11-05-2018

Singapore’s bunker industry set to embrace mass flow meters for MGO ahead of IMO 2020 rule

Singapore’s move to implement the mass flow meters mandate for distillate bunker fuel deliveries next year is being hailed positively, with the step not only set to enhance transparency but also prepare the city-state for the International Maritime Organization’s upcoming global sulfur cap rule.

“In terms of delivery, the mass flow meters for MGO are certainly going to provide more confidence to both bunker buyers and suppliers,” a bunker trader said.

“From a traders’ perspective, it will certainly reduce discrepancies in bunker fuel quantities and hence, the need for mutual agreement. We’ve seen that from past history,” another trader in Singapore said.

MFMs measure the flow rate in the pipe, gauging the quantity as well as the mass and density of the fuel, and were first mandated in the Port of Singapore for marine fuel oil deliveries from January 1, 2017.

The Maritime and Port Authority of Singapore will extend its compulsory use to all bunker tankers delivering distillates in the Port of Singapore, the world’s largest bunkering port, from July 1, 2019.

FULL STEAM AHEAD

The IMO global sulfur rule for marine fuels requires ships to burn 0.5% sulfur limit bunker fuels worldwide starting January 1, 2020, instead of the 3.5% sulfur limit currently.

Singapore remains firmly committed to meet this rule, with the MFMs for MGO giving it a distinct advantage, particularly because gasoil is expected to be the predominant marine fuel of choice for the shipping industry come 2020, industry sources said.

This supply-side response is expected because the uptake of scrubbers is likely to remain slow globally. While alternative fuels including LNG are also an option, their widespread adoption is limited, at least initially, because of retrofit costs and infrastructure bottlenecks worldwide.

Currently, there are about 213 registered bunker tankers in Singapore of which 130 are for fuel oil, 71 are for marine gasoil and 11 are dual-fueled, and 1 is for ultra-low sulfur fuel oil, according to MPA data.

Come 2020, many industry sources expect the number of MGO bunker barges in Singapore to increase significantly, with some expecting the ratio of MGO:MFO bunker tankers to reach as high as 2:1.

“I’d be very surprised if anybody would bring in new fuel oil barges here. Some of those who have modern barges will likely take them off fuel oil and flush out their tanks to do MGO eventually,” a bunker supplier said.

“Right now, the meter for MGO deliveries is [around] 4 inches because the stem is small, but if shipowners are going [for] bigger MGO parcels, then we will just re-calibrate the current fuel oil meters for MGO deliveries, and clean the fuel oil tanks to store distillates, shouldn’t be a problem,” another bunker supplier said.

For MGO deliveries via MFMs, bunker suppliers and barge owners will just have to get their fuel oil MFMs re-certified, which costs around S$30,000, another industry source said. This process takes two to three days — about two barges are required for the MFM trial, and if the downtime of the barges and tank cleaning is considered, the cost could total to up to S$100,000, he added.

Still, the benefits and business opportunities in doing so clearly outweigh the associated costs, he said.

SURVIVAL OF THE FITTEST

One potential consequence of the MFM mandate for distillate deliveries is, however, a possible rationalization of the bunker industry as errant players are weeded out of the system.

This happened when MFMs where mandated for fuel oil deliveries. Universal Energy and Panoil Petroleum, for example, were forced to exit the industry as was Transocean Oil, due to the MPA’s vigil over their non-compliant business practices.

In addition to possible forced exits, some voluntary departures could also occur in the MGO market.

However, sources said that even if the number of suppliers shrank, Singapore’s bunker sales growth would continue unabated.

In 2017, marine fuel sales in the city-port hit a record 50.6 million mt, rising 4.2% year on year, MPA data showed in January.

While the market might tilt toward the bigger players, there will be room for everybody to thrive and traders to play a bigger role as harbingers of credit finance amid tough industry conditions globally, sources said.

Source: Platts

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