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How ship operators can better manage their total of cost of bunkering?

For ship owners and operators, the decision over when and where to bunker in the Middle East can have a very significant impact on their business. Getting it wrong could lead to highly inflated costs, making it vital for shipping companies to scrutinise their total cost of bunkering – the impact of all bunkering factors on overall operational costs and the wider sustainability of their voyage – rather than focus solely on fuel expenditure.

As part of the bunker decision, the price of fuel, now around US$885 per tonne at the region’s ports, is only one of several outlays that maritime companies should consider when calculating their total cost of bunkering. Other significant factors that can influence where an operator chooses to bunker include the negative effect of limited berth availability and long wait times on vessel schedules.

Charter party agreements also need to be factored in – along with the impact of slow steaming and the number of days that takes – such as routes and port arrival times. There are always issues beyond the shipowner or operators’ control that can scupper their attempts to keep costs down, which necessitates the need for maximum focus on controlling outgoings.

In Asia, recent delays at Chinese ports forced some container and bulk ships to skip Singapore, the region’s biggest refuelling hub, to save time. Throughout March 2022, the city state handled 3,020 ships, 441 fewer than a year earlier, according to preliminary data released by Singapore’s Maritime Port Authority.

Congestion at ports globally has led to fewer ships stopping at Singapore, the transit hub between east and west. Meanwhile, gridlock at the world’s largest container port in Shanghai, arising from the city’s lockdown to contain China’s worst Covid outbreak since 2020, has created a backlog of vessels there and at other stops where ships are diverting to.

Shipping analytics firm Windward revealed in April 2022 that 20% of the world’s 9,000 active container ships were stuck in traffic jams outside congested ports, with China accounting for nearly 30% of the backlog. Windward also said that the number of container ships stuck off the coast of China had nearly doubled since China’s lockdowns were introduced in mid-March. Some 506 ships were awaiting berthing spaces as of 19 April, up almost 200% from the 260 vessels idling offshore in February.

The upshot is that shipping companies may face unavoidable delays, owing to port congestion and many other factors, leading to rising operational costs. For example, congestion at a bunkering hub causes vessel delays as well as potential variations in bunker fuel price, meaning shipping companies can do little more than try to mitigate and manage such factors.

While outside issues may affect the total cost of bunkering, there are steps ship owners and operators can take to mitigate them. Digital voyage planning tools that make it much easier to accurately predict costs and gain insights into new, more cost-effective bunkering locations is one. With that information, maritime companies can keep track of the bunker ports that offer faster transit times and reduced waiting periods.

Another option is to optimise the journey time and expense by travelling to the most convenient destination – such as the Port of Duqm, situated on Oman’s Arabian Sea Coast, which provides all port services to callers. In late 2021, Oman Oil Marketing Company (OOMCO) launched a fuel supply terminal and bunker barge at the port, which is located on the Arabian Sea coast, near the international trade route between Asia and Europe. This location offers bunkering, resupply and crew changes without the need to sail to other ports in the region.

From the trade routes, a detour may add seven days to a vessel’s voyage, through diverting to another port, waiting to enter and then continuing the journey. This increases operational costs for fuel usage, crew salaries and food supplies, while the extended journey and time in port will also result in higher emissions.

An exceptional factor in the total cost of bunkering in the Middle East is war risk. Duqm’s location on the Arabian Sea puts it in low-risk waters, where such insurance is not required, helping to lower the daily cost of operating in and near the port. The US$7 billion Duqm refinery being built, with a capacity of 230,000 barrels a day, is another draw for operators in Middle Eastern waters, giving them easy access to a bunkering hub with a strong supply of fuel.

Meanwhile, through its subsidiary Oman Tank Terminal Company, Oman’s national petroleum investment company, OQ, which is also a global integrated energy company, is developing the nearby Ras Markaz storage terminal. The facility will have six million barrels of storage capacity, with scope to expand to an additional 19 million barrels in the coming years. Moreover, future planning is under way to supply other marine fuels from the site, including LNG, methanol, green ammonia and green hydrogen.

Minimising costs presents an ongoing challenge for shipowners and operators, especially when outside factors drive up their outgoings. But making the right choice when it comes to bunkering, such as travelling to the Port of Duqm to refuel, can help them to manage their total cost of bunkering.
Source: OOMCO

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