Oil and GasAnd Now that Bunkering’s Back, the Legal Issues

January 14, 2014by Olufola Wusu0

The Director, Department of Petroleum Resources (DPR), Mr. George Osahon, last Wednesday, the 8th of January 2014 informed stakeholders at a one day forum held in Lagos, titled “Resuscitation of Bunkering Operations in Nigeria”, that President Goodluck Jonathan had approved the return of bunkering operations to the nation’s territorial waters after its suspension since 2003.


History of Bunkering
Some reports have it that the word “bunkering” came into use when coal was still being used to “fire” steam ships. The “bunker” is a dump where coal, the main fuel for the steam ship, was being stored. In those days when people used the expression ‘bunker the ship, they meant, take coal and fuel the ship.
However, society moved away from coal powered engines to engines powered by Oil and Gas but they still retained the word ‘bunker tank,’ that is, where you keep bunker fuel, whether coal or oil, in recent times we now have ships that run on LNG.

Bunkering as a Legitimate Business
Bunkering is defined as a downstream business involving the fuelling of ships of all kinds on the high seas, inland water ways and within the ports of Nigeria. Bunkering is therefore a hospitality business that provides fuel, water and other victuals to ships at sea.
Traditionally bunkering was done in the main ports, but today it may be done in all the ports.  It provides fuels such as marine diesel; low pour fuel oil, lubricants, LNG, water and other supplies to vessels operating in the country’s territorial waters.

Nigerian Street definition of Bunkering
“Oil Bunkering” in Nigeria informally means, crude oil theft and dealing in stolen crude oil or other petroleum products.

Regulatory Body Covering Bunkering
All interested companies must apply to the Department of Petroleum Resources (DPR) for a license to carry out the bunkering business and operate a downstream operation on water.  Illegal bunkering means running bunkering operations without being licensed by the Department of Petroleum Resources.

Other Regulatory Agencies involved are:
Bunkering operators will need to comply with the requirements of the Nigerian Navy, Nigerian Maritime Administration and Safety Agency (NIMASA), Nigerian Customs Service and Federal Ministry of Fisheries before commencing operations. In this writer’s opinion, this may amount to ample regulatory compliance that will cost stakeholders a bit of time and money, which are crucial factors in any shipping based business. If we intend to become a hub, we should make it easier to do business in Nigeria without creating avenues for cutting corners.

Rebirth of the Law Relating to the Sale and Use of Marine Fuels in Nigeria?
The commencement of bunkering may increase activities in ship acquisition, leasing, project financing etc. This is because bunkering is a technical and capital intensive business. Legal aspects of bunkering include contracts, defaults, ship arrest and dispute resolution.

Benefits of Bunkering
It should help generate revenue for the government, help act as a stimulus for growth in shipping activities in inland ports and water ways (cabotage). It should help develop linkage industries and generate employment opportunities. It may help fight Oil theft as ships would have accredited fuel suppliers to patronise and may lead to cheaper freight.
It will make it easy to identify illegal vessels as the DPR may wish to publish the list of licensed bunkering companies.

Basic Nature of Bunkering Operations
It can be Shore based/Static; this will require the use of jetties and depots.
It can be Mobile/ Vessel based, this may involve the use of a big ship, say an FPSO and other smaller ships to supply fuel to the ships at sea.

Possibility of Nigeria as a Bunkering Hub
Presently shippers in Nigeria have to go through the trouble of going to Senegal, Cape Verde and Cote D’ Ivoire to fuel vessels that operate in the Nigerian territorial waters, thereby incurring extra cost and marking up the cost of freight in Nigeria.
With the rebirth of the bunkering industry in Nigeria, Nigeria will have to meets its domestic needs, attract foreign ships and contend with established bunkering hubs like Singapore, Senegal, Rotterdam, Cape Verde and Cote D’ Ivoire.   Some questions arise. Can this be the rebirth of the Legitimate Bunkering Industry? Will this make shipping and freight cheaper, as ships will carry fewer bunkers and more goods?

A “One Stop Shop” for regulatory compliance?
Judging by the long list of regulatory bodies bunkering operators will need to relate with and obtain approval from, is there a need for a one stop shop to facilitate easy compliance? Does the bureaucracy involved in legal compliance in Nigeria aid our desire to be a hub for bunkering in the world?

Financing Options
Are there plans to assist operators to acquire sea-worthy vessels rather than the scrap vessels that are readily affordable and within reach?

Need for a Government/3rd Party Laboratory to Certify Bunker Supplies
There is a need for supplies to be bunkered, to be certified fit for use by a laboratory, so we don’t have bunker operators supplying substandard fuels and other supplies. This should be the first step in a series of quality control mechanisms to be used to safeguard the newly approved bunkering business.

Fantastic Public Sector Branding by DPR
DPR has in recent times been having interactions and communicating with members of the public and stakeholders. Its informative and navigable website has made regulatory compliance a bit easier. Besides, sometime late last year it held a couple of road shows for the Marginal Field Bid rounds 2013; it just held a sensitisation forum for the resuscitation of bunkering activities in Nigeria. The DPR seems to be reaching out and now comes across as nimble and responsive to the needs of its consumers, i.e. the industry it regulates. Perhaps due to the wisdom and foresight of witty and seasoned Director, Department of Petroleum Resources (DPR), Mr George Osahon, the DPR seems to be rebranding.

Innovation/Intellectual Property in Bunkering Operations
Processes and systems have been developed that make bunkering cheaper, better, faster and safer. LNG bunkering anyone? We now have ships that run on LNG and will need specially fitted ships using proprietary technology that supply LNG.
GPS systems have made it easier to track both bunker operators and ships utilizing their services. Some supply ships now have robotic arms protected by patents that aid in the supply of bunker supplies to the recipient vessels. Bunker fuel metering systems are now computerised with various firms owning proprietary software and hardware.

Can this be the rebirth of the Legitimate Bunkering Industry? Will this make shipping and freight cheaper, as ships will carry less bunker and more goods? Developing a framework for bunkering operations will involve both existing legal framework regulating shipping and the development of commercial practices to encourage bunkering. This will require legal knowledge, foresight and common sense. The information contained in this piece should help inform the Government and stakeholders and possibly foster frank discussion between the Government and the stakeholders prior to the drawing up of guidelines covering bunkering operations in Nigeria and stakeholders investing their funds in the business.


Olufola Wusu

Leave a Reply

Your email address will not be published. Required fields are marked *

Megathos Law Practice

© Megathos Law Practice 2020 © Megathos LP 2020.  All rights are reserved.
MegathosLaw Practice is an international legal practice.

Show Buttons
Hide Buttons

You cannot copy content of this page