Bunkering Restrictions will Undermine Competitiveness of Russian Ports

Restrictions imposed by regulating authorities in respect of the activities of Russian bunkering companies will certainly undermine competitiveness of Russian ports.

Alongside with the reduced price difference between Russian ports of the Gulf of Finland and the European neighbours, the Government restricted bunkering operations to specific locations. Offshore anchorage locations fell under the ban.   

On August 22, 2013, Pavel Strelnikov, Chief of the Central Energy Customs (CEC) forwarded an instruction on the location designated for the customs operations in respect of goods declared as sea stores (including bunker fuels).

According to the document, bunkering operations were allowed only at the berths of specialized oil terminals.

Central Energy Customs of Russian Federal Customs Service authorizes bunkering operations at outer/inner anchorage of seaports, on certain condition though.

According to a teletypogram of Igor Golodayev, deputy chief of CEC, offshore bunkering is permitted for vessels to be supplied with fuel by specialized bunkering companies of vertically integrated structures "as participants of foreign economic activities with a low risk to violate the existing legislation", as well as by "the fleet of other business entities" supplying fuel produced by refineries which were put into operation under orders of RF Ministry of Energy.

A wave of indignation from the community of independent market players had lead to the adjustment of the Central Energy Customs' position.

However, this adjustment even emphasized the fact of whose game the CEC plays.

This order has backed the official letter of Rosneft President Igor Sechin.

He has addressed RF Prime Minister Dmitry Medvedev with a proposal to put implementation of the programme on bunkering market development into the hands of ship fuel producers with a priority provided to companies with long-term contracts.

According to the letter dated September 23, 2013 (IAA PortNews has obtained a copy of it), the volume of Russia's bunkering market is estimated at 8-9 million tonnes per year with subdivisions of vertically integrated oil companies (VIOC) accounting for 70% of sales.

Among such companies Sechin mentioned RN-Bunker, Lukoil-Bunker and Gazpromneft Marine Bunker. He also said that apart form VIOC subdivisions, the Russian bunkering market is represented by a pool of independent players which "purchase fuel from mini-plants, so called 'teapot refineries' producing low-quality products".

"Later these dumped products are sold through shadow and offshore schemes, leading to considerable shortfall of taxes in the budget," Sechin writes.

According to Sechin, state fiscal agencies have no possibility to execute proper control of bunker fuel sales.

The resolution of Dmitry Medvedev orders RF Transport Minister Maksim Sokolov and head of the Federal Customs Service Andrei Belyaninov to elaborate notes on the development of port infrastructure and the bunkering market.

We are following the developments.

Elena Snitko head and lead analyst of PortNews Media Group