Singapore completes first live bunker delivery financing pilot

To up the ante on the digitalization of Singapore’s bunkering sector, DBS, in partnership with Trafigura Group’s marine fuels supply and procurement joint venture TFG Marine, Ocean Network Express (ONE) and Ascenz, and supported by the Maritime and Port Authority of Singapore (MPA), have successfully completed Singapore’s first live bunker delivery financing pilot transaction. The transaction was done by way of an electronic bunker delivery note (BDN).

Singapore is the world’s leading bunkering hub in terms of volume, with close to 50 million tons of marine fuel sold in 2020. However, banks currently rely on physical copies of the BDN and other supporting documents to avail bunker financing to clients. This is a cumbersome process that typically takes a few days to a week as clients have to manually deliver the physical BDN back to shore for compilation with other paper documents, before a trade finance application can be submitted. 

The newly digitalized process demonstrated that in future, clients will be able to obtain financing for their underlying trade in under two hours, enabling them to obtain working capital faster and better manage their cashflows.

Another pain-point the digital BDN mitigates against is the risk of fraud in the bunker industry. In the traditional bunker trade world, the physical BDN has a higher risk of being manipulated as it can be used to request for financing for underlying deliveries which may not be genuine or which could have already been financed by another bank. 

With the digitalization of the BDN, this risk is mitigated as counterparties are now able to ascertain the trade data at source. This is done by leveraging the Mass Flow Meter (MFM) system for bunkering electronically. This helps to provide greater transparency and certainty to participants in the bunker trade supply chain ecosystem.

Kenneth Lim, Assistant Chief Executive (Industry) of MPA, said, “MPA has been accelerating the maritime industry’s digital transformation efforts, and these include digitalization of the bunkering sector, a vital part of our hub port service offering. The adoption of digital documentations will help stakeholders across the value chain move towards more efficient and transparent operations that are aided by data-driven decision making. We welcome more of such private-public collaborations facilitated by our regulatory sandbox, that will help Singapore remain the world’s leading bunkering port.”

Part of broader efforts to digitalize financing services for Singapore’s maritime sector

The live pilot transaction comes on the back of a joint agreement signed between DBS and MPA in 2020, to accelerate the digitalization and innovation of financial services and payments across Singapore’s maritime industry.

The collaborative areas which MPA and DBS have identified include streamlining and enabling payment transactions between the users of maritime services to expedite end-to-end payment life cycles, as well as digitalizing supporting documents for financing. MPA and DBS will also facilitate innovation and creation of potential new financial solutions with the startups ecosystem for the maritime sector.

Future integration with SGTraDex

For the next phase of development, there are plans to integrate the use of digital BDNs with SGTraDex once the digital utility is operational in 2022. Developed by public and private sector partners led by the Alliance for Action (AfA) on Supply Chain Digitalization, SGTraDex is a common data infrastructure launched in July 2021 to facilitate trusted and secure data sharing across supply chains. In addition, added transactional data points such as the receiving of vessel and barge location and the timing of delivery can help to enhance visibility to the underlying physical trade, further improving risk mitigation in the bunker industry and elevating Singapore’s position as a world-class digital and bunkering hub.

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