INTERVIEW: New Alliance Seeks to Crack Down on ARA Quantity Disputes

The ARA hub is the world's second largest marine fuel delivery location after Singapore. File Image / Pixabay

A group of marine fuel and shipping firms has joined forces in a bid to set higher standards for bunker supply at the Amsterdam-Rotterdam-Antwerp (ARA) hub.

The Bunkering Services Initiative will bring together companies representing 20% of ARA's bunker volumes, committing to robustly-monitored barges with mass flow meters, digitalised deliveries and transparency on marine fuel quality.

The initial participants are Cargill, Frontline, Hafnia, Hapag-Lloyd, Mercuria, Minerva Bunkering, Oldendorff, Trafigura, TFG Marine, Unifeeder, and Vitol. Lloyd's Register will act as system auditor carrying out checks on barges, while ADP Clear Pte Ltd will be its technology partner for multi-party workflows, real-time reporting and verifiable performance metrics.

The initiative is setting out to improve trust in the level of service offered in ARA, one of the participants' managers said in an interview with Ship & Bunker.

"For the industry it will increase trust and efficiency, because we have standards and a system that can provide certainty over quantity control, and traceability and visibility on fuel quality throughout various different points of the supply chain," the manager said.

"There's also certainty over the integrity of the last mile logistics, which is the bunker barges.

"Those are physically inspected on a surprise basis and audited to ensure compliance with the standards and integrity of the mass flow meter system."

ARA Quantity Disputes

The ARA hub has long been one of the focal points for the industry's discussions around quantity disputes. Some suppliers are widely reported as frequently delivering less bunker volume than was paid for, either accidentally or deliberately, meaning shipping companies pay more than they expected to for the amount of fuel they actually receive.

Adrian Tolson, then head of consultancy BLUE Insight and now running 2050 Marine Energy, published research in 2022 suggesting that about 3%, or about $150 million/year, of the bunkers recorded as delivered at Rotterdam were never actually pumped on the ship.

Rotterdam and Antwerp-Bruges are in the process of mandating the use of mass flow meters by their bunker suppliers from next year, but some in the industry have questioned whether the regulation being used will be sufficiently robust to ensure the meters are being used properly.

The initiative is geared towards giving shipowners information on which suppliers are committing to accurate delivery volumes.

"We think it eliminates one of the biggest challenges that buyers have, which is how to make their best economic procurement decision when they know today that price is a very crude proxy for value," the BSI participant said.

"This is to say that variances in quantity actually delivered and fuel quality can be much more impactful than the difference in price between competing offers, so how do they choose what is best for their companies? 

"With the BSI, price represents value; that is really the objective, that's a big enhancement for buyers.

"For suppliers, the BSI standards create a level playing-field, so competition is based on performance and economic efficiency, and it's not based on variances in business practices or ethics."

Surprise Barge Checks

Lloyd's Register's role in monitoring the barges used by suppliers in the initiative will include surprise checks of their layout and how their mass flow meters are calibrated.

"The BSI has a set of protocols for them to both qualify barges that are going to be utilised by participating suppliers, and then also to inspect those barges on a surprise basis, to ensure that sealing plans, piping plans and the MFM system itself are all compliant," the manager said.

"All of the documentation related to each qualified barge is available to buyers in the technology platform provided by ADP Clear."

As part of the initiative, data from barges' mass flow meters will be taken automatically into e-BDN generation.

The system will also provide traceable fuel-quality measurements throughout the supply chain.

Shipowner Commitments

For the shipowners joining the initiative, they will guarantee a share of their volume requirements in ARA will be taken only from suppliers who are also participants, to help those suppliers make back some of their investments in the initiative's systems.

"They're providing some assurances of demand to the suppliers that are embracing these standards," the manager said.

"They have some volume commitments that they're making to what is a competitive marketplace and open to anyone who wants to participate."

These shipowners are likely to face more of a two-tiered market in ARA from now on, with those suppliers in the initiative likely to charge a little more per tonne than others because of their commitment to accurate delivery volumes. 

But the move to more reliable volumes measurements is likely to prove to reduce costs overall for those buying from the initiative's suppliers, the manager said.

"We believe having a tier of the market in which there's robust competition, but on a completely level and standardised playing-field, will be a great development," the manager said.

"When it comes to what any price difference there could be versus other players in the market that behave differently, I think we'll have to see how it evolves.

"What is clear is that the initial buyers are some of the most sophisticated in the market, and none of them are doing this to increase their costs. 

"They have all independently concluded that they will be saving their organisations money by operating in this manner."

Rollout to Other Ports

The new initiative is still in its infancy, and whether or not it succeeds in ARA will be a major factor in whether the system could be rolled out to other bunkering hubs where quantity disputes are a prominent feature.

But its backers believe it's a system that could work at other locations.

"We believe the structure and standards are universally applicable," the manager said.

"We'll see how it develops in ARA and then if there's interest in taking this approach to other markets - that would be for the industry to decide."