The International Bunker Industry Association (IBIA) has called on the South African government to realise the potential of the ship refuelling market in its ports and the impact this will have in supporting regeneration.

Speaking at the African Ports Evolution conference in Cape Town today (27 August), IBIA chief executive Peter Hall told delegates that whilst more than double the number of vessels move around the Cape of Good Hope than transit the Straits of Gibraltar, the South African bunkering market has declined whilst Gibraltar’s continues to grow. Last year around 600 ships a day moved around South Africa, whilst the volume of bunkers sold in Durban hit a twenty year low with 1.1m tonnes traded in 2012. 2013 sales volumes look set to decline further as the area struggles with current market forces.

IBIA has advised the country to open its bunker market to an open economy system; produce fuel in line with global carbon and sulphur restrictions; adjust its fuel pricing structure to be competitive against South American and Asian port options and create safe offshore refuelling areas.

Partnering with neighbouring countries for crude cargo purchasing and keeping its port tariffs relevant and competitive can also revitalise an industry on the verge of collapse. IBIA believes that these steps would help stem the decline in South African bunker fuel sales. It says the South African government should closely examine the potential impact of a successful bunkering sector on the country’s GDP and develop a strategy in partnership with industry stakeholders, including the oil majors who own the current aging infrastructure.

Peter Hall said:

“It is time that that we all awoke to the enormous potential that is currently lying dormant in South African ports. The annual gain of an additional 900 ships a year in Durban for example would contribute an estimated 2.4 trillion rand (USD 126m) a year to the South African economy, excluding the value of bunker sales. A growth in the country’s bunkering market would have a huge benefit to the South African economy specifically in terms of job creation and community regeneration. Competitively priced bunkering facilities in SA ports would also benefit IBIA's owner and operator members as well as suppliers and the SA economy.”

He added:

“The country is strategically very well located to handle vessels servicing the predicted increase in South American to Asia dry bulk trades as well as Asia to South America container traffic. Increased bunkering would mean increased business for port operations firms, oil producers, barging companies as well as international bunker trading companies.”

The reasons for South Africa’s decline in the ship refuelling market are numerous, according to IBIA.

The availability of South African fuel has historically been termed as "feast or famine" which can be attributed to limited fuel storage facilities and inconstant refinery turnarounds which are unable to give the shipping market sufficient notice of refinery shutdowns. These occur primarily because the aging refineries are constantly being upgraded to produce the more lucrative "white oils" than residual fuel oil. In recent years residual fuel oil production volumes have remained unchanged with the balance of unsold fuel being exported to eastern markets. It is estimated that around 80,000 tonnes a month is distributed in this manner. These refineries are also unable to produce the low sulphur, low carbon, 380cst fuel which ship operators require. Added to the problem is the fact that port call and bunker costs are high; the supply of fuel from offshore barges is banned and there is little competition in the market with only four suppliers serving the sector.

“Bunker vessels are just too low on South African ports’ list of priorities. There is currently limited port berthing for bunker vessels in all ports with vessels being dealt with on a first come first served basis. And all too often the focus has been on developing container facilities rather than bunkering facilities in recent port upgrades,” said Peter Hall.

IBIA has approached Professor Trevor Jones of the University of Kwa Zulu Natal, Marine Studies to undertake a study of the impact that the loss of bunker fuel sales has on the economy of Southern Africa.