West Indies Petroleum Limited, WIP, has struck a deal with American oil and gas company Sunoco to distribute marine fuel in the Caribbean, using Jamaica as a base.
It comes amid a reorganisation of the bunkering and petroleum distribution company, which involves splitting up the operation into five entities.
The new arrangement with Sunoco, which became active on January 1, marks a shift away from long-time supplier BP.
The arrangements with the British petroleum company initially came up for renegotiation in 2022.
“It was a period of incredible volatility in global oil markets, coinciding with the war in Ukraine,” said WIP Executive Director Charles Chambers in an interview with the Financial Gleaner.
Because of the volatility, the pricing that BP was offering on a long-term basis would have been uneconomical, said Chambers. So WIP began talks with other suppliers.
“That new paradigm allowed us to find different suppliers and to change our supply base,” he said.
The Sunoco-WIP partnership addresses key challenges in the marine fuel market, particularly related to credit and supply chain operations, Chambers noted. The American company lies at mid-table of the top 100 oil and gas companies in the world, and distributes over 8.5 billion gallons annually across more than 40 states in the United States and the Caribbean.
“Marine fuel transactions involve very large volumes and require significant credit capacity, both from suppliers and for customers,” he explained. “Sunoco’s scale and financial strength will allow us to offer more competitive terms to vessel operators, potentially attracting ships that currently fuel at other ports,” he said in a press release announcing the deal with Sunoco.
WIP has 750,000 barrels of storage capacity at Port Esquivel, near the Clarendon-St Catherine border. The company also has a lease on property at the Reynolds Pier at Ocho Rios, St Ann, which offers another 73,000 barrels of storage capacity. However, a cruise ship accident at Reynolds Pier in February 2024 has hobbled WIP’s operations there.
Chambers said that until the pier is reopened, or unless the company has another storage facility on the north coast, then bunkering ships on the north coast would be unprofitable.
As such, the Sunoco arrangement will be utilised to grow the Kingston market and its share of the market overall.
Chambers said WIP has 30 per cent market share, translating to five million barrels of petroleum products. Comparatively, Petrojam Limited, in financial year 2023-24, imported 5.9 million barrels of crude and another 4.9 million barrels of finished product.
Regarding the structure of the company, Chambers says WIP is in the process of fully reorganising the business, so that each entity “is its own company, with its own board of directors, and its own mandate for profitability and efficiency”.
So far, two entities – WIP Energy and WIP Terminal – have been spun off.
The WIP Energy board includes Patrick Hylton as chairman, with Dennis Cohen, Catherine Lewis-Green and Winston Watson as independent directors; Charles Chambers, Gordon Shirley and Tarik Felix as founding shareholders; and Danville Walker.
WIP Terminal’s board includes founders Gordon Shirley, Charles Chambers and Tariq Felix; along with Kurt Boothe, Amanda Levien and Demetri Adams as independent directors.
Chambers said WIP will eventually become a group of five.
Asked whether there will be a new holding company, Chambers was non-committal, saying a group “must flow up to somewhere ultimately”, but WIP “wouldn’t want to put into the public space what that entity fully looks like,” he said.
“There’s a lot of considerations that go into it. We know who we want, and we know these are the lines. We know that there are different performance metrics. Even though we’re all in the fuel business, shipping is different, and storage is different, and trading is different, and they need to have their own (legal identities), not just a segment of the company,” Chambers said.
The five entities can still share resources to maximise profitability, he added.
The other companies are expected to encapsulate storage as one entity, shipping as another, and possibly a regional operation, Chambers said.
Regarding WIP’s shipping operation, WIP both leases and owns vessels in its fleet. The current size of the fleet was not disclosed, but WIP has said previously that it wants to grow to about 10 ships.
Multiple sources have indicated that WIP is likely to approach the stock market with an initial public offering, possibly in the first half of 2025, and the petroleum distributor will be going after $10 billion in equity capital.
Sources also say that WIP has been actively courting the brokerage community and institutional investors. But Chambers is downplaying talk that the company is going public.
“We raise capital in the market in many ways and work with a number of financial institutions. Some of these things would be public. We have publicly listed preferential (shares),” Chambers said.
Meanwhile, WIP and two former directors, Courtney Wilkinson and John Levy, remain locked in legal wranglings over payment for their 20 per cent stake in the bunkering and petroleum distribution company. Chambers said that while the lawsuits are not fully settled, WIP has “zero obstruction from doing the business”.
