Esso boss says increase to Texaco fair

(CNS): As pump prices finally began to fall across the islands’ fuel stations today, Alan Neesome, Country Manager for Esso Standard Oil, defended accusations made by Leader of Government Business Kurt Tibbetts last week that the firm had passed on an unfair increase to the islands’ second fuel supplier, Chevron-Texaco, for use of the storage facility.

Neesome said it was fair and the last time Esso increased “seaberth thruput fees” (sic) was in 2001.  “The increase made in September is only 0.12 CI cents per Imperial Gallon (about a tenth of a CI cent per US gallon).  This is relatively insignificant and does not cover the real inflation rate for the elapsed period (2001-2008),” he said. He explained that since 2004 Esso has invested over $2Million to replace seaberth pipelines and hoses.

“We installed a second larger diameter discharge hose and pipeline system which allows for two different products to be off-loaded from a ship simultaneously, ensuring an added degree of redundancy in the instance one of the receiving lines is out of service for maintenance and enhancing stability of fuel supplies to the island. It also means that ships can off-load in less time, which reduces risk exposure to changing weather situations because a ship can typically berth, off-load its cargo and unberth in about 18 hours,” he added.

Neesome said that it also reduces the instances of demurrage charges being incurred because discharge times are less. “In other words, by reducing the time that a ship has to be unloading its cargo, we made it a safer operation, reducing the potential impact for environmental impact.”

Denying any dispute with Chevron, he said the company was in fact negotiating a potential aviation joint operation at the airport with them, which he said was of interest to the government.  “These on-going commercial negotiations are, of course, of a private and confidential nature,” he noted. Last week LoGB had said the suppliers were in a business dispute and the government would intervene if the two firms were not able to settle things among themselves.

The issue of fuel prices has remained extremely controversial as prices in the US seemed to fall dramatically recently while Cayman’s pump prices remain significantly high. However, Neesome explained yet again that the market in the United States is so different to the Cayman Islands that comparisons cannot be fairly made.

“The Cayman Islands’ fuel demand is extremely small.  You can’t make a fair comparison of this market with the USA market, which represents 25 percent of the global demand and has totally different supply logistics,” Neesome added. “USA pump prices change more quickly reflecting the volatility (ups and downs) of the international fuels markets. Vessels currently come to the Cayman Islands for Esso on average every 21 days.  To ensure consistent fuel supplies to the island these vessels are scheduled up to 3 months in advance by Esso Cayman’s suppliers and load several days or in some cases weeks prior to arriving in Cayman depending on the fuel source and the route to Cayman.”

He said that landed prices in here reflect  international prices perhaps up to 20 or 30 days prior
to the date that the fuel actually arrives in Cayman and Esso pays the international price of the date the ship loads the fuel, not the international price of the date the ship discharges the fuel in Cayman.

“The lag is real,” he said. “In the volatile international environment which is subject to daily fuel
price fluctuations caused by many international factors, unlike the USA which has huge volumes and is constantly resupplied through its vast storage and distribution network, Grand Cayman because of its fuel supply logistics and very low fuel demand does not reflect this daily volatility in the domestic Cayman market. This is true whether international prices increase or decrease. “

He explained that the Cayman Islands, as well as the Caribbean, are exposed to international fuel price variations but with very limited influence on prices. However, Esso was doing what it could to be as efficient as possible in order to keep costs as low as possible.

“Our international fuel suppliers are sourcing their products from the most convenient points of supply in terms of quality, price and reliability,” Neesome added.