World Fuel Services - Beyond Fuel
The world's biggest fuel services company is reinventing itself.
(Article originally published in Mar/Apr 2017 edition.)
Michael Kasbar has a plan. The CEO of global giant World Fuel Services wants to reinvent his company, taking it beyond its original business of buying and selling fuel and into the broader realms of energy, technology, logistics and payments. He’s already part way there, but there’s more to be done to transform WFS into, as Kasbar puts it, “a ubiquitous global energy management, logistics and payments company to the transportation, commercial, industrial and governmental sectors.”
It’s a Bold Vision, and Kasbar’s ultimate goal is “to make myself irrelevant.” He quips that some people think he already has, but he knows better. To get to the next level requires a steady hand at the helm (his), and the commitment of a team of dedicated professionals. “Do good and make a profit,” he says. “It’s as simple as that.” As incentive, he keeps a poster in his office reminding him of his first big blunder – when he was young and inexperienced and just learning the ropes. It was a valuable lesson.
Kasbar has spent his entire career buying and selling fuels and bunkering ships. Today, WFS generates about $27 billion annually from its aviation, marine and land-based operations – a number that varies depending on the price of fuel. It operates in 190 countries and employs over 5,000 people, supplying more than a million barrels of product daily. Aviation is the biggest and most profitable sector while marine continues to suffer from a protracted market slump. Land is the newest and fastest growing part of the business.
He recalls with a laugh graduating early from the State University of New York at Plattsburg with a degree in environmental science and having no idea of what he really wanted to do. After his mother vetoed an assistant baker’s job, she instructed him to visit his sister’s manufacturers sales representative business in the garment industry. After some discussion, he realized the oil industry intrigued him, and he began to systematically call every oil company in the Yellow Pages. He finally landed a job in marine fuel sales and worked there for five years.
He left to establish marine operations for a global business but soon found there were too many issues at the company. Along the way he had the good fortune to meet and hire Paul Stebbins, who would become his lifelong business partner and friend. In 1985 Kasbar and Stebbins founded bunker trading firm Trans-Tec, and by 1995 it had become one of the largest marine fuel suppliers in the world.
With an eye toward accelerating growth, Kasbar and Stebbins then sold Trans-Tec to Miami-based and publicly traded International Recovery Corporation for $14.5 million. The two friends signed employment contracts and continued to manage the business. Later that year IRC, whose main businesses were aviation fuels and oil recycling, changed its name to World Fuel Services but retained its original ticker symbol (INT).
Kasbar says the company’s real business is managing risk: “We assume the burden of risk throughout the fuel management process for our clients. We handle it all so they can focus on what they do best – running their own businesses.” Those risks include fuel quality, price and availability along with credit and logistics.
The complexities of supplying fuel, while limiting exposure to volatile energy prices and geopolitical conditions, can pose significant challenges. But Kasbar says his company thrives on volatility because “That’s when we offer the greatest value. We manage the volatility in the market for the client’s benefit.”
The recent bankruptcies of Hanjin Shipping Lines in 2016 and OW Bunker in 2014 are stark reminders of the ever-present risks in the marketplace. In 2014 OW Bunker started the year with a promising IPO but quickly accumulated more than $1 billion in debt and filed for bankruptcy in November of that same year. The Hanjin bankruptcy resulted in write-offs for dozens of customers and suppliers, including WFS.
Nonetheless, the company has built a solid reputation over the years based on its financial strength and global office network, which can identify risks in the marketplace earlier than most. “A successful business strategy is based on the assessment of risk,” Kasbar says. “Working with an experienced global specialist like World Fuel Services is smart because we manage the performance risk. Our global market intelligence and local focus allows us to proactively spot a multitude of risks and issues so problems can be identified and resolved before they impact operations or rapidly respond when they do.”
Kasbar himself is a risk-taker. He rides motorcycles in his spare time (the Kawasaki 1400 Concours is his current favorite) and takes annual road trips with a small group of like-minded adventurers, exploring the far reaches of the American West and staying at off-the-beaten-track motels.
THE SINGAPORE MANDATE
A common complaint in the bunkering business concerns the amount of miscalculation – or just plain cheating – that goes on when measuring the amount of fuel loaded onto a ship and charged to carriers, a practice WFS is well aware of through its management of over 50,000 marine fuel deliveries every year.
So the company greeted with open arms the decision by the Maritime and Port Authority of Singapore (MPA) to mandate the use of mass flow metering (MFM) on its bunker barges effective January 1 of this year. As the world’s largest bunkering port, Singapore is making a bold statement in taking the lead on this long-overdue initiative.
“The MPA’s efforts have been applauded by many in the industry, including WFS,” Kasbar says. “We strongly believe that mass flow metering is an important tool for developing more transparency and accountability in the bunkering supply chain.”
The process has been used for decades in other sectors of the oil industry, especially on land and in refinery operations. It’s a proven technology already in use in some quarters of the bunkering industry as well, but Singapore is the first nation to mandate its use and impose strict requirements. The MFM systems must be from accredited laboratories and recalibrated three years after they were first approved. In fact, the systems are subject to verification checks quarterly for the first year and every six months thereafter.
Using MFM provides greater accuracy for shipowners and ensures they get exactly the amount of fuel they paid for and that suppliers are not giving away extra fuel. The fueling operation is also expedited, saving two to three hours for each delivery. It’s a win-win for the customer, the supplier and the port.
GLOBAL SULFUR CAP
Looming on the horizon for shipowners and their fuel suppliers is the mandated implementation of the global sulfur cap of 0.5 percent in marine fuels effective January 1, 2020. While the industry was already aware of the scheduled reduction, there were many who hoped that final implementation would be pushed back to 2025.
But the IMO’s Marine Environment Protection Committee decided to move forward on the original timetable based primarily on a study released last July by the Netherlands research institute CE Delft. The analysis stated that the refining industry could meet the 2020 deadline and there would be sufficient low-sulfur fuel available by that date.
In reaching that conclusion, the study assumed that roughly 3,800 ships would be outfitted with scrubbers by 2020 and therefore would not have to use ultra-low sulfur fuel since the scrubbers would remove the necessary pollutants. Others argued that this was an optimistic assumption given that fewer than 1,000 ships are outfitted with scrubbers today. If significantly fewer than 3,800 ships have scrubbers by 2020, demand for ultra-low sulfur fuel could outstrip supply, potentially causing disruption in the market.
All of which makes the role of WFS increasingly important. According to Kasbar, the WFS commercial and technical teams have been tracking developments, filtering out the noise and providing clients with accurate, up-to-the-minute information on fuel availability and the transition to the new standard.
“Shipowners will depend on us to bridge the information and supply gap and ensure that the fuel is available when and where they need it,” he says. “We will also counsel our clients on the trade-offs of installing scrubbers or switching to alternative fuels, which could be a costly endeavor. Every case and market is different.”
A SOLUTIONS COMPANY
Kasbar sees the company’s future in software, financial technology, technological breakthroughs and energy management. “The energy diet of our customers is changing,” he explains, “so we need to diversify our offerings – LNG, renewables, special fuel blends and the like.” All in all, WFS supplies over 180 discrete energy and industrial products.
He’s a big believer in the Industrial Internet and combining the use of technology with physical fulfillment – “a vision that resonates with me.” Recent acquisitions in energy management include European companies Bergen Energi in 2015 and Utilities Exchange Ltd. last year. In the U.S., subsidiary KTM has been busily expanding its energy management and regulatory offerings, and Xisot is building its cloud-based predictive analytics to dynamically manage the myriad sources of electricity.
The newly formed Kinect Energy Group combines the collective and diverse offerings of six companies that now provide energy management advisory and fulfillment services in over 30 countries and energy reporting in over 150 countries in almost every language and currency. Customers include consumers of natural gas, power, solar, wind, biogas, biomass, and virtually every form of energy aside from nuclear.
Multi-Service Technology Solutions continues to focus on niche B2B payments solutions primarily to the energy and logistics space and streamlines complicated cross-border transactions in 25 countries, 10 currencies and nine languages. It handles 19 million transactions annually, services 4,500 fleets with its over-the-road fuel fleet card and services another 200 global fleets or 700,000 trucks with parts procurement and the associated payments. Multi-Service also provides commercial driver’s license protection for 15,000 truck drivers in the U.S. and, combined with AVCARD, is the largest closed-loop aviation fleet fuel card.
Kasbar is enthusiastic about the future. Building on its core energy management franchise and “asset-right” business model, the company is evolving into a full-menu solutions provider to meet the changing needs of its clients. “We’re a solutions company,” he says. “We’re more than just fuel.”
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.