Bunker Fuel

Integr8: Oil-dominated bunker market for at least another 10 years but industry cannot stand still

Research Contributor Steve Christy takes a look at bp’s latest ‘Energy Outlook’, highlighting that it sees alternative fuels accounting for around 15% of the bunker market in 2035, but reaching close to 40% of the market by 2050.

Published

1 month ago

August 8, 2024

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Integr8: Oil-dominated bunker market for at least another 10 years but industry cannot stand still

By Steve Christy, Research Contributor, Integr8 Fuels
[email protected]

24 July 2024

BP’s latest analysis looking at the energy sector to 2050

BP has just published its annual ‘Energy Outlook’ looking at two scenarios going through to 2050. These are not forecasts, but illustrate two cases, the first reflecting what it would take to reach ‘net zero’ by 2050, and the second showing a scenario if the world continues on its ‘current trajectory’ of policies and timings towards environmental measures.

A picture paints a thousand words!

Historically, the graph below shows how CO2 emissions have risen since 2000 and that the environmental measures taken so far have not been enough to stop increases in global CO2.

Source: BP

Looking to the future, the net zero case highlights the extreme challenges the world faces to achieve this target by 2050. It is literally the ‘bottom line’ for any scenario looking at the future for energy, and a 95% decline in CO2 emissions would clearly have an inconceivable impact on almost all industries, including our own.

Even BP’s ‘current trajectory’ case indicates a turning point and a 25% decline in CO2 emissions by 2050. This is still a major shift from where we are today and would require significant changes in bunker fuels to take place (as is shown later in this report).

A focus on BP’s oil and shipping analysis

In their outlook BP cover oil, gas, coal, power, and low carbon hydrogen. However, in this report we focus on BP’s scenarios for the oil sector and their cases for marine fuels.

The first main point is that in both scenarios there is a forecast major increase in seaborne trade; a 70% gain in the current trajectory and a 30% gain in the net zero case by 2050. Despite this, with greater efficiencies and shifts they see no net gain in energy demand for shipping under the current trajectory case, and a 20% decline in net zero.

The common theme in both cases is that BP see a move away from oil as a bunker fuel and a shift to what are currently viewed as ‘alternative fuels’. This is through the delivery of new ships capable of running on alternative fuels and the retro-fitting of older ships to use these alternative fuels. In this way, biofuels and low carbon hydrogen are potentially the biggest elements of the bunker market going forward, especially moving towards a ‘net zero’ world.

What is the outlook for oil demand in the two BP scenarios?

Electrification is going to be the major shift in the energy balance. The ever-falling cost structure of wind and solar power is accelerating this transition. For oil markets, there is already a seismic shift underway in the electrification of road transport markets, away from gasoline and diesel towards EVs (and electric trucks sometime in the future).

Although shipping is generally a ‘hard to electrify’ industry, we are not immune to what is happening elsewhere in the oil sector. The loss in gasoline and diesel demand could have a major knock-on effect on refining.

It is not surprising that the future profile for oil demand is very much aligned to the success, or not of reducing global CO2 emissions. Hitting the net zero target by 2050 (or whenever this may be) would mean a near non-existent oil industry.

Source: BP

In contrast, BP’s ‘current trajectory’ case would mean the size of the oil industry stays more-or-less the same as it is today through the next 10 years. It is only in the 2035-50 period that oil demand declines, and then only taking it back to the same size of the market we saw in 2000.

The make up of the oil industry is going to change, whatever happens

Even with very little change in the overall size of the oil market through to 2035 under the ‘current trajectory’ case, the refining industry must still adapt. The graph below highlights the shifts in demand for different sectors:

moving away from gasoline, diesel, and gasoil; the products in decline because of electrification in road transport, buildings and industry;
and towards the growth markets, including bunkers and aviation, but especially into lighter end products as feedstocks into the petchem industries.

Source: BP

What about in the much longer term?

In this same BP case, the significant changes in the size of the oil industry and the balance in products takes place after 2035. The more rapid moves away from gasoline, diesel, and gasoil indicate a 20% decline in the size of the oil industry in this 2035-50 period (as opposed to the 1% gain over 2022-35).

Source: BP

Although the scenario shows only a small decline in oil use in bunkers and aviation, this is against significant increases in seaborne and air travel. The pointers are we are moving more towards alternative fuels.

The drive to alternative bunker fuels must continue

The current discussions, investments, and technologies in alternative fuels for shipping are testament to the future needs for our industry.

BP comment on this and in the next 10 years highlight LNG, biofuels (bio-methanol and biodiesel) and hydrogen derived fuels (ammonia and methanol). In their current trajectory case, they see these alternative fuels accounting for around 15% of the bunker market in 2035, BUT reaching close to 40% of the market by 2050.

Source: BP

For a 40% share of the bunker market by 2050 an enormous amount of work has to be done in low carbon shipping, especially considering the lead times in the industry.

What about the net zero case, whenever it may happen?

An even more radical approach must be adopted if ‘net zero’ is to be met, even if the target or achievement is after 2050. In their net zero case, BP put oil products at only 10% of the bunker market. The growth in LNG is also constrained in this case, again as it is a fossil fuel.

In a decarbonised world there would have to be a strong drive into biofuels and hydrogen derived fuels to achieve the ‘net zero’ balance.

Source: BP

As we are currently seeing in the wind and solar power sectors, we need high volumes and lower costs in hydrogen derived fuels to make low carbon shipping possible.

No big changes in the bunker market in the next 10 years, but that doesn’t mean we can do nothing!

In general terms, a number of analysts are still indicating oil demand rising through the next 10 years or so, and pushing the point of peak oil demand to around the mid-2030s. In fact, Goldman Sachs Research has just put out an article along these lines, with peak demand another decade away and then plateauing around this level for another few years (i.e. not falling until the late 2030s).

So, it seems oil is going to be the key supplier to the bunker market for at least the next 10 years or so. This could instil a degree of complacency, but given political direction, public sentiment and impacts on the oil industry outside the bunker sector, it is only a question of time when ‘alternative fuels’ dominate our business, even if it is post 2050.

Given the lead times and the technological advances needed, it is clear we have to continue to drive our industry forward along a low carbon path.

Photo credit: Integr8 Fuels
Published: 8 August 2024

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Financial Result

CBL International gross profit down 32.2% on year for 1H 2024

Decline primarily driven by reduction in premium sold to customers; leading to lower gross profit per tonne even though there was an increase in volume sold, says CBL.

Published

2 hours ago

September 13, 2024

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CBL International Limited (CBL), the listing vehicle of Banle Group (Banle), a marine fuel logistic company in the Asia-Pacific region, on Thursday (12 September) announced its unaudited financial results for the six months ended 30 June.

CBL said its gross profit for the period was approximately USD 2.72 million, a decrease of 32.2% compared to USD 4.01 million for 1H 2023.

The firm said the decline was primarily driven by the reduction in premium sold to customers and led to lower gross profit per tonne, which was partially offset by an increase in volume sold.

CBL also reported its Consolidated revenue for 1H 2024 increased by 44.4% to approximately USD 277.23 million, compared to USD 191.96 million in the same period in 2023.

“This significant growth was driven by a 39.4% year-over-year increase in sales volume, attributed to the expansion of the Company's global supply network and higher marine fuel demand due to geopolitical factors,” it said.

The company announced the pricing of its initial public offering on Nasdaq Capital Market on 22 March last year.

“We are pleased with the robust growth in our revenue and sales volume during the first half of 2024, despite the challenging market conditions. Our strategic initiatives, including the expansion of our service network and our focus on sustainable fuel solutions, have positioned us well to navigate these challenges and capitalise on emerging opportunities,” said Teck Lim Chia, Chairman & CEO of Banle Group.

“While the current market environment has pressured our margins, we remain confident in our long-term strategy and our ability to deliver value to our shareholders.”

Other Financial Highlights:

Operating Expenses: Operating expenses rose by 64.0% to approximately USD 4.12 million, up from USD 2.51 million in 1H 2023. This increase was attributed to higher selling and distribution expenses related to our sales growth, strategic expansion in the Company's supply network to new geographic areas, and the development of our biofuel operations.
Net Income: The company reported a net loss of approximately USD 1.62 million, compared to a net income of USD 1.15 million in 1H 2023. The loss was driven by lower gross margin and higher operating costs.
Cash Flow: Net cash provided by operating activities was approximately USD 2.30 million, a significant improvement from a cash outflow of USD 7.24 million in 1H 2023, reflecting better management of working capital.
Cash position: As of June 30, 2024, Banle's consolidated cash balance increased by approximately USD 2.29 million, or 30.9%, to USD 9.69 million, compared to USD 7.40 million as of December 31, 2023. This increase was primarily driven by improved working capital management. The Company also reported a significant increase in accounts receivable and accounts payable balances, reflecting the growth in its sales activities.

Operational Highlights:

Global Network Expansion: As of June 30, 2024, Banle expanded its global service network from 36 ports at our IPO in March 2023 to over 60 ports across Asia, Europe and Africa. This strategic expansion has enabled the Company to secure new bunkering business opportunities, particularly in European markets where environmental regulations are increasingly stringent. The opening of the Company's new office in Ireland in late 2023 has bolstered our market coverage and enhanced local sourcing capabilities. Notably, the Company completed inaugural bunkering services through a local physical supplier in Mauritius in May 2024, further strengthening our market presence.
Biofuel Initiatives: Banle continued its commitment to sustainability by expanding its B24 biofuel operations, obtaining ISCC EU and ISCC Plus certifications in 2023. The Company successfully commenced biofuel bunkering services through local physical suppliers in Hong Kong, China, and Malaysia, positioning itself as a pioneer in sustainable fuel solutions. The B24 biofuel blend, which includes 24% UCOME (used cooking oil methyl ester), offers a 20% reduction in greenhouse gas emissions compared to conventional marine fuels, aligning with global decarbonisation efforts.
Response to Macroeconomic Environment: The global economy has shown signs of moderate growth in 2024, with emerging markets, particularly in Asia, driving this recovery. However, the shipping industry continues to face challenges such as fluctuating freight rates, port congestion, and disruptions in major trade routes due to the ongoing Red Sea Crisis. Banle has proactively adapted to these conditions, coordinating increased fuel supplies in Asian ports to meet heightened demand, ensuring that our customers' needs are met despite logistical challenges.

Looking ahead, Banle said it remains focused on expanding its market presence, particularly in the biofuel sector, and continuing to enhance its global supply network.

Photo credit: Essow on Pexels
Published: 13 September, 2024

Alternative Fuels

KPI OceanConnect expands Asia footprint with new Tokyo office

New office will help existing and new clients navigate increasing operational complexity in the marine energy sector, from new alternative bunker fuels to tightening environmental regulations.

Published

2 hours ago

September 13, 2024

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KPI OceanConnect expands Asia footprint with new office in Japan

Marine energy solutions provider KPI OceanConnect on Thursday (12 September) announced the opening of its new office in Tokyo, Japan, to strengthen its regional presence and support to local customers.

The office is KPI OceanConnect’s fifth in Asia, reflecting an increasing commitment to strategic growth in the region.

Japan is a leading innovator in the maritime industry, operating the third largest merchant fleet and is an important market for KPI OceanConnect.

The new office, led by Ken Kobayashi, Head of Japan, will help existing and new clients navigate increasing operational complexity in the marine energy sector, from new alternative fuels to tightening environmental regulations.

The announcement follows KPI OceanConnect’s recent publication of robust financial results for the year 2023/2024 and demonstrates its continued commitment to investing in building strong partnerships across the marine fuels value chain worldwide.

The expansion of the local team in Japan will enable KPI OceanConnect to actively engage with Japanese buyers and suppliers on a daily basis to exchange knowledge and expertise to support the development of innovative energy transition strategies for its clients.

The launch of the new office was celebrated with an opening reception on 10 September. The event was attended by the group’s owner, Nina Østergaard Borris and the Executive Management team of KPI OceanConnect, including Anders Grønborg, CEO, Dorthe Bendtsen, COO, and Jesper Sørensen, Global Head of Alternative Fuels and Carbon Markets.

To celebrate this milestone, KPI OceanConnect hosted an opening reception at the XEX Tokyo restaurant, just steps away from its new office in the Burex building. The event also featured music by DJ Yumi.

Anders Grønborg, CEO of KPI OceanConnect, said: “KPI OceanConnect has worked closely with clients in Japan for a very long time. As a key market for our sector and our business, this new office allows us to be closer to our customers and other important local stakeholders.”

“It is a time of transformation in the maritime value chain, and we are ready to work with our partners to identify opportunities for further collaboration and innovative solutions. We believe that our values of decency, good governance, transparency and long-term sustainability resonate well in this market.”

Ken Kobayashi, Head of Japan, KPI OceanConnect, said: “KPI OceanConnect is here to support its clients in turning today’s challenges and future uncertainties into opportunities for growth and innovation. From new fuels to new regulations, our network of experts is focused on delivering tailored, value-adding services to clients to future-proof their decision making, no matter the complexity.

“With a partnership-driven approach, we’re enabling greater transparency and innovation and are helping rewrite the bunkering playbook to support clients through the energy transition.”

Photo credit: KPI OceanConnect
Published: 13 September, 2024

Alternative Fuels

European shipowners and bunker fuel producers launch Clean Maritime Fuels Platform

Members of the initiative include ECSA, FuelsEurope, eFuel Alliance, European Waste-based & Advanced Biofuels Association, HydrogenEurope and Methanol Institute.

Published

2 hours ago

September 13, 2024

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European shipowners and bunker fuel producers launch Clean Maritime Fuels Platform

The European Community Shipowners’ Associations (ECSA) on Thursday (12 September) announced the launch of the Clean Maritime Fuels Platform.

The new Clean Maritime Fuels Platform is a bottom-up industry initiative aiming to enhance communication between the shipping sector and fuel producers and to identify common challenges and possible solutions, considering the implementation of the Fit for 55 package and the transition to a net-zero economy by 2050.

Members of the initiative include ECSA, FuelsEurope, eFuel Alliance, European Waste-based & Advanced Biofuels Association (EWABA), HydrogenEurope and Methanol Institute.

According to ESCA, access to clean maritime fuels is a top priority for the decarbonisation of the shipping sector.

The recently published Draghi report on the Future of European Competitiveness identifies shipping as one of the most difficult sectors to decarbonise, requiring around 40 billion in annual investments between 2031 and 2050.

The report highlighted that, while the EU is a world leader in sustainable renewable and low-carbon fuels for the decarbonisation of transport, it has limited installed capacity and planned production. The EU needs to start building a supply chain for clean fuels, or the costs of meeting its targets will be significant.

Representatives of ECSA, FuelsEurope, eFuel Alliance, EWABA, HydrogenEurope and Methanol Institute held their first meeting on 12 September and agreed on the objectives and the working principles of the new platform. Members also started to discuss the key topic of infrastructure gaps.

The platform will focus on policies and tools to support the production and uptake of clean maritime fuels in Europe including areas such as maritime in EU ETS and funding opportunities.

The platform will hold regular meetings with ECSA taking care of the secretariat’s tasks.

“Today, the shipping and energy industry join forces and launch a dialogue platform that can facilitate better flow of information about the common challenges we are facing. We need all hands on deck to make the energy transition happen. In order to meet our targets, we need clean fuels available in the market in sufficient quantities and at an affordable price. European shipowners are proud to launch with the fuel producers the Clean Maritime Fuels Platform”, said Sotiris Raptis, ECSA Secretary General.

“We are very excited to launch the Clean Maritime Fuels Platform today. Our 55+ members from across the EU are working tirelessly to produce waste-based and advanced biodiesel of the highest quality requirements and GHG savings to bring a new era of clean shipping to Europe. We believe that a closer collaboration between renewable fuel suppliers and ship owners will significantly reduce technical, operational, and financial barriers across the supply chain for the development and uptake of renewable maritime fuels”, said Angel Alvarez Alberdi, Secretary General of EWABA.

“The energy transition is a gradual journey, not an overnight change. It demands a robust regulatory framework and collaboration among all stakeholders involved to drive effective decarbonization. As we work alongside our 100 members through the complexities of this transition, the Clean Fuels Maritime Platform will play a crucial role in accelerating our shift to cleaner fuels and innovative technologies. By combining our collective expertise and efforts, we are not only tackling the pressing need for emission reductions but also laying the groundwork for a more resilient and sustainable maritime industry”, said Greg Dolan, CEO of Methanol Institute.

Photo credit: European Community Shipowners’ Associations
Published: 13 September, 2024