World Bunkering > News > Summer 2009 > Malta

Because the island straddles the main Mediterranean shipping lanes, a call at Malta offers the advantage of no deviation from a planned voyage, a powerful incentive for owners. So the island nation should be a near-ideal spot for a bunkering industry to develop. That has indeed happened, but only since deregulation of the industry in the nineties.

John Sullivan, the chairman of Sullivan Shipping Agencies says that, as a result of its location, bunkering at Malta proves to be very convenient and cost effective to many ship and yacht owners.

Increasing activity

Bunkering has become increasingly active over the last 15 years or so due to the development of an oil terminal at Marsaxlokk by Oiltanking. This company, operating four safe berths for vessels up to 120,000 dwt, offers a number of facilities including making and breaking bulk for long or short hauls respectively, and other value added activities like blending and treatment, among others. The terminal has a total storage capacity of over 600,000 cu m in a number of tanks varying in capacity from 5,000 cu m to 35,700 cu m and as a result handles a variety of products.

Mr Sullivan adds: “Bunkers at competitive prices can be supplied offshore by means of dedicated barges at five main locations around the island, thus catering for most weather conditions. Bunkers are also supplied inside the harbour via pipelines located at different berths within the harbours. Moreover, following the economic and social development of Malta during the last 50 years or so, the use of petroleum products for domestic consumption has increased tremendously. This has also contributed to the increase in bunkering activities in Malta, more so as Malta is fully dependent on its oil and gas importation to service its local manufacturing and tourism consumption requirements which have developed and increased over the years. In this regard the island is well served – with its respective providers – to offer a comprehensive service which should satisfy all requirements of those opting to use Malta as a base for bunkering and related services, including ship to ship transfer operations.”

Since the liberalisation of most petroleum products in 1996, bunkering has increased to over one million tonnes of fuel a year and this has mostly been achieved over the last four years or so. Domestic consumption has also increased to the same level or even more but figures in this regard are not readily available. Most products used by the aviation and maritime industries are available in Malta and this includes ‘ultra’ low-sulphur fuel.

“In fact,” says Mr Sullivan, “most domestic consumption is based on low-sulphur fuel and this includes the consumption at Malta’s power stations, most of the automotive industry and most domestic marine industry in accordance with the standards set by the EU.”

Established over a century ago Sullivan Shipping represents the interests of a number of major owners and offers the full range of agency services. The company is particularly active in transhipment and domestic containerised cargo and related logistics and also represents a number of shipowners operating oil and gas carriers calling at Malta to discharge products for Malta’s domestic requirements, as well as for bunkering and related services in and outside harbour.

Demand patterns

Falzon Group, through its member company San Lucian Oil Company, is one of the main suppliers of bunkers around the Maltese Islands. The company’s Head of Corporate Services, Cornelia Zammit German, says that the company supplies various grades of bunker fuel, with the most common requests being for high-sulphur fuel oil with viscosities of up to and including 380 cSt.

Dr German adds: “We also satisfy requests for low-sulphur fuel oil with viscosities of up to and including 380 cSt. The demand for bunker fuels with viscosities higher than 380 cSt remains very limited and therefore availability cannot always be guaranteed; all efforts are made, however, to accommodate requests for such high viscosity products.”

The Group’s focus regarding bunker fuel specifications is currently on the sourcing of low-sulphur products. Dr German says: “While we market high-sulphur fuel oil, we are committed to ensuring that such fuel oil contains a maximum sulphur content of 3%.”

Besides its long-established bunkering business, the Group owns and operates Malta’s only waste oil recycling facility, effectively collecting and treating all waste oil emanating from the marine industry, including ship’s ballast and bilge water, and oily waste resulting from tank cleaning.

“We are conscious of today’s environmental obligations of the marine industry,” says Dr German, “and we have continued to invest in the research and development of new technologies in this sector, and are currently working together with a reputable European organisation towards this end.”

She notes: “Current trends in relation to the specifications of bunker fuels are consistent with recent years. We are noting an increase in demand for low-sulphur fuel oil; however, when one considers this against a backdrop of the overall drop in global demand for bunkers, the increase in low-sulphur fuel oil demand is not significant. This global drop in demand for bunkers is a direct result of a worldwide economic slow-down, and has continued to affect the volatility of prices of bunkers which, in turn, creates more uncertainty and instability in this sector. Oil flows from Northern Europe to the Mediterranean have also affected prices in the region, and it is imperative that bunker suppliers in and around Malta monitor such movements and their effects closely.”

Looking ahead, Dr German says: “The Group can confidently state that, in spite of the great instability suffered by the oil industry worldwide, its performance remains consistent with previous years. Future plans of the Group include the ongoing conversion of the Group’s fuel oil bunker barges into double-hull, scheduled for completion in the 3rd quarter of 2009. More investment in sophisticated anti-pollution technology and equipment is also in the pipeline, which will complement the Group’s EMSA-contracted vessel Santa Maria in the continuous fight for the preservation of the marine environment.”

Island Bunker Oils is another significant player on the Maltese scene. It set up in 2002 as a joint venture between two entrepreneurs involved in the local maritime industry. The company operates mainly with three bunker barges and a supply vessel. Bunkering is normally carried out both within and outside the Maltese territorial waters. Vessels can also be supplied ex pipeline or by tank truck. The company leases storage facilities at the Mediterranean Offshore Bunkering company in Marsa and also leases storage at Oiltanking in Marsaxlokk.

Going beyond fuel

Among global players with an involvement in the Malta market is OW. The company says its recent appointment of Hans Staal as its new Worldwide Trading Manager, has been designed to not only solidify OW Bunker’s positioning in the Maltese market, but to also further strengthen and resource its Piraeus office, which is where the company and its team of 11 people is based.

There is also a recognition that the learnings from the growth and development of the Greek market can also be translated into opportunities in Malta; embracing modernisation, and ensuring that, quality, reliability and excellence in customer service is viewed as a key point of differentiation where the focus is based on how value can be added, above and beyond commodity.

OW Bunker does not have a physical supply base, but it does have agreements with selected suppliers to use their licenses and barges, and operates as a market maker, setting schedules, providing customers with all ranges and grades of fuel oil, as well as setting its own price points.

According to OW, the key to the development of positive progression in the region must be a continued focus on customer service and responsibility; central themes to ensuring leader status over other Eastern European markets. An OW spokesman says: “While this may sound obvious, it requires a significant change in mindset, where selling bunker fuel is not just based on the ‘sale’, but also about maintaining complete responsibility for the load, from the point of purchase to delivery, ensuring quality, safety and reliability at all times. It is about taking charge and maintaining contact with barge operators and captains of the vessels, engaging in constant dialogue to ensure a smooth operation, and if and when there are delays, understanding the nature of the issue and making the right decisions to expedite a solution; ultimately it is about putting the customer first.”

OW Bunker says it is also the only operator both in the Greek and Maltese markets to have a dedicated risk management division. The current global economic climate and the unprecedented volatility of fuel prices have made it essential for customers to implement an effective hedging strategy that locks in and controls costs, mitigates risk and maximises profitability. The complex tools, processes and instruments that are employed in developing a hedging strategy requires significant knowledge of the global market, as well as an in-depth understanding of a customer’s operations. Significantly, this also further enables the development of customer relationships, moving it away from one simply based on selling, to one that is founded on consultatively looking to improve the performance of their business.

The current downturn and issues of liquidity in the market have also necessitated a stringent need to manage credit and counterparty risk. Credit lines have been significantly shortened, coupled with a requirement for considerable financial transparency that minimises risk exposure. Ultimately, lending procedures must reflect the market reality, combined with suitable insurance coverage to protect against bad debt; having the facilities, resources and financial stability to do this is a critical necessity for this new era of responsibility.