2016 March 22
Economic and legal aspects of the bunker market development in the Primorsky Territory raise much discussion related to technologies and interpretation of laws.
Kings of heavy fuel oil
As it is well known, an amazing growth of bunkering market seen in the Primorsky Territory two years served as a background for new bunkering and stevedoring projects. According to IAA PortNews’ Analytical Department, bunker sales in the Far East region almost doubled in 2014 to 8.1 mln t which is a half of all bunker sales in Russia (Russia accounts for 3% of the global market). It was then followed by an irresistible fall of bunker sales.
Three major ports of the Primorsky Territory – Nakhodka, Vostochny and Vladivostok account for over 80% of bunker sales in the region. More than 3.5 mln t of marine fuel was sold in Nakhodka in 2014 and 2.2 mln t in 2015. 48 companies sell bunker in the region (almost a half of all bunker suppliers in the Russian Federation). The leaders of the regional market are Russia’s leading bunker suppliers – RN-Bunker (Rosneft), NNK-Bunker (NK-Alliance) and Gazpromneft Marine Bunker.
According to IAA PortNews data, market segments in the Far East of Russia in 2015 were as follows: RN-Bunker — 33%, NNK-Bunker — 22%, Gazpromneft Marine Bunker — 14%, Transbunker and Tranzit DV —8% each, SC Pavino — 6%, others — 9%. The leaders of the region’s major bunkering port, Nakhodka, are RN-Bunker, NNK-Bunker, Gazpromneft Marine Bunker, SC Pavino, Fesco-Bunker, Trans-Bunker and Tranzit-DV.
Despite relatively stable throughput of the region’s ports (general growth of 5% in 2015 with Vladivostok and Posiet showing the fall of 16% and 3% accordingly), bunker market recession of the past year and a half is mostly explained by a fall of transit bunkering which used to account for almost a half of all sales in the region.
The number of transit vessels’ calls was mainly affected by fuel prices fluctuation and their level against the foreign companies’ prices. In 2014, the difference of HFO prices at the ports of Russia’s Far East and at Singapore, the largest bunkering port of the APR was as high as 30–35% (with the domestic price of $800 pmt). In the first half of 2015 the difference decreased to 20% following the fall of oil prices. Heavy fuel oil became almost two times cheaper. By the end of 2015 the prices became equal amid the deficit of oil products in Primorje. Moreover, light fuel prices exceeded those at the port of Singapore by 11%. Therefore the number of container carries calling at the ports of Russia’s Far East to be bunkered with a cheaper fuel decreased considerably. For example, in January 2016 the scope of bunkering at the offshore terminal of port Vladivostok plunged almost 7 times, year-on-year, from 40,500 to 5,700 t.
Another cause of the market stagnation — customs ban on bunkering of transit vessels. On the one hand, the customs bans duty-free sales of fuel to transit ships. This measure serves the economic interests of the state but is not an advantage for those sell and buy the fuel. On the other hand, the customs provides this opportunity as a bonus if a vessel changes its status and becomes a participant of a cargo operation, mostly imitatively. Fuel is then bought through as replenishment procedure. Duty-free bunkering at off-shore terminals with amount calculated in view of a specific route for a specific vessel would be an optimal solution. They say the new procedure is under development. Meanwhile there is an interagency conflict of interests due to different interpretation of regulations and rules.
Harbor transshipment centers
In 2015 the conflict resulted in interference of RF President who ordered to introduce severe control of authorities related to the market of bunkering services. Under the order number 68 issued by Russia's Ministry of Transport, loading/unloading operations required for bunkering of transit vessels should be performed at dedicated harbor transshipment centers (HTC). Being in charge of the procedure enforcement, regional Harbour Master’s Office provides quarterly reports to Moscow authorities. Availability of HTC Vostochny 1 caused disputes between the customs service, Harbour Master’s Office and the maritime business.
Apart of Vostochny 1 at Vostochny port, there are two HTCs at Slavyanka. Besides, HTC is to be launched in Popov Bay at port Nakhodka. As for charges for the use of HTC, its regulation is beyond the competence of port authorities. The rates depend on the demand, recovery of investments and risk coverage.
Launching of own HTCs by any market player could be an alternative solution. There are no restrictions for investors here, except for those set forth by the law.
Tamara Patrakova, Head of Ports Department at Far East Maritime Research Institute (FEMRI OJSC), says that seven HTCs have been designed for Primorje ports’ water areas, one more is under development. All of them have been designed by DNIIMF specialists to the orders of private investors.
Private HTC is a combination of technical, procedural and commercial aspects. On the one hand, it is a part of the water area with certain coordinates and a special structure consisting of a mooring buoy fixed to the bottom with a chain and a weight. On the other hand, it is a prescribed procedure correlated with the port operation schedule, plan of emergency response activities, etc. As a private investment facility HTC is an instrument of commercial activities with the rates regulated by market relations.
A fundamental condition for HTC establishment is the point of its location specified by a Harbour Master. When the location is approved, the institute makes all calculations required for efficient ad safe operation. HTC is a standard structure consisting of a fixed mooring anchor, a chain and a buoy. Its parameters, as well as the area depends on the tonnage of expected vessels. The largest HTC intended for 400-meter long boxships is placed at Slavyanka. It takes FEMRI a month and a half to design a HTC. Detailed engineering takes one more month. Yet, final approval of HTC requires tests including soil survey which takes certain time.
When defining a location there is a possibility to select a thoroughly surveyed place within the port’s water area or to find a new one. Of course, the firs alternative is less costly and takes less time.
How much time does the approval take? According to Aleksandr Kuvshinov, head of the advisory department of the Administration of Seaports of the Primorsky Territory and the Eastern Arctic, when properly arranged the process can take 3-5 months from application till having HTC put into operation and on the register. “The first HTC was put into operation two years and a half ago and it is frequently used. Two HTC have been placed and underwent technical inspection at Vladivostok. As of today they are under the procedure of approval and introduction of amendments into the Compulsory Regulations at Seaport Vladivostok”, he said.
“As for the service fee, it is based on the investments and potential risks. Under the order number 68, operator is in charge of both technological and operational issues. All the responsibility related to safe navigation, environmental and other risks is born by an operator. Full-scale bottom survey by one of Russia institutes is said to cost tens of millions of roubles. 100-tonne anchor with a chain and a buoy costs RUB 35-40 mln, excluding extra costs (an operator says). This investment is certainly much less than that could be spent to response to water area pollution. A positioned vessel surrounded with booms ensures more efficient protection of environment”, explained Aleksandr Kuvshinov.