Factbox: Hin Leong collapse ripples through Singapore's petroleum supply chains

Singapore — The collapse of Singapore's largest homegrown oil trader Hin Leong, and its sister company Ocean Tankers, removed one of the biggest regional suppliers of marine bunker fuel, gasoline and gasoil from the Asian oil trading hub in April.

Here's how the physical supply chain in the world's largest bunkering port has been impacted.

PRICES

**Singapore marine fuel premiums have risen since Hin Leong's subsidiary Ocean Bunkering halted supplies. At the beginning of May, the Singapore delivered Marine Fuel 0.5%S bunker premium over benchmark FOB Singapore Marine Fuel 0.5%S cargo was at an 8-week high of $36.08/mt compared to a record low of $7.39/mt on April 9.

**The price impact on other markets like fuel oil, gasoline and gasoil, where Hin Leong was a big player, has been muted due to general oversupply in petroleum fuels and demand destruction due to COVID-19 related lockdowns throughout Asia.

**Hin Leong had fuel inventory of 608,745 mt as of April 9, 2020 (when it met with bank lenders), down 77% from October 31, 2019. Its value fell 56% to $141 million between January 31 and April 9, while ICE Brent crude prices fell to $31.48/b from $58.16/b over the same period.

**By end-April, ICE Brent crude had slipped below $20/b, further lowering the valuation of Hin Leong's inventory held in Universal Terminal, its floating storage units E Mei San and Wu Yi San, and trading vessels Ocean Queen and Ocean Gar. ICE July Brent settled at $30.97/b on Tuesday.

**Hin Leong's exit impacted other supply chain components. For example, gasoline buyers like Pertamina who benefited from Hin Leong's cost efficiencies face higher prices, Ocean Tankers' barges going out of service increase logistics costs, and traders wary of storing products in Universal Terminal to avoid comingling with disputed volumes will drive up storage rates.

Related infographic: Hin Leong collapse sends shockwaves through oil trading industry

TRADE FLOWS

**Shipowners and traders have cut exposure to Hin Leong, Ocean Tankers and related assets by avoiding any cargo or vessels that belonged to the two entities to avoid legal disputes, while the trader enters judicial management.

**Hin Leong's leftover inventory is subject to multiple claimants. Sembcorp Cogen, one of its customers, terminated its supply agreement with Hin Leong on April 22 and initiated legal proceedings saying: "There is a possibility that the gasoil reserves designated for Sembcorp Cogen may be subject to competing claims by one or more third parties."

**Hin Leong's bunkering subsidiary Ocean Bunkering Services, or OBS, canceled all its bunker spot sales for delivery from April 18 onwards. OBS was the third largest bunker supplier in Singapore in 2019, with a supply of 500,000 mt to 700,000 mt each month, accounting for 10% to 15% of Singapore's total. Its exit has attracted rival suppliers, and shifted some sales to Chinese ports and Fujairah.

**OBS owns 14 licensed bunker barges of 400 dwt to 6,500 dwt, and the group charters others. They operate around Singapore, service offshore installations in the South China Sea, and supply fishing boat operators in the Indian and Pacific Ocean. These vessels have gone out of service and caused supply disruptions, impacting prices in the short-term.

**Hin Leong was the largest buyer of HSFO on the Platts Market on Close assessment process in 2019, with about one-third of the volume, and led gasoline purchases in the 12 months to April 2020 with over 50% of the volume. It was also one of the largest gasoline suppliers to Indonesia's national oil company Pertamina, and Myanmar. Market share will now shift to commodity traders like Vitol and Trafigura, and refiners like Malaysia's Petronas and Saudi Aramco.

INFRASTRUCTURE

**Hin Leong and Ocean Tankers ran an integrated downstream energy business that included oil trading, tank farm storage, blending and floating storage, bunker supply, lubricant manufacturing, inland transportation, diesel retail and marine logistics support, founder OK Lim said in his affidavit dated April 17.

**Ocean Tankers charters or operates Singapore's largest fleet of tanker vessels, and it is also one of the world's largest tanker fleet operators with over 150 vessels ranging from coastal barges and VLCCs, the affidavit stated. Most of the fleet is bareboat chartered from Xihe Holdings Pte. Ltd. and Xihe Capital Pte. Ltd., which are also Lim family companies.

**Hin Leong regularly nominates Ocean Tankers' vessels for its oil business, and Ocean Tankers also regularly charters vessels to numerous oil majors such as ExxonMobil, Shell, Total and BP, traders such as Vitol, Lukoil, and Glencore, and state-owned enterprises such as Unipec and PetroChina, Lim's affidavit said.

**Universal Terminal is the largest independent storage facility in Singapore and one of the world's largest with 2.23 million cu m of storage capacity, and 78 tanks in 13 tank farms, with leases to oil majors and commodity traders.