Fit for purpose. Roman Miroshnichenko's interview for Bunkerspot Magazine
In this Q&A, Roman Miroshnichenko, Managing Director, Gazpromneft Marine Lubricants, explains how the company has adapted to the recent challenges of IMO 2020 and the pandemic and is positioning itself for new markets, fuels and technologies
How did Gazpromneft Marine Lubricants prepare for the introduction of IMO 2020 and did 2020 align with the company’s expectations?
To cope with IMO 2020 requirements we improved not only our product range but our technical service specialists also developed detailed recommendations for fuel switching, including custom-made guidance based on the design features of our customers’ engines. They participated in more than 100 individual consultations and, as a result, our customers were well prepared and made the switch to low sulphur fuels smoothly.
Could you explain the impact of IMO 2020 on lubes production, with a switch to lower BN products?
We expected a significant increase in demand for low base number (BN) oils. In 2019, they accounted for only 27% of our lubricant sales volumes, however, at the end of 2020, this share had increased to 75%.
Ahead of 2020, it was important to accurately forecast the shift in demand to adjust the production schedule and to ensure the stable availability of the products in distant storage locations. In relation to a changeable pattern of demand during the year, it was necessary not to accumulate excessive stock so as to avoid additional expenses.
Towards this goal, we took some of our automated processes in relation to supplying to distant regions under close control. Over the past year, we have been analysing turnover indicators every week and only then do we make decisions about moving the products to the 13 warehouses that we have around the world.
We also began to supply in smaller quantities – up to 100 tons – but on a more frequent basis. This allows us to maintain an optimal structure in our storage facilities.
Have the composition and characteristics of very low sulphur fuel oils (VLSFOs) proved to be a challenge for the formulation of lubricants – and how has Gazpromneft Marine Lubricants responded to this?
The appearance of the new blended VLSFOs has led to an increase in the formation of asphaltene deposits in engines. This has created an additional challenge for lubricants – oils with low alkalinity have to show equal or better performance than the high BN products have previously shown.
Throughout 2020, our R&D specialists have been developing formulations of new generation oils, and this year we intend to start trials of new products.
What is market demand for lubes to be used with high sulphur fuel oil? Are you seeing any increase in demand as more scrubber-equipped vessels enter the global fleet?
In the fleets of our customers, the number of vessels equipped with scrubbers has hardly changed. Shipowners’ decisions to retrofit their vessels are still being affected by uncertainty in the bunker fuel market and the shipping market in general.
However, over the course of the past year the demand for high BN oils did slightly increase. In the first quarter of 2020, their share of total engine oil consumption amounted to 15%, and by the end of the year this had risen to 17%.
Analysing client feedback, we see that consumption of high BN oils is also influenced by OEMs’ recommendations to alternate the use of low BN and high BN oils in instances of increased deposit formation in engines operating on blended fuels.
Ahead of 2020, there were concerns that supplies of IMO 2020-compliant bunker fuel would principally be available at the main bunkering hubs. What is the availability of lubricants at smaller/mid-sized ports as well as the key flow ports?
The stable availability of high-demand products and their delivery at short notice – even to small, distant ports – is one of the most important elements of a highquality service. Therefore, we do our best to cover the needs of our customers in any country as much as possible.
Notice periods depend on the port category, but we aim to ensure that the delivery time, even to distant ports, does not exceed four days.
How has the pandemic impacted on procurement of lubricants? Are you seeing a return in demand – and, if so, in which areas of the world?
In 2020, we maintained the sales volumes at our average annual level. However, this was achieved through active supply network expansion. The increase in demand we had seen in some countries before the pandemic balanced the decline in demand in some other regions. For example, sales of Gazpromneft Ocean oils in Panama in 2020 surpassed the volume of 2019 by 3.5 times.
At the same time, we have continued to enter new markets. In October 2020, we brought our products to China. This country is really special for us, as the very first announcement of the Gazpromneft Ocean product range took place at the MarineTech China forum.
For the period from October 2020 to February 2021, we sold 200 tons of oils at ports in Southern China. This is a small amount but, considering all the circumstances, we view it as a success.
Are you seeing more owners and operators using engine condition monitoring programmes?
Today, technical service has become an important, if not mandatory, part of a maintenance programme. Constant and careful monitoring of the condition of the oil in operation as well as accurate interpretation of the results enables changes tobe monitored in equipment performance patterns and prevents mechanism breakdowns.
Between November 2019 and May 2020, the number of requests for the assistance of our technical specialists increased by 1.75 times compared to the average, and 7 out of 10 shipowners ordered unscheduled laboratory tests of working oil for at least one of their fleet’s vessels.
There’s a lot of discussion about the impact of digitalisation on shipping. How is Gazpromneft Marine Lubricants using data on lubes to optimise product performance?
From time to time, we face up to the fact that the impact of base oils on lubricants’ performance is underestimated. As owners of production sites, we know that the same additive package in combination with different base oils can show different performance properties during operation. Therefore, we pay great attention to the base oils’ quality control.
An improved product quality control system is being launched at the production facilities of Gazpromneft Lubricants. This automatically monitors the quality indicators of incoming raw materials, comparing them with established specifications. If the slightest deviation is detected, the system immediately sends a notification to operational staff so they can respond as necessary. This gives us confidence in the high quality of raw materials and, as a result, of the base oils produced.
In mid-2021 we will also put a new digital service into operation, which will allow us to predict the basic physical and chemical parameters of new oil formulations before testing them in the laboratory. We expect this to reduce the number of intermediate samples by three times and will also speed up the process of new product development.
Since Bunkerspot’s last Q&A with Gazpromnef t Mar ine Lubricants (Bunkerspot December 2017/January 2018), the company has expanded its production and storage bases to other geographies, such as the Mediterranean and the Asia Pacific region. Can you provide some more information about these operations?
Asia-Pacific is a really significant region for us as we began the first steps towards entering the global market in Singapore. It wasn’t easy to find a reliable partner as we needed one that could meet all our requirements covering technologies and quality control systems. But nothing is impossible, and in 2019 we signed a contract with a local blending facility and established an operational office in Singapore. This allowed us to provide a strong offering in the local market and to expand the supply network to Malaysia, South Korea, China, Hong Kong, and Taiwan.
In Europe, our focus is on the Mediterranean and we cooperate with blending plants in Greece and Turkey. This cooperation allows us to always have a full range of oils available and hold one of the strongest port directories in these countries. Gazpromneft Ocean oils are available in 27 Greek ports and 20 Turkish ports, and delivery notice does not exceed 3 days.
In total, Gazpromneft Ocean oils are produced at seven partner plants, two of which are in Russia. Our essential conditions for all the facilities are compliance with international standards and quality control at all stages, from the raw materials’ delivery through to the transport of the lubricants to the vessel.
Does the company have plans to expand its global market reach – through new production or storage facilities in other countries?
In 2020, we worked hard to enter the US market. However, we decided that it was too adventurous to expand to another continent during the pandemic and have postponed this move to later this year. Currently, we are making final preparations to start working in South Africa this year and to explore new opportunities in this new region.
Are there any developments in the Russian market in terms of the supply/demand for lubricants that the company would like to highlight?
We are seeing a significant increase in orders for new vessels at Russian shipyards and consider this segment as one of the most promising growth areas. According to Clarksons, in Q3 2020, Russia became one of the top three world leaders in shipbuilding, taking its place between South Korea and China.
We already have experience in providing the ‘first fills’ at Russian and foreign shipyards, for example, Hyundai Heavy Industries in South Korea and Tersan in Turkey.
Our customers also number some large Russian companies, such as Sovcomflot, Atomflot, and Russian Fishing Company.
How is the company preparing to meet the increasing use of alternative bunker fuels, such as LNG, methanol and ammonia? What are the challenges in producing lubricants for these fuels and are you seeing the market beginning to ask for these products – for LNG-fuelled vessels, for example?
Shifting the marine fuel landscape toward zero-emissions will generate a lot of challenges concerning engine design and the bunker infrastructure developments required.
to ensure the suitability and the availability of new fuels. It is obvious that cylinder lubrication will need to evolve to adapt to such changes. This will impact not only on oil formulations, but also the methodologies for carrying out bench tests and other approaches in the lubricant design process.
We reckon that in the medium term, LNG may become one of the main fuels that will be widely used in international shipping.
Are lubricants still largely bought on a contract basis? Is there a developing spot market for these products?
We keep working with the majority of our customers on a contract basis. Right now, we see an increase in spot requests by both small local shipowners and industry leaders, however we consider this to be a temporary phenomenon. A shortage of base oils can lead to a scenario where some suppliers can face challenges in covering the basic needs of their regular customers.
In such situation, shipowners need to look for alternatives to get the products. This provides a great opportunity for our company, which has its raw base oils, to increase and sustain our market position and proposition.