Regional Focus: Gibraltar Rocks

Europe’s number one bunkering port, a pivotal link between the Mediterranean and the Atlantic Ocean, a favourite stopping-off point for superyachts and a tiny city port with a burgeoning  infrastructure base. Gibraltar has never been busier

A spectacular landmark for passing ships? A UK Royal Navy base? Or an outcrop of southern Spain? The British Overseas Territory of Gibraltar has been all three of these at one time or another. However, its pivotal position on a major sea route has given it a far more modern role as Europe’s number one bunkering port and a favourite stopping off point for an almost unending procession of superyachts.

But its importance internationally has been highlighted extraordinarily as it looks set to become entwined in the negotiations between the UK, the European Union and now Spain over Britain’s exit from the EU.

Strategically perched on the route that links the Mediterranean, the Atlantic and the Caribbean and overlooking the Strait of Gibraltar, the Rock is a vibrant and dynamic port city with a bulging infrastructure that belies its tiny 6.7 square kilometre size and population of 32,000. Gibraltar shares a 1.2km-long land border with Spain and lies 14km north of the African coast of Morocco.

The numbers and volumes of projects in Gibraltar in the last 12 months have exceeded every previous year. It is generally acknowledged in the region that the main reasons for this current upsurge in activity are greater global appreciation of its pretty and unique location, a dynamic and interdependent shipping sector and the hands-on stewardship of Commodore Bob Sanguinetti, the CEO and Captain of the Gibraltar Port Authority (GPA).

Many of the sector’s companies are involved in Gibraltar’s primary industry – bunkering – which is also the factor that has helped forge one of its biggest success stories – the exponential growth of Peninsular Petroleum, the bunker supply and resale company founded by John Bassadone, son of the founder and joint owner of Gibunco. The younger Bassadone was a junior trader in London when he started the company in 1996 with 75,000 tonnes of bunkered fuel oil from the Gibraltar refinery. Since then he has overseen recent average annual growth of 22%. Peninsula now supplies 13.1 million metric tonnes of fuel and has a network of 20 global offices  including such global maritime hubs as Singapore, Shanghai, ARA, Houston, Hong Kong and Tokyo (See ‘How I Work’ article on John Bassadone on p52). 

Another local sector that has continued to prosper despite the global downturn is ship repair. Among recent contracts at Gibraltar repair specialist Gibdock last year were scrubber retrofits for five Vroon Offshore Services-operated offshore support vessels and, backed by a favourable, post-Brexit exchange rate, repairs to a range of German-owned general cargo ships, container ships, reefers and bulk carriers. “We are maintaining a strong ferry and ro-ro business, have started new cluster work from the UK Ministry of Defence, are getting more ballast water appliance work and pipework contracts, while Dutch-owned dredgers have proved a good source of repairwork too,” said Gibdock’s enthusiastic Managing Director, Richard Beards.

The week SMI visited Gibdock in February this year the yard was technically full with eight vessels berthed at the quayside including the multifunctional subsea vessel (MSV) Olympic Intervention and several ferries and offshore vessels.

Gibdock’s recently opened specialised prefabrication area, Pad 1, has enabled the company to take on more complex offshore projects, many of them from repeat customers.  “In line with our offshore successes, we are also continually improving our QHSE (Quality, Health, Safety and Environmental Management). While some shipyards may be tempted to seek work based on aggressive pricing alone, we know that safety and the environment in particular are key concerns for offshore owners and operators,” said Mr Beards.

However, the offshore industry’s bleaker side – caused by the sector’s five-year trough in global trading – was reflected in an increase in local lay-ups of offshore supply and support vessels including the demise of one of the world’s largest and most futuristic pipelaying vessels which is worth an estimated €400m.

One of Gibdock’s other specialities is repairing and refitting cruise ships – the shipyard is very close to Gibraltar’s cruise terminal – and it recently carried out a two-week repair and renewal project on Louis Cruises’ 41,000gt Thompson Majesty. “It is especially satisfying when Gibdock’s capabilities for on-schedule high quality work are vindicated by a high-profile owner in the luxury cruise market,” said Mr Beards.

In another sign of Gibdock’s year of prosperity, the company has recruited 16 new trainees to its apprenticeship scheme. “We are strongly committed to the programme so we can develop a succession plan to foster the ship repair technicians and managers of the future,” added Mr Beards.

Like Gibraltar’s repair market, there are exciting changes planned at Gibraltar’s Ship and Yacht Registries. The number of ships registered at the Ship Registry in the last 14 months was 290 – a 2% increase on the previous year. The Yacht Registry, meanwhile, has been through a near-revolution with almost 900 superyachts on its books. For owners and operators, one of the Registry’s unique selling propositions (USPs) is its almost blemish-free white-listed record at the Paris Mou and the US Coast Guard inspection regimes – and 18 months ago it was also elevated to the Tokyo MoU white list.

On a more political note, Britain’s decision to leave the EU could have a profound impact on the Registry. Richard Montado, Maritime Administrator at the Gibraltar Maritime Administration (GMA), the government body that runs it, said: “Brexit has had a similar psychological impact on the Registry to the UK Registry. It looks as if one-third of the fleet who have registered here for domestic taxation advantages could be looking to flag out.”

More encouragingly, the Gibraltar government has provisionally approved the formation of a new  ‘post-Brexit’ Registry, as Mr Montado describes it. “The idea is to operate the Registry 24/7 and in different time zones. We also aim to increase the size of the Registry and maintain our same high standards. We’re looking to offer products to Far East owners and also owners in the US where we are recognised as a white-listed, high performing flag,” he said.

Two other structural improvements that will appeal to ship owners and managers is a recent decision to move the two Registries online – a project that is due to be completed in the autumn of this year. It means that all registering and other services offered by the Registries such as seafarers’ certificates will be computerised. On the new Registries, owners will be able to register ships while they are still being constructed.

“One of the advantages of registering in Gibraltar is that everything is close by. You can walk to the post office or the hospital and when you are fed up with going local you can go across the border to Spain. Most of our customers live in Gibraltar and as a region it feels very safe. Education is paid for by the Government, buses are free, there is no inheritance tax or VAT and in 2011 corporation tax fell from 30% to 10%. If somebody gets mugged here it is headline news,” said Jens Sorensen, Managing Director of ships’ registrations provider Sorek Group.

From registering to refuelling. The number of bunkering visits by commercial vessels to Gibraltar hit record levels in 2016-2017. The number of superyachts visiting to refuel has also risen to unprecedented levels matched by newly opened and expanded anchorages in Gibraltar’s Mid-Harbour Marina, the Ocean Village Marina and Marina Bay giving visiting vessels up to 90m-long some 600m of berthing facilities. Albert Isola, Gibraltar’s Minister of Commerce, said it was “fantastic to be doing that well in the current economic climate”. Many yachts were staying longer after refuelling and enjoying Gibraltar’s hotels and restaurants and such tourist attractions as cable car rides, scenic tours of the Rock as well as exploring its intriguing underground cave network.

And more vessel visits means more potential business for the Gibraltar Port Authority (GPA), the Gibraltar Tourist Board and the region’s ship and port agencies. There were 25 local ship agencies at the last count. One of the larger ones is INCARGO, part of the INCARGO Group. Its director George Dyke said the agency has handled 60 to 65 ships a month in 2016-2017. “Bunkering dictates 90% of the shipping business in Gibraltar plus the support services – husbandry, crew changes, storage and minor repairs. That’s why I would like to see permanent bunkering storage in Gibraltar. We also have more anchorage space than the Port of Algeciras [which lies the other side of the Bay of Gibraltar], so theoretically we should be doing our bunkering more effectively. We bunkered 3.8m tonnes last year, though during our peak period in 2007-2009 we reached 4.5m tonnes,” he said.

INCARGO handled more cruise ships – notably from the Royal Caribbean Group, Celebrity Cruises and Thomsons Cruises – than in previous years and 238 cruise liners were scheduled to call in 2017, said Mr Dyke. Two new cruise liner berths are also planned for the port. Although it had all the right service facilities, Gibraltar needed more accommodation for the crews of longer-staying ships, said Mr Dyke. Although a Holiday Express hotel is opening in 2017, Mr Dyke said the region needed more beds “to compete with Algeciras where you can stay for €70-a-night while it is much more expensive here.”

The Algeciras question was raised by Ian Penfold, Director of Gibraltar’s largest port agency, MH Bland, which was founded in 1810. Mr Penfold, who was a member of the Government-led marketing groups who recently visited Singapore and Hong Kong, said the initiative had attracted a lot of new business to Gibraltar. “We have had to do it as we have been getting so much competition from Algeciras which runs its own marketing trips,” he said. MH Bland handles an average of 140 to 150 ships a month and is aiming to top 200. It has also expanded its agency and support services to 13 overseas offices – the latest will be in Casablanca this spring. Because of the recent surge in superyacht visits, the company plans to open a separate department to service the sector.

One reason for the Gibraltar shipping sector’s recent buoyancy has been the weakening pound, said Alex Lavarello, Director of port agency Turner Shipping. “The devaluation of the pound against the Euro virtually gave us a 20% advantage overnight, allowing for more flexible trading and making Gibraltar feel less hemmed in,” he said. Another cause for optimism was a new flight service from Tangiers airport which has brought Chinese businesspeople to the region for the first time, said Mr Lavarello.

He said globalisation and the rise of the internet had prompted the number of local shipping agencies to grow from 10 to 12 around 15 years ago to “a lot more now – approximately 25 – and means that eventually all agents will have to work together or diversify”.

“Gibraltar is giving out a lot of licences. However a bunker call is something that is very easy to do and any agent can do it. It is when something goes wrong that an agent is worth his money as we’ve seen time and time again. The biggest issue is when agents set up business in Gibraltar and then set up another agency in Algeciras where getting a licence is cheaper,” he said.

Gibraltar was in a position to react quickly to Brexit and “shipping may be the pillar to support the Gibraltar economy like it did once before,” he said. The only real snag was the colony’s relationship with Spain, which has periodically contested ownership of the colony with the UK. The solution could be to move to “joint sovereignty” said Mr Lavarello.

Danny Gabay, Director of logistics service provider Redwood International, said the buoyant bunkering market and the increase in visiting ships had created a brisker trade in the delivery and collection of spare parts in 2016-2017. Another “cash booster” was the increased activity of the shipyard and the demand for spare parts for ship repairs. “Whenever a ship stays in the yard for a month or so we get a lot of orders for spares coming in and going out,” he said.

Mr Gabay said the number of systematic checks at Gibraltar’s border with Spain, which is outside the EU’s Customs Union but inside the Schengen area (the European area of passport-free, unrestricted borders between 26 member countries) on the Spanish side, was increasing due to an upgraded system that was introduced  in March this year. He said it involved “more red tape and hold-ups” but he did not believe Brexit would have a negative effect on his own company’s business activities. “The problem will be the movement of people, not goods, and on the positive side we are no longer seeing the seven-hour queues that used to build up at the border,” he said. “At the moment it is easier to procure parts and supplies from Spain than anywhere else as it is next door,” Karl Alecio, Redwood’s Operations Manager, observed.

One person who will help to oversee Gibraltar’s transition to a post-Brexit future is its Minister for Commerce, Albert Isola. Mr Isola, who was until recently the region’s Minister for Shipping, said: “Although it is brutally competitive in the bunkering sector and equally so in the superyachts sector, if we raise the bar in terms of the quality we deliver we will see more business coming through – as we have seen in the past two years.”

He said the Government’s decision to allow future ships to be put on the Registry during construction was “an innovative way of providing security during a time of economic uncertainty when a shipyard could go bust while a ship is still hallway built.” He said that by registering and putting a mortgage on the vessel, it became the owner’s asset and they could “pull it out of the yard and finish it somewhere else”.

Apart from improving the blending of bunkering fuel and reducing the sulphur content, another commercial innovation was to introduce land storage for bunkering. “We have gone out publicly and had expressions of interest and engaged with a number of companies,” he said. “It is a necessary investment for the long-term future of the sector here which we can deliver in a relatively short time. A proper land-based bunkering facility will enable us to meet our standards much more easily than we would with floating storage.”

An area Mr Isola would like to expand is shipmanagement. “One of the areas we think we should be much better at is shipmanagement – we think we are ideally located for companies to have their shipmanagement based in Gibraltar, particularly with the volume of shipping that is coming through the Strait of Gibraltar,” he said.