Vitaly Kovalev: "Competition tightening is always good for customers"
Russia’s bunkering market has been developing dynamically with annual growth rates exceeding 10%. Bunker suppliers, which actively provide vessels with fuel, encounter a number of problems related to quality control, ecological safety, cooperation with customs and other authorities. The above issues require joint discussion of all market participants to find optimal solutions and to form general opinion. In June St. Petersburg will host All-Russian Forum “Current state and prospects for development of Russian bunker services market”. The review of the current bunkering market and the issues of the Forum were revealed to PortNews IAA by Vitaly Kovalev, President of Russian Association of Marine and River Bunker Suppliers.
- What is the reason to hold all-Russia bunkering forum?
- Lots of different conferences take pale in the world annually. Even this specific business represented by limited number of companies is the subject of some 10-15 large international events all around the world apart from educational programs and seminars. Of course, our Russian colleagues participate in them but since our Association had been established we have been permanently asked to arrange a ground for meetings and discussions in Russia. The reason is obvious: international conferences discuss global problems while generally we cannot influence global processes. For example, introduction of limits for sulfur content in marine fuel has been actively discussed recently though Russia did not participate in development of related legislation with bunkering companies having no influence at all.
- There are specific issues urgent for Russia alone, aren’t there?
- There are enough urgent problems in Russia not clear for our western colleagues. For example, customs limits for sale of bunker fuel. We have officially asked BIMCO (Baltic and International Maritime Council) to assist us as such unjust limits threaten safety of vessels in emergency situations and prevent healthy competition. The reply demonstrated that BIMCO cannot and does not want to interfere with our internal affairs.
Thus, to discuss the problems urgent for our bunkering business we invite representatives of the authorities, cooperation with which is the most complicated, and gather maximal number of business colleagues at a forum with a program formed according to our interests.
- The Forum is to unite the business representatives so can we say the formation of Russia’s bunkering market is over?
- I would call our market quite mature at least in major shipping regions of Russia. The industry’s leaders have a well developed infrastructure. They are well managed, work in compliance with labor and environment legislation, meet all the required safety measures. All the markets are quite competitive and ensure high quality of bunker services.
- Vertically integrated oil companies are active today in entering bunkering market. What do you think about their influence at the market?
- None of entrepreneurs enjoy appearance of strong rivals though there are economic laws, according to which competition tightening is always good for customers, if it is a healthy competition, of course.
Bunkering market was for a long time out of VIOC’s attention contributing to the development of independent companies. The situation is difficult today and oil majors understand they may lose a profitable segment. Theirmain advantage is financial power and administrative resources. However, independent companies are more flexible and willing to meet the customers’ requirements. In other words, one could use Mao’s motto ‘Let a hundred flowers bloom, let a hundred schools of thought contend’.
- Do you expect new players to come to the Russian market, either foreign or Russian ones?
- I don’s think, foreign companies will be a success as bunker suppliers in the nearest future. Operations with oil products are not like assembling of automobiles, where western business has evident advantages. Russiam oil products are of high quality and today’s leaders have well developed infrastructure and ensure world-standard services. At the same time, business is quite specific in Russia and one should have good links and experience to work efficiently.
So it would be more reasonable for foreign companies to operate as traders purchasing necessary services from their Russia colleagues. Besides, they are in need of good Russian managers. That was actually the way of Norwegian Bergenbunkers, which entered our market in July 2007 having opened its representative office in St. Petersburg. Bergenbunkers Neva has been successfully operating at the market from December 2007.
- What are the most serious problems in the industry today?
- Bunkering is a complicated business in terms of legislation in particular. The laws regulating distribution of oil products and their customs clearance are not perfect with their dubious interpretation. A qualified expert representing customs authorities will deliver a speech at the Forum.
Another important problem today is the ban for the use of one-hulled tankers for bunkering of vessels. The requirements of MARPOL Convention cover first of all oil tankers operating at international lines but not bunkering fleet operating within internal territorial waters. As of today, Russian market of bunkering services consists mainly of one-hulled vessels, similar to the bunkering vessels in the majority of countries. The ban for their operation will paralyze the bunkering business in the Russian Federation. It is also important that the delivery of fuel to the North is carried out by water and all bunkering vessels deployed for that purpose are single-hulled and there are no plans of its replacement or introduction of any alternative way of delivery.
- How reasonable is the ban in view of ecological issues and safety?
- Bunkering fleet is being used exclusively within port limits or for costal trade operations. Besides, all bunkering vessels are obliged to provide OSRA plans (oil spill response activities) and ensure special equipment for their implementation. Thus, in case of emergency situation oil spill response teams based within port zones are ready to start response operation within the shortest periods. Port administrations, ship owners and freighters of bunkering vessels undertake regular measures aimed at prevention of emergency situations related to oil spills. Besides, bunker suppliers are provided with sufficient insurance.
- How do other countries solve this problem?
- The ban for operation of single-hulled vessels within inland waterways is the state’s competence. It is not an obligatory solution. Prompt introduction of such a ban is to paralyze the branch despite the purpose. It is important to note that quite a long buffer period (some 5-10 years) before introduction of laws requiring considerable investments from business are typical for global practice. Besides, government usually provides economical support of such changes through application of different instruments.