Reputation damage and the road to recovery for South Africa’s bunkering sector

Linsen Nambi is a South African owned and operated shipping company.

We permanently employ 118 South Africans of which 100 are seafaring staff aboard our 3 bunker tankers. We have operations in Durban and Cape Town. The company has operated in the South African bunkering space since 2008.

I’ve been in the bunkering industry for 25 years myself, involved in areas of Administration, Crewing, Operations, Health and Safety and Risk and Compliance management.

When I was a much younger man I worked as a Deck Hand for a company called FFS Bunker Services and served on various bunker tankers including the MT Dolphin Coast, MT Black Egret and MT Stanley, so I’m able to provide a well-rounded industry perspective based on what I’ve seen and experienced over the years.

Last year at this I briefly spoke about the erosion of bunker fuel volumes across our major ports and the impact on the local bunkering industry as well as other support sectors of the South African maritime industry.

Very briefly to recap between 2008 and 2022 we recorded a 61% decline in bunker fuel volumes moved across our 3 major ports i.e. Durban, Richards Bay and Cape Town. Convert that into tons, that’s around 1.4 million tons per annum of bunker fuel that’s no longer shipped through our port system, covert that into monitory terms, that’s 1 billion and 78 million dollars or 19.4 billion rand lost purely on the sale of bunker fuel within our ports using the present average price of low sulphur fuel oil in Durban.

If we now consider last year’s bunker fuel volumes moved within our ports, we note a further 33% decline in volumes year on year moved between 2022 and 2023 despite the resumption of refining activities at the Astron Energy refinery in Cape Town and Trafigura’s entry into the Table Bay bunker fuel market. These two events should have seen a significant increase in bunker fuel sales across our major ports, but this has not occurred.

Logic would dictate that the only operating local refinery in this space should be able to produce bunker fuel and make product available to fuel resellers and the traditional oil majors at competitive rates, thereby discouraging the importation of bunker fuel and increasing the overall cost-based attractiveness of bunkering in South African harbour ports. We haven’t seen that yet. This is just one of the many factors negatively impacting port bunkering activities in South Africa and as a result serves to discourage Ship owners from bunkering at our ports.

Other significant factors negatively impacting the industry, and again these have been highlighted previously and is nothing new.

·?????? High port costs for ships berthing in South African harbours,

·?????? Port congestion

·?????? Lack of bunker berths

·?????? Low productivity and low efficiency of port services including tugs, berthing services, pilotage, bunker terminal operations, liquid bulk terminal operation etc.

·?????? High, uncompetitive bunker fuel prices driven by a shortage of bunker fuel supply and unrealistic margin expectations.

·?????? Reduced stem sizes as a result of uncompetitive bunker fuel pricing, the majority of ships uplift only what’s absolutely necessary in South African ports for passage to the next port or until they are able to load larger quantities at competitive prices in other ports.

·?????? Unused land side storage tanks.

·?????? Dilapidated land side storage tanks

·?????? Decommissioned refineries, and a reliance on the importation of bunker fuel for sale in the local market.

·?????? Development off and the relative attractiveness of bunkering in neighbouring ports i.e. Walvis Bay, Mauritius and Mozambique.

·?????? Environmental factors and the global shift toward cleaner less harmful fuels in the maritime industry.

·?????? Lack of Government will / action or policy to protect the security of energy in the country and the bunkering industry.

·?????? Bureaucratic red tape hindering the development of new projects or access too and use of existing storage.

·?????? Lack of investment in the maintenance, development and upgrading of local refining capacity.

·?????? Lack of financial resources both government and private sector.

·?????? Skills drain through the disenchantment of our technical skills base i.e. the decommissioning of refineries and the subsequent job losses.

·?????? Competition from foreign operators who do not need to satisfy local content requirements. SARS have now arrested some of these ships and stopped various established companies from delivering bunker fuel in Algoa Bay and at other South African ports of interest. This action is especially damaging for the South African bunker fuel industry as the Algoa Bay bunkering operation is heavily reliant on foreign operators with foreign ships and foreign crew. Bunkering in Algoa Bay is non-existent at present. 100s of jobs in the marine support service industry in that area has also been heavily impacted, with many companies shutting down operations and relocating assets. In a country with a 32% unemployment rate and an unemployed labour force of 16.7 million people, this is unacceptable.

·?????? Unavailability of all bunker fuel grades at South African ports is also an issue. There hasn’t been MGO supply in Richards Bay harbour for last 4 years and there are now MGO supply constraints in Durban.

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What needs to happen?

As the South African bunkering industry, we’ve collectively destroyed our reputation for being a suitable destination for bunkering operations.

As South African society we’ve also not covered ourselves in glory. Political unrest, riots, looting, violent protest, corruption, crime, the safety and security of our ports etc. have an impact on the view the international community including the shipping industry has of South Africans and conducting business transactions with South Africa or South African companies.

South African Seafarers are also expensive, and the international maritime industry’s perception is that South African seafarers are substandard, poorly trained and unskilled.

These events, occurrence, perceptions right or wrong affects sentiment and negative sentiment breaths apprehension and market degradation, festering the widespread instability we know see.

So that’s where we are and what we’ve done wrong. ?

The next question is, can we recover? The short emphatic answer is YES.

We need to address and find long term solutions to the problems I’ve eluded too but we also need to value and capitalise on what we still have and ensure that it is preserved, supported and developed for the benefit of industry.

South African ports are equipped with state of the art, purpose built bunker tankers, capable of loading and delivering bunker fuel in excess of 1000 MT / hr.

Tankers are fitted with radar tank gauging systems and Mass flow meters (proven to be the most accurate) fuel metering equipment in use in the world today.

Navigation and cargo systems on the tankers are automated and can be operated by a single user.

We have highly skilled, experienced, well trained South African seafaring crew operating our ships.

The South African in port bunkering safety record is among the best, if not the best in the world at present and a testament to the standards and safety culture on our ships.

Port bunker tankers are able to deliver in excess of 70?000 MT per barge per month, to customer vessels calling at our harbours despite poor terminal performance. If we considered the current barging infrastructure in place at present across our ports and assume all vessels have similar capabilities, this translates into the movement of 4.2 million tons of bunker fuel, generating $3.2 billion dollars or R58 billon purely in the sale of bunker fuel within our ports. If we are able to tap into just 50% of these capabilities, we become a 2.1-million-ton market valued at around $1.6 billion dollars or R28 billion rand.

The port bunker tanker fuel delivery service is world class in South Africa and that strength is not being harnessed for the benefit of the industry. Barges across our ports are operating on average at around 17% utilisation at present and those levels are not sustainable. The performance data I’ve given you in based on what individual operators and vessels have achieved in the past and the historic data serves as a reminder as to what can again be achieved.

South Africa’s geographic location is along established international shipping trade routes. Its position and the position of its Maritime Ports provide a competitive advantage over other countries in the region. We are ideally situated to service the worlds shipping fleet with bunker fuel.

It must be noted that, and above all other interventions, plans and strategic developments: government assistance and resources are required to effect lasting change and the necessary reforms to stabilise, assist with recovery and transition the South African bunker fuel industry into the future and the green realm of sustainable energy in shipping. With out the political will, policies and considerable investment in infrastructure, industry will not be able correct the current trajectory with the significance required for true sustainability.

This is at the highest level and unless there is political will and understanding of what’s required for sustainability in the bunkering sector, industry alone cannot make the necessary changes. Government support with the intervention of energy security measures, parastatal reforms and infrastructure investment are what’s required to become truly sustainable and prevent a similar industry recession in the years to come.

Conclusion

Let me leave you with the key take away from this presentation, all the industry failings, weaknesses and strengths discussed have a role to play in industry reform but without policy at the highest level to support industry we cannot succeed.

As industry stakeholders we have a collective responsibility to make those who have the power to impact change aware of the problems, the impact of doing nothing and what’s required to ensure a sustainable South African bunker fuel industry well into the future.