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2016 May 17

No Klondike?

The Far East region of Russia expected to become a ‘bunkering Klondike’ shows a plunge in sales of marine fuels amid the oil market situation and intensified pressure on business.

Long-term prospects

Bunker sales at the largest bunkering centers of the Far East have plunged in the 4-month period of 2016. 

According to the data provided to IAA PortNews by the Administration of Seaports of the Primorsky Territory and the Eastern Arctic, total amount of bunker sold at the offshore terminal of port Nakhodka (Primorsky Territory), the largest bunkering center of Russia’s Far East totaled about 235,000 t in January-April 2016, half of the volume sold in the same period of the previous year (498,000 t). The number of bunkering operations performed this year decreased from 744 to 595. Heavy fuel oil accounts for over 90-95% of sold fuel with fuel containing material making the rest of the amount (last year proportion was about 70%/ 30%).

Bunker sales at the port of Vladivostok sank three times. In the 4-month period some 135,000 t of fuel was sold there (against 418,000 t sold in the same period of 2015). One third of this amount was sold via the off-shore terminals (western, eastern and inner ones) with the rest sold in the port. Heavy fuel oil amounted to some 102,000 t, fuel containing material – about 30,000, diesel fuel – 3,000 t.

The third busiest center of the region, port Posiet, also saw the fall of bunker sales. Total amont of bunker sold at the Slavyanka terminal, at the offshore terminal and at port Posiet in January-April 2016 amounted to 68,500 t, down by one third against the 4M’15 result (103,400 t). The number of bunkering operations fell from 49 to 37. Heavy fuel oil accounted for more than 95% of sales.

So the trend is both the decrease of general sales volumes and the reduction of light oil products share.

As market players told IAA port news, the situation should be attributed primarily to macroeconomic factors. Amid sharp devaluation of rouble against main currencies and unpredictable fluctuation of the rates bunkering companies tended to purchase smaller batches of fuel. Refineries, on their turn, are interested in larger sales. Therefore they tend to overprice smaller batches of fuel. In this context heavy fuel oil prices at Russian ports proved to be slightly lower than those at the Asian bunkering centers while light oil products prices were equal or exceeded then in certain periods of time. 

According to IAA PortNews bunker prices review, heavy fuel oil prices at the port of Vladivostok are only $20 lower than those at the port of Singapore, diesel fuel is cheaper by $46. In the beginning of the year diesel fuel price was higher in Vladivostok and in spring it was almost the same as in Singapore.

Besides, the development of the bunkering business in the region is hindered by the policy of state authorities which decided to tighten the control of oil product exports. RF President Vladimir Putin earlier demanded that exports of oil products registered as marine stores not subject to export dues should be stopped. The amount norms for bunker fuel transported by vessels as store have been developed but not put into effect yet. However, before the norms are approved officially, customs carry out an audit and charge bunker suppliers for taking on “excess” fuel. The amount of fuel stored in excess of the norms is calculated on their own. We covered this issue earlier >>>>

It should be noted that some investors have announced their plans on attraction of large ocean going lines to Far East port.  It should be due in no small part to more profitable bunkering as compared with the Asian ports. They counted on multiplicative effect form such calls.

Vitaly Chernov, Marina Borisenko

IAA PortNews review of bunker prices in different centers can be provided in English upon request >>>>

The issue will be also discussed at the 9th Forum “Current State and Prospects for Development of Russian Bunker Services Market” on June 23-24 in Saint-Petersburg >>>>