FEATURE: Singapore's bunkering operations pose some hurdles but MFMs a bright streak
1st July 2021 09:57 GMT


Maritime industry players in Singapore are keeping a close watch on bunker fuel quantity disputes, as a slew of pandemic-related restrictions including contactless bunkering potentially reduces the scope for checks on bunker tankers and tough markets may tempt some unscrupulous players to benefit from the situation.


"We haven't seen a lot of [bunker quantity disputes] reported, but there's more of an opportunity now for such cases [due to contactless bunkering]. So, we're definitely keeping an eye up," a shipowner said.

A shipping circular by the Maritime and Port Authority of Singapore on May 28 noted that owners, agents and masters of vessels must ensure that all operations -- cargo operations, bunkering, ship’s supplies and stores, other marine services -- are carried out contactless or contactless with segregation protocol.

Contactless operation means no boarding of the vessel by any person other than MPA-licensed harbor pilots, authorized government officers, and persons approved by the Port Master of the MPA while contactless operation with segregation protocol means that enhanced safe management measures must be implemented to minimize interaction between the vessel’s crew and shore-based personnel.

Even as surveyors were being allowed to board bunker tankers, there were gaps, an industry source said.

"There are a few bunker players that are up to no good," he said, adding that they might try to err in marine fuel supply volumes.

A source at a bunker surveyor firm noted it was vital to engage surveyors of repute to avoid industry malpractices.

"Our surveyors are going on board, but the number of surveys has dropped quite a lot [compared to pre-COVID-19 days]," he said, adding that shipping restrictions worldwide was adding to the overall complexity.

Weak margins and intense industry competition aren’t helping the situation either, industry sources said.


Margins hit


Determined offers amid ample availabilities and a firming flat price for marine fuel 0.5%S bunker sold on a delivered basis has led to a narrowing spread between product sold on a delivered basis and that on an ex-wharf basis. This spread, much of which is barging cost, chips away at suppliers’ margins.

“Bunker suppliers [are] struggling to recover barge operating costs,” a Singapore-based bunker supplier said.

The spread between Singapore-delivered marine fuel 0.5%S bunker and the same grade sold on an ex-wharf basis averaged $4.34/mt for June, up from May’s average of $2.80/mt, S&P Global Platts data showed. Still, even at the slightly higher levels seen in June, sellers are struggling to recover margins because a minimum of $3/mt differential is apparently required to cover the operating expenditure of a barge itself, sellers said.

Whereas the barging spread should ideally be $8-$10/mt to justify the time-charter cost of the barge, and operate at a reasonable margin, sellers are now trying to at least recover just the barge operating costs, a barge charterer said.

“With margins under pressure, bunker suppliers may seek to eke out small gains via shortfalls [short loading] that vary from contracted volumes; this could potentially lead to outturn quantity disputes,” another shipowner said.

The implementation of mass flow meters, or MFM, in Singapore has significantly reduced such disputes, so even authorities at the port of Zhoushan and in other countries have been exploring the feasibility of MFM implementations, he added.


MFMs come to the rescue


Singapore is the world's largest bunkering port and was the first one to mandate mass flow meters for fuel oil bunker deliveries from January 1, 2017. It also mandated MFMs for distillates bunker delivery from July 1, 2019.

The first shipowner noted that the MFM system was particularly beneficial in the present coronavirus-related environment when contactless bunkering was being encouraged at some ports.

With MFMs, the process is very “well-controlled,” even in the absence of a bunker surveyor, he said.

The source at the surveyor firm noted that MFMs have enhanced the integrity of the system. However, malpractices could still take place while using them, making surveyors' role very important.

A case in point was Southernpec, whose bunker supplier license was revoked by the MPA in 2019.

"Its employees engaged in bunker malpractices, which include the use of magnets to interfere with the mass flow meter during bunkering operations. Its cargo officers also did not record the information in the bunkering documents accurately," the MPA said then.

Meanwhile, the MPA has also continued to weed out errant players through strict enforcement while also enhancing port infrastructure, spearheading technological advancements, and providing financial support to maritime players in difficult markets.

In 2020, Singapore’s launch of two new MFM bunkering standards -- SS 660, code of practice for bunker cargo delivery from oil terminal to bunker tanker using MFM, and TR 80, meter verification using master MFM -- has only raised transparency, sources said.

Platts ,
1st July 2021 09:57 GMT