Singapore Bunker Meter Mandate Targets 'Frothy Fuel'
Singapore, the world's biggest bunkering port, plans to end the so-called "cappucino effect" in ship fuelling through new meters designed to stop suppliers from short-changing customers, although the industry is warning of a short-term sales dip.
The Maritime and Port Authority (MPA) of Singapore, which sold more than 42 million tonnes of bunker oil in 2013, will be the world's first port to mandate the use of mass flow meters for fuel oil bunkering.
The meters show the actual mass of fuel delivered, preventing suppliers from boosting their profits by injecting air into the fuel as it is pumped aboard.
The practice, known as the "cappucino effect", is currently so common in the industry that bunker tankers can charge ships less for fuel than the price they pay for lifting the fuel from on-shore oil terminals.
"It happens everywhere - it's a standard play in stealing oil, just that Singapore is the bunkering hub in Asia so it's definitely more prominent," said an Asia-based fuel trader.
But ending the practice comes at a cost. Barges using the meter are charging $2 to $10 a tonne extra for fuel, which also takes into account the $150,000 cost of installing each meter.
"Shipowners will be very interested in the meter but they are not willing to pay the premium," said a Singapore-based marine fuel trader with a fleet of seven bunker tankers.
"So that's why we are trying to defer the installation to as late as possible."
Singapore supplies about half of Asia's marine fuel demand. The port authority said the meters were part of its focus on providing quality and reliable bunker fuel, and to ensure Singapore remains a trusted hub for bunkering.
Some traders said the meter mandate, which takes full effect from January 2017, could push cost-sensitive shipowners and suppliers out of Singapore, leading to a fall in sales, at least in the short-term.
"I would not be surprised if some suppliers want to hedge their bets," said a Singapore-based bunker trader, adding that some bunker suppliers could move their barges to nearby Malaysia.
So far, 11 of Singapore's 214 licensed bunker tankers have been fitted with the meter, the MPA said. Expectations are that by the end of 2015, more than half of fuel oil bunker deliveries will be done by metered barges.
However, any sales loss is likely to be short-lived.
"I believe volumes would gradually improve as more shipowners would realize the benefits of a secured system that the meter offers when bunkering in Singapore," said Desmond Chong, general manager of Sinanju Tankers.
(Reuters)
