Bunkering is an industry that is not usually in the spotlight. Quietly and efficiently this industry fuels the world’s ships. But recently the upsurge in the price of oil has impacted everyone involved in shipping, and made the cruise industry think more about the fuel it burns. The price of crude oil has rocketed and bunker fuel prices have risen accordingly.

Although bunker fuel does not follow the daily crude oil price trends, the price of marine fuel oil over the long term shows a close link. Many in the cruise industry have endured higher operating costs caused by more expensive fuel. Several operators have blamed bunker fuel costs for pushing their balance sheets into the red this year; some have even considered adding a daily fuel surcharge to their passengers to overcome the issue.

GREEN TAX

The cruise industry and their bunker suppliers are also grappling with the introduction of air emissions reduction legislation. The first stages of Marpol Annex VI have been introduced. Annex VI sets a global 4.5% limit on sulphur content in bunker fuel. Earlier this year regional enforcement came into force in Europe, with a sulphur emissions control area (SECA) being imposed in the Baltic Sea.

In addition, European legislation has also been introduced, which has been modified to closely resemble Marpol Annex VI. But cruise operators need to take note, because a significant difference is a 0.1% sulphur limit on fuel used by inland vessels and by seagoing ships at berth in EU ports. This is scheduled to come into effect on 1 January 2010. These tighter regulations will impact the cruise industry by raising fuel costs further.

An ironic effect of the recent crude and bunker price increases is that the premium bunker buyers are paying now – and will need to pay for low-sulphur fuel in the future – will look less painful in relation to the overall price of bunkers. But this is cold comfort for those in the cruise industry responsible for buying bunker fuel.

Bunker fuel is a huge expense for any voyage. Price increases have meant that cruise operators are now focusing on fuel conservation and reduction measures. Slow steaming and better engine maintenance practices are renewed priorities. Sorry, there are no polls available at the moment.

“Price increases have meant that cruise operators are now focusing on fuel conservation and reduction measures.”

The costs of the new legislation have not yet been quantified for older ships and unifuel vessels. These do not have the capacity to switch between high and low sulphur fuel. The IBIA has been sounding the alarm about this issue for several years. But ships that are not capable of burning low sulphur fuel are being built even today.

The regulations will become more stringent, with a further SECA in the North Sea and other possible SECAs not ruled out. It will cost money for cruise operators to make sure their vessels comply. The quicker they cope with the new rules, the better.

IN FOCUS

Bunkering as an industry has come of age, and is able to operate in the spotlight. Of course, it is affected by events that happen in the bigger associated industries. It is vital to both the energy and shipping markets – and at the mercy of both. When the energy markets move, bunker prices move. When crude availability is tight, bunkers feel the effects. When air quality laws force refineries to change their practices, bunkers suffer.

Bunkering was at the mercy of regulators and regulations that were not directly aimed at it. Today, bunkering is in their sights, and the industry must be ready to deal with that.

Bunkering has emerged with an identity in its own right – something it did not have even 20 years ago. The presence and visibility of the IIBIA has played a large part in the industry’s development, and as it has grown, the association has become more visible. The IBIA has become a consultative member of the IMO, with the right to take part in debates and influence the drafting of legislation.

Through the IBIA, the bunker industry has a voice and is using its expertise to advise the IMO on legislative issues that affect bunkering. This positive engagement with regulators and other industry bodies is good for everyone involved.

KEEPING UP TO DATE

The IBIA was set up to bring a disparate group of stakeholders together to achieve a common understanding of the bunkering industry. Education was a key part of the organisation, while technical and commercial working groups produced solid reference documents. Today the IBIA is rethinking its goals, not because all of the previous issues have been resolved, but because there are new things that need to be done.

On the technical side, especially in light of high fuel prices, an indisputable quantity measurement system is still needed, so that every ship that takes bunkers can be confident it has received the amount of fuel that has been paid for. With the massive volumes delivered to cruiseships, even a small systemic loss amounts to deficits worth millions of dollars.

For the cruise industry the incentive is already there. Owners expect to receive fair value, and the steep increase in bunker prices means that the cost of bunkers is more than ever a priority.

CHANGING IMAGE

Bunkering was once considered the unglamorous end of the petroleum industry, supplying dirty, low-grade fuel, which the oil majors wanted to distance themselves from. How things have changed.

“Shipping is the most environmentally friendly form of transporting goods, and the bunker industry is its lifeblood.”

Perception now matches reality – shipping is the most environmentally friendly form of transporting goods, and the bunker industry is its lifeblood. And there is plenty of healthy competition between independent suppliers and oil majors to provide the best and most cost-effective product to ships.

Safety is also of paramount concern to the bunkering industry and work has been undertaken over the last few years regarding safe access between ship and bunker barge. The bunker fuel quantity standards will make significant steps to address this issue.

But what of the safe handling and use of bunkers, especially for the ship’s crew who receive and handle the bunkers?

Most suppliers have been providing material safety data sheet (MSDS) to their customers since the early 1990s. But to really be of use this needs to be provided by the supplier at the point of delivery to ensure that the ship’s crew are fully informed of the risks, precautions and safe handling of bunkers.

The IBIA fully supports the need to ensure the MSDS is included at the point of bunker delivery. It does not support the use of the MSDS as a surrogate for managing bunker product quality or as a quality certificate. This is an inappropriate use of an MSDS and would detract from its essential focus of providing safety information for a ship’s crew.

The IBIA has used its members’ industry experts in product stewardship to advise administrations of the right balance for the document that will be presented to the Marine Safety Committee (MSC) of the IMO in November 2006. This will ensure an eventual global harmonisation of MSDSs, the highest industry standards, unambiguous requirements for the production of marine fuel MSDSs, and the supply of MSDSs at the point of bunker delivery.

The role of the MSDS is to help protect seafarers, and it must do just that.

Regarding the bunker industry’s image, and, taking a cue from the cruise industry, the IBIA is trying to inject a little glamour with the IBIA Annual Convention, to be held in Monte Carlo from 23 to 26 October. It is a tight-knit social industry and it will be a great chance to rub shoulders with colleagues in the surroundings.

There will also be the chance to talk about the pressing issues that affect cruise industry bunker buyers. In particular the environment is increasingly a burning question for legislators, and one that the bunker industry must be prepared for. It is one of the main topics to be discussed.

A cleaner environment, with reduced levels of sulphur and nitrogen oxide in the atmosphere benefits everybody. Shipping, the cruise industry and bunkering should be preparing to meet the environmental challenges of the future head on.