Bunkering: Can an App Replace a Trader?

Possessiveness comes with working in the global fuel trade and it's easy to understand why. It’s so heavily reliant on internal information, figures and projections that people on the inside are reluctant to say too much, lest that information gets into the wrong hands - the hands of a competitor.

While the traded price for fuel on any given day is easy enough to figure out, it is much less certain where the price will be on the next day, week, or month. In addition to the fluctuations in price due to supply and demand, the price of fuel can be affected by weather patterns, geopolitics, international conflict and commodities speculators. It is truly a global phenomenon, mammoth in its scale.

In addition to volatile market prices, one has to consider the effects of national legislation on duty-free fuel, availability of stocks and client specifications, the availability of berths or barges, along with myriad other variables.  

All of this adds up to a make bunkering a particularly stressful experience for captains and managers within the industry. As a result, many have built relationships with trusted suppliers who will take care of the details.

“Most of the new customers we get, it’s word-of-mouth,” says Brian Messina, who works as a trader in Peninsula Petroleum’s Gibraltar office. “Our customers will come to me and say, ‘Look, I want to work with Peninsula, not some guy in Sardinia who I don’t know.’”

Like virtually everything in yachting, bunkering is much more complicated than you’d expect it to be.

“I’ve had this conversation with management companies before and they say, ‘Well, surely it’s like pulling your car into a gas station,’ ” says Rebecca Aylen, manager with Yacht Fuel Services. “But it’s really not.”

However, in a sign of the times, there is now an app that has been introduced which is intended to overthrow this long-standing relationship by offering to simplify the buying experience and reduce costs by cutting out the middleman.

Neil Miller's app, BunkerBuoy, is intended to “save the owner as much money as possible” by taking those personal relationships out of the equation. “It’s quite a disruptive app, as you can imagine,” he says.

And, in spite of all its promises, allowing buyers to bypass the traditional wholesale-trader-client networks, take-up within the industry is not without challenge. For many, good old-fashioned trust and the depth of knowledge that fuel specialists offer remain top of the list.

How it all works

Generally speaking, when a yacht is looking to take on fuel, they will send an inquiry to a global fuel supplier outlining where they are and where they’re headed and how much they want. The global supplier – or trader, as they’re more often known – will then do their due diligence and get in touch with physical fuel suppliers that are located on the ground, with physical possession of the fuel, and then come back to the yacht – be that the captain or engineer or yacht manager – with a quote.

The yacht would then carry out a cost comparison and decide which quote (if any) to accept.  Once a quote has been accepted, it all becomes a matter of logistics: organising the transfer of the fuel at a specific date and time.

This is all sounds very simple. But listen to Messina describe a recent request: “A yacht came to me the other day for duty-free and they were in Riposto. Now, Riposto is Italy, and their flag is Cayman Islands. So what does that mean? It means that, even if it’s a chartered and commercially registered yacht, it’s not E.U.flagged, which means they can’t take the duty-free. They need an Italian [V.A.T.] representative... It’s a mess – a huge mess. That’s why there’s not a lot of fuel being lifted in Italy… So, I tell the captain, ‘Listen, you’re in Riposto and depending on where you’re going, you can either go down to Tunisia, or you can go to France and you can take fuel in Bonifacio or Porto Vecchio – one of these places – and get the duty-free.”

He went on for a while longer and finally said: “We get this a lot.”

Which is why it’s a headache involving lots of matrices – and more so recently with all the changes to duty-free within the European Union. And that’s why captains and management companies use global suppliers, says Messina.

“It’s convenience and trust,” he says. “It’s about simplification. That’s our goal, is to try to make life easier for them.”

A trusted trader

Naturally, with all the complexities involved, captains often prefer to rely on one trusted global fuel supplier.

“It’s an industry that’s based on network, and that network is very much about human interaction,” says Aylen. “Quite often it’s easier to pick up the phone and have a conversation with someone who already knows all your specifications and can then give you advice based on their specialist knowledge and experience.”

In 2011, Yacht Fuel Services was purchased by World Fuel Services, which was founded in 1984 and is traded on the New York Stock Exchange. Yacht Fuel Services is now a division under the ample umbrella of World Fuel Services which brought in $39 billion in revenues in 2012, according to its website.

“It’s an amazing position to be in because they brought with them the experience in the niche yacht market, then added to it the financial security and the purchasing power of World Fuel Services,” says Rebecca Aylen. “We can really leverage that to give our customers the best prices.”

World Fuel Services maintains 23 marine offices around the world and employs around 3,000 employees, while Peninsula Petroleum maintains 17 regional offices with a legal department in London to keep its traders updated on new sanctions and laws. But the importance of relationships and trust hold just as true for a small, two-sister operation in Florida.

Global Yacht Fuel has a single office in Fort Lauderdale with two traders: sisters Marianne and Gail Vanstone. They’ve been in the business for over 20 years and Marianne Vanstone says simplicity and trust are the key components.

“We’ve developed relationships with suppliers and customers all over the world over those years. People know us, and luckily they trust us,” she says. “Sometimes the simplest situation just works.”

Meeting demands

However, with size comes key advantages. In addition to being global fuel brokers, both Peninsula Petroleum and Yacht Fuel Services are also physical suppliers.

Peninsula Petroleum maintains several physical bunkering facilities in Gibraltar, Panama, the Canary Islands (at both Las Palmas and Tenerife), and in Ceuta.

Yacht Fuel Services maintains physical bunkering in Falmouth, U.K., and in Gibraltar, just a friendly wave across the port from Peninsula Petroleum. “It’s one of the many parts of the company, which is fantastic for us, because it’s duty-free for private and commercial yachts in a great location,” says Aylen.

This allows the companies to offer up a hard-to-beat price. “This is one of our key selling points, a really attractive price,” says Messina.

“There are key locations for the highest quality and cheapest fuel that’s duty-free,” says Messina. “Number One is Gibraltar. I’m fortunate enough to be here.” Both marine gas oil and automotive diesel oil are available in Gibraltar.

Otherwise, Tunisia has high-quality low-sulfur marine gas oil for duty-free. And Montenegro has good automotive diesel oil for duty-free.

Turkey offers low-sulfur marine gas oil, but it’s barge delivery.

“Having ex-pipe is key,” says Messina, referring to a direct hose connection at a berth. “Truck-delivery is fine, and we do it all over the world, but ex-pipe is one of the best ways to supply a yacht and have virtually no issues.”

Southern France offers a quality product at duty-free for commercial yachts, but it’s almost all truck-delivered due to logistics. Most places in Europe, like Malta, France, Italy and Spain, all require a yacht to be commercially registered for charter in order to take duty-free.

Yacht Fuel Services, meanwhile, is reaping the benefits of its acquisition by World Fuel Services, which has greatly expanded its network – not to mention its prices.

“We’re a division of World Fuel Services, so we get to use their supply network,” says Aylen. “So there’s local knowledge but on a global scale. And to have that in the yachting market is amazing.”

Physical suppliers also rest easier with the backing of a giant like World Fuel Services, she says.

“Some of it, as well, is having the financial stability of World Fuel Services as a counterpart,” says Aylen. “Credit is a big thing for a small supplier.”

The future for traders and suppliers

Just what the future holds for yacht bunkering is a question that’s up for debate. Messina believes that yachting will follow suit with the commercial companies which have hired employees whose role is exclusively centred around bunkering.

He says he has talked to many yacht management companies and he doesn’t see this as a threat to traders. “A lot of them seem interested, yet no one has taken that leap yet,” Messina says.

However, as Aylen points out, it's often the case that physical suppliers aren’t inclined to extend credit – and millions of dollars of it – to a bunch of small yachts based all over the world. Instead of dealing with fifty outstanding invoices to various yachts, they can send just one invoice to the global supply company, such as Yacht Fuel Services.

“If they’re quoting to us, they know they’re going to get paid,” she says.

At the other end of the equation, Miller's pitch for BunkerBuoy remains optimistic: “The idea is that [BunkerBuoy] would be more on the side of the yacht than the fuel supplier,” he says. The app aims to allow a savvy captain to play traders off one another and find the lowest price around and even grant them direct access to physical suppliers.

Interestingly, from 2004 to 2008, Miller owned Yacht Fuel Services along with several other investors, so his current venture is a bold step in the opposite direction, for reasons he is keen to point out.

“Captains were not doing their jobs correctly – or they were lazy,” Miller says. “It was easier to go and get an offer from someone they’re used to working with, without going and checking to see if that was the cheapest price.”

Using the app, captains can now send out one query to a variety of global suppliers allowing them to compare quotes in terms of price, fuel type, and other factors.

The app had a soft-launch more than two years ago, and is now on its third version, with a messaging service and the ability to send and receive PDFs of fuel specs. All yachts managed by Y.CO already have access to a version of BunkerBuoy designed exclusively for the company.

“With captains already using iPhone and iPad for many yacht operations, it simplifies the process of bunkering,” says Charlie Birkett, co-founder and CEO of Y.CO. “We have already seen new technology become an important part of yacht operations. As more and more captains embrace new, forward-thinking ideas, I think this way of bunkering will become increasingly widely used.”

So far, over 30 suppliers have signed up to work with BunkerBuoy, including Peninsula Petroleum. However, Yacht Fuel Services are not participating. Aylen said the app wasn’t in line with their mission.

“The ethos behind it is to simplify it,” says Aylen. “But we might have several conversations with a customer to find out all the details of the supply before we actually give a price…That’s simplified something that’s really quite complex. We might have a customer that is looking at several different locations and we’re able to advise them, well, this one’s good for duty-free; you’ll be able to get in this berth at that location; you can’t get in there because your draft isn’t sufficient.”

This hasn’t deterred Miller, though. In fact, it has pushed him to consider direct access to physical suppliers who, he says, are interested. Initial take-up was slow, with around 100 yachts on the app after its first 18 months. But he says: “I’ve got time on my side to develop this. I’m not going away.”

Only time will tell exactly where the chips will fall, but a little competition and debate is no bad thing. For the time being, with all the complexities involved, many yachts still value the expertise and support offered by traders and the comfort of long-standing relationships.

*Image credits: wikimedia commons