Friday, November 14, 2014

Bunker Fuel Firm Collapse Has Repercussions for World's Merchant Fleet

Calls for Proper Registration of Oil Suppliers in Ports Worldwide
Shipping News Feature

SINGAPORE – DENMARK – WORLDWIDE – Confusion reigns in the aftermath of the collapse of fuel suppliers OW Bunker Far East (Singapore) and Dynamic Oil Trading, which both filed for bankruptcy last week. The companies, which are said to supply up to 7% of the fuel needs of the world’s merchant fleet, folded after two Dynamic employees were accused of a massive fraud and the Danish owned OW Bunker A/S, OW Bunker & Trading A/S and OW Supply & Trading A/S filed for restructuring of debt, presumably to prevent creditors taking steps against the assets of the group. According to Chairman Niels Henrik Jensen the closure of the group’s credit line prompted a ‘significant erosion’ of the underlying business. He continued:

"The banks hold mortgage over all receivables and consequently, without the provision of new, significant credit facilities in the immediate future, it is not possible to save the business. On behalf of the entire board of directors and management, we deeply regret this outcome and the consequences affecting the company, its employees, shareholders and business partners.”

With many suppliers reportedly out of pocket customers of the companies involved have been warned against settling debts directly with any company approaching them until the legal situation is resolved. At least five companies, Bunker House Petroleum, Equatorial Marine Fuel Management Services, Panoil Petroleum, Golden Island Diesel Oil Trading and Hin Leong Trading have reportedly lodged claims against members of the OW group for substantially more than S$5 million (US$4 million).

The fuel barge Laguna, laden with oil sold to OW Bunker, has been arrested whilst the matter of who owes what to whom and how much is resolved, potentially a very lengthy process. What is certain that with other bunker groups now firmly in the spotlight, the Maritime and Port Authority of Singapore (MPA), the body for ensuring all is well with fuel supplies in the sovereign city state, is now apparently looking at the situation of Tankoil Marine Services Pte Ltd.

It is likely that many of the companies in the bunker sector, often accused of under capitalising in what can be a fluid market, are sitting on stocks purchased at a high price since which the cost of supplies has tumbled. The International Bunker Industry Association (IBIA) is urging ports worldwide to sign up to its Port Charter in a bid to clean up the industry worldwide whilst insurers and lawyers are advising creditors it may be some time before the legal position of OW Bunkering and its subsidiaries is made clear by the Court.

The proposed IBIA scheme, apparently already endorsed by Singapore as well as Rotterdam and Gibraltar, has been designed to effectively ‘Kite Mark’ members which sign up by testing their ability to provide services under licence in each port and audit procedures to ensure all standards remain within certain agreed parameters. Speaking of the OW situation, IBIA Chief Executive Peter Hall said:

“This is an unprecedented occurrence and our thoughts are with the very large number of competent hardworking ex-employees now urgently in need of support and industry contact. It is important that dialogue is maintained across the supply chain and we are pleased to be able to support the Singapore bunkering community. We hope that our efforts will ensure an uninterrupted supply of bunkers. We are willing and able to act as local point of support in European ports as we are doing in Singapore.

“We are offering all ex-OW Bunker employees impacted by the situation free IBIA membership. This is a modest gesture, but will provide them with access to an independent forum where their details can be made rapidly available to others in the industry including employers who are picking up the business previously conducted by OW.”

Meanwhile should debtors decide to settle outstanding bills to OW directly with the original fuel suppliers, something which might seem tempting if it means a continuation of supplies, there is a very real risk that they will end up paying for exactly the same oil again when the matter is eventually settled legally.