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Would you fill this tank?
We asked a selection of distributors what their policy was with respect to delivering to dodgy tanks such as this one spotted in the Channel Islands. Share your experiences and dodgy tanks with liz@fueloilnews.co.uk
January 2014 could bring higher European jet fuel prices.
In recent months there has been a considerable degree of confusion regarding the EU’s Generalised Scheme of Preferences (GSP) and the impact it may have on oil prices within the EU.
The GSP allows import tariff exemptions on goods from developing countries, thereby encouraging trade with poorer countries. It may come as a surprise that, at present, countries eligible to benefit from the scheme include Russia and most of the Persian Gulf (including Saudi Arabia). However, the World Bank has now reclassified these nations as upper-middle income economies which will mean that, from 1st January 2014, all standard import tariffs will apply. To compound matters further, Libya, a key supplier of jet fuel into the Med, is considered to be on the verge of a World Bank upgrade, so may soon be subject to the same import tariffs.
Information coming out of Brussels on how this relates to oil imports has not exactly been clear: initial reports were that, as of the start of next year, all crude oil and refined product imports from the newly upgraded nations would be liable for duty at 4.7%. This was swiftly followed by the news that all oil products would in fact remain exempt, before the latest update confirmed that jet fuel (kerosene) will be liable for duty whereas crude oil and low sulphur gasoil/diesel (less than 0.2% sulphur) imports will remain exempt.
“If the planned changes do go ahead, a large amount of imported European kerosene will see price increases of 4.7%”
What would be the implications of a 4.7% import tariff on kerosene jet fuel? At present, the EU as a whole imports roughly one million tonnes of jet fuel per month from the Persian Gulf and North Africa, with imports nudging two million tonnes in peak (holiday) periods. A source from a state run Persian Gulf oil refinery explained, “We are concerned these changes from the EU will cut demand for jet fuel from the Middle East region [which] will hurt our own refining margins at a time when we are expanding our capacity, in part to meet European demand.”
At the same time, questions are being asked of the extent to which refineries in India (which will remain a GSP beneficiary) could step up to any increase in demand. We could well end up in a situation where refined jet fuel from the Middle East regularly travels to Europe via an intermediary in the Far East, thus still qualifying for import tariff relief under the GSP – hardly the intended effect of the scheme and certainly not a supply-chain likely to bring down prices. Another likely consequence is that, if jet fuel in Europe does end up being sold at a premium to that of the rest of the world, airlines will look wherever possible to refuel outside of the EU to reduce costs.
In recent weeks there have been increasing noises coming out of the EU to suggest that the import tariff on jet fuel could be avoided altogether if the Gulf Cooperation Council States (Saudi Arabia, Kuwait, Bahrain, Qatar, UAE and Oman) reconsider engaging in bilateral trade negotiations with the EU, which have been on hold since 2007. So depending on your opinion of the EU, this whole episode could be considered either as strong-arm tactics to boost trade with the Middle East (“come back to the table on the trade bilaterals or we will block your fuel imports”), or an EU oversight and failure to consider the actual implications of the GSP.
If the planned changes do go ahead, a large amount of imported European kerosene will see price increases of 4.7% and for distributors that should be a worry. Not only is the legislation set to be applied in the midst of the heating oil season (Jan 2014), but for an industry already under pressure to prove its consumer value versus other methods of heating, a jump of circa 2.5ppl will not be welcome.
“We could well end up in a situation where refined jet fuel from the Middle East regularly travels to Europe via an intermediary in the Far East”
If international trade is deemed to be the lifeblood of economic activity, then its principal means of transportation, by sea, is a critical enabler; at the latest count, shipping conveyed approximately 90% of world trade by volume
Worldwide the marine bunker market consumes approximately 200 million mt/year, which represents about 5% of overall oil demand. The EU is estimated to comprise around 25% of total international bunker use.
By far the largest bunkering port in the world is Singapore, which supplies around 36million mt/year; total US bunkering activity amounts to circa 25 million mt/year, with China at about 10 million mt. Within the EU, the Netherlands, with Rotterdam and Amsterdam, accounts for around 15 million mt/year, followed by Spain (especially Algeciras and Ceuta) at 9 million mt and Belgium (Antwerp) at 7 million mt/year.
UK international bunker supply is just over 2 million mt. (with a further 1.2 million mt supplied to vessels which remain within UK coastal waters).
As a rough and ready rule of thumb, vessels up to about 6,000 DWT use marine diesel/gas oil for propulsion, while vessels above that size use a grade of fuel oil in their main engines and marine diesel/gas oil in auxiliary power units. Typically, fuel oil accounts for between 80% and 90% of total marine fuel supplied on a worldwide basis, with relatively minor variations by country according to the type and pattern of trade.
A well-established feature of the supply chain is the role of the bunker trader, who acts as a reseller from a physical supply source(s) and/or, in certain instances, has direct access to their own physical products in storage. Active in this area are well known names such as Argos Bunkering, Aegean Bunkering, Bominflot (now owned by Mabanaft), Chemoil, Cockett Marine, Maritime Bunkering, Mersey Bunkering, OW Bunkers and World Fuel Services, etc. These companies maintain and service substantial portfolios of shipping customers.
The marine fuels supply chain
“We have to be careful that consumers are given the correct information,” said David Blevings, spokesman for the Northern Ireland Oil Federation (NIOF), in response to the launch of the Crumlin Oil Club
Unrealistic savings
“The club’s publication refers to some GB schemes saving participants between three and 6ppl; this maybe the case in GB, but with a highly competitive local market in Northern Ireland, where 275 distributors supply around 500,000 homes, these savings are frankly not realistic. Reviewing the Fuel Oil News Price Totem the actual distributor margin in Northern Ireland is somewhere between 2 and 4ppl – the saving’s just not there.
“Many oil clubs are making comparisons based on the £1 plus per litre for a 20-litre oil drum, which includes the drum’s cost. Consumers have moved past buying drums; most households will have procured two or three drums which they use to fill up at the forecourt kerosene pump. Over the last two years, the biggest growth in kerosene has been at the pump; in rural areas the majority of retail sites now sport one.
For emergency use only
“The growth in the drum business is a concern; there are clear health & safety issues when carrying kerosene in cars, and there’s potential for environmental contamination from drips/spillages as it’s poured into the household tank.
“Small oil drums are for emergency use only. They should provide a small amount of oil – often in an out of hours run out situation – allowing the householder to heat their home until a distributor can visit the next day. They’re not promoted as a method for heating a family home and we continue to discourage consumers from using them, except in an emergency.
“We’re convinced that the future for oil consumers is a viable pay as you go system similar to that operated for gas and electricity. Along with OFTEC we continue to lobby minister McCausland to introduce the new technology that has already been developed locally by Kingspan and Carillion.
Prepare ahead for winter – ensure your customers know what payment terms you offer
“In this difficult economic period, NIOF is only too aware of the impact increased energy costs have on consumers. We’re not against oil clubs per se, but consumers should be given the correct information on potential savings.
“As a responsible industry, numerous products are already offered to help consumers budget for annual fuel requirements. Putting money aside each week into a budget payment scheme such as PayPoint and Council stamp schemes, can deliver all oil requirements over the winter period. Most distributors will accept direct debits and many operate their own savings schemes. These schemes are ideal as the consumer can build up credit and/or budget to buy a more economical amount of oil and control their fuel spend.”
Planning ahead of winter, distributors should ensure that customers are frequently reminded as to the options available.
Mabanaft – committed to adapting to the prevailing market
In July 2012 Raphael Hüttmann stepped into the role of managing director of Mabanaft Limited. A long-standing employee of the group holding company Marquard & Bahls AG, a member of the board and a former financial director of Mabanaft Limited, Hüttmann brought with him a thorough knowledge of the UK business and of the industry as a whole.
The appointment formed part of a management restructure aimed at supporting the ongoing development of the Group’s business interests in the UK. In an exceptionally challenging market, Mabanaft began to implement a change management programme designed to transition its operating model to more closely reflect the current and projected market environment in order to ensure a long-term and sustainable future for Mabanaft in the UK. In this interview he talks frankly about what has been achieved over the past year and why swift action and careful planning will ultimately pay dividends.What have the past 11 months been like?
Exciting, challenging and more recently, rewarding. It’s a challenging market place and we, as a team, have had to decide on the best way to take the business forward. Change is not always easy; however it’s very rewarding to see that it pays dividends.Please tell us about some of the changes
We appointed a new finance director and a new head of supply and operations. The combined management team brings together a great deal of expertise, together we took the opportunity to review the business and the marketplace. This led to the decision to step away from certain activities and focus on what is core to Mabanaft in the UK.What are the benefits of being part of the Marquard & Bahls group?
Marquard & Bahls is a very strong group; we’ve shown substantial growth in profits in the last 10 years which is set to continue. We benefit in a number of ways such as financial strength and support as well as inter-group product purchasing at competitive rates. However the most important benefit is the breadth of industry expertise that we have access to whenever we need it.How do you view the current environment?
The international supply market has been backwardated for the majority of the last 12 months; if you hold stock and you hedge, you risk losing money every month which makes it very challenging as we must continue to maintain sufficient levels of inventory for onward distribution to our customers. There is a great deal of volatility and uncertainty in the market. We must endeavour to balance this uncertainty and create a product for our customers that is not only attractive in terms of price but is also secure in terms of physical availability. In the UK market there has been a period of unprecedented change – we have seen consolidation of large parts of the customer base, refiners have increased their market share, and economic recession – all of which has led to changes in profile and demand. The underlying trend is a continued reduction in consumer demand and very intense competition. It is a challenging time for the industry.What has Mabanaft done in response to market conditions?
We looked at the locations we were in, the kind of deals we were offering and the risk reward of these and decided to make changes. There are really good parts to our business; such as Grays, Belfast, Grangemouth – all of these are doing really well, but there were two locations, Cardiff and Immingham, that were not working for us. These changes – and the fact that some people in the industry are aware that our results last year were disappointing – have resulted in rumours. Honestly, there is no change in the service or in the product that we deliver; there has simply been uncertainty as a result of rumour. In these volatile times and with such a challenging market one shouldn’t be afraid of making the right decisions. Admitting that something doesn’t work and stepping away from it strengthens your business – that is what we have done.Has your strategy been successful, have you achieved what you set out to do?
We are moving in the right direction and I believe that there is a great deal of potential in our organisation. While part of a very big group, in the UK we are a fairly small company – one of our strengths is the ability to make quick decisions. Here we have all of our expertise together in one room which facilitates interaction between supply, marketing, operations and finance – it’s something we can take full advantage of. In terms of financials, our result this year compared to same period last year is substantially better. We are seeing that change pays off and that is rewarding.Have you got more changes planned for the future?
I don’t foresee anything at the moment but it’s important to understand that in a market that will constantly change, we as a company have to change as well. If you stop changing or do not adapt to market forces, I believe that is the beginning of the end. We have to remain flexible – that’s our strength as an organisation.What are Mabanaft’s plans for the future?
In locations we are committed to we are looking at opportunities to grow our position. We are currently negotiating investment into terminal infrastructure in the UK that will allow us to sell additised product, something customers have been asking for and that we have not previously been able to offer at all of our locations. We are also looking to invest in new IT systems to allow us to offer electronic invoicing and online administration. This will increase efficiencies within our organisation which will in turn allow us to offer more benefits to customers.
In terms of commitment to the UK – we have been in the UK for more than 60 years and we’ve had very good times and more difficult ones. As a group we feel that the UK market place is an important part of our business and we remain committed to adapting to the prevailing market.You sound very positive …
Yes I am – there’s more work to do and the environment remains tough – there’s nothing we can do about that – but there’s a lot we can do to cope with it.www.mabanaft.co.uk
Phillips 66 has further strengthened its commitment to UK fuel sales, appointing Tony Reddington as national sales manager for its UK & Ireland marketing division.
In his new role, Tony will be 100% customer-focused, targeting new customers and strengthening existing relationships with supermarkets and high volume resellers and dealers throughout the UK and Ireland. He will take responsibility for the development of the company’s speciality fuel businesses – marine, aviation and LPG.
Since joining the company in 1987, Tony has held a number of roles across its upstream, downstream and corporate divisions, with a particular specialism in finance.
Pete George, the company’s managing director UK & Ireland marketing, commented: “Tony has extensive experience of our business and our brand, as well as an in-depth understanding of the UK and Ireland’s fuel market. He is well-placed to take on the challenge of increasing our market share, identifying new opportunities and developing our customer base across all of our fuel products.” www.phillips66.co.uk
Valero has extended and expanded its partnership with Wincanton.
The partnership, which has spanned almost 20 years, will now continue for at least another five years. Wincanton has also been awarded a new, five year contract to take over the scheduling and planning of its deliveries, including taking and managing customer orders.
Under the new terms Wincanton will operate out of Valero’s network of UK terminals, transporting more than two billion litres of fuel a year for the business. The logistics provider will operate a 24/7 service on behalf of Valero, taking up to 600 customer orders a day before scheduling and planning delivery to more than 1,000 UK locations.
Commenting on the announcement, Wincanton’s CEO, Eric Born, commented: “We are delighted to be expanding our relationship with Valero and are looking forward to finding further opportunities to develop new and innovative ways of adding value to our partnership.
“Today’s announcement confirms Wincanton’s position as a market leader in the sector, with a proven capability to deliver value added services that are usually out of scope within a traditional fuels distribution model.”
The Federation of Petroleum Suppliers (FPS) has produced a Code of Practice and Customer Charter in a bid to raise standards within the oil distribution industry.
Since the 2011 Office of Fair Trading (OFT) investigation, the FPS and its members have worked closely with the OFT, Citizens Advice Bureau, Consumer Focus, Advisory Committee on Releases to the Environment and Department of Energy and Climate Change to form the new documents.
Launched earlier this month, the Code of Practice is designed to ensure all members adhere to high standards and contribute towards the professionalism of the industry. Together with the Customer Charter, the new code should ensure that the best service is offered by FPS members and that customers are fully supported when ordering heating oil.
Chief executive, Mark Askew, said: “The Code of Practice has taken time to implement but we have ensured that we have consulted with consumer groups so the consumer has their say as well as ensuring DECC and the OFT are happy with the proposed Code.
“The FPS will act as guardians of standards for the oil distribution industry and through this Code of Practice we will set those standards and show we take them seriously. Having a Code of Practice in place for FPS members will give the public reassurance that they are dealing with companies who are adhering to best practice.
“Every FPS member should offer clear pricing and delivery guidance to customers at the time of ordering, and the new charter explains all this. As well as providing information on the different ways to place an order, members should advise on matters such as the right to cancel and what to do when something goes wrong. We are doing everything we can to ensure the customer experience is a positive one.”
Brian Worrall, DODF chair and Marisa Ferguson, contracts manager, SQA, at the signing of the PDP agreement
The UK’s first Petroleum Driver Passport (PDP) has moved a step closer to completion with hauliers and training providers being invited to gain approval to deliver the necessary training and assessment.
Hauliers and training providers are now able to apply to Scottish Qualifications Authority (SQA) to become PDP approved centres, enabling them to carry out some or all of the required training and assessment.
The scheme will be open for driver training from January 2014. During 2014 all drivers must be trained and pass the associated assessments before being issued with the PDP card. Terminals will begin mandating the scheme from January 2015.
Training providers can register to undertake all activities, classroom and practical, on a five year and annual refresher basis whilst others may opt to conduct their own annual refresher, practical or classroom training. Some operators may choose to undertake the practical assessments for themselves and others, leaving the classroom elements to third party providers.
Brian Worrall, Downstream Oil Distribution Forum (DODF) independent chair, said: “The implementation of the PDP is progressing well and we are inviting companies to register with SQA as training providers so that we are in a position to begin driver training in January 2014. By implementing PDP, the industry can have confidence that drivers have been trained to a consistently high, externally verified standard in all aspects of tanker driving, from pre-vehicle checks to loading, driving and discharging.”
Secretary of state, Ed Davey added: “Government is supporting the PDP scheme which will improve standards and the quality of training across the industry. We would encourage all training providers to sign up to delivering this new qualification.”
Sue Macfarlane, head of specialist awards and services at SQA, said: “We are delighted to be working with the DODF. I believe SQA’s considerable experience of developing, assessing and quality assuring qualifications relating to the transport of dangerous goods means we can be trusted by the industry to help demonstrate drivers’ skills and knowledge of relevant safety procedures to terminal operators, customers and the public.”
The vice lord lieutenant of Lancashire presents Edward Fort OBE with the Queen’s Award for Enterprise:International Trade
Fort Vale recently celebrated its fourth Queen’s Award for Enterprise: International Trade.
Vice lord lieutenant of Lancashire, Colonel Alan Jolly, visited the company’s headquarters in Burnley to present the trophy on behalf of the Queen, to company founder and chairman, Edward Fort OBE.
Edward Fort said: “I am extremely proud of our company and what we have all achieved together. Such an endorsement means that customers can be confident that they are dealing with the best in our field.”
The company has just released a new video on YouTube, showcasing the company’s latest developments. In an interview Ian Wilson, the company’s managing director, explains the company’s philosophy on continual improvement and innovation.
“We are a team of engineers and innovators and firmly believe that adapting to constant change is the only way to move the business forward. Our customers are demanding shorter and shorter lead times and it is only by having our own dedicated foundry that we can control the quality of components and the rate of supply to achieve these demands.
“We have recently constructed a 1,000 m2 research and development unit together with a test facility which will enable Fort Vale to continue to improve and develop its product range and keep the business in its current position in the market.”
The new range
Maxol Lubricants has unveiled a new motor oil range for the retail market.
The range reflects the new look of the Maxol brand and introduces new labels and symbols to make it easier to choose the correct motor oil. The symbols on each product indicate whether the motor oil is for petrol or diesel engines, or both and that it meets European Automobile Manufacturers’ Association standards. The label also displays a list of vehicles for which use of the oil is recommended.
At the beginning of the year Maxol unveiled a new brand and forecourt identity and the new range marks the company’s continued rejuvenation of the brand. Maxol Lubricants worked closely with leading brand consultants Neworld Associates to incorporate the aesthetics of the new retail forecourt brand in the motor oil range. Research showed that consumers were largely confused by technical data on traditional packaging and were averse to buying from forecourts where specialist advice was unavailable.
Commenting on the new look motor oil range, general manager, Owen O’Neill commented: “We have always been known as the pioneers of the industry and believe that we have again set a new higher standard by being the first to introduce clear and simple labelling as part of our new look motor oil range.
“Our primary focus was to make the purchasing process easier for consumers and we feel the non-technical language, new symbols and clever design achieve this.
“This has been an exciting project and one which we feel will help Maxol to win new customers. It is also important that the Maxol Group’s new brand identity is adopted across all facets of the business to guarantee consistency for all stakeholders.”
The new look range will be fully rolled out by the end of 2013.www.maxol.ie
Andrew Bentley of Chester Performs with Ian Cotton of Essar Energy
Stanlow-based Essar Oil UK is sponsoring The 2013 Essar Chester Literature Festival.
The autumn festival, which is produced by city arts organisation, Chester Performs, will run from 13-27th October.
Ian Cotton, Essar’s head of communications and community, said: “We are delighted to be sponsoring the festival for another year. The event has become an integral part of the city’s cultural calendar and this year, there really is something for everybody.”
Festival manager, Paul Lavin, added: “We’re pleased to have Essar on board. We’ve developed a great relationship with the company, and through their continued support, we can ensure the festival continues to grow.”
Among the authors starring at the festival are broadcaster, Clive James, comedian, Tim Vine, war correspondent, Kate Adie and actor, Sir Derek Jacobi. Other big names on the bill include BBC Radio 5 Live’s, Richard Bacon, Beatles historian, Mark Lewisohn and TV personality, Kate Humble.www.chesterliteraturefestival.co.uk
Greg Garland, chief executive of Phillips 66, has revealed that a number potential buyers have expressed interest in acquiring Ireland’s only refinery, possibly saving it from closure.
“We do have people interested in Whitegate,” he said of the Cork-based plant which employs 200 staff.
The refinery, which has operated in east Cork for nearly 55 years and supplies approximately a third of the country’s oil, requires extensive modernisation and closure looked likely if it was not sold.
Michael Martin, Fianna Fail leader earlier this summer, commented: “The threat to its future has serious implications for Ireland’s energy supply and consequently for our economy.”
Phillips 66 is pulling out of Ireland completely, selling its wholesale marketing business and a storage terminal in Bantry Bay.
World Fuel Services barge Cap Mejean, bunkering the Seven Seas Voyager
Like many other industries, shipping was a casualty of the economic downturn in 2008. Liz Boardman looks at how the distributors supplying the marine market were affected, how the industry has bounced back and concerns over new legislationA downturn in volume
“The shipping industry was booming before the summer of 2008, but freight rates like the price of oil crashed,” explains Nikki Jessop the Rix Group’s director, Maritime Bunkering. “Following this, ship owners and operators resorted to slow steaming and bunkering at locations offshore on passage at lower levels to keep their costs under control. Marine fuel volumes and margins are down significantly and credit risk management is more important than ever.”
Peter Hunt, who handles Falmouth marine sales for World Fuel Services, agrees. “We saw a peak in terms of volumes in 2007/8. Total UK bunkerage in 2007 was between 2.5-3 million tonnes; now it’s down to approximately 2.2 million tonnes.”
World Fuel Services is one of the biggest suppliers of bunkers to the UK market. Its UK-based subsidiaries (Henty Oil, Falmouth Petroleum and Tramp Oil) supply over 750,000 metric tons of bunkers each year in UK ports (HSFO, LSFO and LSMGO). The company has storage and blending facilities at Immingham, Falmouth, Liverpool and Holyhead and a resident barge at Dover.Recovery
“As with most UK industries, the marine fuel industry has not escaped the downturn unscathed,” says GB Oils’ marine national sales manager, Gary Byers. “However we have experienced an increase in demand for marine fuel oil throughout the UK due to factors such as increased brand awareness and establishment of close, trusting relationships between the company, international traders, ship owners and the UK and international government bodies.”
Since it was formed some years ago, GB Oils’ marine division has become a key player in the industry and is continuing to grow. The company’s marine team is a trusted supplier to some of the UK’s main marine companies including the Royal National Lifeboat Institution and Ministry of Defence.
The company is the only bunkering supplier able to distribute nationwide and is one of just a handful of companies permitted to supply fuel on the Thames. Another specialist service provided by GB Oils is the transportation of IFO grades from Eastham to every port in the UK, Northern and Southern Ireland, allowing the company to not only maintain business, but to continue to grow.
The Rix group currently owns three coastal tankers plus three estuarial barges, all suitable to load from the major oil companies. The marine department charters three/four of the tankers for bunkering activities ECUK, whilst the other two are on charter to third parties.
“The Humber, like most ports saw a significant reduction in bunker volumes by early 2009,” explains Nikki. During 2008 Maritime Bunkering operated two coastal tankers plus two estuarial barges. As a result of pressure from the major oil companies over age and vetting, the Rix group had already entered into a phase of new builds to maintain its market position.
“We (Rix/Maritime Bunkering) have managed to keep our heads above water during challenging economic times through a conservative approach to the creditworthiness of our clients, securing product availability from our business partners and also investing a substantial amount of capital into our barge fleet, providing a good service.”
In order to ensure that it maintains its barge fleet, Rix’s marine department also offers a barge hire service to other local suppliers, maintaining continuity to the area with regular barges.”Marine legislation
From 1st January 2015, legislation will come in to force, further reducing the content of sulphur in marine fuel from 1% to 0.1%. “The use of low-sulphur fuels is a hot topic within the industry,” says Gary Byers. “The ECA regulations are designed to limit the harmful impact sulphur can have on the environment, but there is some debate on how effective this will be and the potential impact it could have on the marine industry.
“Long-term, the regulations will have clear environmental benefits, however in the short-term, the treatment process required to convert fuel so that it contains 0.1% sulphur results in large scale carbon emissions, the impact of which negates the benefits of using a low-sulphur fuel.
“There is concern that the ECA Directive may lead to increased bunkering costs, which could push cargo towards non-ECA zones, and also that there may be a rise in the use of alternative transport, including land, causing more congestion and emissions from those modes of transport, therefore counteracting the planned benefits of marine vessels using low sulphur fuels.”
Nikki Jessop echoes these concerns; “It’s not known if sufficient 0.1% fuel oil will be readily available or if some ships will switch over to 0.1% MGO further increasing demand for MGO.”
Melanie Noel, WP Group’s fuel sales manager agrees: “Legislation changes will only see more marine customers switching to gas oil 10ppm which will open the market up to more competition. It will also see increasing issues with fuel specification as FAME is present in most gas oil 10ppm and this causes microbial growth between fuel and water interface. This will in turn accelerate degradation in fuel quality causing efficiency problems.”
WP Group purchases gas oil 10ppm direct from Esso’s Fawley refinery. Melanie explains: “Our fuel supplier, Esso, has taken the decision to produce gas oil with no added bio content by meeting its RTFO obligations elsewhere. As a result, WP Group can guarantee to supply gas oil containing less than 1% biofuel.”
On the positive side, Peter Hunt believes that the new legislation could be a good opportunity for Falmouth. “World Fuel Services expects Falmouth volumes to benefit from the reduction in maximum sulphur content for bunkers used in the European and USA/Canada ECAs when it comes into force. Ships approaching the European ECA from the Atlantic will not always be able to secure ‘ECA-compliant’ bunkers before entering; Falmouth’s location (just outside the western border of the ECA) makes it the last opportunity for ships to secure compliant fuel before entering the ECA.On the horizon
“While there are areas of uncertainty, the marine industry continues to be a strong business sector with opportunities for expansion. Marine fuel suppliers such as GB Oils have a key role to play in supporting the industry and for us, the focus remains on helping our customers to comply with legislation and working hard to ensure their needs are met,” says Gary.
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HSFO – High Sulphur Fuel Oil
LSFO – Low Sulphur Fuel Oil
LSMGO – Low Sulphur Marine Gas Oil
IFO – Intermediate Fuel Oil
ECUK – East Coast UK
ECA – Emission Control Area
MGO – Marine Gas Oil
FAME – Fatty Acid Methyl Ether
Killybegs – where Donegal has a depot
Some lucky decisions and a keen share of the marine and lubricant markets have helped give one distributor a positive outlook in recession, writes Irish correspondent, Aine Faherty.
“All markets are contracting but we’re maintaining our own and growing market share where we can,” says Arthur McMahon, managing director of the Letterkenny-based Donegal Oil Company.
In the last two years, the company’s lubricants sector has seen growth treble as great strides were made in gaining market share.
The marine industry is also an important component with business from the fisheries and exploration industries in both winter and summer. The exploration industry is serviced from the port of Killybegs, where Donegal also has a depot. If oil exploration develops further off the west coast of Ireland – something largely determined by global oil prices – Arthur is hopeful there will be a beneficial knock-on effect on his business.
Presently, the company, which was formed by Arthur’s grandfather in 1954, operates in four areas with its core being home heating oil, delivered countywide from Falcarragh to the north and Killybegs in the south. The company also supplies diesel to agricultural, commercial and small retail customers. There are 30 full-time staff and 15 tankers, ranging from mini-tankers to full articulated trucks.
Now with his grandfather, father and brother Barry acting as non-executive directors, Arthur is the first McMahon to have a hands on role as managing director. Firmly in the driving seat, he looks to the future with positivity.
“When everyone else was getting bigger, we didn’t join them,” he said. He recalls how the company sold two filling stations in 2006 and 2007. “Good business decisions on our part which I would best describe as ‘lucky’ now. Thankfully we’ve no big legacy of debt and we’re happy enough with business, at the moment.” Many of Donegal’s customers and suppliers are, however, under pressure from the banks. “This constitutes a bit of a squeeze on everything and costs are controlled accordingly,” he added.Maintaining a good reputation
The Donegal Oil Company has a strong association with Topaz – a brand Arthur says is synonymous with quality. Although cheaper options for oil are available, he believes that people appreciate brands they can trust.
Acknowledging the substantial amount of illicit home-heating practices around, with cross-border smuggling and laundering operations in full swing, Arthur admits such activity is “very frustrating” for legitimate players. To remain disassociated with such practices and to keep reputation intact, the company supplies a number of small rural filling stations on an on-going basis. “This needs to be all or nothing. We’re not willing to share business,” he says explaining that if its brand were to be seen at a station which was also being supplied in the middle of the night by another lorry, this would have a detrimental effect on business. “A good reputation in business is next to impossible to claw back.”
Since the closure of BP’s Belfast plant in 1982, the UK refinery network has undergone continuous shrinkage, from 18 facilities with a total distillation capacity of 132 million tonnes (mt) to 7 plants with a capacity of 77 million mt. The network that remains has an above average level of complexity, with catalytic reforming capacity of 13.6 million mt and cracking/other conversion capacity of 31.4 million mt.
Against a background of continuing change in the downstream sector, DECC has conducted a number of assessments. These have included studies with the Downstream Oil Industry Forum, a Deloitte LLP assessment on resilience to some hypothetical ‘stress test’ scenarios and an assessment of the UK’s refined product supply market, by Purvin and Gertz.
Developing a strategic policy framework
DECC and UKPIA then prepared the scope of a study to develop a strategic policy framework for the UK refining sector. The resulting report, compiled and published in May by Purvin & Gertz, sought to do the following.
CDS managing director, Bill Lea (l) with product director, Paul Willis at the company’s Salford office
Started in 1973 by a group of construction industry professionals and academics including Bill Lea, a building engineering graduate from the University of Liverpool, CDS Computer Design Systems celebrated its 40th birthday in January. Buying a mini computer, CDS set about producing software for architects and quantity surveyors. However, in 1974 a local fuel distributor’s request for a system to capture orders and produce delivery tickets was to introduce CDS to another software market.
When Shell issued a specification for software to assist its 35 UK distributors, armed with the aforementioned experience, CDS put in its proposal. With the addition of programmer Dan Townsend – still on the team today – CDS competed alongside big names for what was a very substantial project; the contract to design a pilot scheme was won in 1975.
Run with Pilot Fuels and Fuel Services Garstang, the pilot scheme was successful and rolled out to all Shell’s distributors by the late 70s. Bill explained: “We put everything together here – hardware and software – packed it up and put it in a van. I would then meet the van at the distributor’s office, install the equipment and ensure all was working before Shell started training. I got to see a lot of the UK.” By the end of the decade, CDS had 15 staff and contracts with Esso and BP followed.Creating, maintaining and developing the CODAS product
Having garnered much information about the industry, CDS created its own CODAS product, putting in the first system for an independent distributor in 1982. “Although people knew of us, when we needed to get really serious about marketing, Rob Bowran, formerly with Shell, joined us. His marketing expertise and commercial nous really drove our marketing activity.”
How CODAS looks and is developed is the responsibility of product director, Paul Willis who joined in September 1979.
“In the 80s, every single system was different, indeed tailor made, with all maintenance done on site,” said Paul. “Now there’s a seamless system that works for everyone from just two to hundreds of users. Everything can be done in house whether it’s installing a complete system, loading a licence or providing monthly updates.
“Substantial investment has created a product that stands out. With everyone used to systems like Windows, we follow leading standards to create intuitive systems that people of all ages and abilities can quickly get to grips with. We don’t reinvent wheels – we like to use existing pieces of software under licence where we can. We also pay attention to what’s below the surface so that in five year’s time, the distributor has a system that’s current.
“We’re a team of technology-loving people who always want to learn about the next bright thing,” added Paul. CDS now has 36 staff, a quarter of who have 25 years service. The company’s graduate recruitment programme has seen six graduates join in recent years.Providing an aspirational business information system
A modular system, CODAS enables distributors to enter orders, arrange delivery, send confirmation, update the sales ledger, generate invoices, produce statements and collect and process cash. It can also take care of RDCO and other legislative matters. Plus offer computer telephone integration and schedule and route vehicles.
“We’re not the cheapest but we do set out to be the best,” said Bill. “CODAS is a great product with the scope to embrace everything today’s distributor – from the largest operator to the two-man business where dad still does the coal deliveries – needs. There’s nothing cheap about it and nothing that says you’re only a fuel distributor so this is good enough for you – our standards are aspirational.”
When it comes to improving efficiency, more and more distributors are realising the value of technology. Making use of the fact that the exact location and amount of fuel on each of 10 tankers was known in real time, one distributor regularly rescheduled orders to ensure all customers were satisfied in the depths of last winter. Delighted by the efficiency improvements, the distributor told CDS that ‘everytime we buy something from you, we make money out of it.’
Paul is baffled by those who spend hundreds of thousands on trucks, but operate without technology. “I wonder if they know just how much margin is being made at any given time and exactly where it came from?”
Today over 400 depots use CODAS. With a high level of dependence on the information generated, it is sometimes hard to get people to turn it off.
“The level of stability we maintain for our customers is vital so upgrades are done in the evening and we’re always there to help at month end,” said Bill. “We’re committed to the fuel distribution industry, we won’t let our customers down and we’re honest about what can be achieved. We make mistakes like anyone else; sometimes a fault may not get attended to immediately but we can always be relied on to do everything it takes to see things through.”