Factors of Success: Resources, Infrastructure, Clients

Andrey Vasiliev

Interview with Andrey Vasiliev, General Director, Gazprom Neft Marine Bunker

Journal «Siberian Oil»

— What were last year’s most important results, and what changes have occurred in business since 2009?

— Perhaps the main qualitative change has been the correction of the sales structure. If in 2009 the ratio of Gazprom Neft Marine Bunker projects between small wholesale sales and “on-board” bunkering was around 50-50, then in 2010 approximately 65% of fuel was sold to the end users, the shipowners. Accordingly, the number of direct contacts increased; in 2009 there were around 60, which last year rose to 100. Most of our clients are shipowners, but we also deal with international traders representing overseas bunkering companies, and brokers working for specific shipping companies. Therefore our actual number of clients for the past year is more like 200.

In terms of actual figures, in 2010 we supplied 935 thousand tons of fuel to 3241 ships. In terms of bunkering this comes to about nine operations per day, which is very high. All in all, last year we sold 1.464 million tons of fuel, a figure comparable to 2009, but in 2009 we also dealt in large-scale wholesale fuel supply, whereas in 2010 we decided not to work in this segment.

— Why was that decision taken?

— Gazprom Neft Marine Bunker, as a separate business unit of Gazprom Neft, was created to ensure implementation of the company’s own resources in the premium market. This means that we must raise the bar on wholesale prices, predominantly through retail and “on board” bunkering. Up to 90% of all fuel sold by us is produced in Gazprom Neft refineries, and the remaining 10% is procured on the open market.

— What is Gazprom Neft Marine Bunker’s current share of the market?

— The entire Russian bunkering market was estimated by experts in 2010 at approximately 5.7 million tons of marine fuel, of which our own sales amounted to 17%. Gazprom Neft Marine Bunker works in 20 Russian ports, 13 of which are located along the coastline and 7 on rivers. The largest share of Gazprom Neft Marine Bunker sales comes from the North-West region of Russia, one of the largest markets, making up a third of all sales of bunker fuel in Russia. In 2010 Gazprom Neft Marine Bunker’s retail sales in St Petersburg, Kaliningrad, Murmansk and Arkhangelsk amounted to 628 thousand tons, of which 336 thousand tons were sold in St Petersburg, where according to industry agency PortNews we control a 19% share of the market.

— Do you work with both Russian and overseas partners?

— 80% of our clients are overseas-based shipping companies. Indeed, only a small part of our fleet is currently in Russia, just 15 sea- and riverfaring vessels. Most of them are contracted to supply bunker fuel. Foreign companies usually work on the spot, i.e. they check the prices for a particular date and take a decision on each individual bunker. However, there is a linear fleet whose operators are interested in long-term projected relations, for example every summer around 300 cruise liners pass through the St Petersburg port. Last year we refuelled around 100 of these craft on a contractual basis. It is profitable to shipowners, who get refuelled for a good price, and to us, the suppliers, who understand that we have a guaranteed supply plan. Each of these liners can hold 1000-1500 tons, or about 20-25 tank cars of fuel.

— How active is the company in expanding its geography?

— Active. We already have four regional offices. In 2010 we opened our international department, which made it possible to start work abroad; we began by implementing bunkering in Istanbul, Turkey.

This year several new ports will be added to our river bunkering geography, in Nizhny Novgorod, Samara, Astrakhan and Taganrog. The latter are actually seaports, but according to our classifications they fall under the banner of river management, because they are mainly utilised by smaller vessels, and so accordingly we use smaller bunkering tankers with a capacity of 200-300 tons. For comparison, at the Grand Port of St Petersburg our bunkering tankers have a capacity of up to 4-5 thousand tons.

— What makes you want to develop river bunkering?

— The bunkering volume on inland waterways will keep growing alongside the volume of traffic on the rivers, and river transport is cheaper than road and rail. We currently hold a 5% share of river bunkering operations, but we seriously intend to develop this segment. We plan to increase the sale of marine fuel on Russia’s inland waterways by 14% in 2011 compared to last year.

— What is the current state of the Gazprom Neft Marine Bunker fleet?

— We are currently upgrading our bunkering fleet, getting rid of the older vessels, which, although they meet all necessary requirements of the MARPOL convention, are expensive to repair and maintain. Therefore the company has decided to introduce an age limit of 10 years on newly-acquired vessels, as well as not operating tankers older than 25 years. Currently the fleet operated by Gazprom Neft Marine Bunker consists of seven bunkering tankers, four of which meet all international conventions. By the end of this year we plan to acquire two more such tankers. I can confidently say that, out of all Russian companies working in the bunkering sector, we have the most modern fleet. We expect that by 2020 we will own 15 of these ships, that is, we will purchase on average two bunkering tankers per year.

In ports with a high-quality barge service, we also use vessels belonging to other organisations. For example in the Far East we have two leased bunkering vessels; on the Black Sea, in addition to our own, we charter a bunkering vessel in Tuapse, and have been leasing a tanker in St Petersburg for two years. On inland waterways we also use fleets belonging to local barging companies, because we considered that it would not be beneficial to maintain our own fleet on the river, as there are too many tankers already in search of work. Overall Gazprom Neft Marine Bunker currently uses 21 vessels; 7 of its own, and 14 under contract.

— And what are the plans for the development of ground infrastructure?

— The development of the Russian terminal network is an important strategic initiative for 2011. The project involves the establishment of our own or associated terminals. Right now we are in the process of forming the target grid, which will show us where and under what conditions (acquisition, construction, leasing) we should create terminals.

The main piece of data, on which we will base our conclusions as to the effectiveness of a terminal, is the turnover of the tank park. For example, if the volume of our terminal at the port of St Petersburg is 10 thousand tons, and monthly turnover amounts to 30 thousand tons, then that is a normal average figure. But here, for example, in May the terminal had eight turnovers. I believe that our pilot project, Gazprom Neft Terminal SPb, which was implemented on the premises of the Kirov factory, is a very good start. We chose the right partner and the project has proved worthwhile. The St Petersburg model has paid off, and we will take advantage of this experience when working in other locations, working towards creating a complete terminal network across Russia. We have already begun negotiations towards the joint construction of a terminal with a Murmansk shipping company, and signed an agreement with the Kaliningrad fishing port.

— Are there any short-term plans to implement projects abroad?

— Of course. First of all, the Balkans. At Serbia’s NIS we already have a functional bunkering unit. At the present moment renovation of the infrastructure is being carried out there; previously on the Danube there were fueling stations which need to be brought to modern standards of environmental and technical supervision. Our Serbian colleagues are working on state regulations for bunkering. In Serbia no such regulations exist, and government agencies are currently in the process of rectifying that situation. NIS plans to implement the supply of the first 10 thousand tons of bunker fuel by the end of this year. The refinery in Serbia organises the production of marine fuel, and through modernisation of refineries the capacity of production assets has been increased, and black oil appears in the balance. With this resource, by the way, we plan to enter the Romanian market; Gazprom Neft Marine Bunker has plans to start work at the port of Constanţa, the maritime gateway between Europe and the Black Sea. We are also interested in the Baltic states, a nearby market that logically corresponds to the strategy of Gazprom Neft Marine Bunker. We are currently undertaking a trial run of transferring our own resources there. In principle, success in our industry depends on three factors: resources, infrastructure and the consumer. If a company possesses at least one of these prerequisites, then it can work in the bunkering industry. If we enter the Baltic markets then we will immediately have two of these factors working in our favour, namely a good consumer base and our own resources. We plan to lease a terminal infrastructure.

— Last year the company strategy of Gazprom Neft Marine Bunker was updated up to 2020. What are the long-term plans of the company?

— First of all the company strategy was adjusted in terms of deadlines; the previous strategy provided for access to foreign markets no earlier than 2015, yet we are already actively working on developing our overseas presence. Under the new strategy we are aiming to control 2% of the global bunkering market by 2020. We will remain an all-Russian supplier, but the volume of overseas sales must exceed the volume in Russia, amounting to 4.5 million tons per year with a total annual sales figure of 7 million.

REFERENCE:

“GAZPROM NEFT MARINE BUNKER”

Subsidiary of Gazprom Neft, supplier of bunker fuel. Founded in October 2007 in St Petersburg. The enterprise comprises of five divisions, in Moscow, Novorossiysk, Vladivostok, Kaliningrad and Murmansk, and two subsidiaries: Gazprom Neft Shipping, which operates the fleet of GPN MB, and Gazprom Neft Terminal SPb, operating a bunker tank farm located on the territory of the Kirov plant in St Petersburg.

At present Gazprom Neft Marine Bunker is present at most major sea and river ports:

  • North-West: St Petersburg, Murmansk, Primorsk, Kaliningrad, Arkhangelsk, Ust-Luga;
  • Black Sea: Novorossiysk, Tuapse, Caucasus Port;
  • Far East: Nakhodka, Vladivostok, East Port;
  • Inland waterways: Yaroslavl, Samara, Nizhny Novgorod, Kazan, Volgograd, Rostov-on-Don, Astrakhan, Irkutsk.