Adrian Tolson, Senior Partner at 20|20 Marine Energy
The recent news from Veritas Petroleum Services (VPS) regarding fuel contamination issues, which hit over 30 vessels in Houston is hard evidence of the serious problems and challenges that we have within the bunkering industry. The reality is that there have already been many rumors already this year about the significant outbreak of fuel quality issues in the US Gulf Coast between February and April. It has been estimated that at least 50 ships have seen claims, due to problem fuel, causing a range of technical issues, and in some cases a complete loss of main engine power. Further reports see these claims extending to the Panama Canal and it would not be surprising if this extended further afield.
VPS has stated that the within the samples they have tested, there has been a presence of 4-Cumyl-Phenol, which is used in the manufacture of epoxy resins and as an emulsifier in pesticides, both of which utilize the adhesive qualities 4-Cumyl-Phenol exhibits. It is also undetectable by analysis of standard ISO parameters, and only realistically identified by following more complicated post damage testing for contaminant chemical compounds. The industry is worried and surprised by the frequency of problems and its seeming inability to prevent them. I am not!
In 2007 cutter stock from the US Gulf Coast found its way to all corners of the bunker supply world and the results were catastrophic for many.
Clearly, the bunker industry likes to operate in a blissful state of amnesia. Surely it can't be that the similar types of claims that have been so prevalent within the industry over the past 25 years and more have simply been 'forgotten'? Some of the more recent claims events, such as in 2013, were isolated to the Gulf Coast (2013). However, in 2007 claims seemed to tear their way through the entire global bunker industry – not to mention the myriad of ship engines - impacting almost every major supply port. While the origin of these contaminants is not exclusively the US Gulf Coast, a great number of them can be traced back there. Cutter stock has a way of moving itself around the world either as a cargo on its own or blended into fuel oil; both have been and sold on ISO specifications with scant regard to being basically basic "fit for purpose" for sale, or definitely with no regard for, or ignorance of ISO 8217, Clause 5. In 2007 cutter stock from the US Gulf Coast found its way to all corners of the bunker supply world and the results were catastrophic for many.
Amnesia might be explained by new participants in the industry discovering problems without the knowledge of what went before. However, the less charitable – but frankly real scenario – would suggest that in many cases the same participants repeat the same mistakes over and over again; those who do not learn from history are destined to repeat it!
It is therefore no surprise that the industry witnessed significant contamination challenges in 2007 and 2013, which were eras of peak bunker prices.
It is easy to blame those who pedal these marginal components to suppliers, or suppliers who buy them themselves. However, it is perhaps more prevalent to blame the industry as a whole for not ensuring that there is clarity on what is being purchased, and that there is a complete understanding of the whole supply chain. The reality is that it is indefensible considering how many times these problems and issues resurface, and the massive risk and danger the bunker industry exposes its customers too.
Suppliers will defend themselves saying that margins are under pressure and that they must buy the cheapest components. At least they feel this way until the lawsuits start and the claims mount into the millions of dollars. While saving money has much to do with these problems it is something of an irony that rising oil and fuel prices seem to lead to contaminant issues; chemical contaminants that find their way into bunkering enter the supply chain not only because of supplier amnesia but because bunker prices have risen to a point where the producers can get a better return from the bunker supply chain than selling into their normal outlets. It is therefore no surprise that the industry witnessed significant contamination challenges in 2007 and 2013, which were eras of peak bunker prices. Can it therefore be a surprise that we are dealing with this problem as the bunker market is well over $400 a ton, and crude over $70 a barrel?
given the industry's horrendous track record, it will be good news that some suppliers and wholesalers will drop out
Ultimately, the bunker industry needs to understand that a fuel that "meets ISO specs" is not a real excuse to a Captain who finds his ship drifting on the high seas from engine failure. It is unacceptable that suppliers in the bunkering industry knowingly take these risks and then try and justify it when there is an issue. Surely it is therefore time that blenders and suppliers fully warrant the quality of their fuel, even if it is sold in the Platts window. Knowing and understanding the supply chain is the only way to ensure this.
And how does this impact feelings as we move towards 2020? The residual-based bunker industry is going through an existential crisis as we approach 2020 and perhaps, given the industry's horrendous track record, it will be good news that some suppliers and wholesalers will drop out.
Of course, there is a worry that 2020 will bring more sub-optimal non-salable blends; this specification change is worrying enough without sharing it with the chemical waste disposal industry. Now is the time for the industry to get its house in order and raise the level of professionalism. If this means losing a few participants as collateral damage, then so be it. Bunkering will be better for it.