Assessment of the Competitiveness of

Hambantota Port as a Bunkering Hub

Table of Contents
1.Introduction.............................................................................................................................2
2.Literature Review....................................................................................................................3
2.1. Global bunker industry....................................................................................................3
2.2. Sri Lanka Bunker Industry..............................................................................................4
2.3. Factors of Competitiveness.............................................................................................4
2.3.1. Bunker Fuel...............................................................................................................4
2.3.2. Location....................................................................................................................5
2.3.3. Port Accessibility......................................................................................................5
2.3.4. Rules and regulations................................................................................................5
2.3.5. Services.....................................................................................................................5
2.3.6. Infrastructure.............................................................................................................6
2.3.7. Cost of Service..........................................................................................................6
2.3.8. Human Capital..........................................................................................................6
3.Research Methodology............................................................................................................6
3.1. Outline the steps of proposed research............................................................................6
3.1.1. Data Collection.........................................................................................................6
3.1.2. Data Analysis............................................................................................................7
4.Expectations/Anticipated Outcome.........................................................................................7
5.Anticipate a realistic timetable................................................................................................8
6.Anticipate potential Problems.................................................................................................8
7.Reference.................................................................................................................................8

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1.Introduction
Sri Lanka is positioning in a strategic location that connects trade routes from east to the west
with two international ports and five domestic seaports. According to the (Anon n.d.)
statistics, 36,000 vessels including 4500 oil tankers sail along Sri Lankan coasts annually.
But only 4,879 vessels visit Sri Lankan ports(2017)(Anon n.d.) and the percentage of
replenishing bunker vessels is less than 5%. The busiest port in Sri Lanka is named as Port of
Colombo and with the port of Trincomalee which starts bunkering in 2015, both ports are
currently engaged in bunkering. But Colombo port is capable of serving only 0.2% of
bunkering services from its port services (Anon n.d.) in 2010. Emergence of Port of
Hambantota, with newest and advanced infrastructure and technological strengths creates a
valuable business opportunity in the sri Lankan bunkering industry. Hence, this show that
bunker industry in Sri Lanka is not capable enough to support the economy of the country
because lower attraction comparison to vessels sails along coast.
Port of Hambantota is located 16 nm from the trade route which connects Europe and far East
to South Asia linking to the Suez Canal and Malacca Straits.(Anon n.d.) The port is able to
serve inshore and offshore bunkering with the storage capacity of 1000,000 ton oil and gas
berths which occupies an area of 140,000 square meters. The port is the first in the region to
have LSFO aligned with IMO fuel regulations. Expected bunkering calls over vessels are
forecasted as 35% of shipping traffic. (Anon n.d.)In April 2020, the first bunker business was
deal with the vessel, “Melody”(Anon n.d.) with the connection of the second largest oil
producer in China, Sinopec (Anon n.d.).
According to previous studies, availability of strengthen infrastructure, strategic geographical
location and cost structure drives the competitiveness of ports within the transport and
logistic chain. Quality service providing is critical, to be in the competition. These factors are
critically evaluated in the literature review.
This study examines the factors affecting the competitiveness of bunkering at Port of
Hambantota in relation to competitors in the region and how bunker industry in Sri Lanka can
be made to be competitive with the Port of Hambantota.
The study peruses to solve below sub questions align with main research problem.
i. Factors of competitiveness and are they equally important or not
ii. Factors consider to be important to achieve competitiveness in the industry according
to industry experts.

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 iii. To confirm the factors that are necessary for bunker industry competitiveness as
tested in other scenarios
iv. Determine, how can Hambantota Port improve the competitiveness of bunker industry
v. Address non-competitiveness in the industry through making recommendations.

2.Literature Review
2.1. Global bunker industry
According to world Oil Outlook reports, four hundred major bunkering ports are contributing
to global marine bunker sector and the ports are distributed along shipping lanes with high-
density. Singapore Port, Fujairah Port(UAE) and Rotterdam Port(Netherland) can be
highlighted as largest bunker hub ports and in 2014, the three ports are accounting for one-
third of total bunker.(Lichtblau 1985)
The Singapore port is largest and busiest port which shows significant growth in bunker
turnover. The port is dealing with 140,000 vessel calls annually. (Anon n.d.) Fujairah Port is
second largest bunker port and the strategic location is influenced in increasing bunker sales.
(Lichtblau 1985) Rotterdam is world third largest bunker port and the largest bunker port in
Europe. In 2012, the bunker sales were declined with the economic situation and
Environmental policy in European Union. But it owns deepest draft of 21 ft and technically
advanced infrastructure. Other important bunkering ports can be highlighted as Hong Kong,
Antwerp port and Busan Port.(Lichtblau 1985).
Previous studies show that the three bunker hub ports (Singapore, Fujairah and Rotterdam)
show, similar strengths and advantages in the competition. (Anon n.d.) Singapore Port have
strategic location of being a port in the line of international trade and located next to oil
refineries and consists of advanced infrastructure. (Anon n.d.)
Port of Fujairah is benefited from strategic location in Middle East region and show a
significant growth as a hub in trading and bunkering with the excellent storage. Emirates
largest oil storage is crucial strength to the Fujairah Port. (Anon n.d.)
Rotterdam Port have high oil product variability in terms of bunker. Strategic location of
refineries is beneficial and, as the port is a bunker price-setting port, it has been benititial in
terms being a bunker supplier. (Anon n.d.)

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2.2. Sri Lanka Bunker Industry
Port of Colombo and Trincomalee currently engaged in marine bunker industry and
Hambantota Port calls its first vessel for bunkering in 2020. As Hambantota Port project was
concerned on to be in bunkering, needed infrastructure, technology, equipment, and related
activities are already initiated in the port premises. With the strategic location and advanced
infrastructure, the strategical and tactical decision making is needed aligned to the
competitiveness.

2.3. Factors of Competitiveness

According to previous studies related to bunker industry, eight(8) factors can be identified as
most relative attributes to bunker competitiveness. (Acosta, Coronado, and Del Mar Cerban
2011; Anon n.d.; Lam et al. 2011).

i. Bunker Fuel
ii. Location
iii. Port Accessibility
iv. Rules and Regulations
v. Service
vi. Infrastructure
vii. Cost of Service
viii. Human Capital

2.3.1. Bunker Fuel

Bunker fuel is crucial in voyage and the bunker fuel can be delivered to vessels at any
surrounding bunker port which located along the voyage including starting port, destination
poet and in between ports. When considering the bunker fuel as a competitive factor, bunker
fuel price, quality, supply and options have to be concerned. (Acosta et al. 2011; Anon n.d.;
Lam et al. 2011).

Fuel cost directly impact on vessel running cost and its crucial in voyage, ship owner are
optional at selecting cheapest price from supplying ports. Hence, been price concerned port is
positively effects on attracting vessels. (Acosta et al. 2011; Anon n.d.; Lam et al. 2011).

Bunker fuel quality is critical as it significantly impact on engines’ life span and
functionality. It impacts on vessels’ environmental regulation as well. Hence bunker quality
monitoring systems are used. (Acosta et al. 2011; Anon n.d.; Lam et al. 2011).

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Bunker fuel supply in terms of service supplier is important role in the chain. Selecting best
supplier who is suitable for the business is in the fundamental decision-making process. In
order to maintain customer loyalty and trustworthy market, without shortage and quality
mismatches, suppler selection is important. (Acosta et al. 2011; Anon n.d.; Lam et al. 2011).

Bunker fuel options are important, to be competitive. Product variability is key factor in any
business. Hence, the type of fuel available at the bunker port influenced in attracting vessels.
Most preferred fuel grades can be chosen according to the customers. (Acosta et al. 2011;
Anon n.d.; Lam et al. 2011).

2.3.2. Location
Geographical location is the most critical factor which enables access to trade routes, and it is
proven by bunker hubs in the world. Port of Singapore, Fujairah and Rotterdam can be
illustrated. (Acosta et al. 2011; Anon n.d.; Lam et al. 2011).

2.3.3. Port Accessibility

Port accessibility is important because it depicts efficiency and effectiveness of bunker port.
accessibility is not only related to sea navigations but also connectivity to land services.
(Acosta et al. 2011; Anon n.d.; Lam et al. 2011).

2.3.4. Rules and regulations

Rules and regulations of the government of Port’s nation is directly impact on bunker vessels.
It can be categorized as below.

 Port bunkering supply regulations (bunker barge licensing regulations), inclusive of

safety, environmental and security regulations(Anon n.d.).
 Customs regulations(Anon n.d.).
 The political stability of the environment which affects law and order and good
international relations(Anon n.d.).
 Government policies like incentives
 Market transparency which speaks to corruption in the officials and professionals
involved in the processes(Anon n.d.).

2.3.5. Services
Ship owners highly concern about the service quality of the port when selecting the port for
bunkering, prior to the geographical factors and port specific factors (water depth).

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Punctuality, reliability and dependability are some of factors that shippers tend to consider.
(Acosta et al. 2011; Anon n.d.; Lam et al. 2011).

2.3.6. Infrastructure
Exceptional infrastructure with the advanced technology increases the efficiency and
effectiveness of the bunker process with prompt utilization of resources. Fuel storge, bunker
barges and effective communication system can be illustrated as infrastructural facilities.
(Acosta et al. 2011; Anon n.d.; Lam et al. 2011).

2.3.7. Cost of Service

Cost of service is the costs related to direct port visits. In the business context, cost of service
is the price of product or service that customer considers when selecting set of products.
Therefore, in the bunker sector, shippers use to accept the lower costs. But it should be
equivalent with the bunker quality and service providing. (Acosta et al. 2011; Anon n.d.; Lam
et al. 2011).

2.3.8. Human Capital

Human Capital is one of the fundamental factors in the competition theory. Educated and
trained workforce is critical in a competitive business organization. Equivalently, it is
acceptable to bunker ports. Creative, skillful, and passionate workforce drives the business to
its goals and objectives. Quality and standards of the workforce should be considered in
terms of decision making in operational, tactical and strategic levels of the Port. (Acosta et al.
2011; Anon n.d.; Lam et al. 2011).

4.Expectations/Anticipated Outcome
The research is to determine the factors affecting the competitiveness of bunkering at Port of
Hambantota and how bunker industry in Sri Lanka can be made to be competitive. Many
activities should take place to be developed as a bunkering hub. Identification of existing
strengths which should improve and weaknesses to be removed by taking appropriate
decision making through discovering available opportunities and be aware on threats with
being competitive enough to be compete in the industry. Proper utilization of available
resources with the elimination of management and operational inefficiencies can be made the
port as a key player in industry. Available resources are more than enough to develop the
country.

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Identifying relationship of variables in the quantitative model to concentrate on
competitiveness of Hambantota port. Pricing strategy, sourcing, distribution, price
discrimination with other ports in the country have critical influence on the competitiveness.
Hambantota port should implement marketing strategies, develop port operations and service
providing with a competitive transaction cost will leads to integrate Sri Lankan bunker
industry with world trades with the contribution of Hambantota Port.

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