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Analysis: Singapore bunker suppliers plan expansion amid brighter growth outlook

Highlights

Participants in Singapore's bunker market are firming up plans to expand this year amid expectations that a robust economic outlook would help volumes to grow, while industry rationalization through the possible exit or restructure of some firms due to stringent rules creates more opportunities for accredited and larger bunker suppliers to fill the void.

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Industry sources close to the situation told S&P Global Platts that at least three accredited bunker suppliers are planning to expand their physical supply operations in Singapore -- by either time chartering or by acquiring more barges for deliveries -- as they remain upbeat about the country's bunkering prospects.

"The pie is getting bigger. But there's also going to be a redistribution as some players exit or downsize operations," said one industry source.

Singapore is located along one of the world's busiest waterways, with close to 1,000 ships anchored at any given time. According to data from the Maritime and Port Authority of Singapore, vessel arrivals in Singapore last year were 138,998.



Singapore is also the world's top bunkering port. Bunker fuel sales in 2016 rose 7.7% year on year to 48.6 million mt, surpassing the 2015 record high of 45.2 million mt, MPA data showed.

Over January-July, Singapore's bunker fuel sales grew 2.85% to 29.31 million mt.


SCOPE FOR GROWTH


Bunker fuel sales in Singapore are expected to rise, thanks to improving global macroeconomics and world trade, as well as continued strong policy measures by the Singapore government to retain its competitive edge by strengthening port infrastructure, said a bunker supplier, who plans to add at least one barge this year.

Singapore's economy rebounded in the second quarter to grow 2.2% over the previous quarter in terms of seasonally adjusted annualized rate. In Q1, the economy had contracted by 2.1%. The turnaround was due to an improvement in trade-related sectors' performance and a reversal to positive growth in financial services.

Some analysts and sources are of the view that marine fuel sales will remain positive in 2017, witnessing a year-on-year growth of 2%-3%.

MPA last week said it will not renew the bunker supplier licenses of Universal Energy and Panoil Petroleum after they expire on August 31. Both companies will no longer be allowed to operate as a bunker supplier and bunker craft operator in the Port of Singapore, it said.

"Panoil Petroleum and Universal Energy were significant bunker suppliers. Their volumes will have to be served by somebody else now," one source said.

Universal Energy's license was not renewed as it had accumulated demerit points for delivering bunker fuel that was severely aerated as well as stoppages during bunkering operations. Panoil Petroleum had made unauthorized alterations on the pipelines of its bunkering vessels and had accumulated demerit points for non-compliance with bunkering procedures, MPA said in a statement August 30.

Among the various options available, the two companies could lease their barges or dispose of them as they can no longer operate as a bunker craft operator, some sources said. A potential sale could propel opportunistic buys for some existing suppliers, should the barges become available at lucrative prices, they said.

"MFM barges are not too much in supply. So, they might still be able to sell them at a fair price," one supplier said.

Universal Energy has 11 bunker tankers listed on its website. The UE Sapphire and the UE Star are owned by Universal Energy. The Debonair and Consort Justice are on bareboat charter, and the rest are on time charter, according to the company's website. Panoil's fleet also consists of 11 barges, according to its website.

Both companies did not comment at the time of writing.

"We think that there is a general appreciation for how the MPA is handling the situation to weed out industry malpractices," said another industry source, who has recently time chartered additional barges and also harbors plans to buy a few barges before the end of December.

"There is always a relief to see that there is a move to ensure a level playing field. This also gives more legitimacy to the entire MFM system," he said, adding that this also made for a more compelling case to expand in Singapore.

In addition to existing suppliers, other bunker suppliers such as UAE-based Gulf Petrochem, have been eyeing physical operations in Singapore.

"We are a large cargo player in Singapore. So becoming a physical supplier [in Singapore] is a natural extension and seems to be the way forward," Gulf Petrochem Group Director Prerit Goel had said in an interview with Platts in March, adding that the Singapore market offers good growth potential and there was still room for new players.

--Surabhi Sahu, surabhi.sahu@spglobal.com
--Edited by Irene Tang, irene.tang@spglobal.com, and Sambit Mohanty, sambit.mohanty@spglobal.com