Bunkers: Qualifying Quality A supplier's view of what really happens John Stirling – World Fuel Services Quality Manager June, 2014

World Fuel Services Corporation 2013 Revenue $41.6 billion Market capitalization $3.28 billion Stock symbol NYSE: INT Fortune 500 Ranking* 74 Global headquarters Miami, Florida, USA Founded 1984 Number of employees** 2,500 All figures, except employee count, are as of 12/31/12 * Source: Fortune 500 Ranking Issue Date May 6, 2013 ** As of February 2013

Global Presence with Over 60 Offices Miami London Singapore Afghanistan Australia Argentina Brazil Canada Chile Colombia Denmark Germany Gibraltar Greece Hong Kong India Japan Kyrgyzstan Mexico Netherlands Norway Russia Singapore South Africa South Korea Taiwan United Arab Emirates United Kingdom United States 3

WFS is #1 in market with 10% share WFS Manages the Largest Bunker Volume WFS is #1 in market with 10% share Million MT

Marine Technical – who are we? Five professionals with broad technical knowledge and marine educational backgrounds About 180 years experience marine fuel and lubrication quality bunker fuel testing ship machinery and hull Inspection new ship construction project management marine consulting shipboard engineering marine engine design and construction Bob Thornton Dennis Eley John Stirling

Marine Technical Sea experience Members of Multiple types of diesel and steam vessels Members of ISO 8217 Marine Fuel Specifications Working Group ISO 13739 - Bunkering Protocol Working Group CIMAC Heavy Fuels Working Group IMO's Marine Environmental Protection Committee IBIA Board (International Bunker Industry Association) Immediate past Gajanan Pawar Manuel Vinas

Technical Issues Facing the Industry Frequency of fuel claims Quantity disputes both higher in number & Mt Related to high price of fuel Quality claims more complex – FTIR / GCMS Influence of the testing services

Technical Issues Facing the Industry Environmental Legislation Proliferation of ECAs Rules and enforcement not uniform 2015 – Max 0.1% sulfur in an ECA 2020 – Max 0.5% sulfur global Scrubbers vs using LSGO or 0.5% LSFO if available Is LNG really the future?

Technical Issues Facing the Industry Changing fuel quality Suppliers blending to meet legislation v.s. spec Law of unintended consequences

Typical concerns Quantity disputes Use of surveyors Barge vs ship figures Cappuccino – real or an excuse for sleeve oil Vnet Quality claims Sulfur test accuracy MARPOL vs Commercial testing Study of “normal” bunkers Debunkering may no longer be possible Using what’s on board Sulfur legislation Revision of the EU Sulphur Directive North American ECA : U.S. & Canada Reports of detentions & fines in Europe & USA

Additional worries Fuel quality Is it really getting worse? ISO 8217: 2005 vs 2010 vs 2012 vs Future Blending to meet LSFO with MGO Cost to meet sulfur specs with 95% & 99% certainty Responsibility of the vessel to clean the fuel Future availability – an educated guess Sampling MARPOL vs Commercial samples Why suppliers insist on sampling on the barge Why Owners want it on the vessel What we’ve seen Contractual requirements Supplier’s terms of sale Charter party clauses

WFS Bunker Claims - 2013

Split of Registered Claims - 2013

WFS Quality Claims - 2013 98.5% of products (MGO & IFO) delivered by WFS are free of claims Of the 1.5% having a claim, only 32% relate to quality Quality Claims = 32% of 1.5% or less than 0.5% of WFS deliveries WFS claims results are 50x lower than the 25% off-spec test results cited by some test labs Some off spec not claimed? Frequently the contractual sample is subsequently tested and found to be on-spec Pay attention to the T&C sample! Since some WFS quality claims relate to experience from vessels, not lab results, the difference is even higher Are we that good or is there some explanation for the extreme difference?

But first – Since perception becomes truth Ask Anything! But first – Since perception becomes truth Is the quality of bunkers really getting worse? Are Catfines increasing dramatically as claimed by many?

Are Bunkers Getting Worse? Courtesy of DNVPS

Focusing on Al+Si Courtesy of DNVPS 1717

A Dramatic Increase or? Data - courtesy of DnVPS

An Accurate Depiction Data - courtesy of DnVPS

Use of Truncated Graphs ISO 2005 ISO 2010/2012 Note that both of these graphs display identical data; however, in the truncated bar graph on the left, the data appear to show significant differences, whereas in the regular bar graph on the right, these differences are hardly visible. Data - courtesy of DnVPS

It’s not always the fuel

GC-MS Analysis

Quality – What’s in Bunkers

Would you use this? Sulphate SO4 - 534.6 mg/kg (ppm) Calcium Ca++ 208.0 mg/kg (ppm) Chloride Cl - 68.0 mg/kg (ppm) Magnesium Mg++ 53.5 mg/kg (ppm) Sodium Na+ 42.0 mg/kg (ppm) Potassium K+ 2.8 mg/kg (ppm)

San Pellegrino Mineral Water

San Pellegrino Mineral Water Sulphate Bicarbonate Calcium Chloride Magnesium Sodium Silica Residue Strontium Potassium Borates Nitrate Fluoride Bromide Lithium SO4 – HCO3 – Ca++ Cl – Mg++ Na+ SiO2 Sr++ K+ H3BO3 NO3 – F – Br – Li+ 534.6 mg/kg (ppm) 222.7 mg/kg (ppm) 208.0 mg/kg (ppm) 68.0 mg/kg (ppm) 53.5 mg/kg (ppm) 42.0 mg/kg (ppm) 9.4 mg/kg (ppm) 3.5 mg/kg (ppm) 2.8 mg/kg (ppm) 1.2 mg/kg (ppm) 0.77 mg/kg (ppm) 0.61 mg/kg (ppm) 0.40 mg/kg (ppm) 0.18 mg/kg (ppm)

THE INTERNATIONAL COUNCIL ON COMBUSTION ENGINES CIMAC is a worldwide non-profit association consisting of National Member Associations, National Member Groups and Corporate Members in 26 countries in America, Asia and Europe. CIMAC covers diesel and gas engines and gas turbines which are used for power generation, marine propulsion and locomotives. Worldwide members include engine manufacturers, engine users such as ship owners, component suppliers, fuel and lubricant companies, research organisations, classification societies, universities and other interested bodies. www.cimac.com

CIMAC WG7 - Fuels Who we are • Engine manufacturers • Handling equipment manufacturers • Ship owners • Fuel analyst institutes • Classification societies • Fuel additive suppliers • Fuel suppliers What we do Prepare recommendations for: • LSFO quality & operation • Bio fuels considerations • Combustion properties • Follow fuel quality worldwide • Fuel grade rationalization • Investigate different fuel compositions Who we work with We are a working group of experienced specialists within marine fuels, represented by the major players, and our goal is to prepare recommendations and make tools for the industry on how to operate on fuel, and choose fuels that will ensure safe operation of the diesel engines. Many CIMAC WG7 members also participate in ISO 8217 TC28/SC4/WG6 Marine Fuels

CIMAC - Guide on Sulphur Testing International Bunker Conference April 3 & 4, 2014 Copenhagen

Interpreting a test result in accord with ISO 4259 For the supplier, with a single test result In the case of a maximum specification limit, the specification limit has been met, with 95% confidence, if the test result is less than or equal to the specification limit minus 0.59R.   However, it is further given that this is for the guidance of the supplier, not an obligation, and that a value between the specification limit and the limit minus 0.59R is not proof that that the specification has not been met.   For the recipient, with a single test result In the case of a maximum specification limit, the specification limit has not been met, with 95% confidence, if the test result is greater than the specification limit plus 0.59R.  This means that the recipient with a single test result with a value above the specification limit but below the ‘limit plus 0.59R’ cannot claim that the specification has not been met and consequently has to accept that the product met the specification.

The implications of ISO 4259 interpretations The Supplier If a supplier intends to meet a particular maximum specified limit, they should target a value at or below the specified limit. If the supplier blended the fuel such that the ‘true value’ was equal to the specified limit then there would be as many test results above the specified limit as there were below that limit (50/50) Therefore, despite all the care taken, there remains a slight chance that the result variation will be outside this ‘0.59R’ margin. The supplier has to accept the risk that any test result obtained by the supplier which exceeds the specified limit indicates that the product has not met that specification limit The Recipient The recipient can only consider that a maximum specified limit value has been exceeded if their test result exceeds the limit plus ‘0.59R’. There is the same chance that a result which indicated that the limit plus ‘0.59R’ had been exceeded is not supported by subsequent analysis. Such is the reality of fuel oil testing.

ISO 4259 Clear and unambiguous Since all fuel oil testing is subject to inherent variations, in commercial practice, the assessment of fuel oils as supplied is governed by the provisions of ISO 4259. This in essence requires that the supplier must not obtain a test result over the required specification limit value In contrast the receiver cannot consider a product out of specification unless it exceeds that value by more than the 95% confidence limit which, for a single test result, is given by the reproducibility of the test method multiplied by 0.59 (0.59R) This statistically based process, gives a clear and unambiguous finding with the necessary margin to allow for the reality of variations in test results.

The implications of ISO 4259 interpretations

Enforcement? Enforcement is inconsistent – confusing Different from country to country and even port to port Bunkerworld 12th June 2014 11:11 GMT

Enforcement?

Rotterdam in the forefront….EMSA and Europe “Follow Rotterdam model”

US? Chamber of Shipping America advice

A final distillate slide...

CP/CFPP/PP CP CFPP PP Cloud point Temperature at which dissolved particles precipitate and form a cloudy appearance CFPP Cold filter plugging point Lowest temperature at which the fuel will pass through a filter under specified conditions PP Pour point Lowest temperature at which the fuel will flow Courtesy of DNV Petroleum Services

Distillates are all very different..... Courtesy of DNV Petroleum Services

Cloud Point (CP)/Pour Point (PP) Measured using the ASTM D-2500/ISO 3015 test method. Generally, each diesel fuel supplier sets their own cloud point maximums which may vary seasonally. Definition : PP Pour point is measured using ASTM D-97/ISO 3016 test method. Fuel suppliers typically set pour point specifications seasonally. It may not be possible to re-liquify a fuel that has gone solid Fuel must be kept in storage at 5 centigrade degrees above its pour point at all times to reduce the risk of solidification.

Cold Filter Plugging Point (CFPP) Definition : CFPP The Cold Filter Plugging Point (CFPP) is the temperature at which a fuel will plug a 45-micron screen under prescribed test conditions. CFPP is measured using European Test Method IP 309, and is currently the most commonly used cold-weather operability indicator. Although widely used, CFPP has its limitations. (CFPP) Reduction The CFPP of a typical diesel fuel can be reduced by the addition of kerosene. The maximum blending volume is limited by the effect kerosene will have on specific physical and performance properties of the diesel fuel (eg flash, visc) As a general rule the diesel fuel CFPP can be reduced by about 10 C to 20 C for each 10% of added kerosine. Geographically specific Hot and cold climates Arctic

Land Based? EN 590

What can the challenges look like...

Now you can ask anything! Hopefully!