuffing, endangering the liner.

Achieving the optimal feed rate solution may rely upon the adoption of a combination of traditional and state-of-the-art tools and techniques. It is certainly possible to simply adjust lubrication according to the OEM’s instructions, but this is risky. You may only experience the effects later on when you notice the loss of more liners, and as the average insurance claim for unexpected liner loss is over $250,000, this can be an expensive realisation.

Effective feed rate optimisation is a dynamic, ongoing exercise – it is not based on a single test at a fixed point in time.

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region. The mismanagement of the federal amnesty programme and alleged abuses by the JTF have fuelled ex-militant discontent. Since May 2012, three groups of ex-militants have warned of renewed violence if various demands are not met, including the payment of stipends and entry into the amnesty programme.

Government plans to intensify security operations on and offshore the Niger Delta are likely to mitigate the risk of a full-scale resumption of militant activity. The $5.67 billion spending for security proposed in the 2012 budget is likely to fund efforts to limit illegal bunkering and ensure the government’s target oil production rate of 2.48 million b/d. This target also indicates there are likely to be negotiations with political ‘godfathers’ who support militant activity.

Other measuresAlongside security crackdowns against illegal bunkering and pipeline vandalisation in the Niger Delta, President Jonathan has ordered Parliament to probe the recent increase in smuggling activity. The Department of Petroleum Resources (DPR) had already warned that it would impose sanctions against oil marketers involved in oil smuggling. The oil smuggling industry, which has cost the economy $15.8 billion according to government accounts, diverts up to 100,000 b/d, or 5% of Nigeria’s daily production.

Attack hotspotsThe incidence of piracy attacks off Lome, Cotonou and Lagos is likely to increase, but it is likely that when oil tankers are seized, they will not be held for long.

On 4 September 2012, five armed pirates in four powerboats took over Abu Dhabi Star, a Singapore-owned oil tanker off Lagos, Nigeria. The Nigerian Navy freed the vessel and its 23 crew the following day. This was the third such hijack in the space of a month in the Gulf of Guinea after a lull in piracy that has primarily targeted tankers off the regional ports of Lome (Togo), Cotonou (Benin) and Lagos. On 28 August, the Energy Centurion, carrying $54 million worth of gasoil, was hijacked 8 nautical miles (nm) from Lome and two crewmen were shot and wounded when naval forces pursued the hijacked vessel.

While ships at anchor are vulnerable to petty theft across the region, the risk of hijack in the Gulf of Guinea is principally driven by onshore oil smuggling activity in Nigeria. Ships at most risk of hijack are tankers; this includes chemical tankers, which are often mistaken by pirates as oil tankers. Given the

In the Niger Delta region, ‘illegal bunkering’ (the local term for oil theft and the lightering of stolen

products) currently accounts for an estimated 150,000 barrels a day (b/d) of oil. This is unlikely to decrease in the one-year outlook. Furthermore, frustration amongst ex-militants and union members is likely to lead to an increase in violent attacks on energy assets.

MilitantsThe amnesty programme for Niger Delta militants, which started in 2009, has had some positive effect. Oil production rose to 2.35 million b/d in the first quarter of 2012, from 1.5 million b/d at the height of the militancy in 2009. However, while there had been a reduction in activity by the Movement of the Emancipation of Niger Delta (MEND) following the federal amnesty programme’s introduction, low-ranking MEND militants are likely to engage in sabotage attacks against energy assets in order to register their dissatisfaction with President Jonathan’s failed commitment to address grievances in his home region.

On 4 February 2012, MEND militants launched an improvised explosive device (IED) attack against an Agip pipeline in Brass, Bayelsa. They subsequently issued a warning stating they would attack foreign companies operating in the region, specifically South African firms.

Military response In March 2012, the Joint Task Force (JTF) released a report in which it stated it had destroyed over 200 illegal refineries and arrested over 200 people over the previous 12 months to counter illegal bunkering. Though this represented a significant military push by the government to curb the activities of illegal oil smugglers, they did not target the main sponsors, who are alleged to be highly influential personalities including former heads of state, governors and retired service chiefs. On 29 May 2012, the Commander of the JTF in the Niger-Delta stated that it had uncovered over 56 illegal oil sites which were being bankrolled by an oil firm linked with the Nigerian National Petroleum Corp. (NNPC).

Government responseIn President Jonathan’s second term, his administration has taken a hard line against the Niger Delta insurgency and in 2012 he intensified security operations in the oil-rich

Exclusive Analysis looks at how ‘illegal bunkering’

is affecting the oil business in the Niger

Delta region

Energy Security

Delta Blues

ContactExclusive AnalysisTel: +44 845 676 9226Web: www.exclusive-analysis.com


at Lome Port, and the Nigerian Federal Executive Council approved $70 million worth of contracts for maritime security, including the acquisition of six fast patrol boats. However, offshore security measures are unlikely to reduce risks significantly, unless onshore issues driving the rise in for-profit attacks are addressed.

International pressureAlthough regional security measures, particularly around Togo’s Lome port, have become more effective, the reduction in attacks is probably linked with recent operations against illegal bunkering in the Niger Delta.

As Nigeria faces increasing international pressure to address piracy within its territorial waters, ships suspected of involvement in illegal bunkering are at high risk of seizure and crews at risk of arrest if they are poorly registered and their movements unaccounted for.

lack of the type of onshore bases enjoyed by Somali pirates, vessels in the Gulf of Guinea tend to be released within a week, after cargo has been offloaded to waiting illegal bunkering vessels. Due to the small size of the illegal bunkering vessels, the amount of product stolen tends to be between 1,000 metric tonnes (mt) and 3,000 mt, as in the case of the Energy Centurion, which lost 3,000 mt of gasoline, worth roughly $2.8 million.

Recent trends suggest that pirates are operating closer to shore, targeting the numerous vessels obliged to wait outside ports for up to a week for a berth. Tracking data from 11 September showed at least 28 tankers off Lome and around 65 off Lagos. Regional security forces have been slow to respond. The limited improvements to regional naval capabilities have been overtaken by pirate tactics, such as the use of mother ships.

It has been reported that security force officers often collect bribes to ignore illegal

bunkering activities, while politically-connected local businessmen source financing or secure the illegal bunkering vessels.

Niger Delta In the Niger Delta, incidents of illegal bunkering have been on the rise, especially in Bayelsa and Delta states, primarily due to frustrations among youths and ex-militants over lack of economic opportunities. Collaboration of military personnel and businessmen in illegal bunkering activities along the creeks is also supporting the illicit business. Military personnel in the Niger Delta are known to offer armed protection for vessels involved in illegal bunkering into the high seas.

ConclusionRegional maritime security measures improved in early 2012. In July, the Togolese government introduced stricter security

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‘Bunker fuel was until now the missing link, but

conversations with owners as well as fuel traders

convinced FIS that the time had come for a new and

transformational approach’

‘Bunker consumers and traders have previously looked to the paper market for hedging and the use of cash-settled swaps to

hedge their price risk’

for a new and transformational approach. The first step was taken with the launch

of the FIS Fuel Oil Single Swap (FOSS), a cleared, cash-settled bunker swap with a tenor of up to four years. Rather than rely on users trading large clip sizes at high cost, the FOSS allows users to trade as little as one metric tonne (mt) up to the maximum that fits their requirements.

Using bunker swaps in this way can help owners to easily and cost-effectively fix the price of future bunker fuel purchases and can also be used by a wider range of market stakeholders, including charterers, traders, physical suppliers and financial institutions.

Swaps enable bunker fuel users to stabilise their cash flows and secure margins, as well as reduce the risk of financial distress and non-performance. No upfront premium is required to trade.

Used as part of an active risk management strategy, the swap can deliver a competitive edge by stabilising prices along the supply chain, thus giving the company better control over its pricing structure.

The swaps are focussed on the most liquid fuel oil markets with execution brokering provided by FIS on the following contracts listed for clearing on future exchanges.

● Singapore 380 centistoke (cst) fuel oil ● Singapore 180 cst fuel oil ● Rotterdam 3.5% sulphur barges

But we didn’t stop there. FIS has now launched the second phase of its campaign to put bunker hedging in the hands of the people that really need it.

The FIS Bunker Screen is a completely new concept in the fuel oil trading market – we believe there is no comparable system that provides the same level of transparency and liquidity for consumers.

Screen debutBunker Technology

Damien King unveils the FIS Bunker Screen

platformAsk any shipowner or operator

which issues keep them awake at nights and along with charter

rates, piracy and regulation, the cost of bunker fuel is likely to be close to the top of the list.

While owners and managers can to some extent control other costs, it has traditionally been difficult to manage bunker price risk, except through the physical market.

Even then, buying forward or at a fixed price gives little of the flexibility that owners and operators need, except where stems can be planned exactly to co-ordinate with port calls and consumption, a model that does not suit spot market trading.

Bunker consumers and traders have previously looked to the paper market for hedging and the use of cash-settled swaps to hedge their price risk. The issues here for users have historically been numerous.

While the fuel oil paper market used for hedging bunker fuel exposure is very liquid, shipping demand is still a very small part of the overall volume. As a result, buyers and sellers have not traditionally got a great deal from the banks they have worked with, either because the banks have their own interest, are charging high fees or only offer trades in volumes that are too expensive and impractical for owners.

It’s a market ripe for change and a model that is ideally suited to the use of technology. The solution – a new service, combining a flexible cash-settled swap, tradable in lots of one tonne upwards, together with the provision of real-time firm bids and offers on screen, with numerous clearing options – has just been launched by Freight Investor Services (FIS).

FIS spent considerable time studying the bunker market and assessing the potential for a new type of swap from a position of accumulated knowledge. We have spent 10 years developing the means for owners and charterers alike to hedge their freight risk and we are recognised as one of the leading brokers in the dry cargo market.

As time has gone on, we have added new swaps in iron ore, steel, scrap coking coal, fertiliser and containers to provide a portfolio approach to maritime risk management. Bunker fuel was until now the missing link, but conversations with owners as well as fuel traders convinced FIS that the time had come

Damien King is a bunker broker with Freight Investor Services.Users can sign up for the FIS Bunker Screen at: www.thecleartrade.com/fis/.

Contact: Damien KingFreight Investor ServicesWeb: www.freightinvestorservices.com


‘Swaps enable bunker fuel users to stabilise their cash flows and

secure margins, as well as reduce the risk of financial

distress and non-performance’

The FIS Bunker Screen works by collating prices from multiple market-makers and provides firm bids and offers in tight spreads along six months of the forward curve, updated in real time on a single screen.

Prices are fed into the FIS Bunker Screen automatically and cash-settled swaps can be executed directly on screen, with straight through processing to clearing at the Singapore Exchange (SGX), the Norwegian Futures and Options Clearing House (NOS) and the Chicago Mercantile Exchange (CME) and by voice clearing at the IntercontinentalExchange (ICE).

Prices for a further three quarters and four calendar year contracts are available on an indicative basis and firm bids and offers may be placed on the screen by users. Prices displayed on the screen move with the market, reflecting up-to-the-minute changes in prices of the key Singapore 180 cst, Singapore 380 cst and Rotterdam 3.5% sulphur barges contracts.

Indicative prices can also be provided on the US Gulf Coast 3.0% contract and for any port quoted by Platts BunkerWire.

But the screen not only improves price discovery and transparency for buyers and sellers. Because it provides constantly updated prices in only the most liquid markets, users such as owners and operators can use it to

Bunker Technology

buy or sell swaps exactly equivalent to their physical exposure.

When a shipowner knows it is performing a given voyage or charter, it can use the screen to hedge its fuel like-for-like in the volume that it needs. The trade can be made with or without the assistance of the broker and users can monitor the price changes in real time though the course of the contract, adjusting their position as necessary.

Layer of certaintyClearing provides an additional layer of certainty for swaps users. Rather than having to do their own diligence on counterparties in over-the-counter trading with bilateral settlement, use of a clearing house effectively removes counterparty default risk by assuming the responsibility to pay out if either party fails to perform.

In this way, the screen also allows users to get ahead of impending regulations for swaps trading, as trades flow via the FIS Swaps Execution Facility (SEF) and are registered on the regulated Cleartrade Exchange for onward processing to clearing, making the system future-proof.

FIS has made it simple to get established and start trading bunker swaps. Trading on the screen requires an FIS broking agreement and a clearing account with the clearing houses noted above.


Networking

On the move... EuropeThe International Bunker Industry Association (IBIA) has appointed Captain Cliff Brand, a former head of the Gibraltar Maritime Administration, as its new Chief Executive, based in Southampton. He replaces IBIA board member and maritime arbitrator Trevor Harrison. Tel: +44 20 3397 3850; Email: [email protected].

Chris Morgan, previously with Ocean Intelligence and World Fuel Services, has joined Peninsula Petroleum (Brokers) Ltd in London, replacing Johnny McIlroy who left to join Cockett Marine Oil Ltd. Tel: +44 207 766 3999; Mob: +44 7920 057 328; Email: [email protected].

Ocean Intelligence has moved its UK office to Plymouth. It is staffed by Can Besev (Managing Analyst Europe, Middle East and Africa), Nikki Creswell (Senior Analyst), Ewa Maria Kozak (Analyst) and Anna Maria Foteinou (Trainee Analyst). Tel: +44 1752 588 311; Fax: +44 1752 587 634; Email [email protected].

Adam Toale has joined Bominflot Ltd as a Development Analyst Trader. Tel: +44 1482 219428, Mob: +44 7798 683225; Email: [email protected].

Rosneft Bunker (RN-Bunker) has appointed Olegs Lokotoshs as Acting CEO.

Classification society Bureau Veritas has appointed Philippe Donche-Gay to head the newly formed Marine & Offshore Division. Donche-Gay, based in Paris, France, joined Bureau Veritas in 2008, and has been Executive Vice-President in charge of the Industry and Facilities Division.

Topoil AB has appointed Hanna Andersson as a bunker trader. She was previously involved in maritime security at the Port of Gothenburg. Tel: +46 3169 6150; Mob: +46 709 759 477; Fax: +46 3169 1967; Email: [email protected].

Wilhelmsen Premier Marine Fuels is now to be known as Wilhelmsen Marine Fuels.

Gamal Saaid has joined A/S Dan-Bunkering Ltd as a bunker trader in Copenhagen. Tel: +45 3345 5410; Direct: +45 3345 5431; Mob: +45 2945 3904; Fax: +45 3345 5410; Email: [email protected].

Nellos Filopoulos, previously with Aegean Petroleum Network Inc. in Piraeus, has joined

FT Maritime Services Ltd (Fuel Trade) in Greece. Tel: +30 210 429 3100; Mob: +30 6986 628 888; Fax: +30 210 429 3810; Email: [email protected].

AmericasAdrian Tolson has been appointed Regional Manager – North America and Keith Richardson Senior Trader at OW Bunker’s new physical operation, OW Bunker North America Inc., based at One Stamford Plaza, 263 Tresser Blvd, Suite 900, Stamford CT, 06901, United States. Both previously worked at Noble Bunkering and Chemoil. Contact Adrian Tolson –Tel: +1 203 564 1512; Mob: +1 415 420 0767; Email: [email protected]. Keith Richardson – Tel: +1 203 564 1440; Mob: +1 415 298 6373; Email: [email protected].

Robert Lake has been appointed Executive Vice President/Managing Director of Matrix Marine Fuels, following the retirement of Ron Disbro. The combined Matrix/Bominflot US operation is headed up by Gene Owen as President/CEO, while J.Philip Chesson has been appointed CFO. Tel: +1 713 952 5151; Direct: +1 713 353 9518; Mob: +1 832 794 0173; [email protected].

KPI Bridge Oil has appointed Mauro Agostini as a bunker broker and trader in its Miami office. Mob: +1 954 591 0966; Email: [email protected].

Shipbroker Marygrace Collins of US-based Bulkore Chartering Inc. has been elected President of The Federation of National Associations of Shipbrokers and Agents (FONASBA), succeeding Christakis Papavassiliou, who steps down after his two year term of office.

PDVSA has announced that its new bunker and lubricant trading team now includes the following bunker and lubricant traders: Orlando Castejon – Tel: +58 241 820 3157; Mob: +58 416 645 7821; Email: [email protected], and Zelime Gonzalez – Tel: +58 241 820 3154; Mob: +58 416 645 7821; Email: [email protected]: [email protected].

Nancy Cleofa has joined Curoil's team of fuel traders. Tel: +59 99432 0517; Mob: +59 99522 9812; Email: [email protected].

Mideast and AfricaCem Saral has joined Vitol Dubai Ltd. Tel: +971 4 428 1800; Mob: +971 56 644 2577; Fax: +971 4 363 7467; Email: [email protected].

Asia Pacific Global head of trading and chief executive of Brightoil’s Singapore operations, Quek Chin Thean, has resigned. Davy Choo, a senior fuel oil trader, and Lim Eu Ming, a derivatives trader have left Brightoil’s Singapore office. Tel: +65 6571 5999.

Paul Bradshaw, formerly head of trading operations for Asia at BP, and more recently the Vice President of Oil Storage and Operations at Brightoil, has been appointed the new Regional Manager for OW Bunker Asia. Tel: +65 631 700 10; Email: [email protected].

Sharon Ng, previously at Toyota Tsusho Petroleum Pte Ltd, has joined Dynamic Oil Trading in Singapore as a bunker trader. Tel: +65 6437 5500; Fax: +65 6295 2885; Direct: +65 6437 5508; Mob: +65 9647 9645; Email: [email protected]. Shirli Goh has also joined the company as a senior bunker trader. Direct: +65 6437 5502; Mob: +65 9617 0282; Email: [email protected].

Carlo Fuentes has joined Dan-Bunkering (Singapore) Pte Ltd as a bunker trader. Tel: +65 6572 4300; Direct: +65 6572 4325; Mob: +65 9821 3301; Fax: +65 6572 4301; Email: [email protected].

Industry veteran R S Sharma has joined Lloyd’s Register as Chairman of Operations for South West Asia. He is the former Chairman and Managing Director of India’s Oil and Natural Gas Corporation.

Gerardo Borromeo, Vice Chairman and CEO of Philippine Transmarine Carriers Inc., has been appointed the new President of InterManager, succeeding Alastair Evitt, Managing Director of Meridian Marine Management, who has completed his two-year term of office.

GAC Group has appointed Bengt Ekstrand as its new Group President, taking over in January from Capt. Lars Säfverström who has held the position since July 1998. Ekstrand is currently Group Vice President of GAC's Asia-Pacific region and was previously the head of the Middle East region.

ObituaryTor Melsom, of Norwegian Oil Trading died on 12 November. Tor’s career in bunkering began in 1980. After a stint in New York, he joined his father’s company in Tonsberg, Norway – Tor Melsom A/S. The company changed its name as it grew, first to Entranor AS, and then to Norwegian Oil Trading. Tor became managing director in 1993. Everyone in the industry will be saddened by the news of his death.


the shipping industry within the next few years: air pollution and changes to cleaner fuel, ballast water management and carbon dioxide (CO2) regulation.

Finally, Mortensen highlighted Maersk’s future strategy, citing its much-anticipated triple-E vessel and the need for greater economic and environmental efficiency through measures such as retrofitting instead of newbuilding and working towards a more sustainable future by developing technology to meet regulation changes.

Lars Robert Pedersen, Deputy Secretary General of the Baltic and International Maritime Council (BIMCO), echoed Mortensen’s views identifying ballast water treatment, sulphur regulations and regional regulations as the most significant regulatory challenges that the industry is facing.

As a consequence, owners must make strategic decisions on whether they should invest in technology ahead of compliance dates. Being one of the first to invest brings a significant attendant risk of having first generation equipment that may not prove to be durable. However, weighed against this is the risk of having too little time to get the technology in place once compliance dates are fixed or indeed additional cost burdens in retrofitting rather than incorporating the technology at newbuild stage.

Specifically with relation to the sulphur regulations, Pedersen said that choosing the right fuel option is vital, with fuel already accounting for more than 60% of all operating expenditure (OPEX). However, the challenges lie in the uncertainty of the future options. Will heavy fuel oil (HFO) continue to be an option with scrubbers? What will be the future price developments for alternatives? If 2020 proves not viable for a global sulphur cap of 0.1%, then will 2025 be viable?

Pedersen also highlighted regional regulations as a further significant challenge as, he said, they are not aligned with the global framework and all too often based within a shoreside regulatory framework.

Whilst there are many that would likely agree with these remarks, they were somewhat controversial given that they were made after Nicholas Debaisieux, of the Climate Change Policy Office at the Directorate General for Climate Action (DG CLIMA), set out the European Union’s (EU) position on shipping emissions.

Debaisieux, who led the recent impact assessment of shipping emissions at the EU, told delegates that the transportation roadmap is among the flagship initiatives as part of the EU 2020 Strategy for Smart

Lean and greenEvents

Fathom Shipping’s recent Ship Efficiency conference looked at how companies can

reconcile the twin drivers of profitability and

sustainability. Alison Jarabo-Martin reports

The political agenda can sometimes seem a long way from the business of profitable

operations in the maritime business. Despite profits being at a record low in this vital world business, regulation that brings with it additional cost burdens is seemingly inexorably spreading.

This was a central theme on the first day of the second annual Ship Efficiency: The Event, hosted by Fathom Shipping.

The initial discussions centred on the current condition of the shipping industry, with individuals from a number of organisations and companies joining in a discussion regarding the financial and environmental situation facing shipping.

Andreas Chrysostomou, the chairman of International Maritime Organization’s (IMO) Marine Environment Protection Committee (MEPC), set the scene with a presentation on the current state of the shipping industry, including his views on the future of the industry.

He made reference to the need for increased sustainability and efficiency within shipping in light of the current circumstances and future regulation changes that are set to dominate the sector in years to come.

His closing comments outlined the IMO’s strategy on reducing shipping emissions and ensuring both economic and environmental sustainability, making reference to stringent plans due to come into force in the coming months and years. In order to maintain its central position in regulating the shipping industry, the IMO will have to come to agreement on what it is possible to achieve.

Niels Bjorn Mortensen openly discussed how current and future changes will affect A.P. Moller – Maersk, for whom he works as Head of Regulatory Affairs. This began with a written comment from Nils S. Andersen, the CEO of A.P. Moller – Maersk, who said: ‘We want to be a profitable, responsible and sustainable business. It is in line with our values, and is expected by our shareholders, customers, employees and society in general.’

Frank assessmentMortensen’s speech included a frank assessment of the shipping industry’s current position. Energy efficiency, increased competition and financial constraints have dictated the industry’s direction in recent years, and Mortensen showed real concern that this may shape the sector in the future.

He made reference to the alarming number of unviable newbuilds in the industry, and this was followed by a critical analysis of the three most significant challenges facing

Alison Jarabo-Martin is the Managing Director of Fathom Shipping.Fathom Shipping’s Ship Efficiency: The Event took place in London on 24-25 October. As part of Petrospot’s week-long Maritime Week Americas event in Miami (www.maritimeweekamericas.com), Fathom Shipping will be holding an MWA Ship Efficiency conference on 30 April – 1 May 2013.

Contact:Alison Jarabo-MartinFathom ShippingTel: +44 7703 612 130Email: [email protected]: www.fathomshipping.com


believes that in order to reduce or minimise costs, risk and emissions, it is necessary to engage a cycle of measuring, monitoring and thus improvement. Far from being a financial burden, WWL feels that this approach is actually beneficial in driving the profitability of its operations.

WWL, at least, seems to be one ship operating company that believes that the political agenda of reduced maritime emissions is not at odds with profitable operations.

Indeed, there seemed to be a general consensus through the day’s discussions that the maritime industry can change, and must change. Whilst there is always going to be significant discord on changes that are enforced (i.e. regulation), the economic crisis is perhaps as powerful a driver for voluntary change as there is ever going to be.

Streamlined, fuel efficient, environmentally responsible operations can make business sense and also give competitive advantage.

Events

Inclusive and Sustainable Growth. He said that, from the preliminary results of the impact assessment, the EU believes that a Market Based Measure (MBM) in Europe could result in up to €50 billion (US$65 billion)of additional annual net cost savings in the maritime sector by 2030. This is in addition to the environmental and social benefits. The EC thinks that an MBM has the potential to create 10,000 new jobs in the technology provider sector as well as a small increase in jobs onboard ships.

However, Debaisieux could not be drawn on exactly which the options that the EU was considering – saying that the EU regarded the IMO as the best place to regulate greenhouse gas (GHG) emissions of international shipping and were committed to supporting it.

He confirmed that the EU definitely has no plans for a full MBM in the coming year, although it will be running a pilot project

and exploratory studies around obligatory measuring, reporting and verifying of maritime CO2 emissions in 2013.

Roger Strevens, Global Head of Environment for Wallenius Wilhelmsen Logistics (WWL), explained how the shipping company not only sees its stance on driving down emissions as key to profitable operations, but also aims to live this vision on a practical, daily basis. He said that WWL looks for preventive solutions to attack the root cause of the problem, not just the symptoms.

Bright ideasWWL aims to get everyone in the company involved in the strategy – and in order to capitalise on the ‘bright ideas’ of its employees it runs an annual in-house energy efficiency competition.

Strevens added that WWL places tremendous importance on transparency when it comes to environmental performance. WWL

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UNITED STATES: Maritime Week Americas29 April-3 May, MiamiContact: The Petrospot Events TeamTel: +44 1295 81 44 55Email: [email protected]

MAY

UNITED KINGDOM: The Oxford Bunker Course20-24 May, OxfordContact: The Petrospot Events TeamTel: +44 1295 81 44 55Email: [email protected]: www.petrospot.com/oxford

NETHERLAND: European Bunker Fuels23-24 May, AmsterdamContact: Simon Kears, PlattsTel: +44 20 7176 6273Email: [email protected]: www.platts.com/events

JUNE

NORWAY: Nor-Shipping4-7 June, OsloContact: Nor-Shipping organisersTel: +47 66 93 91 00Email: [email protected]: www.nor-shipping.com

TURKEY: International Istanbul Bunker Conference5-7 June, IstanbulContact: The Turkish Bunker AssociationWeb: www.istanbulbunkerconference.com

SINGAPORE: Singapore Bunkering Week25-28 June, Singapore Contact: IBC AsiaTel: +65 6508 2401Email: [email protected]: www.ibc-asia.com

SEPTEMBER

UNITED KINGDOM: London International Shipping Week9-13 September, LondonContact: Shipping Innovation, a joint venture between Petrospot and ElaborateTel: +44 1295 81 44 55 /+44 1296 682 051Email: [email protected]: www.londoninternationalshippingweek.com

Events

Events Diary JANUARY

NETHERLANDS: European Oil Storage Conference21-22 January, AmsterdamContact: Andrew Kinash, PlattsTel: +44 20 7176 6227Email: [email protected]

GHANA: Oil and Gas Infrastructure Security21-24 January, AccraContact: Hanson WadeTel: +44 203 141 8700Email: [email protected]: www.oilandgas-security.com

NETHERLANDS: LNG Bunkering Summit 201328-30 January, RotterdamContact: Carly Greene, IQPCTel: +44 20 7368 9300Email: [email protected]: www.lngbunkeringsummit.com

SOUTH AFRICA: Maritime Week Africa28-31 January, Durban Contact: Osei Mitchell, PetrospotTel: +44 1295 81 44 55Email: [email protected]: www.maritimeweekafrica.com

FEBRUARY

MOZAMBIQUE: Indian Ocean Ports & Logistics27-28 February, Beira Contact: Transport Events Management LtdTel: +60 87 426 022Email: [email protected]: www.transportevents.com

PANAMA: Panama Maritime XI27 February - 1 March, PanamaContact: Panama MaritimeTel: +507 340 3467Email: [email protected]: www.panamamaritimeconference.com

MARCH

NETHERLANDS: Bunkering in Europe4-7 March, Amsterdam Contact: IBC AsiaTel: +65 6508 2401Email: [email protected]: www.bunkeringineurope.com

UNITED STATES: Shipping 201318-20 March, StamfordContact: The Connecticut Maritime AssociationTel: +1 203 406 0109Email: [email protected]: www.shipping2013.com

UNITED ARAB EMIRATES: World Ports & Trade Summit19-20 March, Abu DhabiContact: Omar Hassan, Seatrade Middle EastTel: +9714 324 5344Email: [email protected]: www.worldportsandtrade.com

UNITED KINGDOM: Bunkering and Infrastructure for LNG Fuelled Vessels19-20 March, LondonContact: Lloyd’s Maritime AcademyTel: +44 20 7017 5510Email: [email protected] Web: www.lloydsmaritimeacademy.com

UNITED ARAB EMIRATES: Fujairah Bunkering & Fuel Oil Forum25-27 March, FujairahContact: Conference ConnectionWeb: www.cconnection.org

SENEGAL: Intermodal Africa North27-28 March, DakarContact: Transport Events Management LimitedTel: +60 87 426 022 Email: [email protected] Web: www.transportevents.com

APRIL

SINGAPORE: Sea Asia9-11 April, SingaporeContact: Helen Ong, Seatrade Events AsiaTel: +65 6294 2280Email: [email protected]: www.sea-asia.com

EGYPT: Med Ports23-24 April, AlexandriaContact: Transport Events ManagementTel: +60 87 426 022Web: www.transportevents.com

SWEDEN: International Bunker Conference24-26 April, GothenburgContact: BI Norwegian Business SchoolEmail: [email protected]: www.bi.edu

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