Physical challenges in Singapore

Singapore’s latest move to clean up its bunkering sector has already claimed its first major casualties, following the high profile closures of the bunkering operations of Panoil Petroleum Pte Ltd and Universal Energy Pte Ltd.

We will discuss the direct impact of these moves soon, but it is worth noting that there are wider forces at play here, not least Singapore’s mandate forcing the use of mass-flow-metres (MFM), and the increasing reluctance of lenders to finance the physical supply business.

There is evidence that Singapore’s Maritime Port Authority (MPA) is keen to reduce the number of accredited suppliers from circa 50 at present (already down from over 100 in 2012), to less than half this number (note that Fujairah, the 2nd largest bunkering anchorage with annual volumes of circa half of Singapore operates with less than 20 licenses). The implementation of the MFM rule alone has seen an unprecedented imposition of barging fees, and delivered prices that are now consistently higher than ex-wharf.

The MPA’s greater willingness to issue demerit points has also seen the revocation, or non-renewal, of bunker fuel supplier and/or bunker craft operator licences. This uncertainty appears to be already making itself felt in the trade finance community, with reports that major banks are becoming more reluctant to lend to physical suppliers, which may increase costs to unsustainable levels (particularly for smaller suppliers); in an attempt to bring more transparency we may have to first navigate through even darker waters.

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