World Bunkering Magazine Feature : UAE - Changing times

Spring 2012

The make-up of the UAE bunkering market is changing against a backdrop of increased economic and political uncertainty, and thin margins.

While tensions rise around the Strait of Hormuz and the global economy appears to, once again, be faltering, there is still plenty of optimism in the UAE and Saudi Arabia.

One major project that illustrates this optimism but also reduces potential risk associated with shipping oil from inside the Gulf is the Abu Dhabi Crude Oil Pipeline, running to Fujairah, which is expected to be operational by June. The pipeline should be able to deliver up to 1.5 million barrels of crude oil a day. The project should also boost Fujairah’s bunker market with large crude oil carriers taking on stems prior to loading.

Meanwhile it has been reported that Fujairah’s state-owned Fujairah Petroleum Company (FPC) has bought a 12% share of Gulf Petrochem Group’s 412,000m³ storage terminal project in the emirate. The terminal is expected to be completed next year. International Bunkering Middle East’s managing director Carsten K Ladekjaer told World Bunkering: “The bunker scene within the Middle East in general is going through a phase of transition at present. Some players are scaling down or even withdrawing from the market while others have gained market share and are consolidating their position within the region. We belong to the latter group. Being based in Dubai, we of course feel that the Middle East is an important market for us. However, International Bunkering is a growing company and with more offices opened abroad lately we are currently increasing our market shares globally.

Underlining the UAE’s prominent position in the global bunker industry, GAC Bunker Fuels, part of global shipping, logistics and marine services provider GAC, is to relocate the headquarters of its worldwide bunker fuel services to Dubai, under the new name, GAC Bunker Fuels Ltd. The move is slated to take place in August 2012.

A company statement says: “The move is driven by the benefits of Dubai as a shipping location, the opportunity to maximise the synergies between GAC’s bunker business with its strong ship agency business in the Middle East and a strategic decision to more closely integrate GAC Bunker Fuels within the GAC Group, which also has its corporate headquarters in Dubai.”

Christer Sjödoff, group vice president, GAC Solutions, explained: “Co-locating our bunker business alongside GAC Group’s corporate headquarters in Dubai will allow us to exploit the full scope of services offered by the group for the benefit of our bunker fuel customers and better synergize the comprehensive package of shipping services that we are uniquely well placed to deliver to vessel owners and operators. In addition, Dubai has great strengths as a strategic hub between Europe, Africa and Asia for international business.”

Global trader and supplier OW Bunker recently announced that it is strengthening its Fujairah desk with the appointment of Sahar Zarghamian as a bunker trader. Ms Zarghamian is rejoining OW Bunker Middle East, where she started her career as a bunker trader before moving on to work as a derivatives trader.

Jesper Jervild, OW Bunker’s regional manager for the Middle East and South Africa, said: “Strategically, Fujairah is a very important area of operation, as one of the world’s top three bunkering hubs and a rapidly expanding port. Having highly-trained staff with a forensic knowledge of local operations, and important local business relationships is critically important to our continued success.”

In another increase in capacity, Shell Marine Products began supplying marine fuels at Jebel Ali Port last year. Shell says that it is currently the only global integrated energy company that has set up operations there. “The strategic location of Jebel Ali Port, a fastgrowing container port, puts Shell in an excellent position to support liners operating in the Middle East,” said Richard Jory, general manager, Shell Markets Middle East Limited in Dubai. Shell acquired several storage oil tanks adjacent to one of the main terminals at Jebel Ali Port, as well as setting up a high-capacity bunker barge to deliver fuels and services that meet international barging standards to customers. The 8,000-tonne barge, which was previously deployed in Singapore, is one of the first vessels to use mass flowmeters in the Middle East.

Zain Jamal, chief operating officer of Dubai-based Asean International points out that the UAE has been, among many things, a centre point of trade and business in recent times within the Middle East. He says: “During its 40 years of independence UAE has undoubtedly made its name in world markets, including particularly now in the ever-changing bunkering industry sector.”

He notes that since the onset of the global economic crisis and the various recent political upheavals, business in the regional bunker market has stagnated. He says that the well-established players in the UAE “still reminisce of the boom volumes of 2008”. However, not all suppliers look to the past and the dynamic ones have adjusted while others just ride the storm.

He notes too that most ships sailing into the Middle East Gulf, from large containerships to small supply tug boats, call at UAE ports for bunkers. He says that this has been helped by the increasing efficiency local physical suppliers are committing. Asean International this year celebrates 20 years in the bunker market. It is currently a physical supplier in UAE ports, making deliveries by road and sea. Mr Jamal says; “The simultaneous role play of physical suppliers and worldwide traders has provided us with substantial market share and ever-growing network spread in different continents.” Recently Asean has expanded its bunkering activities to Dar-Es- Salaam, in Tanzania, becoming one of the very few suppliers in the eastern region of Africa. Mr Jamal says: “2012 holds good prospects for the Asean Group which is constantly on the brink of expansion. As always, we continue to seek to uphold the efficiency of our practices and provide a sense of comfort for our clients. We are simultaneously focusing on our strategic growth objectives and the inherent value we can share with our business partners.” Late last year there had been widespread doubts about the ability of Middle East suppliers to comply with the new IMO 3.5% sulphur cap. However reports from testing agencies appear to show this change has caused few problems. Mr Ladekjaer of International Bunkering Middle East says: “We have addressed this subject with our most important supply partners and they have all assured us that they do not foresee any problems in relation to sourcing 3.5% sulphur products at this stage. This also goes hand in hand with our actual experience, namely that we have yet to be turned down on those requirements by our suppliers.” Similarly Mr Jamal says that all UAE suppliers complied with the new limit during the last quarter of 2011.

In January Dubai-based International Bunkering Middle East DMCC opened a liaison office in Mumbai, India. Country head, Capt Virendra N Mishra said: “It is estimated that about 1.8 million tonnes of bunkers are sold in India annually. This number is likely to increase in the coming years. The traffic at Indian ports is rising and the infrastructure is also improving.”

The company’s managing director, Carsten K Ladekjaer, said that “we believe in India as an important future market for us”. He continued: “Of course India’s shipowners, operators, charterers, etc also have their challenges these days as freight markets are depressed worldwide. However, at International Bunkering we are of the opinion that, with the right product and market knowledge, sufficient access to finances and by adapting continuously to market changes, we can still gain market shares in this big nation whilst serving customers on one of their most vital needs, bunkering.”

Also in January, a major Indian oil, gas and chemicals marketing and distribution company, Aegis Logistics, launched a marine products division offering an “extensive range of bunker fuels, marine lubricants and technical services at various ports.” The company’s president, business development, Rajiv Chohan, said: “We are delighted to leverage our unique strength of extensive tankages across many ports to offer world-class fuels and bunkers to the shipping industry, which takes care of their main concerns around quality, safety and timely delivery that is so critical to this industry.”

Aegis president SO Malhotra, added: “India is poised to grow in the bunker market given that there has been rationalization of duty structure by governments, and we at Aegis Group will ensure a ‘win-win’ situation with our customers. We are here not just to compete but also to contribute to this industry and develop the market.” In addition GAC India has been expanding, opening an office in Pipavav “to cater to the needs of the growing number of vessels calling at the port and principals using it as a base for operations in the Mumbai High oil field, off the country’s west coast”.

GAC now has 27 offices in 22 locations across India. Primarily a bulk cargo port, Pipavav has diversified with the addition of a container terminal handling exports from Delhi and North India, and the LPG Terminal serving the Mumbai High oil field. Administrative problems have often been blamed for the relatively slow progress made by the country’s bunker sector and for uncompetitive prices compared to its direct rivals at Fujairah and Singapore. India is actually a major supplier of bunker cargoes to Singapore, which makes its lack of progress in the bunkering market all the more striking.

At a recent conference in Singapore several players in the Indian market complained that taxation on bunkers imposed at most Indian ports puts it at a distinct disadvantage to competitors like Singapore. Chemoil Adani Pte Ltd chief executive Basheer Ahmed Sayed was quoted as saying that Singapore sources a significant amount of bunker from India and sells it at a lower price. He asked: “How do they do that?” Answering his question he said: “It is because they have removed taxes on bunkers, which make it cheap.” He noted that China’s bunker industry started to grow after taxes had been removed.

Chemoil Adani is a 50:50 joint venture between Chemoil, Singapore and Adani Group India. It is a physical bunker supplier with a fleet of five barges at Gujarat ports, where supply is arranged from the bunkering terminal at Mundra. Supplies to other Indian ports are arranged through Indian state-owned oil companies. State-owned Bharat Petroleum and the country’s two largest refiners, Indian Oil Corporation and Hindustan Petroleum Corporation, are also involved in bunkering.

Among other smaller players is Aditya Marine Inc, which provides physical supplies of bunker fuel products in the eastern coast of India, at Kakinada, Vizag, Gangavaram, Tuticorin, Chennai, Paradeep and Krishnapatnam. Aditya owns a fleet of five barges, of between 250 and 400 tonnes capacity and also runs a fleet of 20 road tankers.

Added 14 May 2012 in the category: Spring 2012
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