Commercial Bunker Operations
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Commercial
Aspects
of
Bunker
Operations
Fuel
Bunkering
Operation
in
nut
shell
Global
marine
fuel
market
is
supplied
by
Independent
•
physical
suppliers
National
•
government-owned
supply
companies
Major
oil
companies
are
the
Significant
suppliers
in
the
world's
major
ports
(
Approximately
45
%
of
the
supply
world
wide
)
Another
significant
trend
is
the
major's
shift
from
supplying
at
the
retail
level
to
the
wholesale
bunker
market
reflecting
a
desire
to
avoid
pollution
and
credit
risk
Marine
fuel
traders
and
brokers
comprise
a
second
category
of
suppliers
,
amounts
to
24
%
of
the
marine
fuel
supplied
worldwide
.
A
trusted
broker
is
eyes
and
ear
of
the
industry
and
may
be
neutrally
positioned
.
To
seek
high
returns
,
traders
,
using
large
amounts
of
capital
,
take
positions
and
hold
inventory
and
opportunistically
play
movements
in
the
market
Independent
•
physical
suppliers
,
purchase
marine
fuel
from
refineries
,
major
oil
producers
and
other
sources
that
is
then
marketed
,
sold
and
physically
delivered
to
a
broad
base
of
end
customers
.
National
•
oil
companies
generally
operate
in
monopoly
positions
in
their
respective
countries
,
resulting
in
the
provision
of
fully
integrated
supply
operations
at
the
major
ports
in
the
country
unable
•
to
compete
on
pricing
,
National
oil
companies
focused
solely
on
supplying
the
local
market
.
Recently
,
they
have
become
more
competitive
and
have
tried
to
capture
the
business
of
ocean
going
ships
calling
on
their
ports
Independent
•
refiners
seek
to
sell
the
fuel
oil
they
produce
in
the
marine
fuel
market
.
Typically
,
these
companies
supply
fuel
around
their
refining
locations
where
they
are
not
only
competitive
suppliers
but
often
the
only
significant
supplier
within
these
ports
and
regions
Marine
•
fuel
prices
are
volatile
,
largely
unpredictable
and
not
solely
linked
to
the
price
of
oil
.
CIF
(
Cost
,
Insurance
and
Freight
)
:
This
arrangement
similar
to
CFR
,
but
instead
of
the
buyer
insuring
the
goods
for
the
maritime
phase
of
the
voyage
,
the
shipper/seller
will
insure
the
merchandise
CFR
(
Cost
and
Freight
)
:
Seller
delivers
goods
and
risk
passes
to
buyer
when
on
board
the
vessel
.
Seller
arranges
and
pays
cost
and
freight
to
the
named
destination
port
FOB
-
Free
On
Board
:
Risk
passes
to
buyer
,
including
payment
of
all
transportation
and
insurance
costs
,
once
delivered
on
board
the
ship
by
the
seller
DES
(
Delivered
Ex
Ship
)
In
this
type
of
transaction
,
it
is
the
seller’s
responsibility
to
get
the
goods
to
the
port
of
destination
or
to
engage
the
forwarder
to
the
move
cargo
to
the
port
of
destination
uncleared
.
“
Delivery
”
occurs
at
this
time
.
Any
destination
charges
that
occur
after
the
ship
is
docked
are
the
buyer’s
responsibility
Bunker
Delivery
Contracts
Contracts
for
the
supply
of
marine
bunkers
are
made
between
the
bunker
supplier
and
the
organization
which
orders
the
bunker
It
may
give
rise
to
a
number
of
challenges
to
owners
,
charterers
and
sellers
of
bunkers
.
A
close
study
of
these
contracts
will
reveal
onerous
liabilities
and
responsibilities
put
on
the
buyers
Contracts
relating
to
sale
of
bunkers
often
include
provisions
of
a
general
nature
,
which
apply
to
all
dealings
between
the
parties
and
may
well
be
given
priority
over
other
contracts
Affiliates
of
the
sellers
may
also
be
affected
by
the
general
conditions
even
if
the
buyer
may
not
be
aware
that
a
company
selling
bunkers
is
an
affiliate
BIMCO
Bunker
Contract
Clauses
Clause
2
–
Specifications/Grades/Quality
It
is
the
buyer's
responsibility
to
nominate
the
specifications
and
grades
of
bunkers
that
are
suitable
for
their
ship
.
It
is
not
the
task
of
the
sellers
to
provide
fuels
that
are
"
fit
for
use
by
the
vessel
“
Clause
3(b
)
–
Quantities/Measurements
Ensures
that
the
buyers
have
the
possibility
to
be
present
and
to
access
gauges
when
quantity
measurements
are
taken
by
the
sellers
.
It
is
intended
that
the
buyers
should
make
all
of
the
tanks
on
the
bunker
barge
or
barges
available
for
inspection
One
of
the
main
issues
is
the
location
of
the
sampling
point
–
at
the
bunker
barge's
manifold
or
at
the
vessel’s
bunker
manifold
.
The
parties
can
agree
on
the
location
on
a
case
by
cases
basis
,
provided
it's
closest
to
the
ship’s
bunker
manifold
and
otherwise
in
accordance
with
the
procedures
set
out
in
the
IMO
Resolution
MEPC
.
182(59
)
BIMCO
Bunker
Contract
Clauses
Clause
4
–
Sampling
(
contd
….)
In
some
parts
of
the
world
,
notably
Singapore
,
mandatory
local
rules
and
regulations
for
bunkering
operations
apply
,
the
Terms
clarify
that
these
will
take
precedence
over
the
provisions
of
sub
clause
(
a
).
The
number
of
samples
taken
also
varies
,
so
the
Terms
set
a
minimum
number
of
5
samples
to
be
collected
Two
samples
should
be
retained
by
the
sellers
for
the
minimum
period
stated
,
as
these
are
the
samples
most
likely
to
be
used
for
checking
purposes
,
and
the
other
three
,
one
of
which
should
is
the
MARPOL
sample
,
are
to
be
retained
on
board
the
ship
Delivery
can
take
place
at
any
time
(
which
includes
holidays
,
statutory
or
otherwise
),
but
is
subject
to
any
restrictions
imposed
by
authorities
at
the
port
or
place
of
delivery
.
The
buyers
are
required
to
gives
notices
to
the
sellers
of
the
vessel’s
expected
time
of
arrival
as
set
out
in
Sub-clause
(
b
),
ending
with
a
24-hour
definite
notice
of
arrival
providing
the
time
and
location
where
delivery
will
take
place
Responsibility
for
compliance
With
local
regulations
in
respect
of
deliveries
rests
with
the
sellers
who
,
if
local
regulations
permit
,
will
also
assist
the
buyers
in
connecting
and
disconnecting
BIMCO
Bunker
Contract
Clauses
BIMCO
Bunker
Contract
Clauses
A
bunker
pre-delivery
form
or
similar
document
must
be
presented
to
the
Master
or
its
representative
(
in
practice
usually
the
Chief
Engineer
)
for
acknowledgement
and
should
contain
values
for
the
various
The
sellers
are
required
only
to
sign
for
values
for
viscosity
,
density
,
sulphur
content
,
flash
point
and
delivery
temperature
,
and
,
if
available
,
similar
information
for
vanadium
,
ash
content
,
water
content
and
pour
point
The
Bunker
Delivery
Note
(
BDN
)
,
which
should
be
signed
by
the
Master
or
authorized
representative
after
completion
of
delivery
of
the
bunkers
,
should
contain
the
information
listed
in
Sub-clause
(
b
)
which
is
warranted
by
the
sellers
,
for
example
,
delivered
quantity
and
delivery
temperature
BIMCO
Bunker
Contract
Clauses
Clause
6
–
Documentation
(
Contd
.)
The
Master
may
make
appropriate
remarks
on
the
BDN
if
not
satisfied
with
the
sampling
,
quantity
or
other
matters
concerning
the
bunkers
or
the
delivery
.
These
remarks
should
be
made
on
completion
of
delivery
so
that
the
sellers
can
start
investigate
the
claim
as
soon
as
possible
The
remarks
should
either
be
stated
in
the
BDN
or
in
a
separate
letter
of
protest
,
if
remarks
in
the
BDN
are
not
permitted
.
To
reduce
the
likelihood
of
disputes
about
the
receipt
of
such
remarks
,
the
sellers
’
representative
must
acknowledge
them
in
writing
.
It
should
be
noted
that
there
is
a
different
time
frame
in
respect
of
quality
claims
in
Sub-clause
9(b
)(
i
)
stating
that
quality
claims
must
be
notified
promptly
after
the
circumstances
giving
rise
to
such
claim
has
been
discovered
Any
additional
charges
incurred
by
the
sellers
but
which
the
buyers
should
pay
for
should
be
listed
in
the
sellers
’
quotation
and
Confirmation
Note
to
avoid
unpleasant
surprises
after
delivery
.
If
charges
such
as
overtime
cannot
be
specified
as
a
lump
sum
then
they
should
,
at
least
,
be
included
as
a
rate
per
hour
The
•
first
stage
of
the
claim
process
is
to
make
a
remark
in
the
BDN
or
in
a
separate
letter
of
protest
The
•
second
stage
requires
the
buyers
to
present
their
claim
to
the
sellers
within
14
days
from
the
date
of
delivery
Buyers
•
cannot
bring
any
other
claims
than
the
initial
claims
that
have
been
noted
in
the
BDN
or
in
the
letter
of
protest
BIMCO
Bunker
Contract
Clauses
Clause
9
–
Claims
(
Contd
.)
BIMCO
Bunker
Contract
Clauses
The
sellers
will
have
this
right
where
the
buyers
have
failed
to
take
delivery
of
the
full
quantity
of
the
ordered
bunkers
,
and
the
buyers
will
have
the
right
when
the
sellers
fail
to
deliver
the
agreed
quantity
(
unless
the
Master
has
put
in
writing
that
a
lesser
quantity
is
to
be
taken
).
The
type
of
costs
that
are
envisaged
are
,
for
example
,
if
buyers
receive
less
bunkers
than
ordered
they
may
have
to
call
at
another
port
to
top-up
with
bunkers
,
which
will
mean
extra
costs
From
the
sellers
’
perspective
,
additional
costs
may
be
incurred
if
the
buyers
do
not
take
full
delivery
of
bunkers
.
As
bunkers
are
often
customs
cleared
for
export
,
the
sellers
will
have
to
wait
for
an
opportunity
to
sell
and
deliver
the
fuel
to
another
client
as
they
cannot
easily
be
“
re-imported
”
Clause
9
–
Claims
(
Contd
.)
If
a
party
suffers
a
loss
because
of
a
delay
,
they
can
claim
compensation
from
the
other
party
for
those
losses
.
From
the
buyers
'
side
,
the
delay
may
spring
from
their
failure
to
observe
the
notices
requirements
or
failure
to
receive
the
bunkers
at
the
previously
advised
pumping
rate
and
pressure
.
The
sellers
,
on
the
other
hand
,
may
cause
a
delay
by
failing
to
commence
bunker
delivery
as
agreed
or
their
inability
to
deliver
bunkers
at
the
agreed
minimum
pumping
rate
and
pressure
Sub-clause
(
d
)
is
to
exclude
certain
direct
and
indirect
losses
:
For
example
,
no
claims
may
be
made
for
loss
of
profit
,
loss
of
use
or
production
,
no
claims
may
be
made
for
any
consequential
or
indirect
losses
However
,
liability
for
such
losses
should
be
included
if
they
are
a
result
of
a
breach
of
the
previous
sub-clauses
of
Clause
9
,
hence
the
words
“
other
than
those
mentioned
above
”
BIMCO
Bunker
Contract
Clauses
The
risk
in
the
bunkers
passes
to
the
buyers
when
the
bunkers
have
passed
the
sellers
’
flange
connected
to
the
ship’s
bunker
manifold
.
The
title
to
the
bunkers
passes
once
payment
for
the
bunkers
has
been
made
.
So
,
until
payment
is
made
,
the
sellers
retain
full
title
to
the
bunkers
and
the
buyers
are
in
possession
of
the
bunkers
as
a
"
bailee
"
only
(
a
legal
obligation
to
look
after
something
owned
by
another
,
while
in
your
Fundamental
to
any
contract
of
this
nature
is
the
right
of
the
parties
to
terminate
the
agreement
under
certain
specified
circumstances
.
For
ready-
reference
,
all
of
the
BIMCO
Terms
'
termination
provisions
are
consolidated
into
a
single
clause
.
The
termination
rights
are
mutual
and
clearly
set
out
in
the
text
BIMCO
Bunker
Contract
Clauses
Regardless
of
which
party
is
responsible
for
a
spill
,
sub-clause
(
a
)
requires
that
buyers
and
sellers
jointly
take
immediate
steps
to
effect
a
clean-up
operation
in
accordance
with
local
laws
and
regulations
Clause
17
–
Drugs
and
Alcohol
Policy
The
buyers
and
sellers
must
have
in
place
,
and
enforce
,
drugs
and
alcohol
policies
that
,
as
a
minimum
,
meet
the
standards
in
the
latest
edition
of
STCW
1978
Clause
18
–
Confidentiality
This
clause
is
designed
to
protect
the
parties
from
the
disclosure
of
confidential
information
to
third
parties
BIMCO
Bunker
Contract
Clauses
Clause
22
–
Dispute
Resolution
Clause
2015
This
BIMCO
Dispute
Resolution
Clause
offers
four
options
on
arbitration
:
London
(
which
applies
by
default
if
no
other
venue
is
agreed
);
New
York
;
Singapore
;
and
,
finally
,
a
free
choice
of
venue
as
may
be
agreed
between
the
parties
BIMCO
Bunker
Contract
Clauses
The
International
Maritime
Bureau
defined
maritime
fraud
as
:
“
An
international
trade
transaction
involves
several
parties
–
buyer
,
seller
,
ship
owner
,
charterer
,
ship’s
master
or
crew
,
insurer
,
banker
broker
or
agent
.
Maritime
fraud
occurs
when
one
of
these
parties
succeeds
,
unjustly
or
illegally
,
in
obtaining
money
or
goods
from
another
party
to
whom
,
on
the
face
of
it
,
he
has
undertaken
specific
trade
,
transport
and
financial
obligations
Commonly
,
disputes
and
alleged
misdealing
are
in
respect
of
:
a
.
quantity
consumption
by
the
vessel
b
.
quantity
of
deliveries
c
.
quality
of
deliveries
Some
of
the
Contributing
Factors
for
the
Dispute
There
•
are
many
factors
that
can
contribute
to
errors
like
incorrect
temperature
,
density
etc
.
These
•
errors
can
be
compounded
quickly
giving
rise
to
large
errors
in
the
final
quantity
of
mass
delivered
.
The
•
calculation
also
depends
on
the
accuracy
of
the
sounding/ullage
tables
Many
•
new
vessels
rolled
out
are
similar
in
design
to
the
previous
vessel
in
their
fleet
or
"
sister
ship
.
Some
of
the
Contributing
Factors
for
the
Dispute
Sometimes
•
the
vessel
has
no
list
/
trim
corrections
onboard
or
the
trim
corrections
given
are
only
up
to
3.5
m
Checking
•
of
all
6
drafts
accurately
–
this
is
often
not
possible
if
the
bunkering
is
in
port
No
•
'bunker
stem
audits
'
are
conducted
prior
bunkering
Malpractices
•
by
either
party
whether
the
ship
or
the
barge
which
would
not
have
been
checked
for
prior
receiving
bunkers
Density
Difference
,
Water
in
Fuel
–
Commercial
impact
When
a
bunker
vessel
handles
3000
MT
/
day
with
25
days
working
a
month
and
if
fuel
oil
contains
allowable
limit
of
0.5
%,
in
month
,
the
receiving
ships
looses
approximately
$
60000
/
month
More
water
in
fuel
is
considered
as
off
specification
bunker
,
ship
owner/charterer
can
initiate
legal
action
against
bunker
supplier
When
a
bunker
vessel
handles
3000
MT
/
day
with
25
days
working
a
month
and
with
a
difference
in
density
(
BDN
990
and
lab
test
report
980
)
the
receiving
ships
looses
approximately
$
37900
/
month
All
•
cargo
tanks
shall
be
calibrated
by
an
organisation
or
surveyor
recognised
by
the
Authority
.
A
•
copy
of
the
tank
calibration
tables
certified
by
such
organisation
or
surveyor
shall
be
kept
readily
available
on
board
the
vessel
at
all
times
.
The
•
cargo
tank
calibration
tables
shall
contain
the
following
:-
(
1
)
name
and
Official/IMO
number
of
the
barge
;
(
2
)
list/trim
corrections
;
(
3
)
cargo
tank
measurements
;
(
4
)
Reference
height
of
every
tank
;
(
5
)
name
and
stamp
of
organisation
or
surveyor
who
calibrated
the
tanks
;
(
6
)
date
of
calibration
;
(
7
)
page
number
on
every
page
and
;
(
8
)
tank
capacity
plan
of
the
vessel
Requirements
of
Bunker
Cargo
Tank
Calibration
Table
The
•
tank
calibration
tables
shall
be
sealed
and
properly
bound
to
prevent
any
unauthorised
amendments
.
The
•
vessel
shall
have
only
one
latest
original
certified
copy
of
the
tank
calibration
tables
for
the
cargo
tanks
available
on
board
for
purposes
of
quantity
verification
.
Should
•
there
at
any
time
be
any
change
in
the
tank
capacity
of
a
vessel
,
the
owner
or
operator
of
such
vessel
shall
not
undertake
any
bunker
delivery
until
new
tank
calibration
tables
for
the
modified
tanks
are
available
on
board
and
a
certified
copy
deposited
with
the
Authority
.
Requirements
of
Bunker
Cargo
Tank
Calibration
Table
Bunker
Cargo
Tank
Sounding
Pipes
Each
sounding
pipe
of
the
cargo
tank
shall
have
a
reference
height
which
shall
be
clearly
stated
in
the
tank
calibration
tables
and
be
clearly
,
legibly
and
permanently
marked
on
or
fitted
onto
every
sounding
pipe
of
a
cargo
tank
.
Bunker
Barge
Cargo
Ullage
and
Temperature
Measuring
Devices
Such
•
vessel
shall
carry
at
least
one
approved
type
set
of
portable
steel
gauging
tape
with
a
150
mm
weight
attached
to
one
end
.
Such
•
vessel
shall
carry
on
board
at
least
one
approved
type
set
of
thermometer
for
manual
temperature
measuring
of
the
cargo
.
Such
•
vessel
shall
carry
temperature/specific
gravity/density
correction
tables
for
computing
bunker
supply
volume
Bunker
Barge
Plans
and
Diagrams
The
•
general
layout
plan
shall
be
conspicuously
displayed
on
board
and
a
further
full-size
true
certified
copy
deposited
with
the
Authority
.
The
•
tank
capacity
plan
,
piping
diagram
and
trim
and
stability
tables
shall
be
available
on
board
for
inspection
by
any
party
concerned
and
a
further
full-size
true
certified
copy
deposited
with
the
Authority
Name
•
and
IMO
number
of
the
receiving
ship
Place
•
or
port
of
bunkering
Name
•
of
bunker
supplier
Name
•
of
bunker
carrier
(
barge
,
tanker
,
truck
or
installation
)
Date
•
and
time
delivery
commenced
Sample
•
method
used
to
obtain
representative
sample
Location
•
at
which
sample
was
drawn
Name
•
and
signature
of
the
supplier's
representative
Name
•
and
signature
of
the
receiver's
representative
Seal
•
number
(
and
also
cross-checked
with
BDN
)
Do
not
sign
any
sample
seals
or
labels
prior
to
completion
of
the
bunkering
Minimum
information
for
a
Sample
label
Do
•
not
sign
extra
seals
or
sample
labels
Do
•
not
sign
as
having
received
any
samples
without
witnessing
the
origin
of
them
Always
•
re-check
the
condition
of
seals
and
recorded
seal
numbers
prior
•
to
signing
the
BDN
If
•
the
receiving
ship
is
only
provided
with
samples
of
unknown
origin
and/or
samples
which
have
not
been
witnessed
,
such
samples
and
associated
documents
should
be
stamped
and/or
marked
and/or
signed
“
sample
[
or
samples
if
more
than
one
]
origin
unknown
,
signed
without
prejudice
to
acknowledge
receipt
only
”
and
a
letter
of
protest
issued
to
that
effect
The
•
samples
given
to
the
vessel
should
be
stored
in
a
safe
place
and
retained
for
a
period
(
usually
at
least
3
months
)
before
safe
disposal
.
Individual
vessel
operators
may
require
the
samples
to
be
retained
for
a
longer
period
The
•
requirements
for
the
MARPOL
sample
are
more
stringent
,
these
must
be
retained
for
a
period
of
1
year
,
either
on
board
the
vessel
or
at
a
location
which
is
“
under
the
ships
control
”
Case
Scenario
:
Supplier
overstated
quantity
supplied
In
•
particular
it
appears
possible
by
the
use
of
pumping
air
into
bunkers
as
well
as
heating
them
to
increase
their
volume
and
create
what
has
been
called
“
the
Cappuccino
”
effect
.
Experienced
•
Engineers
will
be
able
to
closely
monitor
a
fuel
supply
and
check
for
visible
and
physical
signs
of
possible
problems
,
including
monitoring
the
temperature
of
the
supply
as
well
as
checking
for
signs
of
air
supply
Experienced
•
crew
,
assisted
by
a
Bunker
Surveyor
,
can
significantly
assist
in
the
mitigation
of
this
risk
scenario
.
A
mass
flow
meter
on
board
the
receiving
vessel
can
also
assist
to
determine
exact
quantities
supplied
,
as
mass
measurement
may
be
more
accurate
than
volume
Case
Scenario
:
Bunkers
are
adulterated
and
off
specification
Disputes
•
over
bunker
quality
are
not
uncommon
,
and
often
related
the
precise
specifications
,
ignition
quality
,
viscosity
or
other
important
factors
Bunker
•
fuel
is
a
heavy
fuel
oil
product
,
resulting
from
the
refinery
process
of
crude
oil
and
it
contains
a
great
many
chemical
and
metal
traces
.
Ship
engines
are
designed
to
deal
with
these
,
but
unusual
or
excessive
concentrations
may
cause
problems
Wherever
•
possible
new
bunkers
should
be
pumped
into
empty
tanks
on
board
the
vessel
and
not
co-mingled
with
existing
stores
.
These
bunkers
should
not
be
used
until
tests
are
performed
to
determine
the
exact
nature
of
the
supply
.
For
claim
purposes
,
bunker
manifold
samples
on
the
receiving
vessel
can
have
the
best
evidential
value
if
taken
and
stored
properly
Case
Scenario
:
Crew
colluded
with
Bunker
Supplier
to
short
change
on
a
supply
of
fuel
A
•
Chief
Engineer
on
board
a
Tanker
vessel
was
sentenced
to
a
fine
and
imprisonment
after
being
found
guilty
of
having
colluded
with
a
Bunker
Supplier
to
steal
over
100
tons
of
fuel
oil
which
was
sold
on
to
another
vessel
The
•
C/E
had
been
induced
into
this
course
of
conduct
with
a
bribe
,
a
small
percentage
of
the
value
of
the
fuel
,
from
the
Supplier
.
The
fraud
was
detected
as
the
concerned
authorities
were
aware
of
the
general
risk
and
had
been
monitoring
possible
suspicious
activity
which
ultimately
allowed
for
all
the
Conspirators
to
be
caught
Case
Scenario
:
Vessel
is
invited
to
conduct
illegal
bunkering
The
•
potential
fraud
is
the
possible
facilitation
of
the
sale
and
purchase
of
stolen
or
smuggled
bunkers
and
the
avoidance
of
customs
duties
and
other
taxes
which
would
have
been
due
on
the
supply
of
the
bunkers
had
they
been
procured
properly
If
•
the
vessel
sells
part
of
the
cargo
,
then
that
would
be
theft
and
outright
criminal
conduct
.
It
may
also
amount
to
smuggling
.
Buying
cargo
,
or
particularly
bunkers
,
may
amount
to
smuggling
and
customs
evasion
