Marine Fuel Solutions

Cockett Marine Oil Group | www.cockettgroup.com Tel: +971 44 255 100 | Fax: +971 44 255 111 | Email: dubai@cockett.com

5th European Bunker Fuels Conference Rotterdam May 2014Chris Turner Group Technical Manager

A New Dawn

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To what extent will European ships move over to gasoil?

How will suppliers and end users have to adapt to the upcoming changes

Trader Perspective to what is just around the corner…

1st January 2015 heralds one of the biggest changes in the history of Bunkering

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So now what?

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Liner / Short Sea routes have opportunities to consider alternatives such as LNG and scrubbing technologies

If they build it… they will come … but when ?

Not enough time for players to act

Any 0.1% FO will be hoovered up by large contracts – unlikely too see this in Spot market

0.1% also suited to Liner routes, significant operational and technical hurdles to jump

Cold hard truth is there is little option available but to burn DMA 0.1% Sulphur

40 % impact in cost for 6% relative increase in Energy

Will 0.1 be available ?

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A. No Problem in 2015.. 2020 a different story

Demand Europe + 20

KMT /day

Sufficient investment • Closure of Simple

refineries

Demand will impact spread• Tightening of

0.1% in relation to Inland grades

Conclusion• Pricing Incentive

will be there for continued conversion needed

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End User Considerations

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Selection and consideration of

suitable cold flow properties

CFPP, Cloud Point considerations

2010 specification v 2005 Specification

Lubricity protection

DMA v DMZ

2 cSt Min v 3 cSt Minimum Viscosity

Most 2 & 4 Stroke OEM require Min Viscosity before Injection of 2 Cst.

Suitable Lube Oils for longer term distillate

use

Selection of correct BN

Important to follow OEM

recommendations

Purchasing : Proactive planning required to take into account voyages and product availability

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Supplier Impacts

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Purchasing

Cash Flow & Payment Terms

Credit lines

Some smaller suppliers may

exit

Supply Chain

Shore Tank preparation

Suitable Segregation on

Barges

Housekeeping

Bonus !

Traditional LS problems will

disappear

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End User Considerations

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• Rapid changes in fuel temperature will increase the likelihood of pump malfunction and seizures.

• No more than 2 Deg C / Minute

Temperature Gradient

• Fuel pump leakage can result in starting problems at low load

• pump seizures and premature wear due to loss of hydrodynamic lubricating oil film

MGO Viscosity Too Low

• Significant risk between Residual fuels and distillates

• Consider use of Asphaltene dispersant/ fuel stabiliser

Compatibility

• Do not return residue or distillate mixtures back to distillate or MDO service tanks

• Prevention and control of Microbial issues

Housekeeping

• Much easier and less costly for port authorities to check

Compliance

Technical : Switching to and from HFO to MGO 0.1 rather than HS -> LS

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End User Considerations

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Capacity / Equipment

Sufficient storage capacity for MGO

consumption expected

Cleaning / to prevent cross contamination

1% of HFO cross over enough to put compliant MGO off spec

Consider tanks / lines / pumps

In practice buffer cargos will be

required combined with

cleaning.

Change over procedures

Develop and document

Preparation : Timings to ensure Marpol compliance as of 1st Jan 2015 00:01

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Trader Perspective

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There is no education like adversity.Benjamin Disraeli

Counterparty Risk

• 10-15 yrs ago bunkering costs 17-20%• End of Market Spike 2008 50-55%• Currently hovering around 70%• transition period potentially difficult, mistakes will undoubtedly occur

Cash Flow Implications

• Immediate impact 30-40% trade finance facilities required• No correlation between higher product value and increased margin• Short term impacts as markets and banks adjust• Margin erosion continues through a universally recognised tough trading period • Will P&L / balance sheets be suitable to ask for 30% more finance in 2015?

Trader Perspective

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Opportunity : Bridging the gap..

Properly evaluating and pricing

counterparty risk

Compete to gain volume•better financing•smaller players marginalised by new pricing impacts

Accelerate trend of better financed independents aggregating more volume•Oil Majors/Nationals stagnate or retreat from bunkers

•Smaller players increasingly Niche or boutique

Conclusions

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Demand can be met `

Reactive industry tending to be in denial

Significant hurdles to be jumped prior to 2015

Trader Ideal partner to help navigate these stormy seas

Start now !

Are we ready?

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Worldwide Bunker Supplies | Trading • Physical • Offshore

Cockett Marine Oil Group | www.cockettgroup.com Tel: +971 44 255 100 | Fax: +971 44 255 111 | Email: enquiriesdubai@cockett.com

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