Cornering the market
Oil major Transneft in conjunction with Summa Capital, an investment group, has created a Russia's largest stevedore company, combining the control over two leading Russian oil ports - Primorsk and Novorossiysk. We may assume that eventually it would evolve into a dominating company engaged in handling of oil products, taking into account the Far Eastern Kozmino oil port, the terminus of Transneft’s ESPO pipeline and projected launch in late 2011 of an oil terminal in Ust-Luga, the endpoint of BPS-2 pipeline. It has given rise to concerns over possible monopolization of the stevedoring market by the entities associated with the emerging giant in the ports of Russia.
According to shipping companies and maritime agents, since early 2011 there have been more signs that, say, things are likely heading towards monopolization by Transneft of the stevedoring services at the country’s seaports. At least, the Federal Antimonopoly Service has recently blown a whistle over an alleged monopolization attempt by the company of the market at Kozmino terminal.
According to shipping companies and maritime agents, since early 2011 there have been more signs that, say, things are likely heading towards monopolization by Transneft of the stevedoring services at the country’s seaports. At least, the Federal Antimonopoly Service has recently blown a whistle over an alleged monopolization attempt by the company of the market at Kozmino terminal.
Privileged agreements
The Primorsky regional office of the Russian Federal Antimonopoly Service (FAS) has established a violation by Transneft-Service LLC of Part 1 of Article 10 of the Federal Law "On Protection of Competition." According to the agency, the Arbitration Court of Appeal of Primorsky Territory upheld the acts of Primorsky FAS and the company has been brought to account.
Transneft-Service LLC is a company providing towing, mooring / unmooring services and carrying out OSR preparedness in Kozmino harbor of Vostochny port. The company chosen by a ship agent turned down FEMTrans’ offer to sign a contract for providing its services. FAS fined Transneft-Service and ordered the company to reply to the FEMTrans’ official letter.
However, after the fined company gave formal response to FEMTrans's letter it again refused to accept the agreement offer, FAS said.
Noteworthy, PortNews has obtained the Regulation of handling of vessels at Spetsmornefteport Kozmino (a subsidiary of Transneft), which says that the activities of all the maritime services firms located at Kozmino port are operating only on the basis of agreements concluded by these companies with Transneft’s sister company Transneft-Service.
The Primorsky regional office of the Russian Federal Antimonopoly Service (FAS) has established a violation by Transneft-Service LLC of Part 1 of Article 10 of the Federal Law "On Protection of Competition." According to the agency, the Arbitration Court of Appeal of Primorsky Territory upheld the acts of Primorsky FAS and the company has been brought to account.
Transneft-Service LLC is a company providing towing, mooring / unmooring services and carrying out OSR preparedness in Kozmino harbor of Vostochny port. The company chosen by a ship agent turned down FEMTrans’ offer to sign a contract for providing its services. FAS fined Transneft-Service and ordered the company to reply to the FEMTrans’ official letter.
However, after the fined company gave formal response to FEMTrans's letter it again refused to accept the agreement offer, FAS said.
Noteworthy, PortNews has obtained the Regulation of handling of vessels at Spetsmornefteport Kozmino (a subsidiary of Transneft), which says that the activities of all the maritime services firms located at Kozmino port are operating only on the basis of agreements concluded by these companies with Transneft’s sister company Transneft-Service.
Get the go-ahead for bunkering
The attempts to limit free competition in the market of port’s services took a scandalous turn early this year at the port of Novorossiysk, where the Transneft and Summa Capital had acquired control over the Group Novorossiysk Commercial Sea Port (NCSP). Noteworthy, part of the Group - JSC NCSP Fleet provides 95 percent of all towing services at the port.
The incident occurred on January 24th when ZIM’s 4,250teu containership called at the port to be unloaded at the berths #17-18. The master received a negative answer from NCSP Fleet’s dispatcher when applied for the tugs service,Yuri Karapuzov, General Director of ZIM Russia (linear agent of ZIM in Russia and CIS countries) told in an interview with PortNews. Mr. Karapuzov added that the containership was going to get bunker fuel from the company Trans Oil Service, a rival of NCSP Fleet JSC. As a result the ZIM’s vessel had to spend a night at anchorage and the demurrage has cost the shipping company EUR 20,000.
After the Novorossiysk port ‘service blackmail’ report was posted, the PortNews office has received scores of complaints from the other participants of the regional market. However, the news agency’s journalists failed to obtain reliable evidences, but most cases have been verbally confirmed by Southern Regional Association of Maritime Agents (SRAMA).
The attempts to limit free competition in the market of port’s services took a scandalous turn early this year at the port of Novorossiysk, where the Transneft and Summa Capital had acquired control over the Group Novorossiysk Commercial Sea Port (NCSP). Noteworthy, part of the Group - JSC NCSP Fleet provides 95 percent of all towing services at the port.
The incident occurred on January 24th when ZIM’s 4,250teu containership called at the port to be unloaded at the berths #17-18. The master received a negative answer from NCSP Fleet’s dispatcher when applied for the tugs service,Yuri Karapuzov, General Director of ZIM Russia (linear agent of ZIM in Russia and CIS countries) told in an interview with PortNews. Mr. Karapuzov added that the containership was going to get bunker fuel from the company Trans Oil Service, a rival of NCSP Fleet JSC. As a result the ZIM’s vessel had to spend a night at anchorage and the demurrage has cost the shipping company EUR 20,000.
After the Novorossiysk port ‘service blackmail’ report was posted, the PortNews office has received scores of complaints from the other participants of the regional market. However, the news agency’s journalists failed to obtain reliable evidences, but most cases have been verbally confirmed by Southern Regional Association of Maritime Agents (SRAMA).
On February 2nd Novoroslesexport JSC (part of NCSP Group) stops the loading cargo onto the Kocatepe for two hours. This ship was bunkered by Era company, a rival of NCSP Fleet. On February 10th , NCSP Fleet refuses to provide tugs to unmoor the Persenk ships. As a result, the ship delay totaled two hours. And again, as in the previous case, the supplier of bunker fuel was the NCSP Fleet’s rival. On February 14th, NCSP Fleet does not provide tugs to de-berth the Osios David 2, the vessels is delayed for an hour. In this case the bunker fuel supplier was Transbunker company. On February15th, NCSP Fleet again does not give tugs to de-berth the Alioth, the delay was two hours. The ship was charged by the bunkering company Trans Oil Service. So far, the NCSP Group press service has not commented the above mentioned facts.
Besides, there have been attempts to restrict competition at the Novorossiysk-based Caspian Pipeline Consortium-R terminal, as it follows from a letter (PortNews obtained a copy of this letter) of the regional Association of maritime agents and freight forwarders addressed to the Director of the CPC terminal and to controlling agencies.
According to the letter, the CPC-R terminal restricts the list of boats for transportation of the Port State Control officers to oil tankers. The terminal operator has allegedly banned all other vessels from entering the CPC-R harbor and transport of PSC inspectors to tankers, except for the Soll Bora docking tug.
The Association considers the terminal operator’s decision to be illegal and will appeal to the authorities, including the transport prosecutor's office.
Noteworthy, the Caspian Pipeline Consortium-R JSC was founded in 1997 as a Russian legal entity of the Caspian Pipeline Consortium (CPC). The Russian Government’s stake in CPC is in beneficial ownership of Transneft JSC (24%).
Besides, there have been attempts to restrict competition at the Novorossiysk-based Caspian Pipeline Consortium-R terminal, as it follows from a letter (PortNews obtained a copy of this letter) of the regional Association of maritime agents and freight forwarders addressed to the Director of the CPC terminal and to controlling agencies.
According to the letter, the CPC-R terminal restricts the list of boats for transportation of the Port State Control officers to oil tankers. The terminal operator has allegedly banned all other vessels from entering the CPC-R harbor and transport of PSC inspectors to tankers, except for the Soll Bora docking tug.
The Association considers the terminal operator’s decision to be illegal and will appeal to the authorities, including the transport prosecutor's office.
Noteworthy, the Caspian Pipeline Consortium-R JSC was founded in 1997 as a Russian legal entity of the Caspian Pipeline Consortium (CPC). The Russian Government’s stake in CPC is in beneficial ownership of Transneft JSC (24%).
Getting rid of the ice in the Gulf of Finland, and moreover…
For several recent years JSC Transneft and Investment Group Summa Capital has been jointly controlling Primorsky Trade Port LLC (PTP), a stevedoring company, handling crude oil supplied through the BPS-2 (Baltic Pipeline System). All tug services for oil tankers calling at the port and tankers arriving at a nearby terminal of light petroleum products (the terminus of the Sever Pipeline) are being provided by PTP’s sister company CJSC Sovfracht-Primorsk. The company, operating the largest tugs fleet in the North West, considers its dominant market position as quite fair. However, Rosnefteflot, a subsidiary of Sovcomflot and Rosneft has been undertaking attempts to enter the tug services market at Lukoil’s terminal.
In accordance with the “Plan of escorts of large tankers by tugs on the approaches to the waters of the Vysotsk Terminal “LUKOIL-II”, oil tankers must be escorted by at least two tugs, one of the vessels should have engine rated power not below 4 MW. So, in five recent years, the tug services have been provided by powerful tugs of Sovfracht-Primorsk and tugs of LLC Baltic Tugs.
For several recent years JSC Transneft and Investment Group Summa Capital has been jointly controlling Primorsky Trade Port LLC (PTP), a stevedoring company, handling crude oil supplied through the BPS-2 (Baltic Pipeline System). All tug services for oil tankers calling at the port and tankers arriving at a nearby terminal of light petroleum products (the terminus of the Sever Pipeline) are being provided by PTP’s sister company CJSC Sovfracht-Primorsk. The company, operating the largest tugs fleet in the North West, considers its dominant market position as quite fair. However, Rosnefteflot, a subsidiary of Sovcomflot and Rosneft has been undertaking attempts to enter the tug services market at Lukoil’s terminal.
In accordance with the “Plan of escorts of large tankers by tugs on the approaches to the waters of the Vysotsk Terminal “LUKOIL-II”, oil tankers must be escorted by at least two tugs, one of the vessels should have engine rated power not below 4 MW. So, in five recent years, the tug services have been provided by powerful tugs of Sovfracht-Primorsk and tugs of LLC Baltic Tugs.
As Sovfracht-Primorsk General Director Alexander Ovodovsky said, the document mentioned above was developed by St. Petersburg-based Central Maritime Research Institute in 2005, and in September 2005 the company started towing LUKOIL terminal-bound oil tankers. Alexander Suvorov, the head of the department of safety of transport operations of LUKOIL said that the Plan was developed by the experts of maritime inspection of LUKOIL, not by the St. Pb research Institute.
Mr. Suvorov added that in 2010 the company Sovfrakht-Primorsk "27 times failed to fulfill its obligations for the tug escort oil tankers to the terminal of LUKOIL. In January 2011 there were 3 cases when the tankers docked at the terminal without Sovfracht-Primorsk’s tugs assistance. The oil giant’s representative said its company was forced to get involved tugs from the nearby coal terminal, and Vysotsk operator had to get ‘the go-ahead’ from the harbormaster each time they needed the tugs support.
As a result the Vysotsk oil products terminal attempted to attract a new operator of tug services.
Rosnefteflot operates tugs with rated power of only 3.1 MW. So, the owners of the terminal decided to change the Plan of tugs assistance, and coordinated it with Harbormaster of Vysotsk. Sovfrakht-Primorsk considered the fact to be a violation of the safety of navigation in the region. "I'm sure that the work of less powerful tugboats of Rosnefteflot may reduce the level of safety the services at the port of Vysotsk, and moreover, such a decision runs counter to the scientifically calculated minimum safety of tugs service in Vysotsk,” Mr. Ovodovsky was quoted as saying. He added that "for the customer - JSC Maritime agency "Novotorik" the towing service either of Rosnefteflot or Sovfracht-Primorsk will cost the same. The problem is in the allocation of this money through a chain of agents in Vysotsk”.
Besides, Sovfracht-Primorsk has taken a delivery and is going to commission the fourth tugboat worth about EUR 7 million. According to Mr. Ovodovsky, the ship has undergone sea trials and is now docked in the port of St. Petersburg on Kanonersky Shipyard.
As a result the Vysotsk oil products terminal attempted to attract a new operator of tug services.
Rosnefteflot operates tugs with rated power of only 3.1 MW. So, the owners of the terminal decided to change the Plan of tugs assistance, and coordinated it with Harbormaster of Vysotsk. Sovfrakht-Primorsk considered the fact to be a violation of the safety of navigation in the region. "I'm sure that the work of less powerful tugboats of Rosnefteflot may reduce the level of safety the services at the port of Vysotsk, and moreover, such a decision runs counter to the scientifically calculated minimum safety of tugs service in Vysotsk,” Mr. Ovodovsky was quoted as saying. He added that "for the customer - JSC Maritime agency "Novotorik" the towing service either of Rosnefteflot or Sovfracht-Primorsk will cost the same. The problem is in the allocation of this money through a chain of agents in Vysotsk”.
Besides, Sovfracht-Primorsk has taken a delivery and is going to commission the fourth tugboat worth about EUR 7 million. According to Mr. Ovodovsky, the ship has undergone sea trials and is now docked in the port of St. Petersburg on Kanonersky Shipyard.
Sovfracht-Primorsk ordered the ship to ensure smooth tug escorts of oil tankers in Vysotsk, and informed in advance the terminal about it. But, the company’s former partners from Vysotsk changed unexpectedly the towing operator, which has turned a surprise to the company. Since this March the tugboat Stavr of Rosnefteflot has been operating in test mode at an oil terminal in Vysotsk. According to General Director of Rosnefteflot Andrey Aprelenko plans to bring another tugboat by the end of March.
As Deputy COO of Vysotsk LUKOIL-II DTT Sergey Kiselev said, last year the company held talks with CJSC Rosnefteflot to enter into agreement for providing by Rosnefflot tugs services at the distribution and transfer terminal. According to Mr. Kiselev, Sovfracht-Primorsk, unsatisfied it may lose its dominant market position, started "bombarding various authorities with letters complaining about the violation of existing legislation in terms of ensuring safe passage of oil tankers to the docks of Vysotsk LUKOIL-II Terminal.
"In fact, Sovfracht-Primorsk, manipulating the ideas of "safety of navigation", "violation of the law” is trying to maintain its status as a monopolist in the market of tug escort services. In this case, they deliberately mislead the public authorities exercising control over the safety of navigation and environmental security in the eastern Gulf of Finland.They are not even embarrassed by the fact that during 2010 and 2011 instead of 2 ordered tugs Sovfracht-Primorsk over 30 times provided only one tug, Mr. Kiselev said. The company explained that the second tugboat was not operated due to malfunction. So, this fact give us reasons to be concerned about the technical condition of the company’s tugs and to doubt in the quality of services the company provides in its ability to perform tug escorts of oil tankers", said Sergey Kiselev.
"In fact, Sovfracht-Primorsk, manipulating the ideas of "safety of navigation", "violation of the law” is trying to maintain its status as a monopolist in the market of tug escort services. In this case, they deliberately mislead the public authorities exercising control over the safety of navigation and environmental security in the eastern Gulf of Finland.They are not even embarrassed by the fact that during 2010 and 2011 instead of 2 ordered tugs Sovfracht-Primorsk over 30 times provided only one tug, Mr. Kiselev said. The company explained that the second tugboat was not operated due to malfunction. So, this fact give us reasons to be concerned about the technical condition of the company’s tugs and to doubt in the quality of services the company provides in its ability to perform tug escorts of oil tankers", said Sergey Kiselev.
Put in a good word for a monopoly
Mr. Ovodovsky in turn is sure that “RPK-Vysotsk LUKOIL-II and personally Sergey Kiselev use the so-called administrative resource, not allowing the tugs from Primorsk to operate”. The head of Sovfracht-Primorsk believes it is the Vysotsk terminal, which became a stevedoring monopoly, debarring free competition. At the same time, talking about his own monopoly in towing services in the port of Primorsk, he suggested that the integration of stevedoring business in other sectors related to port activities is a good thing."This integration is in mutual interests of cargo owners and the transport business", said Alexander Ovodovsky. (Read more in the PortNews’ Journal "Port Service. Bunker market" ).
"We are also accused of trying to establish a monopoly on the market of services at the seaports, where Rosneft terminals are based. However, there is a difference between us and the service structures of "Transneft" and "Summa Capital," Rosnefteflot head Andrey Aprelenko said yesterday in an interview with PortNews.
“When limits are established by the cargo owner, in our case - Rosneft, the cargo owner will not allow anyone to play with the tariff for services in the port. Because the cargo owner gains from oil exports and is interested primarily in the smooth operation of the terminal”.
“When a stevedore establishes a monopoly on the market of stevedoring services, then it is more interested in high profits mainly from the terminal operation. In this case, when it comes to disrupting the calls or delaying the ship at anchorage of the port, a stevedoring company would rather be in favor of maintaining its dominant position in providing handling services at the port.
“I think this is a far-fetched argument when some port operators say that the availability of the terminal's own towing and bunkering company is a prerequisite for safe and efficient port operations," Mr. Aprelenko said.
In conclusion, we would note that Transneft will soon emerge in another key Russian port - Ust-Luga, where the export terminal of the Baltic Pipeline System 2 (BPS-2) will be based. So, the scheme of cornering the market could be implemented here as well.
Mr. Ovodovsky in turn is sure that “RPK-Vysotsk LUKOIL-II and personally Sergey Kiselev use the so-called administrative resource, not allowing the tugs from Primorsk to operate”. The head of Sovfracht-Primorsk believes it is the Vysotsk terminal, which became a stevedoring monopoly, debarring free competition. At the same time, talking about his own monopoly in towing services in the port of Primorsk, he suggested that the integration of stevedoring business in other sectors related to port activities is a good thing."This integration is in mutual interests of cargo owners and the transport business", said Alexander Ovodovsky. (Read more in the PortNews’ Journal "Port Service. Bunker market" ).
"We are also accused of trying to establish a monopoly on the market of services at the seaports, where Rosneft terminals are based. However, there is a difference between us and the service structures of "Transneft" and "Summa Capital," Rosnefteflot head Andrey Aprelenko said yesterday in an interview with PortNews.
“When limits are established by the cargo owner, in our case - Rosneft, the cargo owner will not allow anyone to play with the tariff for services in the port. Because the cargo owner gains from oil exports and is interested primarily in the smooth operation of the terminal”.
“When a stevedore establishes a monopoly on the market of stevedoring services, then it is more interested in high profits mainly from the terminal operation. In this case, when it comes to disrupting the calls or delaying the ship at anchorage of the port, a stevedoring company would rather be in favor of maintaining its dominant position in providing handling services at the port.
“I think this is a far-fetched argument when some port operators say that the availability of the terminal's own towing and bunkering company is a prerequisite for safe and efficient port operations," Mr. Aprelenko said.
In conclusion, we would note that Transneft will soon emerge in another key Russian port - Ust-Luga, where the export terminal of the Baltic Pipeline System 2 (BPS-2) will be based. So, the scheme of cornering the market could be implemented here as well.
Nadezhda Malysheva, Vitaly Chernov