1. Marine Fuel Solutions
Cockett Marine Oil Group | www.cockettgroup.com Tel: +971 44 255 100 | Fax: +971 44 255 111 | Email: dubai@cockett.com
5th European Bunker Fuels Conference
Rotterdam
May 2014
Chris Turner
Group Technical Manager
2. A New Dawn
2
To what extent will European ships move over to gasoil?
How will suppliers and end users have to adapt to the upcoming changes
Trader Perspective to what is just around the corner…
1st January 2015 heralds one of the biggest changes in the history of Bunkering
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3. So now what?
3
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Liner / Short Sea routes have opportunities to consider alternatives such
as LNG and scrubbing technologies
If they build it… they will come … but when ?
Not enough time for players to act
Any 0.1% FO will be hoovered up by large contracts – unlikely too see this
in Spot market
0.1% also suited to Liner routes, significant operational and technical
hurdles to jump
Cold hard truth is there is little option available but to burn DMA 0.1% Sulphur
40 % impact in cost for 6% relative increase in Energy
4. Will 0.1 be available ?
4
A. No Problem in 2015.. 2020 a different story
Demand
Europe +
20 KMT
/day
Sufficient
investment
• Closure of
Simple
refineries
Demand will
impact
spread
• Tightening of
0.1% in
relation to
Inland grades
Conclusion
• Pricing
Incentive will
be there for
continued
conversion
needed
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5. End User Considerations
5
Selection and
consideration of
suitable cold flow
properties
CFPP, Cloud Point
considerations
2010 specification v
2005 Specification
Lubricity
protection
DMA v DMZ
2 cSt Min v 3 cSt
Minimum
Viscosity
Most 2 & 4 Stroke
OEM require Min
Viscosity before
Injection of 2 Cst.
Suitable Lube Oils for
longer term distillate
use
Selection of
correct BN
Important to
follow OEM
recommendations
Purchasing : Proactive planning required to take into account voyages and
product availability
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6. Supplier Impacts
6
Purchasing
Cash Flow &
Payment Terms
Credit lines
Some smaller
suppliers may
exit
Supply Chain
Shore Tank
preparation
Suitable
Segregation on
Barges
Housekeeping
Bonus !
Traditional LS
problems will
disappear
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7. End User Considerations
7
• Rapid changes in fuel
temperature will increase
the likelihood of pump
malfunction and seizures.
• No more than 2 Deg C /
Minute
Temperature
Gradient
• Fuel pump leakage can
result in starting problems
at low load
• pump seizures and
premature wear due to
loss of hydrodynamic
lubricating oil film
MGO Viscosity
Too Low
• Significant risk between
Residual fuels and
distillates
• Consider use of
Asphaltene dispersant/
fuel stabiliser
Compatibility
• Do not return residue or
distillate mixtures back to
distillate or MDO service
tanks
• Prevention and control of
Microbial issues
Housekeeping
• Much easier and less
costly for port authorities
to check
Compliance
Technical : Switching to and from HFO to MGO 0.1 rather than HS -> LS
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8. End User Considerations
8
Capacity /
Equipment
Sufficient storage
capacity for MGO
consumption
expected
Cleaning / to
prevent cross
contamination
1% of HFO cross
over enough to
put compliant
MGO off spec
Consider tanks /
lines / pumps
In practice buffer
cargos will be
required combined
with cleaning.
Change over
procedures
Develop and
document
Preparation : Timings to ensure Marpol compliance as of 1st Jan 2015 00:01
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9. Trader Perspective
9
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There is no education like adversity.
Benjamin Disraeli
Counterparty
Risk
• 10-15 yrs ago bunkering costs 17-20%
• End of Market Spike 2008 50-55%
• Currently hovering around 70%
• transition period potentially difficult, mistakes will undoubtedly occur
Cash Flow
Implications
• Immediate impact 30-40% trade finance facilities required
• No correlation between higher product value and increased margin
• Short term impacts as markets and banks adjust
• Margin erosion continues through a universally recognised tough trading period
• Will P&L / balance sheets be suitable to ask for 30% more finance in 2015?
10. Trader Perspective
10
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Opportunity : Bridging the gap..
Properly evaluating
and pricing
counterparty risk
Compete to gain
volume
•better financing
•smaller players
marginalised by new pricing
impacts
Accelerate trend of
better financed
independents
aggregating more
volume
•Oil Majors/Nationals
stagnate or retreat from
bunkers
•Smaller players increasingly
Niche or boutique
11. Conclusions
11
Demand can be met `
Reactive industry tending to be in denial
Significant hurdles to be jumped prior to 2015
Trader Ideal partner to help navigate these stormy seas
Start now !
Are we ready?
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