Marine Fuel Solutions. 5 th European Bunker Fuels Conference Rotterdam May 2014 Chris Turner Group Technical Manager

Transcription

1 Marine Fuel Solutions 5 th European Bunker Fuels Conference Rotterdam May 2014 Chris Turner Group Technical Manager Cockett Marine Oil Group Tel: Fax: dubai@cockett.com

2 A New Dawn 1 st January 2015 heralds one of the biggest changes in the history of Bunkering 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 2

3 So now what? 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 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 3

4 Will 0.1 be available? A. No Problem in 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 4

5 End User Considerations Purchasing : Proactive planning required to take into account voyages and product availability Selection and consideration of suitable cold flow properties 2010 specification v 2005 Specification DMA v DMZ Suitable Lube Oils for longer term distillate use CFPP, Cloud Point considerations Lubricity protection 2 cst Min v 3 cst Minimum Viscosity Selection of correct BN Most 2 & 4 Stroke OEM require Min Viscosity before Injection of 2 Cst. Important to follow OEM recommendations 5

6 Supplier Impacts Purchasing Supply Chain Bonus! Cash Flow & Payment Terms Shore Tank preparation Traditional LS problems will disappear Credit lines Suitable Segregation on Barges Some smaller suppliers may exit Housekeeping 6

7 End User Considerations Technical : Switching to and from HFO to MGO 0.1 rather than HS -> LS 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 Much easier and less costly for port authorities to check Housekeeping Compliance 7

8 End User Considerations Preparation : Timings to ensure Marpol compliance as of 1 st Jan :01 Capacity / Equipment Cleaning / to prevent cross contamination Change over procedures Sufficient storage capacity for MGO consumption expected 1% of HFO cross over enough to put compliant MGO off spec Develop and document Consider tanks / lines / pumps In practice buffer cargos will be required combined with cleaning. 8

9 Trader Perspective There is no education like adversity. Benjamin Disraeli Counterparty Risk yrs ago bunkering costs 17-20% End of Market Spike % 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? 9

10 Trader Perspective 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 10

11 Conclusions Are we ready? 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! 11

12 THANK YOU Worldwide Bunker Supplies Trading Physical Offshore Cockett Marine Oil Group Tel: Fax: