Inside Opinion: Singapore Bunkering Going Against the Flow

There has been a lot of talk recently regarding the Singapore MPA's decision to make flow meters mandatory for bunker supplies there.

I alluded to some views in a previous Insider blog whereby I questioned whether this is really a workable solution for ports like Singapore where there is, as most are aware, an issue over quantity disputes. As a background the reason for this is, quite simply, that Singapore is massively competitive as there are so many suppliers in the market.

It is also a port where price visibility is very high. So it is hard to make a margin.

It is possible to get what you pay for in Singapore, and it is by no means the worst port in the world for disputes. However, suppliers have and do short deliveries to pump up their margins. The balance is then usually sold on and the cash pocketed.

We've seen a couple of cases over the last few weeks of people up in court over criminal corruption charges over this practice.

It is great to see Singapore doing something about this issue. Meeting it head on is quite a bold and pragmatic approach for the MPA, who have faced criticism in the past for not being as direct on this as they might have been.

I will say I have always found them to be honest and extremely professional in all my dealings with them over the years and they are an organisation I respect a great deal. They have a uniquely challenging and influential role in an extremely challenging business and generally do it extremely well.

(Not) The Right Way

But the mandatory flow meter thing I think is not the right way. I can see why they have suggested it and applaud the sentiment at least.

The issue is that Singapore is the world's largest and most important bunker port and hosts thousands of bunker calls per year, for a substantial slice of the world merchant fleet. The MPA rightly point out that coriolis flow meters such as the Emerson offerings we've all seen at the many bunker business seminars over the last few years would eliminate quantity claims

That is unarguable, although The Bunker Detectives have recently suggested there could be ways to beat even these fantastically accurate and technically advanced pieces of kit

This accuracy and technical precision is not cheap. Its a serious investment, and with great swathes of the world fleet either not earning enough to cover operating costs or on a break even knife edge, such acquisition and installation (and training, we assume) sums are not inconsiderable

When some owners are not making enough to pay crew and are delaying bunker bills by months, it is hard to imagine the one off flow meter cost per vessel is not more burdensome on some than their modest enough ticket price may suggest. Multiply this by a couple of  dozen or more for larger owners and it all mounts up.

I'm not suggesting they can't do it, I'm just suggesting that it will take time. A lot of time.

The Affect on Bunker Quality

The next issue that springs to mind is that the local market will face a paradigm shift in trading conditions. We have all read the startlingly candid admissions from suppliers that their business model makes little economical sense without measures designed to ensure they make a worthy cut.

What is going to happen when the more unscrupulous suppliers are unable to make money via playing quantity games?

It doesn't take a genius to figure out that the various bunker testing labs taking samples from Singapore suppliers are likely to see a good degree more water, silicon, tank slops and other bits and pieces in their samples as local suppliers turn to the other metric - quality - to make their cut.

The flow meters will not help much in this regard.

So the simple economic rule underpinning this is that it is probably safe to say Singapore may not be the cheapest place to take bunkers for much longer. Common sense suggests that the number of local suppliers will diminish drastically and the average price per tonne will increase.

Locals ports with no flow metre rules stand to benefit of course.

The simple truth here is that no one silver bullet magic solution exists here. Tackling such a big issue is admirable, but it requires big actions, and not a headline grabber to show the media the issue is being taken seriously, as some have suggested this flow meter rule could be.

Clearly the market is bloated and halving the number of suppliers there would be a good start, although how do you do that, in practical terms? Not easy.

Tough Action

Jailings and tough action against perpetrators proven of it are also positive and I don't think anyone reading this could deny that. It is expensive though and is costing the Singapore Government millions to push through. Clearly it is not the solution on its own.

Then you have the suggestion that the MPA administer some sort of scheme as I outlined in a previous blog, whereby they ensure the suppliers get their defined cut and the end users get what they paid for.

I'll be the first to admit this is potentially very complicated, costly to administer and run.

I do agree that flow meters are a key part of the solution, though I suggest not as a mandatory one for reasons mentioned above. Perhaps some incentive linked to port dues / bunker only etc for vessels that carry flow meters, versus ones that do not? Surely that carries the benefits but not the issues?

Best of all it continues to assure Singapore's position as leading port in the region for bunker calls and traffic is not driven in the arms of others nearby.

We all feel like we have a stake in this game because many of the people reading this blog, like me, have a professional interest in it.

So, I'll end by acknowledging fully that it is easy for me to sit in an office and reflect on ways to end quantity disputes in Singapore. Blogging about your thoughts is easy.

Actually tackling the issue as the MPA are doing is a rather more formidable thing and they should absolutely be applauded for doing so.

It has in the past seemed like a tar baby (or should that be IFO380 baby?) that is best left well alone by all concerned, and taking it on directly is very much a trip into the unknown. Nobody has tried to do anything like this before, certainly not on this scale, to my mind anyway.

How successful they are will be something we will not be able to judge fairly for some years yet.