World Bunkering > News > Spring 2010 > Making waves

Mustafa Muhtaroglu

An active member of the IBIA board and a prominent member of the Turkish bunkering community, Mustafa Muhtaroglu is frequently seen at industry events around the world and is known, amongst other things, as an expert on the Eastern Mediterranean and Black Sea bunker scene.

DH: Why are you in the bunker business?

MM: Back in 1986 I became sales manager of one of Turkey’s leading bunker suppliers. Then in 1997 I set up my own company Energy Petrol as physical bunker supplier involved with every aspect of bunkering, including sales, operations, cargoes, storage, barge owning and managing, blending, trading, customs, legal and administrative issues. In short, I now have extensive experience of all parts of our industry. I was elected founding chairman of the Turkish Bunker Association which is now approaching its 10th anniversary. This meant representing the whole industry to the authorities and developing a deeper understanding on their part of bunkering and the need to support the sector.

In 2003 I was elected to the then IBIA Council where I got the chance to understand the global issues that affect our industry. Since last year I have been on the new IBIA Board. Since 2005 I have been a member of the Assembly of the Turkish Maritime Chamber. I am on the treasury committee which oversees the distribution of 90% of the Chamber’s income to educational projects.

Looking at prospects now, would you still want to become involved in this industry if you were just setting out on your career?

Yes, I would. Bunkering is a very exciting industry. It is very lively, dynamic, changing rapidly and very international. You have friends and business associates from all over the world and the business can be both fun and profitable. I was born and still live in a city which has one of the world’s most important seaways passing through the middle of it, with over 50,000 ships a year transiting the Bosphorus. In your daily routine life in this city, you feel it, you feel and live ships, you see them every day of your life. While at university I used city sea ferries every day, sailing through big ships to the pier next to Istanbul’s passenger berth. It is really impossible not to be involved with shipping in Istanbul.

You have considerable experience of the recent development of the Turkish bunker industry. How has it changed over the years?

I was in at what was effectively the start of Turkish bunkering. Over the years the industry here has improved greatly. However, we have not done as well as we should have given those 50,000 ships passing by every year. To be honest, there was not a professional bunkering business worth the name before early 90s in Turkey. The first independent and international bunker supply operation was started during the late 80s but the sector only really developed as late as the early 90s. The Turkish business community, even those closely connected with shipping, and also the authorities, knew nothing about shipping. It is a surprising fact that the Maritime Chamber only established a bunkering committee in 2003.

We really lost about 10 years when we should have gained the active support of the authorities. In 1990 Gibraltar sold about 850,000 tons and Istanbul almost the same. In 2000 we sold only about 1.2 million tons but Gibraltar managed about 2.7 million tons. In 2007 we reached 1.6 million tons but Gibraltar sold a record 4.3 million tons. In those 10 years we missed the chance of setting up the required physical and legal infrastructure for the industry.

Things improved greatly once the Turkish Bunker Association was set up. We managed to promote ourselves effectively to the various relevant authorities, including Customs, and consequently bunkering is now recognised as an important area of the Turkish shipping industry.

By the end of 2009 we had become one of the best, most reliable and convenient bunker centres in the region but are still relatively small compared to Gibraltar and Piraeus. We are the region’s third biggest supply centre and are known for having no quality issues and for fast and efficient, trouble-free supplies.

What are the main challenges facing the bunker industry in Turkey, and more widely in the Eastern Mediterranean?

Infrastructure! If there was good infrastructure – including storage facilities and dedicated berths – all ships passing through the Turkish straits would bunker here. We have a very good location, safe seas, and ships usually have idle time before passing though the Straits. Istanbul is the last stop before going into difficult Black Sea ports and the first possible place to take a breath after working cargoes there.

Unfortunately, the opportunity has been missed. Istanbul has grown so rapidly that all possible locations for such a bunker supply centre have gone. Any municipality with vision and shipping knowledge would have established a bunker centre in Istanbul to serve international shipping. If that had happened we would now sell over 10 million tons of bunkers and bring very large income to Turkey from bunkering and other related services such as crew changes, luboil, fresh water and provision supplies etc. The income could be as high as $10 billion or almost 10% of Turkey’s total exports. In 2000 I wrote an article about our “exports at the door”. But the chance was missed.

There is another reason why some countries are more successful than others. In the Mediterranean we only have one real shipping nation, that is to say a truly shipping-orientated society. They are marine people by their blood and they know every aspect of shipping.

Bunkering is a service business and not all countries excel in the provision of services. Therefore, in the Mediterranean area I don’t really expect big surprises. The current supply centres will keep their positions. However, when (if) the nature of bunkering changes and all shipping burns only gas oil as Intertanko has advocated, Istanbul could take the lead. However, we should not forget that Turkey is completely dependent on imports for gas oil.

The global bunker industry is pre-occupied with environmental issues, and currently especially the sulphur issue and now CO2 emissions. How important are environmental issues for the Turkish bunker industry? Is there any demand for lowsulphur fuel?

Turkey has already acted on the sulphur issue. The Environment Ministry and the main regulating body for the petroleum industry, EMRA (Energy Markets Regulating Authority), have already issued several regulations implementing low-sulphur limits for marine gas oil from 1 January 2012.

Regarding low-sulphur fuel oil demand in Turkey, the local bunker industry mainly supplies vessels operating on trades within the Black Sea – Marmara Sea – Mediterranean range. Some 50 % of ships passing through the Turkish Straits stay in the Mediterranean. Very few ships loading from the Black Sea and/or from Turkey sail into an ECA and even those that do have a week or so sailing through the Aegean and Mediterranean where low-sulphur fuel is not required, and can take on compliant §fuel closer to the ECAs. Therefore, I cannot really say there is a huge demand in Turkey for low-sulphur fuel and that will not change as long as the Mediterranean is not an ECA. Low-sulphur gas oil is largely in demand and is widely available in Turkish ports.

As a Council member how important do you think IBIA is? How do you see its role evolving?

Very important. And getting more important. Bunkering and shipping in general have become the target of international regulatory bodies and regulating institutes, to an excessive extent. Shipping carries about 90% of world trade but is responsible for only 2.7% of the world’s total emissions. There are other steps to be taken before concentrating on shipping. However, this is not a negotiable issue any more and we need IBIA more to protect our rights at all international forums. It is not also only about emissions. We need IBIA to promote and represent this important industry at every level and increase public awareness of our crucial support for world shipping.

What effects do you see the economic downturn having on the Turkish bunker industry, and the global bunker industry? Do you think smaller and medium sized firms will be able to survive or do you expect significant consolidation?

50,000 ships transit the Bosphorus a year

The same number of ships passed though the Turkish straits in 2009 as in 2008. I am not saying, though, Turkey is not affected by the global crisis. I have been part of the shipping community here since 1986 and I have never seen such a huge number of ships laid up. Turkish shipping authorities have allocated special locations for the hundreds of vessels now in lay-up. It is worse for shipbuilding; Turkey had recently climbed to number five in the global shipbuilding league. Now our yards are really in trouble, with cancellations, no new orders and no prospect of recovery before 2011 or even 2012. The Turkish bunker sector achieved the same volume in 2009 as in the previous year, about 1.5 million tons. As a company our volumes were in fact slightly up, by 3%, despite several availability problems in Istanbul.

In the meantime the global bunker industry is going through some confusing times. Some players have experienced such times before and know how to manage it. However, those players include funds and certain credit bodies and it will be interesting to see how they will react in such circumstances. It is very likely that profit margins are better for such bodies but they run risks which are difficult to assess.

We are hearing about bad results from the shipping giants but no one knows how much is due to bunker costs and hedging debts or who is involved. I believe people with traditional bunker knowledge will lead and define this period, and hopefully enjoy the benefits of the recovery.

I don’t think there will be consolidation. The smaller firms become more profitable and may be more healthy. It can be the case that some smaller players are squeezing bigger ones and maybe some larger companies need to acquire those smaller operations in order to balance their portfolios and profitability.

Bunkering is a unique industry. It is based on human relations and service. Some smaller companies become much closer to their core portfolios while bigger companies cannot really get involved in such niche markets but their typical credit issues are much more stressed and restrictive. On the other hand I don’t expect any surprising new entrants into the bunker business. There may be some consolidation, but it will be very limited.

Finally, what makes the bunker industry tick? Is it all about cut-throat price competition or more to do with building relationships and trust – or a bit of both?

A bit of both. No-one will pay more just because of good relationships but nevertheless price is not everything. Buyers never like to disclose their hands; however, they are very careful when choosing their suppliers. They are perfect in judging and balancing price, service and relations items all together. Time is not money now as it was in the past but bunker buyers will always value quality, quantity matters, timely deliveries, trouble-free bunkering and always calculate what they pay for and get.

Bunkering is really a very strange industry. The bunker industry is really important for shipping and shipping is one of world’s key economic activities. Without shipping we wouldn’t enjoy our current standards of living and bunkering keeps shipping going. I don’t think any other industry making such an important contribution to global transport would keep such a low profile. In the meantime the bunker industry is really very capital intensive and rather modest and easygoing. And shipping gets a good deal from the bunker suppliers who, even in times of crisis, provide credit terms customers would not get when making other purchases.

The bunker industry, however, does not get the respect it deserves from the rest of the shipping community, something I find hard to believe even after 24 years in this business. While serving the shipping industry is bunkering’s top priority, our sector is the last in the line as far the shipping industry is concerned. This could be a legacy from the1970s when oil was too cheap but nowadays we are really one of most important parts of shipping. Bunker costs may be half of the total cost of any voyage and good bunker purchase and supply can make the whole voyage profitable especially in today’s markets. However, this situation is our own fault and we all have to try to change this impression. I believe local chambers and associations, and at international level IBIA, can do this and we all have to work hard on this issue.