The marine fuels supply chain is far more complex than it was five or 10 years ago, largely due to increased environmental regulations like IMO 2020, volatility in the crude market and COVID-19. When it comes to transparency and the intertwined challenge of counterparty risk assessment, the biggest challenges have been almost equally far reaching.
In the last couple of years, the marine fuels market has seen the collapse of numerous major players who were once considered reliable counterparties. When this is combined with the withdrawal of banks with long commodity history - such as ABN Amro, BNP, and Rabobank - it becomes clear that the sector has created a new dynamic that requires more openness.
Most tangibly, this dynamic has increased costs and reduced liquidity. The transactional complexities have increased substantially, and forensic due diligence has become commonplace. Moreover, a perception of lenient corporate governance in some corners of shipping has cast a shadow over the sector and is likely to inhibit new banks from starting to lend to the maritime industry as a whole for some time to come.
Sailing towards 2030 and 2050
Although the fuel procurement landscape has become more complex as a result of these factors, the evolving market has, in turn, created new opportunities for shipping in the form of new propulsion pathways and a rapidly evolving marine fuels mix.
Shipowners are facing increasing demands to drive more environmental and operational efficiencies into the supply chain. But the when, how, and what fuels are is still yet to be fully decided, but it is clear there will be an array of different solutions and fuels.
However, the industry is currently lacking the infrastructure to supply multiple fuel pathways at scale around the world, and outside of the major ports there is rarely the choice to stem anything other than traditional bunkers.
There is no question that the shipping industry needs to become more sustainable, it should also be obvious for shipowners that their marine fuel counterparties must be committed to providing its clients’ fleets with the energy they need to operate in a more sustainable manner. To bridge the transition gap, KPI OceanConnect is working with several partners to ensure that our counterparties are always able to find the right fuels in the right locations for their vessels, and this summer we’ll be making a major announcement about the future of alternative fuels at KPI OceanConnect.
We’ve recently demonstrated our strong commitment to shipping’s decarbonization by completing our first carbon offset journey with a long-term US-based client. This transaction balances emissions and CO2 output with the purchase of an equivalent qualified offset. Our first carbon neutral supply was only made possible through a long-term client putting its trust in our partnership approach to find an innovative way to help them achieve their sustainability ambitions. While carbon offsets have existed outside of shipping for several years, the complexities of shipping meant that there were few precedents to draw on, so we used our expertise and innovative approach to create a package that achieved the client’s wishes.
Transparency is key
To be fully prepared to reach the IMO 2030 and 2050 goals, buyers will need to ask the right questions to choose their partners if they’re to receive the right marine fuels solutions for their fleets.
With 50 years of technical expertise, local knowledge and global experience, KPI OceanConnect has proven highly successful in developing fuel procurement strategies that help our partners to overcome the hurdles of SECAs, IMO 2020 and numerous local restrictions. These strategies help them to ensure compliance as well as maximize cost and operational efficiencies.
The reality is that given the current and future market dynamics, shipowners and operators need to reduce risk and exposure, but they also need guidance and consultancy on developing the best fuel procurement strategy to meet the future demands of the ships in their fleets. It will be vital for shipowners and operators to have trusted partners to ensure they have the solutions they need to meet and exceed their environmental targets.
Søren Høll is the CEO of marine fuel trading firm KPI OceanConnect, the sponsor of this post.
