The Hawks, the biggest private fuel supplier in the Maldives and second only to the national State Trade Organization (STO), has just finished a new fuel terminal that will triple its storage capacity and allow it to go international. But in a sector full of opportunity, logistics and pricing remain daunting barriers.
Where do the Maldives stand today regarding fuel security?
The Maldives doesn’t have oil resources of its own or any refineries. All the fuel needs to be imported. Nearly every one of the hundreds of inhabited islands in the country depends on diesel generators for power generation and diesel powered boats for transport. So fuel security is fundamental. Currently, our fuel consumption stands at around 60 to 80 million liters a month. Considering the population size of 400,000, it is a considerable market. However, there are several challenges. Fuel storage capacity is limited and distribution logistics abound. Particularly taking into account how limited the fuel needs are for some of the smaller islands, transporting such small amounts of fuel over long distances can become economically inviable. This has also meant, that in the past, many people were left without fuel or did not receive it on time, which, on its own, opened opportunities for more reliable and capable companies, such as The Hawks.
Are there still challenges regarding storage?
Storage is a very big challenge. As an importer, without considerable storage capacity, the import volumes become impractical. Main supply markets like Dubai, Singapore or even Sri Lanka, are not willing to send as little as 2 to 3 million liters of fuel. It is not worth the effort of transporting it all the way here. At the very least, they will send 10 million liters, and that is something impossible to do without adequate storage. That represents a considerable barrier to entry in this market, but also a struggle for communities that need fuel but might not require enough to economically justify a two day barge trip. These people will find themselves stranded without power if the supply chain does not reach them. While we manage to supply everyone, even in the furthest atolls, it remains an economical challenge for supply companies.
Can The Hawks’ new Thilafushi fuel farm answer these challenges?
We can answer these challenges to an extent. The storage capacity in the Maldives is still not on par with the country’s requirements. We were not getting competitive rates from the international markets because of the small quantity we managed to import and store. We needed to expand our storage facilities. With that in mind, we successfully built a new fuel farm, which grew our capacity to 30 million liters. We are proud to announce that the state-of-the-art fuel terminal will be fully operational by mid-2019. Prior to this pioneering project, our market potential was about 4 to 5 million liters. Now, we have our market potential more than tripled with up to 17 million liters, and we expect to further increase it to 27 million before the end of 2019, as we enter the Sri Lankan market. We see companies like John Keells, McLarens, and Hayleys in Sri Lanka with a combine fuel requirement of up to 12 million liters, which we could easily supply, as well as have sufficient capacity for the Maldivian market.
How is fuel pricing defined in the Maldives?
Fuel pricing in the Maldives is a challenging matter. Regardless of how international fuel prices fluctuate, STO is the one deciding if the price of fuel in the Maldives will go up or down, and the rest of the market follows. This can be extremely concerning for the market as there is very little price predictability. Normally, the price shifts by STO are relatively small, but sometimes the prices will be disproportionately reduced without a prior communication and consultation of the supply companies in the Maldives. As fuel companies buy in bulk, sudden reductions in price can represent a very considerable loss. We urgently need more concerted action between the price setting in the Maldives and the rest of the world market.