Feature: Add (Calorific) Value to Your Bunker Buying

by Alok Sharma, Senior Vice President, Inatech
Friday November 1, 2019

Buying bunkers should be about more than just price. Particularly now, as alternative fuels and blends are coming onto the market to meet the demands of the post-2020 fuel landscape, it is essential to know what you are putting into your ship's tanks. What matters is not just the fuel's quantity and price: its energy content is also important and becoming more so. In response, the traditional way of doing business needs to change, and is changing.

Your ship is powered by energy, so a tonne of high-energy fuel is clearly better that a tonne of lower-energy fuel and is worth paying a higher price for. How much more depends on the fuel's calorific value, but that is not a figure that bunker suppliers are usually able to provide.

Anyone can work it out, however, if they know the right formula using five parameters that are readily available from bunker suppliers: density, viscosity, and the content of sulphur, ash and water.

This is a new approach to bunker buying. At the moment, a buyer simply asks for a fuel grade and a quantity, and the supplier replies with one number: the price. Now, buyers should also ask for those five parameters.

Yet if buyers are dealing via a trader, those figures are unlikely to be available. In those cases, trend data will be important, making it possible to estimate the calorific value of a stem based on an average of those five parameters recorded over the previous few months for the supplier contracted to fulfil the trade.

Inatech's fuel management platform Shiptech can quickly calculate calorific value from those parameters and holds historic data. Shipowners and managers would benefit from additionally building their own database of parameters from their regular bunkering ports to make their own estimates when current data is not available.

The table below lists the calorific values of a number of fuels, but these figures can vary. I have seen differences of around 2MJ/kg between different batches of HFO, which is a range of about 5% in the amount of energy actually being bought. On a stem costing $500,000, that represents $25,000-worth of extra energy at the higher end of that calorific value range compared with a fuel at the lower end, which is a significant amount.

If the choice is between HFO and marine gas oil, the difference in calorific value shown in the table is about 10%, which provides a guide to the premium that might be worth paying for MGO. On a stem of 1,000 tonnes at $500/tonne, that extra energy could justify a margin of up to $50,000.

This is at the heart of how bunker buying should be viewed in future: look at the price that is being offered and calculate its specific energy per dollar. After that, there are two ways of using the information: one is to choose the best product available and be willing to pay a premium for it; the other is to buy on price but to use the calorific value to confirm that the price is a fair one for the fuel on offer.

Of course, there is nothing new about knowing the calorific value of a fuel. It's just that in the past it has been a figure that has been calculated later for reference. I believe it should now be recognised as vital intelligence so I am making the case for bringing it to the forefront of the buying process. This creates a much more intelligent way to negotiate and will be essential as new fuels enter the market.

There are already widely-known concerns about compatibility between low sulphur fuels – even between batches supplied by the same refiner but in different parts of the world – so it should come as no surprise that there is also variability in the calorific values of apparently similar fuels. For those who have always taken for granted the consistency of, for example, RMG 380 fuel, these new uncertainties may be unsettling for the first year or so of the new era.

Not everyone will be able to adapt to this change in approach. We incorporated it into Shiptech during 2018 and spoke to all our customers about this variability at that time. About half of them have adopted this approach while others feel it is a little too complicated for a variety of reasons. For some, the size of their operation does not justify changing their approach; others feel they do not have enough leverage over suppliers.

Looking further ahead, a method must be found to compare different types of energy sources. LNG, LPG and other novel fuels – such as methanol, ethanol and hydrogen – may become significant options, and calorific value will be the only way of comparing them from a commercial point of view.

There will be technical factors to consider when comparing those fuels of course – how they are handled and stored will also influence a shipowner's decision on whether to rely on them, but comparing one fuel against another to establish whether it is an economical store of energy is vastly simplified by looking at its calorific value. And so, my advice boils down to this: try to get more bang for your buck.

* Fuels which consist of a mixture of several different compounds may vary in quality between seasons and markets. The given values are for fuels with the given density. The variation in quality may give heating values within a range 5 -10% higher and lower than the given value.

Source: www.engineeringtoolbox.com. Used with permission.