Not Logged In, Login,

Thursday, January 18, 2018

HIGHLIGHTS FROM BUNKER SESSION ‘TOWARDS EFFECTIVE BUNKER PURCHASING’ – 11 APRIL 2000

The second part of the INTERTANKO Annual General Meeting at Monte Carlo featured a session in which current bunker issues were reviewed, with presentations from three key industry figures in this sector.

Moderator:Kristian Fuglesang, Assistant Director, INTERTANKO

Speakers:

Kjell Haugland, Consultant, DNV Petroleum Services

Bengt Hermelin, Managing Director, Samco (Services) Ltd

Ivar Tonnesen, Managing Director Gearbulk (UK) Ltd and Chairman, International Bunker Industry Association (IBIA)

Kristian Fuglesang, moderated. Kjell Haugland opened the session by noting the 20th anniversary of the DNV Petroleum Services marine fuels testing programme, a scheme which was launched with the support and participation of INTERTANKO. Bunker quality is vital to the safe operation of ships and over the years the key elements of an effective fuel management plan have been established. Fuels with specifications pertinent to individual ships need to be selected and suppliers should be chosen on the basis of fuel quality statistics. Realistic "buyers terms of purchase" should be in place and the carrying out of quality and quantity control is an essential part of effective fuel management. Finally, the use of structured procedures for handling any claims and disputes that arise will save a multitude of headaches. ISO lays down standards on fuel quality, notably ISO  8217, which are subject to continuous revision. Traditionally, shipowners have not been strong participants in this amendment process but the establishment of the INTERTANKO Bunker Committee in recent years is helping to change this.

Bengt Hermelin discussed the issue of how bunker prices are reflected in Worldscale. The dramatic increase in bunker prices over the course of 1999 effectively added US$3.5 million to the annual cost of running a steam turbine VLCC and US$2 million to a diesel engine VLCC. In the current Worldscale system, the bunker price assumption used is the worldwide average for the 12 months ending on 30 September of the year prior to the current edition of the Worldscale Schedule. Following a request by INTERTANKO, the Worldscale Associations have considered ways of reducing the anomalies caused by the present system of reflecting bunker prices in Worldscale. In the event, they have decided not to alter existing arrangements. Bengt Hermelin pointed out that basically the Worldscale system does an effective job in its role as a tool for comparing tanker freight rates and that stability and predictability are important elements of this success. There are other options open to shipowners seeking to accommodate bunker price fluctuations, including the use of bunker price adjustment clauses in charter parties, and hedging in the forward markets. It must be noted, however, that such practices carry a cost as well as the risk that the market can turn in a positive direction.

Ivar Tonnesen, speaking as Chairman of IBIA, said that with the current high price of bunkers and the steady decline in the quality of marine fuel over the years, it pays to be as diligent and as knowledgeable as possible when it comes to bunker purchasing. This means knowing the market, knowing the seller, proper buying routines and documentation, the use of appropriate sampling procedures and suitable follow up to monitor the cost-effectiveness of the purchase. Because bunkers are bought in weight and delivered in volume, knowledge of the relevant temperature and conversion factors used in the conversion process are vital if money is not to be lost. Also, because tanks on bunker barges are calibrated, barge measurement is advisable. Buyers need to have a well-defined purchasing strategy which takes into accounts aspects such as multiple versus single buyers; oil majors versus independent sellers; spot versus contract purchases; the role of hedging; and effective claims/disputes handling procedures. Ivar Tonnesen concluded by saying that in addition to having a well-conceived bunker purchasing administration plan in place, owners are advised to ensure that crews are an integral part of the "bunker watch team". Also, if a dispute with the seller should arise, talking is better than fighting.