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Lloyds List: Shell Marine sets out to syphon away fuel supply and quality risks

By: Concern over security issues, writes Jamie Dale in Singapore, Lloyds List
Published: Sep 29, 2006

SHELL Marine Products is paving the way to ease shipowners’ risk in a market thought to have an overcapacity of vessels in trade today, raising concerns over fuel supply security.

With financing made easier, thanks to low interest rates and a continuing growth from China and India, shipbuilders have enjoyed a surge in orders for newbuilds.

Loh Wai Kiew, chief executive officer and vice president of Shell, estimates the market has an overcapacity of 200 vessels in today’s trade, with little scrapping planned and a greater focus on the Asian market.

‘As of today, 70% of newly flagged ships are based in the East, with 570 berths being developed at new or existing ports, mostly in the East,’ said Ms Wai Kiew, talking at the Singapore International Bunkering Conference (Sibcon).

‘Investors have looked at getting the maximum return on investment, which has turned the focus to getting cleaner, lighter products, prompting refinery upgrades and therefore lowering fuel oil capacity.’

Refinery trends have changed over the past few years with the shift to cleaner products and investments towards refinery upgrades which within their complex refining processes reduce the residual fuel production.

Sulphur regulation has left the shipowner to face risk when it is considered that, not only does the shipowner need to find available low sulphur fuel while in a Sulphur Emission Control Area, but also what will the cost and quality be.

‘Continued acceleration of environmental legislation will have not only significant cost implications, but also critical operational and availability’security of supply issues,’ said Ms Wai Kiew

‘Most of the world’s remaining crude is high sulphur content. [The] Chances of refineries making costly upgrades to produce low sulphur fuel oil does not seem likely.’

Currently Shell is able to lift 500 cst from Singapore and LSFO from the Baltics and blend low sulphur bunkers to meet client needs. But with a lot of people’s crude slate unable to produce LSFO all that is left is to blend products. Ms Wai Kiew told Lloyd’s List Bunker 60 that a lot of particulates have been found coming out of the fuel after blending and that close scrutiny is needed.

‘Shell aims to provide the shipowner with the product quality that it promised,’ claimed Ms Wai Kiew.

A shipowner also faces the concern over the Nox levels. However following extensive testing by Shell Ms Wai Kiew said that no link could be proved between the marine fuel and Nox levels and that the problem arises from the engine, so the shipowner needs to look at the manufacturer.

With all the risks that a shipowner can face, Ms Wai Kiew told Lloyd’s List Bunker 60 that Shell intended to align itself and forge alliances which will help to take some of the risk away.

‘A change has meant that everyone understands where the future lies, by working closer with the engine manufacturer and shipowner who wants to see better fuel efficiencies from engines,’ Ms Wai Keiw said.

By forming alliances with engine manufacturers and shipowners Ms Wai Kiew said that with today’s ‘super-ships, which are a warehouse on wheels’ a lot of clients want the flexibility of getting from port to port with time being of the essence.

Shell aims to strip out the risk from reliability and quality problems by working with the manufacturer and shipowner, therefore reducing downtime risk, for example if a ship needed to be de-bunkered, which is costly and timely.

As a way of the supplier’s service meeting the customers needs Shell has launched a fuel testing kit that will enable its term contract customers to strip some risk out of its business by allowing them to test the quality of the marine fuel on the spot.

Since joining Shell 10 months ago Ms Wai Kiew has been able to use her business acumen from working within Asia to bring Shell closer to the market.

By the end of the year Ms Wai Kiew expects to have all her key staff in Singapore and now feels that she can stamp her signature of leadership on the Shell product.

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