Bunker Fuel Losses:

Bunker fuel is the lifeblood of the shipping industry, powering the vessels that transport goods across the globe. With fuel costs representing as much as 50-70% of total ship operating costs, every drop counts. Recent investigations reveal alarming losses of bunker fuel due to outdated delivery methods and deliberate theft across various ports worldwide, indicating a global issue affecting the industry. 2022 BIMCO/IBIA survey showed that 3 out of 5 respondents had experienced a bunker quantity dispute in the previous 12 months, with estimates of an average fuel oil quantity dispute costing $27,790 (Lloyds, 2023). This article delves into the root causes behind these losses and highlights the importance of modernizing delivery processes.

A study published by the International Chamber of Shipping (ICS) estimated that worldwide bunker fuel losses amounted to approximately 45 million metric tons per year, representing a significant financial burden on the shipping industry. And even though The Maritime AntiCorruption Network (MACN) reported that corruption incidents have been decreasing recently, more than 90% of Thetius survey of maritime bunkering stakeholders reported knowledge of or experience with bunker quantity fraud suggesting that while the general trend has been improving, malpractice is still an issue. These statistics underscore the prevalence of fuel losses and the need for more accurate measurement techniques.

Factors Behind Bunker Fuel Losses

Many heavy industries, such as automotive or fertilizer production plants, have long ago adopted technologies to automate work and minimize human error. Bunker delivery is one of the few left that still mainly use outdated methods, such as manual sounding, for delivery process. Manual soundings for measuring bunker fuel quantity typically involve the use of sounding tapes or portable measuring devices. These devices are lowered into the fuel tanks to measure the depth of the fuel. The depth measurements are then used in conjunction with the tank's dimensions to calculate the volume of fuel present. This method is prone to human error, can be time-consuming and lead to inaccuracies in fuel quantity measurements. It also opens up an opportunity for fraud, even more with additional factors that make the calculations more complex, such as sloshing effect, listing or uneven trim. This outdated approach, still prevalent in many ports, contributes to significant losses.

Inaccurate measurements often lead to incorrect fuel invoices, resulting in disputes and financial losses for both suppliers and customers. "Bunker cappuccino" is a term used to describe a phenomenon that occurs during the bunkering process of ships. It refers to the mixing of fuel oil and air, resulting in a frothy or foamy appearance resembling the foam on a cappuccino. This can happen when the fuel oil is being transferred or pumped into the ship's fuel tanks at a high velocity, causing turbulence and air entrainment. The air bubbles trapped in the fuel oil create the cappuccino-like effect. Bunker cappuccino is generally considered an undesirable occurrence as it can lead to inaccurate fuel quantity measurements. The air bubbles take up space within the fuel, potentially causing the measurement to appear higher than the actual fuel volume.

The Call for Modernization

The introduction of Mass Flow Meters (MFMs) and Electronic Bunker Delivery Notes (e-BDNs) has been heralded as a solution to combat bunker fuel losses. One of the early adopters of this technology was Singapore. It has mandated the use of MFM starting 1 January 2017 for MFO, and extended the mandatory use of to all bunker tankers delivering distillates in the Port of Singapore from July 1, 2019. The use of the MFM system has been launched with the objective of bringing more transparency in the bunkering process and has gathered international praise from shipping organizations and associations. To decrease the financial burden of installing the MFM system for bunkering companies, the Singapore port authority has set aside SGD 9 million for subsidies.

The International Bunker Industry Association (IBIA) conducted a study that found a significant reduction in bunker fuel losses after the implementation of MFMs in the Port of Singapore. The study revealed a decrease in losses from an average of 1.6% to 0.25%, affirming the positive impact of modernized delivery methods. “The use of mass flow metering provides a standard for measuring mass of bunkers delivered to the ship. Standardization is crucial to ensure a level playing field for shipping,” shares BIMCO’s Christian Baekmark Schiolborg.

MFMs accurately measure the amount of fuel delivered by monitoring the flow rate and density. These devices provide real-time data, reducing the potential for errors and manipulation. Ironically, one of the arguments against the use of MFMs is that it slows down the bunkering process due to reduced flow rate, thus prolonging the process of bunker delivery. However, as mentioned above, rushing a bunker delivery process produces “cappuccino”, which causes the discrepancies in quantity. So even without the use of MFMs, it is important to use proper delivery techniques and allow sufficient time for fuel to settle down before measuring it.

Additionally to MFMs, Electronic Bunker Delivery Notes, or e-BDNs, enable digital record-keeping of fuel deliveries, ensuring transparency, traceability, and accountability. During The Marine Environment Protection Committee MEPC80, IMO has formally confirmed that that bunker delivery notes are acceptable in either hard copy or digital form providing they meet the relevant requirements of MARPOL Annex VI, meaning they are retained and made available on board, protected from edits, modifications or revisions and can be authenticated. This recent acceptance paves the way for others to adapt the use of eBDNs.

Several companies in the shipping and bunkering industry, recognizing the importance of it, have already adopted Mass Flow Meters (MFMs) for their global operations. One of them, Petrobras, the Brazilian state-controlled oil company, made the decision to install MFMs on a voluntary basis years ago. The company’s management says that “the adoption of MFMs by Petrobras aligns with the industry's global trend towards implementing this technology to mitigate fuel losses and ensure fair transactions.” Even though the use of MFMs is increasing, not everyone feels the same about it. A panel representing American bunker suppliers at the IBIA Annual Convention 2022 in Houston expressed skepticism about the use of MFMs because, to their knowledge, quantity disputes were less common. However, according to a report by Lloyd's Register Fuel Oil Bunkering Analysis and Advisory Service (FOBAS), in a survey conducted at major ports, an average of 1.5% of the total bunker fuel delivered showed discrepancies in quantities between the supplier and receiver. Nevertheless, as mentioned before, standardization is key in ensuring same conditions for every market participant.

The implementation of technology-driven marketplaces has emerged as a valuable tool in combating fraud and enhancing operational efficiency across various industries. Marketplaces offer a transparent and accessible platform that fosters self-regulation and elevates the standard of services provided by suppliers. A notable example of this transformative approach can be seen in Moorio, a new generation digital bunker fuel marketplace. At its core, Moorio operates as a sophisticated digital ecosystem that empowers stakeholders within the bunkering sector to make informed decisions based on transparent and verified information. The platform's key differentiator lies in its emphasis on open sharing and review mechanisms, which establish a self-regulating framework to ensure the delivery of high-quality services. Verified purchasers within Moorio's ecosystem have the opportunity to openly share their experiences and evaluations of suppliers, creating a valuable feedback loop that holds suppliers accountable for their performance. This feedback not only bolsters transparency but also fosters healthy competition among suppliers to continually improve their offerings and service standards. As a result, suppliers are incentivized to uphold their commitments and maintain a high level of service delivery, thereby reducing the likelihood of fraudulent practices.

In conclusion, the adoption of modern technologies such as Mass Flow Meters, Electronic Bunker Delivery Notes and marketplace utilization has proven effective in reducing losses and ensuring transparency. It is crucial for all stakeholders, including industry participants, port authorities and regulatory bodies, to collaborate in implementing industry best practices, enforcing stricter regulations, and leveraging advancements in technology to combat bunker fuel losses. By doing so, the industry can improve efficiency, enhance transparency and trust, as well as ensure the sustainability and competitiveness of global shipping.