MAJURO Marshall Islands – The Marshalls Energy Co. has signed a long-term fuel deal with an Asian-based company Winson Oil. A major development in the new fuel supply deal is financing to renovate the MEC’s tank farm with the goal of developing the Majuro-based utility’s bunkering operation into a sub-regional distribution point.
The signing of the new agreement by MEC and Winson executives in late August ends a nearly seven-year relationship with SK Networks of Korea. SK Networks had supplied MEC since the mid-2000s when the utility did not renew a long-standing supply pact with Guam-based Mobil Oil Micronesia. Winson Oil is part of the Winson Group that has offices in Hong Kong Singapore Taiwan and China.
The pact will see Winson supply fuel to MEC for five years with an option to extend for an additional five years. Part of the package is $5 million financing at low interest rates for fixing an aging tank farm said Hiroshi Yamamura Public Works minister and MEC board chairman who signed the agreement on behalf of MEC.
The tank farm built in 1981 when MEC’s first power plant was constructed is unique in the region. MEC has eight 750 000-gallon tanks. The six-million-gallon storage capacity offers transshipment opportunities for Winson and MEC. But the tanks have had little maintenance over the years and are seriously corroded from both the salt-air atoll environment and for lack of use in recent years. Because of the high price of fuel since the late 2000s MEC has rarely had more than two million gallons of fuel stored at one time.
Difficulties that MEC has had over the past year in paying off its fuel debt to SK Networks has not dampened Winson’s interest in doing business with MEC. For the past year Winson has provided fuel to MEC on consignment. It has meant that there is always fuel in MEC’s tanks and the company pays as it uses it while Winson has been storing fuel with MEC it sells to fishing vessels that fuel in Majuro.
The new agreement is about expanding fuel sales to the fishing fleet in the region and other nearby islands by fully using MEC’s large fuel farm.
Over the past 18 months MEC engineers have been overhauling engines in the company’s seven-engine power plant. It has completed work on several reducing fuel costs by improving operation efficiency and has now started work on the second of its two largest engines that have been in need of repair a six-megawatt Deutz with a $2.3 million grant from the U.S. Rural Utility Service. With the power plant improving its operations now that several of the engines have been successfully overhauled David Paul MEC general manager is turning his attention to the tank farm.
“The tanks are old “” said Paul. “”We have to fix them now. If we don’t something major will happen that will not be good.”” He said MEC’s board of directors has prioritized work on the tank farm and in anticipation of the $5 million in financing from Winson initial work has started on the tank farm.
MEC staff has already started preparation for cleaning the tanks. This will lead to a survey of the integrity of the eight tanks. Once the survey is completed a scope of work can be developed and then the tank renovation work will be put out to bid. Paul expects the tank project to take 18 months to complete once it gets going.
Although details are still to be developed MEC management sees opportunities for its tank farm beyond its current power plant operations and diesel sales to fishing vessels and two local fuel stations. Mobil currently operates a jet fuel station at Amata Kabua International Airport in Majuro which has increased in activity over recent years with Majuro a central Pacific refueling point for planes being ferried between the United States and Asian destinations. Fixing its tank farm is a first step toward expanding commercial fuel opportunities in this region of the Pacific.