It’s hard to imagine but still possible - a president of a vertically integrated oil company (VIOC) officially asks the Prime Minister of the Russian Federation (RF) to limit competition and have three players left in the market.

Rosneft President Igor Sechin has addressed RF Prime Minister Dmitry Medvedev with a proposal to put implementation of the programme on bunkering market development into the hands of ship fuel producers with a priority provided to companies with long-term contracts.  According to the letter dated September 23, 2013 (IAA PortNews has obtained a copy of it), the volume of Russia’s bunkering market is estimated at 8-9 million tonnes per year with subdivisions of vertically integrated oil companies (VIOC) accounting for 70% of sales.

Among such companies Sechin mentioned RN-Bunker, Lukoil-Bunker and Gazpromneft Marine Bunker. He also said that apart form VIOC subdivisions, the Russian bunkering market is represented by a pool of independent players which "purchase fuel from mini-plants, so called 'teapot refineries' producing low-quality products".

"Later these dumped products are sold through shadow and offshore schemes, leading to considerable shortfall of taxes in the budget," Sechin writes.

According to Sechin, state fiscal agencies have no possibility to execute proper control of bunker fuel sales. The resolution of Dmitry Medvedev orders RF Transport Minister Maksim Sokolov and head of the Federal Customs Service Andrei Belyaninov to elaborate notes on the development of port infrastructure and the bunkering market.

By the way, Mr. Sechin makes several essential errors in his letter. The second largest player in the market is Gazpromneft Marine Bunker and the share of independent participants in Russia’s bunkering market is not as modest as he writes. There is also another interesting fact: large volumes of fuel sold by independent market players are acquired from vertically integrated oil companies, so the oil product quality is as high as that of oil products sold by subsidiaries of oil companies.

For example, in the first half of the year in the St. Petersburg bunkering market, 21 companies supplied bunker fuel.  According to PortNews IAA data, sales in the first half of the year amounted to 974,820 tonnes. Of the total volume, direct sales of the subsidiaries of oil companies accounted for exactly 50%.

Needless to say, that the remaining volumes fell to the independent players. By the way, an independent player in the St. Petersburg bunker market can be a company with its own fleet, sometimes their number exceeds by several times the fleet of the oil company subsidiaries. And it may have been operating in the market for more than 10 years and have a well established logistics and technological scheme.

We are following the developments.