World Bunkering > News > Summer 2009 > A Fujairah welcome

While we all know that Dubai has grown noticeably, every time you go back there, no matter how short the absence has been, Fujairah has also got appreciably bigger since the Fifth Fujairah Bunkering and Fuel Oil Forum (Fujcon) two years ago. Building was evident all around this Indian Ocean coast city.

Fujcon itself seemed a bit bigger as well, although once again just fitting into the large ballroom in the Al Diar Siji Hotel. As in previous years the event was organised by Singapore-based Conference Connection Group. About 250 delegates attended, most from the Middle East but many from much further afield.

In fact there was something of a slight Singapore flavour to Fujcon, including a presentation by the head of Singapore-listed Chemoil, Adrian Tolson, who described his company’s major investment in storage facilities at Fujairah.

Nevertheless, Fujcon was very much a Middle Eastern event which also addressed global issues. Understandably Fujairah, the region’s biggest bunker port, sees the biennial event as its showcase and there were several presentations on this rapidly developing port. The hosts did not overplay their hand but they did present an optimistic picture, despite the current global downturn.

Dr Mohammed Saeed Al Kindi, chairman of the Fujcon steering committee and until recently Fujairah’s Minister of Environment & Water, gave the welcome address, again on an optimistic note.

He said: “Despite the ongoing global economic crisis and other global instability in the business industry, I am happy to say that Fujairah is still a leading business hub. We have all witnessed many changes over the years in global commerce, global trade as well as International Shipping. More changes can be expected and we will adapt within our particular disciplines, and the government’s social and economic policies are likely to favour continued business growth.”

And he certainly made no secret of Fujairah’s ambitions. “Fujairah is seen as a ‘Home’ to one of the world’s most important oil regions, tankers, which constitute a majority of the bunkers buyers (traders) in this market and our aim is to make Fujairah a centre of the bunkering and oil trade base.”

One point made quite strongly was that the majority of the bunker volumes sold in Fujairah are lifted by tankers which are the least hit by the world economy slowdown. While there are fewer cargoes and consequently fewer movements, crude has to flow out of the Middle East Gulf and therefore tankers have to take bunkers at Fujairah.

Nevertheless, the implications of the credit crunch formed a recurring theme throughout the conference. Ian Taylor, president and chief executive of Vitol UK, gave a keynote speech on the effects of the financial crisis on the bunkering industry. In a nutshell his message was that if you are a small player you are in trouble.

Mr Taylor said that credit issues are being factored into the market in a way they weren’t before and more cleared business is taking place, which increases costs and ties up credit lines. There are far fewer acceptable, credit worthy companies to trade with now there is less ability to easily hedge risk. He said: “Players have to demand higher margin to take both absolute and relative price risk. Margins have to increase but probably volumes of physical and paper trade will decrease.”

One interesting development Mr Taylor sees taking place is that different companies will be offered different prices. In other words bunker suppliers will seek risk adjusted returns.

He also saw increasing costs, another driver of the concentration of the bunker business into fewer companies. He predicted increased margins on trading but reduced liquidity and a reduced number of swaps markets. That will lead to less willingness to hedge.

Not only does Mr Taylor see a concentration of the market but also “big advantages to big integrated oil companies”. Partly this will be because they have the financial strength to implement the polices necessary to survive and will be able to resist the temptation to sell cheaply to high credit risk customers. In that regard Mr Taylor commented: “The counterparty list is shrinking and relationships will become important again.”

However, another speaker demonstrated that thinking among the big players in the Middle East oil scene is still very longterm. Ali Al-Yabhouni, general manager, ADNATCO-NGSCO & UAE Governor & National Representative for OPEC, Abu Dhabi surprised the conference with the announcement of a major expansion of the ADNATCO fleet that will turn the company into a major player in the regional tanker market.

He told delegates: “ADNOC has signed shipbuilding contracts with Far Eastern shipyards for 13 new vessels. Starting at the end of next year, ADNATCO will take delivery of four panamax product carriers, two aframax product carriers, four bulk carriers and a further two handy-sized bulk carriers. Once all the vessels are delivered by the end of 2011, our position here in Fujairah will be substantially strengthened.”

He added: “Many of you will be thinking that our fleet expansion comes at a very bad time. One only has to look at the ocean outside to see many dozens of anchored vessels waiting for business to understand just how serious the current recession is and the toll it is taking on global trade. We believe tanker market fundamentals imply that weaker freight rates will persist at least over the first three quarters of 2009. Thereafter a relatively stronger market is forecast in the fourth quarter of 2009, mainly due to historical or seasonal trends.”

As may have been expected the sulphur issue featured prominently but it is interesting that that there were diverging views. Mark Lewis of UK-based EMC, Energy Market Consultants, saw a lack of low-sulphur fuel leading to a much greater use of marine diesel.

John Vautrain, senior vice president & director of Singaporebased Purvin and Gertz, took a different view. In his paper on the Cost of Manufacturing Low-Sulphur Bunker Fuel or MGO he concluded that the large premiums needed to produce sufficient availability of distillate fuels such as marine gas oil would drive the development of efficient and environmentally acceptable scrubbers to remove sulphur oxides from ship emissions.

There was of course much else in the packed two-day programme. Cathie Johnston, Laboratory Business Development Manager, East Coast & National, Intertek, USA, found herself presenting not one but two speeches. IBIA chief executive Ian Adams was unable to attend Fujcon and so Ms Johnston presented his paper, Reducing Sulphur Emissions from Marine Fuel Oil and Testing Methodology Under Marpol Annex VI, on the second morning.

Later in the day she was once again giving a paper to the delegates, but this time on her own behalf, on the Scope for Alternative Marine Fuels. That was one of several papers touching on alternative fuels although delegates will probably find hers most easy to recall, delivered in a very distinctive South Carolina accent – and all the better for that.

The organisers astutely kept one of the most interesting presentations for the last slot, ensuring a full conference hall right to the very end. Journalists were not allowed to hear British Royal Navy Lt Cdr Steve Fry’s talk on Piracy in the Gulf of Aden. But delegates reported a particularly informative presentation. As it happened, two tankers were hijacked the following day, again raising questions about the effectiveness of the international response to the piracy crisis.

Nevertheless, Fujcon yet again proved to be a worthwhile event and there was plenty of food for thought in these difficult times.