Eric Rahn on the Business of Bunkering and what it Takes to Compete

Peterson Fuel Delivery has been offering bunkering services in South Florida since 1990. Its founder, Ted Peterson, designed and built the three custom barges – two in operation in Fort Lauderdale and one in Miami – used by the company to pull up alongside everything from tour boats to megayachts for convenient refuelling. Each barge can carry 10,000 gallons of fuel and can pump at a rate of up to 220 gallons per minute.

After Peterson sold the company in 2006, it struggled to grow and the owners hired Eric Rahn – a management consultant specialising in turnarounds – as the managing director. On the job for just over a year, Rahn has started to turn things around by looking at everything from how the company bought fuel to how it was delivered.

While Rahn is relatively new to the bunkering trade, he has a history in the maritime industry. He worked with Atlantic Maritime, which managed eight chemical and crude oil tankers specialising in transferring Caribbean molasses to Europe.

These days, Rahn deals with a different type of transfer between Europe and the Americas: the seasonal migration of megayachts. Every year a fleet of white-hulled beauties crosses the Atlantic, following the trade winds and warm weather, to South Florida and the Caribbean. It’s a busy time of year for Peterson Fuel Delivery and its five employees, as yachts arrive for the Fort Lauderdale, Palm Beach and Miami boat shows.

Rahn took some time to speak with OnboardOnline about the business of bunkering and what it takes to compete in such a supersaturated market.

OnboardOnline: How did you first get involved with Peterson Fuel Supply?

Eric Rahn: “The owner was seeing a downward trend on his business and he called us in to have a look. We made our recommendations. He liked it. And we stepped in and turned the company around.”

OO: How has business changed since the company’s founding? And how has yachting changed in that time in South Florida?

ER: “Well, we have seen a large growth in what we call the ‘white hull’ business – in the mega and superyachts. So, obviously, size has grown considerably. We find it’s a very competitive landscape between the truck business and our delivery system on large volume of fuel. The price of fuel has gone up considerably in the last few years, so we work on less margins than we used to.”

OO: Was that one of the reasons the owners brought you in – a combination of fuel-price volatility and the onset of the recession?

ER: “You could attribute some of that. The other was we had poor management in place. The owners had appointed a general manager who was not capable of running the business.”

OO: What have you done to change its trajectory?

ER: “First of all, each barge was put into dry-dock and gone over stem-to-stern and brought to specification. One of the problems we found was there was a lot of deferred maintenance that never took place. So, now all our barges are brought up, they’re clean, and we’re proud to pull up to a multi-million-dollar yacht and fuel them.

“Those were some of the physical attributes. And then the rest was how we bought fuel and we now offer our clients additives. We offer them lube oils – more service than was provided in the past.”

OO: Speaking of additives, how will the introduction of stricter emissions standards affect the company and the services you provide?

ER: “Basically, we sell only No. 2 diesel. So whatever the refiners produce, we sell. Any client can request additives put into the fuel. So we also sell bio-diesel to any specification with prior notice – we can have it mixed for them and delivered.

“We find the newer, higher-end yachts tend to be very particular about their fuel. We supply sale certificates and fuel samples with deliveries upon request. We find a lot of the wholesalers don’t provide that service.

“One of the things we find in our industry is yachts that picked up bad fuel somewhere.”

OO: Do you expect to have to diversify the products you supply?

ER: “We just sell the commodity. Whatever the industry demands, that’s what we deliver.”

OO: How do you establish prices? OnboardOnline was interested in producing a bunkering app for crew to be able to compare prices, however, we quickly learned that would be nearly impossible with how the market works. Why is that?

ER: “We get our fuel directly from the fuel farm here in Fort Lauderdale and every morning, about 5:30 in the morning, we get the prices from the various refineries.”

OO: But that price varies throughout the day…

ER: “Yep. And the way the markets go, that could fluctuate 10-to-15 percent in a day. And we adjust our prices accordingly, because we sell based on our average inventory.

“Fuel is a commodity and the price is changing moment by moment.”

OO: The design of the barges is very innovative and specific to the inland waterways of Fort Lauderdale and Miami. Tell us a little about the barges.

ER: “They’re under 100 tons. They carry 10,000 gallons of fuel. They can pump fuel at a rate of up to 220 gallons per minute, which is by far faster than any truck – even 10 times as fast. So we can deliver fuel to a ship as fast as they can take it, meaning as fast as their specifications allow them.

“These are the only fuel barges of their type – self-propelled fuel barges – in the United States.”

OO: Do you feel the barges give Peterson a distinct advantage over competitors?

ER: “We basically sell a commodity with a service based on convenience, where we can bring the fuel right to you. We stop down right beside your ship – we never touch your ship – and hand you the hose. In other words, if you’re a large yacht, you don’t need to move from your dock to go to a fuel dock or have a fuel truck pull into a parking lot and reel out 300 feet of hose. And, again, we pump a lot faster, so your time and your crew spend less time fuelling when they use Peterson.”

OO: Generally speaking, who are your clients?

ER: “We handle everything that’s in the Fort Lauderdale area. Anything from small freighters to tour vessels to dinner boats to megayachts to sport fishermen to supplying generators to condos on the waterway. We also help the Coast Guard during hurricane response. We help fuel the generators in the local bridges. So, we consider ourselves a good local corporate client and we support all our local marine industries and marine patrol.”

OO: What is the most important thing for a bunkering company to adhere to? What do you instil in your employees?

ER: “It’s our employees that make this company. It’s all about delivery. It’s all about being on time. It’s all about courtesy, advice. We’ve got knowledgable captains who know the waterways, who know their products and sell their fuel and it’s always safety first. One thing I can say about our company is that we have a zero spill record.”

OO: No spills is pretty impressive. What safeguards do you use to ensure no fuel makes contact with the water?

ER: “It means communicating with your captain, your engineers, who are taking on fuel. One thing we find is that there’s a lot of boat owners who don’t understand their own vessels or new boat owners who never fuelled their boats before that we normally run into problems with. So, we’re there to assist them. We hand them the hose, but they’re responsible for pumping.”

OO: How many boats do you service in a typical day?

ER: “Anywhere from three to seven vessels per barge. So, can do between 15 and 25 yachts a day, depending on fuel.”

OO: What’s the largest vessel you’ve serviced?

ER: “The largest ship we’ve done is the Yorktown, which is 312 feet (95m). That took three barges-worth of fuel.”