Gulf Oil Marine delivers to the ends of the earth.
A major issue facing the marine industry is the increasingly stringent environmental requirements approach taken by regulators. Under the International Maritime Organization new guidelines, ships travelling to Emission Control Areas are required to burn fuel with a maximum of 1% sulphur content, down from the previous 3.5% limit. And the limits in ECAs will be reduced to 0.1% in 2015. The IMO wants to slash the global sulphur cap to 0.5% by 2020, with a possible extension to 2025 subject to a review in 2018.
“While pollution control is vital, the IMO timeframe is very aggressive. And of course, it could not have come at a worse time for the shipping industry,” says Jackson Davis, general manager Asia Pacific at Gulf Oil Marine.
“Ships navigating in and out of the ECAs will have to use both high sulphur fuel and low sulphur fuel. The use of two types of fuels, and the time consumed in the switch-over add costs. Having to carry inventory for different types of lube products also entails additional costs for our industry.“
“Of course there been considerable marketing around the one-product-does-it-all concept but nobody is 100% satisfied with that. Any product with a specific application is going to be a compromise if it tries to do two things at the same time,” Mr Davis maintains.
“Engine makers design and build their engines around certain kinds of fuel and certain kinds of lube. When you use lubes not consistent with their recommendations, it can present certain challenges.”
While the disagreements on the appropriate lubes to go with the specific fuels will no doubt rage on, the most important facet of the lubes business is simply back-to-basics: getting the lubes to the right place, at the right time, at the right price.
“Gulf Oil Marine has the broadest physical network among the major marine lube players,” asserts Mr Davis.
“As a result of the network we have created, our core client base has been the type of ships that require a very broad breadth of port coverage. While we supply to handysize up to capesize bulkers, chemical tankers, and every kind of vessel up to very large crude carriers, every size and type of containership, most of our volume is from MR tankers and dry bulk carriers because they are the ones that have the most erratic trading patterns,” say Mr Davis.
“The reference cost in Asia for lubes is Singapore; it represents about a third of the global lifting demand. You may have a very good Singapore price - but if you don’t have product for a client in Vancouver and he needs to lift 4,000 or 5,000 litres there, then the savings you made for yourself in Singapore goes away very quickly,” Mr Davis points out.
“Our extensive network and our nine customer service centres strategically placed around the globe across all time-zones, are the main pillars of our value propositions to customers. Our clients in Europe can call our Genoa and Hamburg offices anytime, while clients in the States can call Houston 24 hours a day.
“Our network for deliveries starts in the hubs where our customer service centres are located. It also means that we can cluster inventories around one major hub that is within reach of a number of additional ports,” he says.
“Gulf also has inventories at around 25 ports in China which allows us to get products to around 60 Chinese ports within 48 hours. In Europe the main inventory facilities feed an additional 25 ports each, and all within a day.”
“Having products sitting in the warehouse is one thing. Getting them to the ship is another. So we work very closely with the carriers and our barge operators in all major bulk delivery ports including Fujairah and in Singapore. Our arrangements with the physical delivery agents ensure products can be available 24 hours a day, seven days a week. There’s a premium for that but when you compare the cost of the ship going off-hire due to a late delivery or even not having product for the ship, it's worth it.
“We are one of the few operators in Singapore where our barges are OPL licensed or can get OPL access within a few hours. There are a lot of ships just doing a bunker call in Singapore and we can get our lubes out to them, saving the ships up to 10 hours coming into the IPL. Sure, it's a few hundred bucks extra for the OPL delivery but it translates to better economics when compared against the cost of getting the ship into and out of the inner port.”
In Rotterdam and Singapore, Gulf also employs a number barges as a form of floating inventory. “It forward deploys the product, bringing it closer to the customer,” says Mr Davis. It’s more expensive to store on the barge but delivery to the customer can be up much quicker. Our record in Singapore has been to deliver within 1 hour 15 minutes after receiving the enquiry.
“The industry is structured such that for the more obscure ports, the lead-times are longer and the product list on offer gets shorter. Nonetheless, Gulf tries to have as many products as economically feasible in order to better serve our customers. Some competitors only offer three products at smaller Caribbean ports for example. To be fair those three products would account for 70% of their overall volumes at those ports. But that’s only looking at things purely from the lubes seller’s perspective and not from the perspective of the customer. For if you need that special grease or you’re a reefer ship and your refrigeration’s about to go down because you need Marine Refrigeration Oil – you need it now.
Admittedly, going all these extra lengths for our customers is expensive for us but it does wonders for our customers. And that’s how we have grown our business to where it is today.”
Fluid suppliers in perfect mix
In December 2012, Gulf acquired Houghton International, a global supplier of metal working fluids, from US Private Equity Group, AEA Investments for $1.1 bn. The deal has created the ninth biggest lubricant company.
“This is a very exciting opportunity for both companies,” says Gulf Oil International vice president Frank Rutten. “The global lubricant business is in the midst of an important transition. Many of the world’s largest oil companies are moving out of downstream operations and this movement is creating a void that needs to be filled. Strategically therefore, Gulf and Houghton coming together gives the new entity an extremely strong downstream presence and reinforces Gulf’s commitment to its core business in the downstream lubricant industry.”
Gulf Oil’s general manager for Asia Pacific Jackson Davis adds: “We are very excited about this development and even as I speak, we are working out with our colleagues from Houghton on optimizations and other economic benefits. It is likely that the primary benefit will be on the operations and manufacturing side, given Houghton International’s global network of manufacturing and distribution facilities.