The following interview is part of pre-event coverage for the upcoming Singapore International Bunkering Conference and Exhibition (SIBCON) 2020, where Manifold Times is an official media partner:
Hafnia is one of the world’s leading oil product tanker owners and operators. The company provides transportation of oil and oil products to leading national and international oil companies, major chemical companies, as well as trading and utility companies. Hafnia operates a fleet of 178 vessels in pools and is a part of BW Group – an international shipping group that has worked in oil and gas transportation, floating gas infrastructure, environmental technologies and deep-water production for over 80 years.
Hafnia Bunker Services, which operates within Hafnia, purchases bunkers for part of the BW Group fleet; the company also acts as brokers for its pool partners and third-party members in order to enjoy synergies associated with economies of scale for its alliance members.
Manifold Times recently spent time with Kasper Sørensen, Bunker Manager at Hafnia, who shared with the Singapore bunker publication how Hafnia prepared for IMO, as well as his thoughts and actions in the face of other events in the past year.
MT: What did Hafnia do to prepare for IMO 2020, and how has that preparation paid off to date?
We formed an internal IMO 2020 committee years before the event in order to prepare for the technical side of the transition. This committee was responsible for considering whether to adopt a scrubber based approach for compliance. We didn’t choose the scrubber route for various reasons and have been happy with that decision.
Our IMO 2020 committee also discussed what kind of problems one can expect with the new types of marine fuels. So far, the preparation has proven to be useful and has helped deal with most of the issues that have come up.
On the commercial side of the transition preparation, we had to ensure our terms and conditions were up to the standards required of our typical bunker contracts. We decided to formalise our strong relationships by establishing partnerships with bunker suppliers, which meant more term contracts. We believe this commercial strategy makes sense for both bunker suppliers and ourselves.
Another difficult task was managing expectations of all stakeholders, both on and off-shore, while also ensuring we were not underestimating the impact of the transition in Q4 2019. We had expected this period to be a squeeze both in terms of product but also for barges.
We also spent a long time vetting counterparties to ensure they had the size and firepower to withstand hits even if the market went against them. It is all fine and well having a lucrative contract, but it doesn’t make much sense if they go bust two months after IMO 2020.
MT: Do you feel there is any difference between bunker procurement pre and post-IMO 2020? In what ways?
On the technical side, bunker buyers are now required to have an even deeper knowledge of the supply chain. We now need to understand different product characteristics for bunkers that have emerged around the market with IMO 2020 in order to make fully informed decisions.
The product we get from various suppliers and markets are not uniform, creating many different challenges. There is now a lot of focus on fuel handling. As a result, we have introduced certain restrictions on how much fuel our vessels can carry of any one batch at a given time as part of our risk management practises.
Further, we now, more than ever, have to consider prioritising quality over fuel prices. Just making buying decisions based purely on prices no longer makes much sense, as now we must also consider other factors such as quality and availability of product. It isn’t much use if you have a very good price but cannot use the product.
MT: Were there any unexpected events (e.g. Covid-19, etc.) which affected the bunker buying process in 2020? How did Hafnia overcome associated challenges?
Of course, the coronavirus (Covid-19) was a big curveball in 2020. In terms of the bunker side of things, we capitalised on us being both a strong and reliable counterpart that have also liaised with other strong and reliable counterparties.
As such, we have the luxury of being able to choose counterparts from the top shelf – to fit our profile. During the IMO 2020 transition, we were an attractive counterpart because of our strong financial status and name, which was further bolstered by our strong 2020 results.
MT: Have the commodity trading mishaps in Singapore affected the way Hafnia purchases bunkers and operate as a bunker broker? How so?
The case of Hin Leong and the other commodity trading firms just emphasises the importance of knowing who you are dealing with and having proper K.Y.C. (know your customer) and general terms and conditions.
MT: Thoughts on mass flow meters and the installation of MFM onboard Hafnia tankers to measure fuel delivered at other ports?
We do not have plans to install MFMs onboard our tankers to measure fuel received during bunker deliveries.
We buy bunkers for more than 450 ships. In terms of volume, this means we purchase about 2.5 million metric tonnes of marine fuels a year, including for our third-party members. Out of the total amount, we lift between 30% to 40% of marine fuel from the port of Singapore.
Singapore is the only place that mandates the use of MFMs for bunker deliveries. We are a strong supporter of this. We also encourage any other new technologies that improve the transparency in the supply chain.
MT: What do you think is the next big thing that will happen in the Singapore or global bunkering sector?
We think there will be further consolidation on both sides of the table for bunker suppliers and buyers, and we are playing an active role in this via our Bunker Alliance.
We also expect more new fuels to materialise and, hopefully, more transparency through digitalisation efforts and other technology initiatives that improve the performance of the industry and its procedures.
As a company purchasing bunkers, we are keen to see and support any activity that promotes transparency in the industry.
Photo credit: Hafnia
Published: 2 October, 2020
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