The Marine Fuels Alliance (MFA) aims to provide smaller physical suppliers with the scale to access the resources required to compete with bunker industry’s heavyweights. Bunkerspot speaks to the founder of the new group, Propeller Fuels’ Robert Thompson.
The bunker industry already has an industry association. What additional value will the Marine Fuel Alliance be able to deliver?
IBIA was needed and it’s become a key lobbying body for the industry when it comes to issues such as emissions controls on marine fuels. It is important there is a collective industry voice that can be represented on the IMO, for example.
However, the Marine Fuels Alliance is really quite different. It’s not meant to be all things to all people. It’s actually meant to be about physical suppliers. We are going out of our way not to be impartial. We are aimed at making physical suppliers better at what they do, more professional and more transparent, more standardised and therefore appealing to customers. This is about directly doing business. It is not a bureaucratic exercise.
How long have you been developing the MFA?
The genesis came two or three years ago when I set up Propeller Fuels. Having worked for big companies and realising what resources and reach you need in order to survive in this international market, when I set up my business, I realised that I didn’t have a credit manager. I need to check credit at the point of an enquiry. I can’t just give half a million dollars of credit to somebody, so how do I go about it? Of course, there are excellent credit reports, but these can be expensive. It also depends on the volume or frequency that a company is purchasing reports. To make diligent decisions for your business you need an experienced human being - it’s a very specialist field - and that human being in today’s market is going to cost significant money. Top quality credit managers rightfully command high salaries as the critical advice they give can make such a difference to the trading book and direction of the business. As a new company, or indeed existing small suppliers, it is out of the question to employ such a professional on a high salary scheme.
Then you get a claim and you realise that you don’t have the in-house technical managers that you relied on in your last company. I’ve been around a long time and honestly, 95% of technical matters I’m au fait with but I’m not by training a technical person. You are always going to get one that is just the 5%, that’s just far too technically complex and where you need a chemical engineer to understand precisely what’s going on.
Turning then to legal matters. You feel you dare not pick the phone up because you know it’s going to cost you thousands to even open the conversation and request assistance.
At Propeller Fuels, we were lucky because we had an owner and a partner who is already in an established business [Oil NRG], so I was able to tap into their resources even though they are not marine specialists.
But I started to look around and speak to other small suppliers and they all said they had the same problem. For instance, I’d ask them about what they do on credit and many said simply they went with their gut instinct, and that’s a pretty dangerous game to play.
It became clear that to access the resources needed in this business is really expensive, indeed unaffordable for most small companies. Some are in the no-man’s-land area where they are big enough to need them but not big enough to be able to afford them, and most companies find themselves with that dilemma.
Affordability can be achieved through scale, by teaming together and sharing resources. The idea is that the MFA can work to make these resources available to its members, like many other associations do.
The second part of the driving force behind setting up the MFA was about reach and promotion.
I’ve travelled all over the world with previous companies. For larger trading houses and suppliers, there are designated budgets and marketing plans for sending a delegation to Japan, to Norway or to Connecticut to see a dozen ship owners. But when you are a small company, these are very significant sums of money. Not to mention the time taken away from the office whilst trying to oversee business back home. All this to try to achieve global appeal.
So, it becomes the case that small suppliers become dependent on business routed through a trader, somebody in the middle. The connection is lost between supplier and buyer and the margins available on the deals done swallowed up along the way. For a small supplier to sit and wait for enquiries to come is cost-efficient on the one hand, but grossly reduces the chance to make new money in new ways. Anthony Mollet has spoken of this matter and mentioned it in his presentation of IFS, Malta in Petrospot’s recent online Global Bunkering Summit.
I recognise their need for physical suppliers, especially small ones that don’t have global reach, to be able to come together under a collective umbrella that has a global branding like the MFA. If you have 30, 50, 300 members globally, all operating with the MFA branding in addition to their own branding, then it becomes much easier to promote yourself – and hopefully that will create the global recognition, the scale and the brand awareness. We envisage a supplier on a marketing trip, with a business card also showing the MFA logo. Imagine the power in a meeting to be able to represent other members when face to face with a buyer. You may only be working in one location, but you can show the client you are part of an Alliance with a common approach and set of standards.
How did you go about gauging the appetite for the MFA?
It was mainly face-to-face. Mainly when I was at a function, conference or when visiting companies, I would bring it up during these conversations. The other small suppliers said they were glad I had brought it up because they were having the same challenges and they wanted to do something about it too. Lots of people thought it was a great idea and wanted to be a part of it, but not many people had the time to give to it – and that was a frustration.
The global pandemic has presented an unusual set of conditions at a time when trying to set up a new venture. For about six months I considered giving in because I couldn’t do it on my own, I didn’t have the time and we were no longer able to meet as an industry at the various events. But during phone calls and general day to day business conversations, I came across Anthony Mollet, the Business Development Manager at International Fuel Suppliers Ltd, Malta. He was immediately extremely enthused by the idea and wanted to be part of the project. That’s when I finally had an accomplice and from just over a year ago Anthony and I started to build the concept up to the point of launch. Anthony has experience from various seats, including as a buyer at Shell, a broker at Premier Marine, General Manager GAC Bunker Fuels and now, as a supplier at IFS Malta. His overview of the issues at hand and critically of how IFS has to manage its business has been a great insight.
How did you find the time to develop it?
We’ve both got full time jobs so we needed to ask ourselves how much time we could give to it. We then asked what we needed to do to make this thing credible. We weren’t willing to go to market with a concept, it needed to be more tangible. We decided we needed to have a constitution. We needed to say what it was all about, what the rules were, how it was going to be governed, who’s going to govern it and who’s going to join. We needed to have a website. This sounds like a very quick fix but to work all that out took us many weeks.
Our mission statement is: Promote. Support. Connect. It took a long time to arrive at what we wanted to achieve, what the core values are.
We then began speaking to people and showed them the work we had done. We set up monthly calls to attract key people to the new groups being created. It became easier to approach other suppliers to be founder/executive members as momentum grew.
We have created an Executive Membership formed of suppliers who have been engaged with us and proactive in conversations about the path forward. We want this to be global. We already have people from Egypt, Malaysia, Singapore, Malta, Greece, the UK and Canada.
The idea then is that we split the world into seven global regions. There will be regional executive committees, overseen by a permanent global executive.
Critically, we have also requested key industry stakeholders to form an Advisory Group. It is presently represented by a bank, a trade credit insurer, legal and claims experts and several bunker procurement professionals.
You say you have developed a constitution. Can you go into more detail about what is covered in that?
It is very important to understand that this is not a cartel. The constitution focuses on the governance and how the governance will work. It is not a finished document, it’s about 75% done. We purposely didn’t want it all done because we want the executive to decide it. We have got three main questions that need answering.
The first one is about who can be a member and that is a massive debate in itself. There are many different stakeholders but we have decided the definition of a physical supplier is that you have a bunker delivery receipt and you deliver on it and it’s your own paperwork.
The second question is about what the minimum rules of membership are. We are adamant to engage with stakeholders willing to invest time and bring essential elements to the table. We want proactive and forward-thinking members, who behave according to the constitution and respect all others accordingly. We will, without hesitation, seek to vote out any individual or company who do not behave correctly. We want the Marine Fuels Alliance to be about ethics and standards, and if an individual or company is not compliant, we will have a committee that says firstly ‘yellow card / warning’ and if you carry on doing it, ‘red card, you’re out!’
I’ve said from the off that the best day for the MFA will be the day we first vote an individual or company out. That sounds a really negative thing to say but it’s not, it’s a positive thing to say. We want to demonstrate to the world that this will be about standards as well as the other key areas mentioned.
Thirdly, up to this point, Propeller has funded the foundation of the MFA and some of the costs associated with a basic start-up. But we cannot do that indefinitely and in fact we shouldn’t because it needs to have impartiality. We don’t want people to say this is just a vehicle for Propeller to promote themselves. The MFA will need staff and it will need a certain number of members to afford those staff. So, how do we fund it? Do we advertise? Do we have membership fees?
All of these questions are out there. We will be talking about them over the next month and they will eventually be debated at the next meeting of the executive committee.
Will membership of the MFA extend to physical suppliers who come from outside the conventional, fossil-based bunker sector?
This is actually one of the drivers of the MFA. It’s one of the resources that we just don’t have. We are going to do several things proactively. One is educating the existing industry on the new fuels and the new world. It’s gathering pace massively. I’m probably going to just about see my career out without having to worry too much about LNG, but the next generation are not. They are going to have to know about these matters and they don’t. We are all busy making money but not really busy on the future.
I think we need to be reaching out to the experts [from other energy sectors] and asking them to join us so we can say to our customer base that we are not just about fossil fuel suppliers. We want to have dozens of members who are seeking to enter this market who can learn from us.
A lot of the current conversation concerning the decarbonisation transition involves big players but presumably this is something which the smaller companies, like those who are part of the MFA, are also having to consider?
Absolutely. It is a question that’s certainly on my mind because Propeller Fuels are 25% owned by an inland company, Oil NRG, and that’s a massive question in their world. The inland market is well ahead of us when it comes to thinking about moving on to a world without oil. When you have a company like Oil NRG that has 140 trucks, five terminals and for decades has invested in infrastructure to build for oil, it is worrying where this is going to go.
I think it’s not in the forefront in our minds because people are too busy thinking about today. So, 100%, we want to support and help members with that so they can get some kind of online library to educate them and support them with the decarbonisation transition.
How will the MFA support members in obtaining access to finance?
Ten per cent of funding in marine fuel disappeared in the last year. Recently, the annual marine fuel volume was published for the first time which was 230 million tonnes. That makes it around a $120 billion business at the current price levels which means $12 billion has disappeared, in essence because the banks are not happy with the robustness and diligence of this industry.
Most of the small suppliers I know of are saying they cannot get access to finance, and they are not going to get finance if they are resistant to change and continue to behave in the way that they do. The industry needs to get more professional. Where in the world is there a $120 billion industry that doesn’t have standards? There is no kite-mark. If you go out on the high street and buy something, it’s got a kite mark on it that says it’s a certain quality, it’s been tested and it’s up to a certain standard. We have nothing of this kind in this industry.
The MFA is trying to make us better at what we do so that we can appeal to the stakeholders, financiers and the customers.
What are the short- and medium-term targets for the MFA?
I think the next key steps are to finalise the constitution, finalise the executive, which is nearly there, and then start having what I would consider to be an active, working organisation. That’s all coming and that’s all to be aligned with the launch over the next few weeks. We are really only just beginning the exercise of going out there to attract members, the past year has been mainly about planning and preparation.
We want an active, working organisation with a diverse executive. We want a website and to bring a few key resources into the website, live, from day one and that’s a discussion we are having.
One of the things that we want to achieve is an online directory. We will go to shipowners and ask them to join the MFA for free as an associate member and in doing so we will give them access to some resources. We then want to encourage both suppliers and customers to upload their KYC [Know Your Customer] information. We want a customer to be able to go to the directory and click on a link which will enable them to upload their KYC info if the shipowner has consented.
I know personally how much I would value that because I’ve given and received 100 KCYs and that’s a massive number of working hours I’ve spent. If I could upload it once, and there’s nowhere else in the world where you can access this stuff, that would be a blessing to me in terms of time saved.
Slowly but surely, we will be preaching the message to the supply community to get onboard as well but the real effort on the supply side – actually going out looking actively for members – will start now. We first want to attract the support of the buying community, ship-owners and operators. If you’ve got 300 customers endorsing the concept - big shipping companies who are big buyers of fuel - already registered and then you go out to suppliers around the world and ask them to join the MFA, I don’t think many people would say ‘no’.