WHEN Charles Chambers, CEO of West Indies Petroleum, started a bunkering business with Gordon Shirley and Tarik Felix in 2012, they may not have envisioned that 10 years later the entity would become a big player in the market for petroleum products in Jamaica. Chambers, Shirley, and Felix were simply exploiting an opportunity to supply fisherfolk from Central America with fuel for their boats and make a profit doing so. But the company has grown beyond that “in a relatively short space of time” and has entered the market for consumer fuels, particularly gasoline and diesel, supplying close to a third of the fuel that fills hundreds of thousands of tanks each day.
“The company was formed by myself, Gordon Shirley, and Tarik Felix, and we formed the company because Gordon, at the time, had a very interested business,” Chambers started as he reflected on the journey of West Indies Petroleum. That business was a small petrol station on Barnett Street in Montego Bay, St James.
“At the time it was an Esso, and it was operated by his parents for 42 years before he took it over. So he took it over, and at the time the market in Jamaica was freeing up, about the late 90s,” Chambers said.
But after taking over the gas station from his parents, Shirley embarked on growing his footprint in the energy sector, taking advantage of the fact that though it carried the name of an international petroleum marketing company, Esso, the premises itself was dealer-owned, dealer-operated, with the Esso name used under licence in rolling 10-year contracts.
“So Gordon owned this small station and he transformed it from an Esso into a National and it was the only National in western Jamaica at the time. When he did, the volumes went through the roof which allowed him to qualify to get a supply contract with Petrojam, so he applied for a marketing company license and got the supply agreement.”
But Chambers said Shirley was not only getting petrol for his newly rebranded National gas station. He was also selling to more than a dozen independent gas stations. Then the opportunity for bunkering, supplying ships with fuel, presented itself.
“Gordon basically recognised that there were these Honduran fishing boats that were coming to Jamaica and needed fuel. And what happened? He was selling them the fuel. He couldn’t sell them the fuel without taxes. What he was doing, he was sending trucks to Petrojam [to haul the fuel] and selling it to the Hondurans for the same prices he was selling to gas stations. So the Hondurans were paying these really high prices for it and he thought that it would be a good extension of his business.”
But Shirley didn’t know much about the bunkering business, but that did not deter him. First, he had to work out how to get the fuel to the ships without attracting the tax that was due if it was used in Jamaica. And that pulled Chambers, Shirley, and Felix together to find a solution to build out a business which looked lucrative enough but was not being served.
In those days, Chambers said the bunkering business was dominated by Aegean Marine Petroleum Network, an international bunkering company that has now been renamed Minerva Bunkering after emerging from bankruptcy proceedings in 2019.
“They bought all the products from Petrojam and then they were selling to ships that were coming to Jamaica, but only to a small percentage of the ships, because the volume of fuel that was available from Petrojam for that business was limited. At the time, Petrojam was supplying JPS [Jamaica Public Service, a light and power company] with HFO [heavy fuel oil], and so only a very small amount was left over for anything else.”
That business was not driven by demand, but by supply, Chambers said, but noted that it was “a very profitable business at the time, and because the vessels that bought it needed it, so they sold at a good price and made money”.
But after a global energy crisis at the end of the first decade of the 2000s pushed petrol prices and electricity prices through the roof — the JPS and other electricity producers in Jamaica at the time used chiefly HFO for which the price fluctuated with oil prices — the Government decided to introduce new fuel sources for producing electricity in Jamaica, chiefly liquefied natural gas (LNG), and increase the ratio of electricity generated from renewables. That left Petrojam with tonnes of HFO, which its main customer, JPS, was no longer buying.
“We saw it as an opportunity and we decided to go ahead and start this thing. And when we got into it, we recognised that a bunker business is more than what we thought.”
“We recognised very early that this is a capital-intensive game. The amount of money that you need just for inventory is a massive amount of money,” he said, without divulging more, but gave an insight when he said, “One ship could take all US$2 million worth of products from us in just one go. We do that all the time. So we needed capital and we recognised that.”
But working through the kinks, the nascent company did its first bunkering in December 2013, a year after the company was registered.
“How we survived first, we used to supply a cruise ship that was homeporting in Montego Bay going around to Cuba, and so every Friday we used to sell it 15 truckloads of fuel oil and people began to say, ‘What, who is this company? And what we doing?’ “
But the bunkering business is mostly ships selling fuel to other ships. Chambers said that meant the company had to acquire a tug and barge, which it did from Petrojam. A second tug and barge was acquired later.“When we bought our second tug and barge, we made a big deal about it that we are here and we are doing bunkering.”
Not long after that, Chambers said the Government approached West Indies Petroleum about some storage tanks in Ocho Rios, St Ann, left over by mining companies but were in a derelict state, asking the company if it would be interested in acquiring them.
“In a sense, this was like an inflection point for us because then we started to look at what is the opportunity for owning tanks, and I remember we went to Miami and we went to meet with Carnival Cruise Lines and Royal Caribbean, and the guy at Carnival Cruise Lines, who was the head of purchasing for all fuel used by Carnival Cruise Lines globally, he would spend like US$3 billion a year just buying fuel. And he basically said, ‘Listen, this is a logistics game. If you have these two little tanks in Ocho Rios, your chances of success is not very big. You could put a lot of money into storing and into making that facility viable, but you need to have your own game, you can’t be reliant on Petrojam that has a small amount of fuel available and may or may not give you because you may or may not be their number one in terms of their customers, because JPS is number one in terms of their customers. You need to be in control of your own supply, so you need to figure out your logistics.”
Chambers said that led the company to set about acquiring properties to boost its supply and to make it less reliant on the good graces of Petrojam. West Indies Petroleum then bought a property in Falmouth, Trelawny, in front of the cruise ship pier. Another was acquired through a long-term lease in downtown Kingston with the view to build tanks to bring in large amounts of products and then breakbulk distribute to the bunkering business.
“But then at some point we realised that there is an opportunity to enter the local market by importing gasoline and diesel and then to sell to Gordon, who was a captive customer.”
At that time, Shirley had about 20 gas stations that he supplied and he was buying all the products from Petrojam. Chambers said by then French oil major Total Energies had bought the National gas stations and his own on Barnett Street in Montego Bay, St James, was converted to a Total Energies gas station.
But going after the retail market meant storage was needed. Luckily, at the time, Jamaica Broilers, which had a huge ethanol processing facility at Port Esquivel in St Catherine, was looking to exit that business. Chambers said the company took on debt and purchased the entity and that helped it to transition away from being a bunker company to being a full fuel business.
“Today our business is separated into three segments. We have the bunker business supplying Royal Caribbean, Carnival Cruise Lines, Norwegian, MSC, any cruise line that came to Jamaica, we supply them. We are the biggest bunkering business in Jamaica. We probably do about 60 per cent of the market for bunker fuel. Then we supply gasoline and diesel to the local retail market. Today we probably do about 30 per cent of the petrol market in Jamaica, so you have almost a one-third chance of buying fuel that we bring into the country, and we have done it quietly. We also have a large amount of fuel sitting in Port Esquivel that we re-export. We export to countries like Haiti, Dominican Republic , Guyana, Barbados, St Kitts, Dominica, and so on.”
“That we have 30 per cent of the local market has happened very quickly. Our sales doubled in the last year,” he added. “The local part of our business is quite large at the moment with the kinds of volume that we move. We operate four ships and a barge that we use in the bunkering and to export around the region.”
“We are more than a bunker business and it’s happened relatively quickly, and I think that where we are now, we are seeing a lot of opportunities,” he continued, while declining to “spill the beans” at this moment.
Yet he noted that supplying energy in a more climate-conscious world presents opportunities for West Indies Petroleum. What those will be, Chambers said will be shared in the near future.
For now he posits once more, “We are more than a bunker business.”