SA’s ship bunker prospects hold limited short-term potential

Although there is a growing market out there, it’s going to prove a near unassailable peak for the SA ship bunkering industry to summit, according to an FTW source in the oil industry. It's an area that deserves attention, Andrew Thomas, CEO of Ocean Africa Container Lines (OACL) and chairman of the SA Association of Ship Operators and Agents (Saasoa), told delegates at an Industrial Development Corporation (IDC) Conference last year. Referring to areas in the maritime industry that need to be focused-on in the proposed SA Maritime Policy (SAMP), he said: “Capacity in our regional landside systems remains limited, congestion and delays are common, and internal logistics costs are higher than average. But there are several projects that should be considered.” As one of these Thomas included bunker supply as a more minor but possibly rather vital industry sector that needed further thought. Looking at potential market growth he pointed out that around 1 000 vessels called at the Port of Durban in 2007 just to bunker. And this figure was up from 400 in 2004. “From a Saasoa perspective,” he said, “shipowners would be tempted to call for bunkers in SA.” But SA has certain limitations on its international attraction as a bunkering port, Thomas added. “Due to shutdowns we are unable to supply bunkers for around 11% of the time,” he told FTW. “In addition SA is only able to supply 180- centrestroke (cst) bunkers while 70-80% of the world market is for 380-cst.” The price differential between the two grades, he reckoned, can shade up to around US$100-a-tonne. “Can government policy and willing investors create the environment for the supply of 380-cst in SA ports?” is the question he asked. It was answered by our oil industry contact, who told FTW that developing the bunker market in such a way might be a long-term objective. “But,” he said, “discussion amongst industry leaders suggested that – in the short-to-medium terms – there was no business case to move to 380-cst.” Refineries in SA, he added, concentrate on the primary national demand – for diesel and gasoline products. Heavy fuel oil is only a by-product of the refining process. And currently refineries only have the infrastructure facilities to produce 180-cst HFO. For 380-cst, it was stressed that a lot of new infrastructure would be necessary to produce and to handle an oil grade that requires heating to remain fluid. “To provide the necessary heating, there would be a need to install boiler systems,” said the source. “Heated pipelines would also need to be laid from whichever production refinery to the port, and the oil storage area at Island View would need heated tanks – which it currently doesn’t have.” Such a development – especially the pipelines – would also face another possible social objection. The passing of an environmental impact assessment (EIA) study would be a necessity before construction could begin. He also questioned whether the market demand was actually there to make such a project economically feasible. He asked what potential income there was to justify the investment. “Will the market justify the capex expenditure and the money needed to invest in the infrastructure?” At the moment, he added, the answer would be NO! However, although it shouldn’t be seen as a hope for tomorrow, long-term strategy might eventually justify such a move.