IBIA: Bunker Market Opportunities in Africa

Illicit activities and poor practices are becoming less common, regulation is increasing and quality of service is improving. However, the increased regulation has in some places reduced competitiveness and as a result, is restricting market growth.

This was the conclusion of the speakers and delegates at the International Bunker Industry Association (IBIA) Africa Regional Forum held in Cape Town, South Africa last week. The Forum was chaired by IBIA board member Patrick Holloway of the law firm Webber Wentzel.

Captain Peter Hall, IBIA CEO led the discussions which focused on key developments across the region and stressed the importance of establishing good bunkering hubs for economic growth. There was a balance to be struck between regulation to ensure good efficient practices and empowering a vibrant ocean economy, and ensuring Customs and port dues weren’t discouraging growth.

Increased regulation in West Africa has certainly limited market growth, with restrictive licencing resulting in the anchorage at Pointe Noire, Congo being dominated by one supplier, while a customs crackdown in Angola has halted sales of competitively priced marine gas oil.

The West African market is also suffering from a decline in the offshore and seismic vessel market as a result of the low oil price. Piracy, although in decline is still a serious consideration in the region, and fuel can be expensive, delivery is not always timely and the delivery infrastructure is often underdeveloped.

However, one positive aspect was that the offshore European operators who had been active before they were put off by the industry’s operational challenges, had been delivering higher standards of service that were beginning to be emulated by local operators.

The delegates heard that East Africa’s bunker market is much less developed with limited supply options, even less developed infrastructure, limited product offerings and higher prices. In some areas suppliers cannot risk holding stock because of price fluctuations while hedging is too costly for small operators.

One exception to this scenario is Port Louis, Mauritius, which was the location for last year’s IBIA Africa Regional Forum. Here government policies covering licencing, encouraging good practices and offering economic incentives for ships to call for bunkers such as a 50% reduction in port dues and anchorage fees are delivering positive results. Future plans include additional storage tank capacity for petroleum products, including marine fuels and improvements to the supply infrastructure.

The Forum also considered the outlook in South Africa itself, where- despite an increase in shipping volumes - bunker sales have dropped significantly in recent years.

High port call costs have made it unattractive for ‘bunker only’ calls, product sources have been restricted to three local refineries which has affected product availability and limited the range of fuel types on offer. Also, supply options have been reduced with the decommissioning of pipelines providing fuel to vessels at berth.

However, South Africa has a massive advantage in its strategic location on the international trade routes. Transnet National Ports Authority (TNPA) is investing heavily in port infrastructure to take advantage of this and is keen to promote bunkering by removing trade barriers and encouraging new operators.

One such example is IBIA member, Aegean Marine Petroleum which launched the country’s first ever offshore bunkering at an anchorage in Algoa Bay earlier this year, selling imported product rather than relying on local sources. The offshore service has certainly energised the local market and by supplying at anchorage, the company has been able to offer significantly lower calling costs. Supply from this location has reached around 60-70,000 tonnes per month.

The location is close to shipping lanes with minimal deviation and Aegean’s service is attracting new business to the area rather than competing with existing suppliers, and bringing in new demand for auxiliary services.

The South African Maritime Safety Administration which manages the permits and licences to provide offshore bunker services has received many applications although it was intimated that few would succeed. Plans for a new cruise terminal at Cape Town and significant expansion of the port’s container handling capacity in the future should further boost demand for marine fuel.