|Global Average Bunker Price US$/mt||564||673||454|
Ship & Bunker Prices
Arranging bunker for ships is not a task to be undertaken lightly because lack of experience and care could have adverse effects ranging from mere loss of profit to severe damage to the engine even to total disaster.
- Bunker Quantity
- Bunker Quality
- Bunker Cost
Bunker Quantity, Bunker Quality, and Bunker Cost are all inter-dependent.
Ship operations department describes the intended itinerary of the next voyages. The quantity of bunker currently onboard (ROB – Remaining On Board) is known and the voyage estimate indicates the number of days steaming and in port for the voyage concerned. Bunker Quantity will then depend on how the geography of the voyage coincides with proper bunkering ports. It might be inevitable to adjust the route of the voyage to enable the optimum selection of bunkering ports. Most of the refining of crude oil into a usable state takes place close to the regions of consumption and not close to where the oil is produced. Therefore, the lowest prices and widest choice of bunkers are available at the ports where the larger refineries are located such as Rotterdam, New York, Cape Town, and Rio de Janeiro. These refineries are close to a high-density population and thus high consumption. Therefore, bunker prices in Fujairah, which is located no more than a stone’s throw from the oil wells, are higher than in Rotterdam or Houston. On the other hand, Singapore and Gibraltar tend to be established as bunkering ports because of their strategic position relative to many different voyage routes. Modern specialized ships and liner ships serve the same routes and therefore their bunkering patterns become well-established. However, bunkering tramp ships requires bunkering expertise and ship managers consider various conditions. For instance, every tonne of bunkers carried means one tonne less cargo that can be loaded. Therefore, bunkering at the commencement of the voyage may mean achieving the cheapest bunker price, but this has to be balanced against the additional freight that could be earned if fewer bunkers are taken on. The voyage may take the ship through a cheap bunkering port, however, saving on the bunker bill might not justify the cost of the time spent diverting into the bunkering port plus the port disbursements. Ship managers have to ensure that the ship never risks running short of bunkers. Furthermore, the chance of bad weather has to be calculated because a ship running out of fuel is at best a subject for a salvage job and at worst, a total loss of ship and crew. So a margin of safety appropriate to the ship and voyage always has to be factored into the bunker program. Usually, that safety factor will take into account the distance during that voyage sector from an alternative bunkering port.
Bunker Quality has two aspects, first is the basic type of bunker the ship’s machinery is designed to consume. Besides the main engine, the ship may have one or more of its auxiliary engines (generators) running all the time. During the process of oil refining, the crude oil is heated and the different fractions condense at different levels. At the top the gas is drawn off, next comes gasoline (petrol) then comes the lighter grades of oils which include kerosene (paraffin) and jet fuel, gas oil, and diesel oil. After these lighter grades come the heavier oils which are grouped under the general title of Residual Oils. Today, only the smallest ships use diesel oil for the propulsion machinery. Some coaster size vessels use gas oil. Modern ships today use Intermediate Fuel Oil (IFO). Heavy Fuel Oil (HFO) is consumed by large diesel engines. Ships burn diesel oil during maneuvering. Modern ships use Intermediate Fuel Oil (IFO) for the main engine and the auxiliary engines (generators). According to International Maritime Organization (IMO) 2020 regulations, modern ships are obliged to use VLSFO (Very Low Sulfur Fuel Oil). However, various ships burn different grades within the Intermediate Fuel Oil (IFO) group of oils. The correct grade and quality of bunkers must be purchased. The wrong bunker grade will affect the ship’s speed/consumption performance and poor quality can damage the engines. Intermediate Fuel Oil (IFO) falls into the group referred to as Residual Oils. Intermediate Fuel Oil (IFO) is prepared to be used in main engines and auxiliary engines (generators). Intermediate Fuel Oil (IFO) has to undergo treatment onboard the ship to remove residues but some residues are inherent in the oil and if their percentage is too high there is a risk of damage. For instance, sulfur is present to a greater or lesser degree in all bunkers, however, if there is too much sulfur, acids are accumulated that cause corrosion. Fragments of metals such as sodium and vanadium are also inherent in bunkers, however, extreme amounts might generate adhesive deposits that damage the engine’s exhaust valves. Furthermore, the bunkers must be heated to get them to flow smoothly through the injectors. This equipment is designed to cope with oil of a certain quality and thus the most critical property of the oil is its viscosity. Viscosity can be defined as the measure of an oil’s reluctance to flow freely. Viscosity of bunker oils is classified in Centistokes (Cst). When referring to the bunker viscosity, it is crucial to add the temperature on which the figure used is based. Generally, the viscosity-temperature used when ordering bunkers is 50°C. Paradoxically, the ISO (International Organization for Standardization) standard is based upon 100°C but this an inconvenient temperature at which to work, and testing is normally carried out at 80°C and extrapolated up to 100°C and down to 50°C respectively. Therefore, 180 Centistokes (Cst) at 50°C equates to 25 Centistokes (Cst) at 100°C. Bunker oil quality is based upon ISO (International Standards Organisation) number 8217 therefore when ordering bunkers ship managers stipulate this as the standard adding the viscosity required in Centistokes (Cst) at 50°C. Conventional Bunker Fuels are 180 Centistokes (Cst) and 380 Centistokes (Cst), both at 50°C. Bunker quality standards and viscosity are traded with the acceptable limits of numerous impurities such as ash, sulfur, vanadium, aluminum, silicon, etc.
Ship managers want to know that the bunker supplied does comply with the standards specified and this is ascertained by taking a representative sample at the time of delivery. Surprisingly, there is no ISO (International Standards Organisation) standard for sampling although the ISO (International Standards Organisation) has been striving to design one for more than a decade. The nearest the industry has reached to this goal is a code of best practice which bears the number 13739 and many ship shipowners and ship managers insist that officers adhere to this. The essential thing is for the bunker supplier and ship manager to agree on how sampling takes place and to ensure that this is adhered to and that the samples are duly sealed in front of witnesses from both sides. Any disputes are expected to come along only when the bunker is in use.
Customarily, Independent Bunker Surveyors take the samples at one or other end of the actual delivery hose and there are various ways to extract the sample ranging from automatic devices to less sophisticated methods. It is vital to take an average bunker sample. When shipping practitioners consider how important it is to ensure the correct quality and grade of the bunker are delivered, it seems surprising that more effort has not been dedicated to agreeing on a sampling standard but when approaching practitioners the response is that the present methods seem to work so there is no strong incentive to change. In 2002, Singapore set a sampling standard and introduced the mandatory Singapore Standard. Currently, Singapore supplies more bunkers than any other port. One critical point is that all sampling there has to take place at the ship’s end of the delivery hose. This makes legal sense as this is the point at which ownership of the bunker title changes.
When placing a ship on time charter, asserting a bunker standard is again essential. Usually, Time Charterers want to economize as keenly as the shipowners and ship managers, however, Time Charterers do not have to worry about any long-term engine damage the wrong bunker may cause. Therefore, a clear bunker standard has to be set and the crew members must be instructed to ensure that the standard is adhered to. Apart from any risk of damage to the engines, a poor bunker gives poor speed/consumption performance figures which is the most fruitful subject for time charter disputes without adding the effects of bad fuel to the debate.
Bunker Cost and Bunker Quality run together. To get the optimum, best bunker quality at the lowest cost, ship managers must choose the right bunker supplier. In major ports, ship managers notice the prominent names in the bunker world, however, these bunker suppliers might not necessarily the cheapest. For instance, the bunker supplier directory has many major names at one port, however, many of the lesser-known names are classified as bunker traders. Small bunker traders buy when required at the best possible price and then resell at a profit. Usually, ship managers employ a Bunker Broker who has a well-established reputation for market skill and fair dealing. Furthermore, Bunker Brokers might give proper advice when a ship is venturing to unfamiliar ports.
Careless bunkering is often cited as causing oil spills. Even though bunkering oil pollution is not severe as the catastrophes such as M/T Erika or M/T Prestige, but damaging just the same. Under the headings of MARPOL (The International Convention for the Prevention of Pollution from Ships) or the ISM Code (International Safety Management Code), most shipowners have procedures for the crew members to follow. These procedures are vital so that simple mistakes like failing to tighten hose connections fully or directing oil into a bunker tank that is already full or failing to seal deck scuppers, might be prevented.
Bunker Contract Terms and Conditions
In 1995, BIMCO (Baltic and International Maritime Council) produced a standard form of contract for bunker supplies which was entitled FUELCON. FUELCON form was not widely used because it was considered far too biased towards the shipowner. In 2001, BIMCO (Baltic and International Maritime Council) produced the Standard Bunker Contract which is in two (2) parts:
1- Confirmation Note confirms the bunker nomination
2- General terms and conditions set out the bunker agreement.
The Confirmation Note is in a classic BIMCO (Baltic and International Maritime Council) box style, the headings of each box being self-explanatory. In the General Terms and Conditions, various subjects discussed above have been formalized. BIMCO (Baltic and International Maritime Council) Standard Bunker Contract’s significant part deals with environmental issues and dispute resolution. BIMCO (Baltic and International Maritime Council) the Standard Bunker Contract is more popular than its predecessor FUELCON. BIMCO (Baltic and International Maritime Council) the Standard Bunker Contract provides a clear and logical compilation of the vital points to be considered when contracting for a supply of bunkers.