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Coming of age

24 March 2016

Bunkerspot
Volume 13 – Number 1 – February/March 2016

Over the course of two decades, under the stewardship of John Bassadone Jr, Peninsula Petroleum has grown be one of the largest and most well-known bunker companies. In this profile of the business, Llewellyn Bankes-Hughes charts the course of its development and looks at its ambitions for future expansion

Peninsula Petroleum has come of age. This year it celebrates its 20th anniversary and is going from strength to strength despite challenging market conditions. Still run as a family concern, albeit one of the biggest bunkering companies in the world, Peninsula is not answerable to anonymous shareholders or influenced by market sentiment, but is a successful international business that retains family values at its core.

Rather than follow the well-trodden path of feeding corporate growth through acquisition, Peninsula has focused on growing organically.But instead of repeating the same thing year-in, year-out for 20 years, Peninsula has set its own path for growth and has followed it religiously, retaining its profits and ultimately transforming a two-man back-to-back bunker trading start-up back in 1996 into the globe-spanning fully-integrated fuel acquisition, storage, supply and delivery operation that it is today.

Peninsula Petroleum was incorporated in London in January 1996; set up by John Bassadone Jr, almost fresh out of school and with limited bunker knowledge. Armed with a $50,000 start-up fund provided by his father, John (Johnny) Bassadone Sr, Chairman of the oil, shipping, maritime services and property development Gibunco Group in Gibraltar, which last year celebrated its 50th anniversary, John Jr set about building Peninsula. Since the original funding, no further investment has been sought or needed, outside normal working capital provided by the banks, and no external investors have been invited to join.

The London office was originally tasked with commercialising the physical supply operation being carried out by Cepsa Gibraltar, Gibunco’s joint venture in Gibraltar with Spain’s Cepsa. Gibunco at that time had no commercial company within the group, leaving Madrid-based Cepsa to sell the fuel. Without its own oil, storage or barges, Peninsula had to look for its own niche within the market and ultimately found it in the form of meticulous customer care and attention to detail.

It is now the highest-volume supplier in Panama with a market share of around 50%

Initially, Peninsula serviced the 75,000 metric tonnes (mt) a year supply agreement between Cepsa and Cepsa Gibraltar, operating barges owned 50/50 with Boluda to load fuel at the Cepsa refinery and deliver it to ships anchored or calling at Gibraltar.According to John Jr, this type of operation was ‘supply lite’ in that Peninsula did not own or control the bunkering infrastructure but nevertheless arranged the deliveries.

Peninsula’s first customer was a P&O ship calling at Gibraltar. During its first year, Peninsula exceeded its contracted volume and sold 90,000 mt of fuel, making a profit in the process. In 1999, the company began supplying bunkers in Las Palmas de Gran Canaria and in Ceuta, Spain’s enclave in North Africa, on the opposite side of the Gibraltar Strait, with Cepsa agreeing to an increased volume of fuel under the same supply agreement.

In 2002, in order to provide Cepsa with the marketing and trading help that it needed at the time, Peninsula commenced physical supply operations in Panama on behalf of Cepsa. This agreement lasted until 2012 when Peninsula took the decision to unleash its own potential in Panama. The volumes it had been delivering on behalf of Cepsa had dipped from a peak of around 30,000 mt a month to just 8,000 mt a month. Peninsula opted to set up its own supply peration, buying bulk cargoes of fuel oil from Mexico, Ecuador, Peru and also from international oil traders. Peninsula saw value in renting its own storage tanks on Taboguilla island, undertaking blending to maximise supply value and operating its own high-spec barge fleet, imported from Singapore and Gibraltar, to replace some of the older vessels operating at that time in Panama. Almost overnight, Peninsula’s sales volumes multiplied. It is now the highest-volume supplier in Panama with a market share of around 50%.

Peninsula’s original aim was to establish, port by port, a worldwide network of trading offices and build a global presence, providing a top-level service to customers and increasing ‘resale’ volumes in the process.

In 2001, five years after it was founded, Peninsula’s focus was widened from ‘local supply’ and the company began trading worldwide, focusing on taking on only high quality ‘team player’ traders, including Alonso Young in Panama, Dimitri Deschaume in London, Victor Morales in Gibraltar and Panos Salichos in Piraeus, all of whom – along with many other ‘Peninsula people’, as John Jr refers to his unusually loyal team – remain prominent within the company. According to John Jr, the emphasis has always been to find the ‘right’ people through personal connections and circumstance and this approach appears to have paid off judging by the length of time some staff members have remained with the company. Peninsula operates as a single profit centre, emphasising teamwork and cooperation. Its incentive schemes for traders focus on non-profit measures too, seeking to produce rounded traders who truly understand their customers’ needs.

Initially, as the company structure developed, Peninsula’s risk profile was relatively small, although it has featured comprehensive credit insurance, as a precaution, from the start. This does not mean that Peninsula relies wholly on credit insurance – it also has a large and experienced credit management team.

In 2003, the company opened an office in Gibraltar and supplied in excess of 1 million mt of bunker fuel. That same year it also incorporated a trading entity in Dublin. The pace of development quickened thereafter.

In 2005 Peninsula opened an office in Piraeus, Greece, aimed at developing contacts within the vitally important Greek shipping community. The following year it opened an office in Singapore and began a highly successful yacht bunkering operation in Gibraltar. By 2007, annual sales were rising above the 2 million mt mark. Trading offices in Dubai and Shanghai were added in 2007, followed by one in Geneva in 2008 and another in Montevideo, Uruguay in 2009. By then sales had more than doubled to 4 million mt. In 2010 Peninsula added an office in Tokyo and another in Norway, followed two years later by offices in Seoul, Houston and Panama. It also began a physical supply operation in Houston.

By 2013, Peninsula Petroleum was employing over 150 people. It had opened an office in Monaco and begun physical supply in Algeciras and Buenos Aires, with annual sales running at over 6 million mt a year. In 2014 it opened a trading office in New York. Since 2013, the rate of growth has accelerated even more rapidly, boosted by the start of an ex-wharf physical supply operation in Houston, using Buffalo Marine as its exclusive barging partner, a supply operation in Beaumont, Texas and the start of physical supply in Cristobal, Panama. This was followed last year by a new physical supply operation in New Orleans and an unexpected, but nonetheless welcome, physical supply operation in Antwerp.

Peninsula has invested prudently in expanding its physical supply capabilities. Originally, acting as an agent or reseller for the Cepsa Gibraltar joint venture, the company was primarily involved in physical supply. However, as its worldwide trading activities expanded, its reselling volumes rose substantially in comparison, until 2013, when the proportion of sales attributed to physical supply operations began to grow rapidly. In 2013, physical supply sales stood at about 35% of the total, rising to 45% in 2014 and to 55% in 2015. This year the trend is set to stabilise as Peninsula seeks to enjoy the benefits of a balanced physical supply and reselling portfolio.

With Gibraltar being Peninsula’s home base, the Strait of Gibraltar, which includes the Rock itself plus the Spanish ports of Algeciras and Ceuta, is a natural focus for the company, which it views as one supply region with the benefit of offering optionality of supply to its customers. In 2014 a new Vopak Terminal opened in Algeciras and Peninsula immediately entered the Spanish supply market via a cargo supply contract with Lia Oil and an additional product tanker to satisfy increased demand. Peninsula has steadily grown its volumes since then and took Vopak storage capacity direct in 2015 from both BP and Lia Oil to solidify its position as the leading regional supplier.

With Gibraltar being Peninsula’s home base, the Strait of Gibraltar, which includes the Rock itself plus the Spanish ports of Algeciras and Ceuta, is a natural focus for the company, which it views as one supply region

Peninsula’s growth in the Strait has been well planned and entrepreneurial. In 2012, it was supplying 75,000 mt a month. Now it is supplying some 180,000 mt a month, using a new fleet of bunker tankers. In Panama, its sales have risen from a modest 8,000 mt a month to 120,000 mt a month, thanks to its product sourcing capabilities, leased storage tanks and owned and operated bunker barges. In Houston, Peninsula currently supplies 60,000 mt a month and in New Orleans around 20,000 mt a month. 
While the company now has true global commercial coverage stretching from Tokyo in the east to Houston in the west, three key regions are currently on the radar for further development and growth.
The first of these is Singapore, by far the world’s biggest bunker market and an obvious target for Peninsula which has ambitions to use the strategic port as a springboard into the rest of Asia. It is unlikely that Peninsula will employ its own barges in the crowded and highly competitive Singapore market, but it does plan to source its own oil and acquire its own storage there.
The second market in Peninsula’s sights is Fujairah, offshore the United Arab Emirates, which, as the third highest volume bunker market in the world after Singapore and the Amsterdam-Rotterdam-Antwerp (ARA) region, is expected to offer even more potential now that Iranian oil and ships are shortly expected to be fully free of international sanctions.
The third area Peninsula is looking at is North America, both in the US Gulf, where it plans to increase its physical supply operations, and, for the first time, the US West Coast where Los Angeles is its target market.
Peninsula Petroleum boasts impressive support from the seven major international banks that fund its activities, including ING, Santander and BNP. The company is equally well-aware of the importance of corporate governance and, in addition to its credit risk teams, it also boast an in-house legal department together with a risk management team and a supply credit team established to properly vet reselling suppliers on behalf of its customers. This all harks back to the owner’s conservative risk appetite.
Taking 20 years to reach this point suggests that Peninsula’s transition has not exactly been pacey, but that is exactly the point. Peninsula’s development has been meticulously planned, carefully considered and thoroughly executed, leaving the company in a position of considerable strength. With 20 offices in five continents, 250 employees worldwide, including 120 experienced traders, annual sales predicted this year to top 14 million mt and an average growth rate of 22%, the foundations appear to be in place to allow the company to continue to expand.

 

John Bassadone Jr

Twenty years after having established Peninsula Petroleum, in January 1996, John Bassadone Jr is able to reflect on two decades at the helm. He naturally counts his greatest work-related achievement as the creation and development of the company, to which he devotes a vast amount of time – 60% of which he spends in Gibraltar and 40% travelling to visit his many offices worldwide. His family life is also very important to him. With his wife, fellow Gibraltarian Yvonne, to whom he has been married since 2008, he has two children, Valentina, 4 and Johnny, 2, with a third expected this year. John is also a keen sportsman, being a world sailing champion, a keen tennis player and cyclist; activities which he enjoys mostly in the south of Spain.

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