A white paper sponsored by two John Fredriksen companies and Trafigura is calling for radical change in a bunker sector rife with “questionable” practices.
The fuel supply joint venture TFG Marine, owned by Trafigura, Frontline and Golden Ocean Group, asked expert Adrian Tolson to examine how the industry can modernise.
In the paper, Tolson, owner of 2050 Marine Energy and a director of the International Bunker Industry Association, makes the case for the widespread use of calibrated mass flow metres (MFMs) to eradicate costly inaccuracies.
This will also provide much-needed transparency by generating real-time data for all stakeholders in the supply chain, he argues.
The report notes the success of Singapore’s MFM-based bunker licensing system as a template for regulators in other regions.
MFMs measure the rate of flow of mass through a pipe by mapping the inertia of fluid in motion, using the Coriolis effect.
By contrast, many refuelling operations still use ullage tables and tank soundings, a strictly analogue method of operation.
“The bunker industry urgently needs to modernise and embrace transparency. The traditional practices that persist across its supply chain limit efficiency, constrain growth, hamper industry-wide efforts to reduce [greenhouse gas] emissions, and increase the cost of international trade,” Tolson writes.
“Over the years, bunkering has evolved as a highly competitive, low-margin industry where the lowest headline price wins the business. Counterparties have been less exercised by the quantity or quality of fuel delivered, its energy content and the service levels they experience.”
Tolson warns that this creates the risk of a race to the bottom.
He says “opaque, sometimes questionable, working practices” have developed, becoming a systemic issue for the industry.
High cost of inefficiency
It has been estimated that customers lose up to $5.2bn every year in quantity shortages, while the time lost from delays, disputes and arbitration is put at a further $2.2bn.
“Entrenched interests in shipping and bunkering stand in the way. The major supply chain participants and regulators need to work together to make change happen in the long-term interests of the bunker industry and the global economy,” Tolson said.
Decades of wafer-thin margins and chronic commoditisation have resulted in an undercapitalised industry that remains steeped in outdated practices, some of them unethical, he explained.
Analogue measurements and tank soundings can be challenging in real-world conditions, and the accuracy of ullage tables is also debatable.
“These mechanisms are clearly sub-optimal, yet they are still widely viewed as acceptable and an unavoidable cost of doing business,” he said.
Swift transition needed
When fuels are pumped from a barge to a receiving vessel, the flow may not be consistent. There might also be fuels of different densities, temperature and water content, as well as those with trapped air.
Tolsen says there is continuing concern that early adopters of MFMs will place themselves at a competitive disadvantage.
“But this only strengthens the case for swift transition,” he writes.
“Industry stakeholders need to join forces across the bunker supply chain to promote standards-compliant mass flow metering internationally.
“Adopted worldwide, it will be transformational. What is needed now is for the industry to work together to make it happen.”
