Bunkers: Qualifying Quality

A supplier's view of what really happens

Bob Thornton – World Fuel Services 10 March, 2014

World Fuel Services Corporation

All figures, except employee count, are as of 12/31/12* Source: Fortune 500 Ranking Issue Date May 6, 2013** As of February 2013

▪ 2013 Revenue $41.6 billion

▪ Market capitalization $3.28 billion

▪ Stock symbol NYSE: INT

▪ Fortune 500 Ranking* 74

▪ Global headquarters Miami, Florida, USA

▪ Founded 1984

▪ Number of employees** 2,500

3

Global Presence with Over 60 Offices

3

Afghanistan

Australia

Argentina

Brazil

Canada

Chile

Colombia

Denmark

Germany

Gibraltar

Greece

Hong Kong

India

Japan

Kyrgyzstan

Mexico

Netherlands

Norway

Russia

Singapore

South Africa

South Korea

Taiwan

United Arab Emirates

United Kingdom

United States

SingaporeMiami London

WFS is #1 in market with 10% shareMillion

MT

0.0

3.0

6.0

9.0

12.0

15.0

18.0

21.0

24.0

27.0

30.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

WFS Manages the Largest Bunker Volume

4

Marine Technical – who are we?

5 professionals with broad technical knowledge and marine educational backgrounds

About 180 years experience

marine fuel and lubrication quality

bunker fuel testing

ship machinery and hull Inspection

new ship construction

project management

marine consulting

shipboard engineering

marine engine design and construction

Bob Thornton

Dennis Eley

Marine Technical

Sea experience

Multiple types of diesel and steam vessels

Members of

ISO 8217 Marine Fuel Specifications Working Group

ISO 13739 - Bunkering Protocol Working Group

CIMAC Heavy Fuels Working Group

IMO's Marine Environmental Protection Committee

IBIA Board (International Bunker Industry Association)

John Stirling Gajanan Pawar

Manuel Vinas

Technical Issues Facing the Industry

Frequency of fuel claims

• Quantity disputes both higher in number & tonnes

• Related to high price of fuel

• Quality claims more complex – FTIR / GCMS

• Influence of the testing services

Technical Issues Facing the Industry

Environmental Legislation

• Proliferation of ECAs

• Rules and enforcement not uniform

• 2015 – Max 0.1% sulfur in an ECA

• 2020 – Max 0.5% sulfur global

• Scrubbers vs using LSGO or 0.5% LSFO if available

• Is LNG really the future?

Technical Issues Facing the Industry

Changing fuel quality • Suppliers blending to meet legislation v.s. spec

• Law of unintended consequences

Typical concerns

Quantity disputes

– Use of surveyors

– Barge vs ship figures

– Cappuccino – real or an excuse for sleeve oil

– Vnet

Quality claims

– Sulfur test accuracy

– MARPOL vs Commercial testing

– Study of “normal” bunkers

– Debunkering may no longer be possible

– Using what’s on board

Sulfur legislation

– Revision of the EU Sulphur Directive

– North American ECA : U.S. & Canada

– Reports of detentions & fines in Europe & USA

Fuel quality

– Is it really getting worse?

– ISO 8217: 2005 vs 2010 vs 2012 vs Future

– Blending to meet LSFO with MGO

– Cost to meet sulfur specs with 95% & 99% certainty

– Responsibility of the vessel to clean the fuel

– Future availability – an educated guess

Sampling

– MARPOL vs Commercial samples

– Why suppliers insist on sampling on the barge

– Why Owners want it on the vessel

– What we’ve seen

Contractual requirements

– Supplier’s terms of sale

– Charter party clauses

Additional worries

Ask Anything!

But first – Since perception becomes truth

Is the quality of bunkers really getting worse?

Are Catfines increasing dramatically as claimed by many?

Are Bunkers Getting Worse?

Courtesy of DNVPS

WFS Bunker Claims - 2013

Split of Registered Claims - 2013

WFS Quality Claims - 2013 98.5% of products (MGO & IFO) delivered by WFS are free

of claims

Of the 1.5% having a claim, only 32% relate to quality

Quality Claims = 32% of 1.5% or less than 0.5% of WFS deliveries

WFS results are 50x lower than the 25% off-spec test results cited by some test labs

Frequently the contractual sample is subsequently tested and found to be on-spec

Since some WFS quality claims relate to reports from vessels, not lab results, the difference is even higher

Are we that good or is there some explanation for the extreme difference?

Focusing on Al+Si

Courtesy of DNVPS

A Dramatic Increase or?

Data - courtesy of DnVPS

Data - courtesy of DnVPS

An Accurate Depiction

Data - courtesy of DnVPS

Use of Truncated Graphs

Note that both of these graphs display identical data; however, in the truncated bargraph on the left, the data appear to show significant differences, whereas in theregular bar graph on the right, these differences are hardly visible.

It’s not always the fuel

Now you can ask anything!

GC-MS Analysis

Quality – What’s in Bunkers

Sulphate SO4 - 534.6 mg/kg (ppm)

Calcium Ca++ 208.0 mg/kg (ppm)

Chloride Cl - 68.0 mg/kg (ppm)

Magnesium Mg++ 53.5 mg/kg (ppm)

Sodium Na+ 42.0 mg/kg (ppm)

Potassium K+ 2.8 mg/kg (ppm)

But what is this?

San Pellegrino Mineral Water

Sulphate

Bicarbonate

Calcium

Chloride

Magnesium

Sodium

Silica Residue

Strontium

Potassium

Borates

Nitrate

Fluoride

Bromide

Lithium

SO4 –

HCO3 –

Ca++

Cl –

Mg++

Na+

SiO2

Sr++

K+

H3BO3

NO3 –

F –

Br –

Li+

534.6 mg/kg (ppm)

222.7 mg/kg (ppm)

208.0 mg/kg (ppm)

68.0 mg/kg (ppm)

53.5 mg/kg (ppm)

42.0 mg/kg (ppm)

9.4 mg/kg (ppm)

3.5 mg/kg (ppm)

2.8 mg/kg (ppm)

1.2 mg/kg (ppm)

0.77 mg/kg (ppm)

0.61 mg/kg (ppm)

0.40 mg/kg (ppm)

0.18 mg/kg (ppm)

San Pellegrino Mineral Water