Fuel Tankers Supply Chain

T&BS STUDY CASE

August 2019

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OBJECTIVE

TO EXPLORE ALTERNATIVE SOURCE OF TANKERS,

TO COVER FOR THE CONTINGENCY PLAN FOR
THE KINGDOM OF BAHRAIN.

Thus, to ensure adequate supply logistics “i.e. Tankers” are available for use when needed, it
is essential to continuously explore the market to identify potential new suppliers and readily
streamline the source of tanker supply.

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WHY THIS IS IMPORTANT ?
It is crucial for Bapco local Marketing-Distribution to have a contingency plan for fuel
logistics “i.e. sufficient number of tankers” because it can be great for preventing risks
of fuel supply deficiency at emergency situation.

The proposed recommendation herein is in line with the country contingency plans
when a disaster or unforeseen situation disrupts the operations /normal fuel supply or
in case of power outage or blackout.

The purpose of this proposal is to avoid fuel supply deficiency is case of the disruption,
and to safeguard the data and ensure the safety of everyone involved. There is a
chance that out fuel supply logistics will never make use of its contingency plans. It is
still important to have one because you cannot see the future.

We seek management support to push forward this proposal in order to be able to

execute the Contingency plans for better preparation, which gives us more and better
flexibility to any foreseeable challenges that may arise in the future. Moreover this will
enable Distribution to respond quickly to unplanned events. In addition preventing panic
because securing the fuel tankers allows for quick recovery even in the worst of
situations and this can bring down panic levels by a huge extent.it shall also eliminating
last minute comprehension when the situation arises which can help in minimizing the
cost due to urgency or tankers requirements.

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BACKGROUND
Due to expansion projects and redevelopment of facilities and infrastructures in the Kingdom of
Bahrain, fueling facilities belonging to Governmental and private sectors was established. For
example, a number of fueling facilities was developed for Ministry of Interior and Ministry of Defence
with strategic storage capacities. New large scale Hospitals projects (i.e. King Hamad Hospital,
Awali Shiekh Moh’d Bin Khalifa Specialist Cardiac Hospital) and faculties serving the general public
also have emergency Diesel storage facilities for Generator backup power supply in case of
blackouts.

On the private sector, as a result of any forced interruption of supply of Jet A-1 through the Pipeline
to Arad Depot, Bapco is obliged to response for the implement of road bridging of Jet A-1 from
Bapco Marketing Terminal to Arad Depot, as and when required (1.8 million liter per day using 10
road tankers was used in our last bridging exercise). Moreover, the Bahrain Airport Company is
building a Diesel fuel facility to overcome any black out or power outages, their bulk diesel storage
facility is of 280,000 liters capacity.

In addition BAPCO is now engaged in Diesel Emergency Supply agreement with AMAZON DATA
center facilities (460,000 liters per day). This required tankers to be readily available for use may
the requirement emerge.

All the above requires having the capability of delivering Diesel Fuel if and when the need is
emerged. Thus, a dedicated logistics for the tanker is vital to meet the required demand volume if
and when it occurs.

It should be noted that, from surveys conducted, the only viable suitable Vehicles available on the
Island for bridging purposes are Bapco's road tankers and Caltex road tankers.

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WORK CASE
BAPCO approached other tanker suppliers “in particular Chevron” to assist in
supplying tankers through limited time leasing agreements.
Chevron has been very cooperative in leasing the tankers so far, but they also are
bond to supply agreements with other parties which means the current setup for
leasing Chevron tankers can not be the permanent setup due the risk of
availability of tankers may there be a need for these tankers by Chevron;

The below frequency of usage/need in the last 2 years proofs that a permanent
setup is required and feasible. “refer to the cost comparison in the following slide”.

• Chevron for 10 jet-A1 tankers (May 2018) 6 months.

• AL-Absool Transporting “Saudi Arabia” (Not utilized).
• Chevron for 10 jet-A1 tankers (May 2019) 6 months.
• Delmon for 4 diesel tankers (May 2019) 40 days.
• Chevron for 5 Crude tankers (June 2019) 6 moths.

Additionally, We have experienced a number of unsuccessful tendering outcome

for fuel tankers. Or, the least that can be said that the number of offers received
from tendering where way below expectations.

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COST COMPARISON
Purchase/down
Monthly fee per Accumulative Accumulative
Tanker Source Location/Source payments per unit Total for Year(1)
Unit (BHD) Total for 2 years Total for 3 years
(BHD)

Leasing Tankers
Al-Absool Saudi Arabia 0 7,200 86,400 172,800 259,200
Chevron Local 5,000 569 11,828 18,656 25,484
Delmon Local 2,812 33,750 67,500 101,250

Purchasing Tankers

Recent Tender - Hiel International 54,810 0 54,810 54,810 54,810

Henan Jushixin
China 10,130 0 10,130 10,130 10,130
Transportation Equipment

300 259
250
200 173
Thousands BHD

150
101
100 86
68 55 55 55
34
50 12 19 25 10 10 10
0
Al-Absool Chevron Delmon Recent Henan
Tender Jushixin -
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CONCLUSION
• PROPOSED APPROACH

• Explore International Market for new Suppliers.

• Visit the factory to verify the standards “China identified supplier”.
• Make a trail purchase of a pilot unit. “BHD 10,130/- delivered to BAH”

In parallel BAPCO can:

• Negotiate With Chevron to acquire these tankers for a price less that 10,000 BHD
each, once Chevron terminate their obligations for fuel supply by 2021. These
tankers are +30 years old, but were renovated by BAPCO recently to meet Jet A1
bridging exercise, and the tanker book value to Chevron is considered to be zero.
• Tender the require number of tanker and include the identified suppliers from
CHINA.

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THANK YOU
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