Cargill and Hafnia establish joint venture bunker procurement giant
- New scaled bunker operation promises to address quality, cost and industry complexity
- Seascale Energy to act as a demand aggregator for new sustainable fuels
- Consolidation allows us to address industry challenges, argue Hafnia and Cargill CEOs
Hafnia chief executive Mikael Skov and Cargill Ocean Transportation head Jan Dieleman explain why they are merging their bunker procurement operations to create a new, scaled business that will address industry issues and drive sustainable fuel innovation
CARGILL’S Ocean Transportation business and product tanker operator Hafnia have combined bunker operations to create a new marine fuel procurement giant, Seascale Energy.
Speaking to Lloyd’s List, the two chief executives behind the new alliance said the scaled operation has the potential to drive accelerated demand for new sustainable fuels while addressing persistent problems with quality and transparency in the marine fuels market.
The new joint venture, which combines Cargill’s existing bunker business Pure Marine Fuels and Hafnia’s Bunker Alliance, will initially represent close to 8m tonnes in bunkering volume, but with plans to scale the operation globally and focus on sustainable fuels.
Improved cost efficiencies, quality and transparency are the initial drivers behind the new approach, but the influence of two large-scale fuel users with designs on rapid energy transition also comes with the promise of becoming a demand aggregator for new sustainable fuels.
“The scale is significant — it allows us to address industry challenges around transparency, quality and decarbonisation,” said Jan Dieleman, president of Cargill’s Ocean Transportation business.
“But what it also does is create a potential platform for all the new fuels and the complexity that is coming our way,” he continued.
Both Hafnia and Cargill have been growing their fuel procurement services over recent years.
Pure Marine Fuels was initially a strategic partnership between Cargill and Maersk Tankers, but Maersk Tankers exited in the wake of its acquisition of US tanker pool operator Penfield Marine last year.
Hafnia, meanwhile, has been growing its bunker alliance organically and last year the Oslo-listed operator announced it was teaming up with a company called Big Hill to develop a plant to produce synthetic hydrocarbon bunkers.
The new joint venture between Cargill and Hafnia, however, represents a step change in the scale and approach for both companies.
“Building this organically is tough, it takes a long time. So, we really felt that this was the right moment to do this,” said Dieleman, who says that the idea was born out of regular meetings with Hafnia chief executive Mikael Skov.
“We’re not doing this to create a business where we earn fees as middlemen — we’re creating an alliance between two very big end users of bunker fuels because we believe that the consolidation will give us benefits on a lot of different areas,” explained Skov.
“There’s the increased knowledge about a market by having scale, but there’s also the procurement advantages and pricing quality where an alliance like this, made by real end-users in the market is very different than just people trying to facilitate something in between themselves.”
Skov likens the bunker alliance to the Hafnia pools where the aim is not to make fees, rather it is a case of using scaled, digitalised influence to improve quality and overall earnings.
“We’re running pools because by having 200 ships, instead of making $15,000 per day, we’re making $17,000 per day by combining our efforts to have a better economy of scale advantage in the market overall,” said Skov.
Seascale Energy will take a similarly digitalised approach with the joint venture relying on data-driven insights to optimise decision-making, but the intention is that it will also serve as a centre of expertise for navigating evolving fuel regulations and technologies.
“We’re trying to create a quality bloc where scale means better prices, better quality and better service at the end of the day. And it’s worth pointing out here that we are the end consumers of what we are buying,” said Dieleman, who concedes that bunker fuel quality issues have been a consistent concern in the market.
“But then you have this added benefit because you’re creating this community around the new fuels and I think you start creating a very interesting platform for people to join and plug into scale and we need scale for this energy transition to work.”
According to Skov, one of the main advantages of a scaled alliance is the ability to deal with increasing complexity in the market.
“Price and quality is one thing, but you have a lot of surrounding things around procuring oil and bunkers that are pretty complex, and where there’s a lot of money in terms of claims and avoiding claims, and the way you structure your contracts,” he said.
“We’re coming at all that with a user’s mindset, and I think that’s the big difference. This is ultimately about coming together and with an openness and transparency, to actually solve issues and make really good decisions about how to move forward as an industry.”
Seascale Energy will be owned jointly and equally by Cargill and Hafnia and the new entity will be jointly governed and will operate under a dual-chief executive structure, with Olivier Josse from Cargill and Peter Grünwaldt from Hafnia taking control.
Business operations will commence in the second quarter of 2025, subject to pending regulatory approval.
