Fujairah bunker market not ready for single-hull ban
Bunker suppliers operating in Fujairah are playing a waiting game as a global deadline approaches for a ban on using single-hull tankers above 5,000 deadweight tonnes (dwt) to carry heavy grades oil (HGO).
The International Maritime Organization's (IMO) Marpol Annex I regulations will ban the use of single-hull tankers above 5,000 dwt for transport of HGO, which includes heavy fuel oil, from April 2005, however it does grant governments the power provide dispensations to vessels operating as floating storage units.
Bunker suppliers operating in the United Arab Emirate port, many of which rely heavily on large single-hull tankers for floating storage, appear to be largely in the dark about whether or not such dispensations will be forthcoming. Most suppliers are not even sure if the UAE is a signatory to Marpol Annex I. According to IMO's website, the emirates are not.
Nigel Draffin of London-based brokers E.A. Gibson told Bunkerworld that bunker market regulations in states which are not Marpol signatories will come down to local authorities. Many port authorities have shown an inclination towards following Marpol rules, he said.
This leaves the future for Fujairah's bunker market even less clear, as much the port area and nearby anchorages are controlled by the Fujairah emirate, while some companies operating there are under the control of other emirates such as Sharjah or Dubai. Some also wonder what rules will apply to independent supply companies with no UAE government or private affiliations.
Last week, Abu Dhabi National Oil Co (ADNOC) confirmed that the company has pulled out of the Fujairah bunker market, a move industry sources blamed on increasingly stringent regulations regarding barges and storage facilities.
Several market sources have seen ADNOC's withdrawal as a sign that the UAE is aiming to ban single-hulls from operating in Fujairah and enforce a switch from floating storage to land-based storage facilities from April this year.
Only a couple of suppliers - ENOC Bunkering (Fujairah) LLC and FAL Energy Co. Ltd. - seem prepared to meet the earliest Marpol deadlines, having secured land-based fuel oil storage facilities. These companies have also announced the acquisition of double-hulled tankers to meet new regulations.
A ban on single-hulled tankers above 5,000 dwt from carrying HGO would hit a large share of the tankers currently engaged in Fujairah's bunker trade (especially if single-hulls can no longer be used for storage) and could force an early withdrawal of some players.
According to market sources, it is currently uneconomic to use double-hulled tankers for floating storage as they can earn two to three times more when used for transport.
One player currently waiting and watching the situation is Avin, a long-standing supplier in Fujairah. The company currently uses a single-hull tanker of around 60,000 dwt for fuel oil transport and storage, plus two single-hulls just below 5,000 dwt as bunker barges.
James Hill, London-based General Manager for Avin, believes Fujairah's land-based fuel oil storage and bunkering infrastructure is inadequate to support a bunker market the size of Fujairah today, estimated at around 700,000 to one million metric tonnes (mt) per month.
The problem is not only the actual storage volume, but more importantly insufficient barge loading capacity, which would cause increased barge congestion, according to Hill. Today, suppliers using floating storage facilities have a quick barge turnaround, and Fujairah's overall supply capacity would suffer a big setback if floating storage is banned.
According to Hill, a ban on using single-hulls for floating storage, combined with future demands to use only double-hulls to supply bunkers, could see the number of suppliers in Fujairah dwindle to just two or three major players. In the near term "it all depends on the floating storage issue", Hill said.
The lack of competition, combined with higher operational costs which would have to be passed onto customers, could ultimately erode Fujairah's status as a major bunkering hub. Over the past month, the Fujairah bunker market - which typically trades $3-5 per metric tonne below Singapore - has been uncompetitive with Singapore due to local tight availability. Some think this could be a sign of things to come.
The International Maritime Organization's (IMO) Marpol Annex I regulations will ban the use of single-hull tankers above 5,000 dwt for transport of HGO, which includes heavy fuel oil, from April 2005, however it does grant governments the power provide dispensations to vessels operating as floating storage units.
Bunker suppliers operating in the United Arab Emirate port, many of which rely heavily on large single-hull tankers for floating storage, appear to be largely in the dark about whether or not such dispensations will be forthcoming. Most suppliers are not even sure if the UAE is a signatory to Marpol Annex I. According to IMO's website, the emirates are not.
Nigel Draffin of London-based brokers E.A. Gibson told Bunkerworld that bunker market regulations in states which are not Marpol signatories will come down to local authorities. Many port authorities have shown an inclination towards following Marpol rules, he said.
This leaves the future for Fujairah's bunker market even less clear, as much the port area and nearby anchorages are controlled by the Fujairah emirate, while some companies operating there are under the control of other emirates such as Sharjah or Dubai. Some also wonder what rules will apply to independent supply companies with no UAE government or private affiliations.
Last week, Abu Dhabi National Oil Co (ADNOC) confirmed that the company has pulled out of the Fujairah bunker market, a move industry sources blamed on increasingly stringent regulations regarding barges and storage facilities.
Several market sources have seen ADNOC's withdrawal as a sign that the UAE is aiming to ban single-hulls from operating in Fujairah and enforce a switch from floating storage to land-based storage facilities from April this year.
Only a couple of suppliers - ENOC Bunkering (Fujairah) LLC and FAL Energy Co. Ltd. - seem prepared to meet the earliest Marpol deadlines, having secured land-based fuel oil storage facilities. These companies have also announced the acquisition of double-hulled tankers to meet new regulations.
A ban on single-hulled tankers above 5,000 dwt from carrying HGO would hit a large share of the tankers currently engaged in Fujairah's bunker trade (especially if single-hulls can no longer be used for storage) and could force an early withdrawal of some players.
According to market sources, it is currently uneconomic to use double-hulled tankers for floating storage as they can earn two to three times more when used for transport.
One player currently waiting and watching the situation is Avin, a long-standing supplier in Fujairah. The company currently uses a single-hull tanker of around 60,000 dwt for fuel oil transport and storage, plus two single-hulls just below 5,000 dwt as bunker barges.
James Hill, London-based General Manager for Avin, believes Fujairah's land-based fuel oil storage and bunkering infrastructure is inadequate to support a bunker market the size of Fujairah today, estimated at around 700,000 to one million metric tonnes (mt) per month.
The problem is not only the actual storage volume, but more importantly insufficient barge loading capacity, which would cause increased barge congestion, according to Hill. Today, suppliers using floating storage facilities have a quick barge turnaround, and Fujairah's overall supply capacity would suffer a big setback if floating storage is banned.
According to Hill, a ban on using single-hulls for floating storage, combined with future demands to use only double-hulls to supply bunkers, could see the number of suppliers in Fujairah dwindle to just two or three major players. In the near term "it all depends on the floating storage issue", Hill said.
The lack of competition, combined with higher operational costs which would have to be passed onto customers, could ultimately erode Fujairah's status as a major bunkering hub. Over the past month, the Fujairah bunker market - which typically trades $3-5 per metric tonne below Singapore - has been uncompetitive with Singapore due to local tight availability. Some think this could be a sign of things to come.
Unni Einemo | Tue Jan 18 19:14 GMT 2005