Singapore’s move to make mass flow meters mandatory for fuel-oil deliveries, starting this year, is not only helping to bring pricing transparency to an otherwise opaque market, but is also helping to weed out malpractices, a move that could send signals to other global bunker hotspots to follow suit.
Starting January 1, 2017, Singapore became the world’s first port to make bunker fuel oil delivery using MFMs mandatory. MFMs measure the fuel’s flow rate in the pipe, gauging the quantity, mass and density of the bunker fuel passing through.
Initial skepticism around the efficacy of MFMs has mostly waned in the city-state as the market continues to realize its benefits.
With the MFM mandate effective for over six months and the scope to maneuver on prices getting increasingly limited, more bunker-players are now open to the idea of being more transparent on prices.
“The earlier measurement techniques prior to the advent of MFMs were the very loopholes exploited by folks who knew they could siphon off oil from vessels up to transportation loss limits without getting caught,” said Nevyn Nah, oil products analyst at Energy Aspects.
GET WHAT YOU PAY FOR
Total bunker sales in SingaporeSources said that depending on the parcel size, bunker fuel supplied via MFMs worked out to about $4-$10/mt higher, compared with bunker fuel supplied earlier without MFM. However, traders added that the benefits under MFM outweighed the costs, as potential buyers now can be absolutely sure that they are getting the exact volumes for which they are paying for.
“Customers are now paying for exactly what they get. So effectively, they are not bearing extra costs,” said a Singapore-based bunker supplier.
Lanny Chandra, consultant at Facts Global Energy, said that the new system was helping to minimize discrepancies between the amount of fuel delivered and the amount invoiced. Since its implementation, bunker fuel quantity disputes, while not completely eradicated, had narrowed down.
“Previously, shorted volumes could later on be transacted under the table for profit. MFM would thus indirectly minimize illegal bunkering activities,” Chandra added.
Trade sources said that after the MFM mandate implementation, the bulk of the quantity disputes were limited to either errors in the receiving vessel’s tank calibration tables or non-adherence to Singapore’s TR48.
TR48 is a technical reference for bunker MFM that covers core requirements for metering system qualification, installation, testing, procedures and documentation for the transfer of bunker between a supplier and a buyer in Singapore.
“There have been reports of some bunker barges siphoning off fuel back to their tanks while bunkering is in progress via irregular pipe connections between the meter and the vessel. It is worth noting, however, that barges with MPA-approved MFM system should have physical seals in place for all connections between the flow meter and the vessel,” Chandra said.
Strict enforcement by the Maritime and Port Authority of Singapore has sharply reduced such malpractices, sources said.
MPA had said in the past that it would come down heavily upon bunker suppliers if they found irregularities in the bunkering process.
“MPA will not hesitate to take action against any bunkering malpractices in the port of Singapore,” the regulatory authority had said in a statement in March. “Any licensee found to have contravened any terms and conditions of the license will have their license either suspended or canceled,” it said.
THE TRICKLE-DOWN EFFECT
After Singapore’s successful implementation, adoption of MFMs on bunker barges is also gaining momentum at other ports, notably Fujairah, Hong Kong and Gibraltar. However, their use has not been made mandatory.
In June, Spanish supplier Cepsa said: “The success of Cepsa’s bunker operations under this [MFM] system, which began in the Port of Algeciras last year with Cepsa’s barges in the Strait, has led to the start of operations in the Port of Gibraltar.”
The company hopes that it would be able to extend the mass flow measuring system to other ports where it operates, such as Barcelona, Las Palmas, Tenerife or Huelva, it said in a statement.
The number of inquiries from suppliers in Fujairah to install MFMs has continued to rise ever since Singapore mandated its use, said an industry source, who visited the UAE port recently for discussions on potential installations.
Chemoil and Gulf Petrol Supplies in Fujairah already have some MFM barges.
In Hong Kong, bunker supplier Vermont Marine Bunkering installed its fifth MFM in April. Physical supplier Chuang Xin (China) Group installed its first MFM on one of its six barges in March; Chimbusco Pan Nation Petro-Chemical installed MFMs on two of its barges 18 months ago, with plans for a possible third; while Yee Lee Ltd. installed meters on two barges in April, S&P Global Platts reported in May.
Malaysia’s Port Klang has also expressed interest to introduce MFMs as it wants to “play catch-up,” Simon Neo, regional manager for Asia at the International Bunker Industry Association, said recently while addressing the Platts Inaugural Bunkering & Storage Asia Conference.
Meanwhile, South Korea is also contemplating the benefits of MFM.
“We are monitoring its success in Singapore and evaluating if we want to adopt this system,” Ulsan Port Authority President Jong Yeol Kang told Platts recently. “Currently, Ulsan is not a bunkering hub, but if it helps to increase liquidity and throughput at our port, we can consider various options.”
Source: PlattsPrevious Next
In Conversation With Mr Ajay Reshamwala, Managing Director, Reshamwala Shipbrokers
India Tanker Shipping Trade Summit 2018