Breakbulk Magazine: Issue 2 / 2016

ARCTIC INTEREST MELTS AWAY n BRAZIL’S FALL FROM GRACE n BREAKBULK EUROPE PREVIEW

ISSUE 2 / 2016

A N UBER- ST Y LE SERV ICE IS CREATED FOR HEAVY LIFTING

A RTIFICIA L

DRON E S T R A NSPORT

M A R K E T

WE

OOG CARGO

ESTABLISHES EQUILIBRIUM

COULD

BOOKING IS OPTIM-

3 D PR I N T PROJECT C A RG O

INTELLIGENCE

WHAT IF...

REAL TIME N ET-

IZED BY B I G DATA C A RG O

WOR K S

HANDLING BECOMES

LINK EVERYONE IN

AU TOM AT ED

THE SUPPLY CH A IN THROUGH

THE

CLOU D

THROUGH THE USE

OF

ROBOTIC S

GR APHENE IN C ONST RUCT ION DRASTICALLY REDUCES CARGO WEIGHT VIRTUAL REALIT Y SIMULATES MOVEMENT OF BREAKBULK CARGO IN A D VA N C E

EMBRACE INDUSTRY DISRUPTORS.

d ou Pr LN

GP M be em ce in rS 20

Visit us at Breakbulk Antwerp, Belgium May 24-26, 2016 Booth No 300H4

12

Es 4 00

2 t.

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Application: info@gpln.net www.gpln.net

contents

Cover Story

10

20 2016 ENERGY UPDATE

EMERGING DRIVERS

Developing Economies Dominate Energy Growth Forecasts

28 2016 ENERGY UPDATE

UNLOCKING A TRADE East African Oil and Gas Force Corridor Decisions

38 2016 ENERGY UPDATE

RUNNING ON EMPTY Power Supply Issues Stymie Progress on Projects

10 WHAT IF...

Embrace Industry Disruptors

46

60

46 SHIPPING TRENDS MELTING AWAY

Interest in Arctic Navigation Wanes

54 CARRIER PROFILE

SHUNNING THE HERD Finding New Ways to Combat Project Problems

60 REGIONAL REVIEW

A COLD WINTER

Russia’s Recession Brings Infrastructure Woes

BONUS CONTENT

BREAKBULK EUROPE 2016 PREVIEW

2016

On the Cover: mind illustration via Shutterstock / layout by Catherine Dorrough 4 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2016

Your strategic project partner Whatever trading, cargo and service requirement you have, BBC Chartering is pleased to provide you with the best possible resources and deliver a project specific service design tailored to your needs. Benefit from the world’s most trusted project chartering network, the market leading fleet of project carriers and a global project organization delivering highest service performance. www.bbc-chartering.com

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contents

66

72 PROJECT SPOTLIGHT

FROZEN, BUT FAST-GROWING

Project Cargoes Support Canada’s Mining Aspirations

78 CASE STUDY

WRECKING BALL

Challenging Times for Marine Salvage Industry

82 SPECIAL FOCUS

A VIP SHIPPER’S TALE

The Many Actors of Breakbulk’s Story

66 FALL FROM GRACE

Brazil Seeks to Regain Footing Amid Scandals

72

78

88 TRADE NOTES

CHINA RIDES ON STEEL WHEELS

Expertise, Financing Key in Securing Rail Projects

92 BEST PRACTICES

RECRUIT AND RETAIN Breakbulk Carriers Angle to Get, and Keep, Top Talent

92

98 PORT PROFILE

A CENTRAL ROLE

Port Corpus Christi’s Location Boosts Projects

8 Editorial: Child’s Play n 104 Price-only Focus a Strategy of Diminishing Returns n 105 Need for Pacific Northwest High-and-heavy Corridor 106 Raising Awareness of SOLAS Impact n 112 Breakbulk China 2016 Event Recap n 120 Breakbulk Africa 2016 Event Recap 122 Breakbulk Index n 126 Photo Contest Winner: City Transport 6 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2016

editorial

CHILD’S PLAY

I Gary Burrows

t appears Richard Shelby learned his lessons well from U.S. Senate Majority Leader Mitch McConnell.

Just as McConnell, R-Ky., is holding hostage the highest court in the land by denying consideration of a nominee from a sitting president, Senate Banking Chairman Shelby, R-Ala., is using the same flimflam to paralyze the U.S. Export-Import Bank.

Bloomberg reported on April 14 that Shelby snubbed McConnell’s call to advance a nominee to Ex-Im Bank’s board of directors to the Senate floor for a vote.Although Congress reauthorized the bank last fall as part of a massive transportation bill, only two of the five directors’ positions are filled, and three are needed for a quorum.

Until another director is confirmed, the bank can only finance deals of less than US$10 million, effectively blocking financing for major export projects that are the lifeblood of the breakbulk, heavylift and project cargo industry.

Shelby and the conservatives who support this gambit crow that Ex-Im’s project financing amounts to “corporate welfare” and “crony capitalism.” The bank has been opposed by conservatives in the Tea Party as well as the billionaire industrialist Koch Brothers, who donate handsomely to the GOP. Cronies indeed.

To the contrary, Ex-Im Bank financing has been instrumental in supporting transport projects throughout the country, and in 2014 it authorized about US$20 billion worth of transactions. The bank estimates that this funding helped to support about US$27.5 billion of U.S. exports and 164,000 U.S. jobs. The country’s largest manufacturers, such as General

8 BREAKBULK MAGAZINE www.breakbulk.com

Electric, Caterpillar and Boeing, know that without Ex-Im they will lose business to countries that offer similar if not more competitive financing alternatives.

McConnell and Shelby both voted against reviving Ex-Im Bank last year, which would have left it without authorization for the first time in its 81-year history. Now Shelby is threatening a fight if McConnell tries to sidestep Shelby’s committee and do his job for him.

Thus McConnell gets a taste of being on the other end of his sophisticated “I’ll take the ball and go home if I can’t get my way” strategy.

“As you may recall, I’m not a supporter of Ex-Im Bank, but 65 senators were,” he told reporters.

He’s incorrect; the actual number of supporters was 78, or almost 80 percent of the Senate. Oddly enough, that’s nearly the same share of Americans, in a range of polls, who say President Barack Obama’s Supreme Court nominee, Merrick Garland, deserves a Senate hearing and a vote.

Shelby’s Ex-Im stall tactic has more than US$10 billion in financing deals hung up, according to Sens. Maria Cantwell, D-Wash., and Patty Murray, D-Wash.

With the current struggles of oil and gas and other industries, there is not a better time for this valuable mechanism to spin more jobs and business benefits.

Instead, it’s hamstrung by yet another hack political ploy.

A Republican-controlled Congress was ushered in 16 months ago promising action. In the current whack-a-doodle U.S. political climate, with protectionism and anti-trade talk gaining prominence, the go-to GOP strategy has become total inaction. How do you defend a political scheme that could be performed just as effectively by Silly Putty?

It’s certainly not much of a stretch to see that sitting like a lump while the U.S. Ex-Im Bank smothers serves no one’s best interests.

EDITORIAL DIRECTOR Gary G. Burrows / +1 904 535 5460 gburrows@breakbulk.com NEWS EDITOR Carly Fields carly@breakbulk.com HEAD DESIGNER Catherine Dorrough DESIGNER Mark Clubb REPORTERS Paul Scott Abbott V L Srinivasan Alan M. Field Herman Trabish Lori Musser Mark Willis

BREAKBULK EDITORIAL BOARD John Amos Amos Logistics

Ed Bastian

BBC Chartering

Murray Cooper

McDemott International Inc.

Etienne de Vel Fednav Belgium

Dennis Devlin DB Schenker

John Hark

Bertling Project Logistics

Dennis Mottola Bechtel Corp.

William Moyersoen

ArcelorMittal Antwerp Logistics

Albert Pegg

Antwerp Port Authority

Dirk Visser

Dynamar D.V.

Grant Wattman

Agility Project Logistics

MANAGING DIRECTOR Alli McEntyre / +353 21 477 3808 amcentyre@breakbulk.com ACCOUNT MANAGERS Kathleen Pinson / +1 423 598 2264 kpinson@breakbulk.com Manager for West, East & North Africa Kingsley Ekweariri / +1 353 89 952 4754 kekweariri@breakbulk.com

SUBSCRIPTIONS To subscribe, email bb.breakbulk@adsg.info, or call from inside the US +1 855 613 8186 between 8:00 am and 5:00 pm CST. A publication of ITE Group plc Transport & Logistics business 105 Salisbury Road London NW6 6RG, UK.

ISSUE 2 / 2016

cover story

WHAT IF...

BY C A R LY F I E L DS

T

he relentless march of new technologies stops for no man, MPV, forwarder, or carrier. The next “big things” or self-proclaimed “breakthroughs” are popping up on the radar with worrying regularity.

Not all will be as unsettling as they proclaim to be, but woe betide the breakbulk industry stakeholder that underestimates the one disruptor that really does have the ability to live up to its moniker. Accurate assessment of which to cast aside and which to integrate into forward strategic planning will be critical if the industry is to prosper from this inevitable evolution.

Disruptive changes in technology and business environments have already transformed many sectors. A cursory glance at how the container lines and geared bulk carriers have aggressively targeted traditional multipurpose cargoes aptly demonstrates how influential an outside force can be on a business. So is it only a matter of time before the breakbulk industry is turned on its head by sources of both innovation and disruption?

The scope is broad and finding that one innovation with potential is no mean feat. Expect the emergence of disruptive technology anywhere innovation or process improvement can reduce cost, illuminate risk, or increase certainty of positive outcomes, suggested Bechtel’s Dennis M. Mottola.

Anything that can be lifted from the ground can be subject to disruptive technology, adds Etienne De Vel, commercial

10 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2016

dis•rup•tive in•no•va•tion /dis’rəptiv ,inə’vāSH(ə)n/ n.

A new emerging technology that unexpectedly displaces an established one.

Phrase coined by Clayton M. Christensen, Harvard Business School professor, in 2007.

Artificial intelligence may prove to be a disruptive innovation in breakbulk shipping.

Credit: Shutterstock

EXAMPLE:

www.breakbulk.com BREAKBULK MAGAZINE 11

cover story

WHERE CAN DISRUPTORS PLAY A ROLE IN THE BREAKBULK INDUSTRY?

» ROBOTICS

Automating breakbulk and out-of-gauge cargo handling

» ARTIFICIAL

INTELLIGENCE Maximizing breakbulk stowage plans

» BIG DATA

Optimizing the booking and quote processes for breakbulk cargoes

» DRONES

Offering an alternative mode for movements of out-of-gauge cargoes

» CLOUD TECHNOLOGY

Better real-time linking of all stakeholders in the breakbulk cargo chain

» DEVELOPMENT OF

ADVANCED MATERIALS (SUCH AS GRAPHENE) Traditional heavy-lift cargoes become lighter and can be carried by nonspecialists

» VIRTUAL REALITY

Offering the ability to simulate the movement of a breakbulk cargo in advance to pinpoint weak points in the handling chain

PICTURED: An artist’s rendering of

the atomic structure of graphene.

Credit: Shutterstock

12 BREAKBULK MAGAZINE

Photos: Shutterstock, BBC, Mammoet, Bertling, Fednav; Photo Illustration: Catherine Dorrough

manager of European services and director of Fednav (Belgium). “If we could know today which one it could be, we would take actions, but a lot will depend on politics, international rules and regulations, rates of exchange, environmental issue and production capacities.”

Some disruptors are closer than we think. The breadth and depth of available project information has exploded through Big Data. It’s not about logging on anymore, it’s about stakeholders having access to constantly streamed data.

And drones are becoming a reality for some shipping companies, albeit early tests have been limited to transporting cookies to ships.

“We see technology taking a larger share of our lives, and we need to recognize this as an important dynamic which also influences the way we do business,” said Raymond Fisch, senior vice president of public relations at BBC Chartering. “We are always interested to learn what the meaningful use cases for our industry are, and where such disruptive potential may turn into promising new opportunities.”

But there’s a caveat: the saying “whatever can be digitized will be digi-

Dennis Mottola

Raymond Fisch

Bechtel

BBC Chartering

tized” can be read two ways, he said.

“This saying indicates a process but it also indicates that digitization cannot be forced. Next to maturity, it requires vision and eventually much energy to create businesses that will eventually add value on such basis; certainly this is not for everyone.”

As an example, the booking process is one example that might hold some potential, but by itself, it cannot become disruptive without being tied to a service infrastructure, i.e. the vessels and their associated operations.

René Bomholt, a change management specialist in the shipping and cargo ISSUE 2 / 2016

cover story

WIDER ISSUES AT PLAY

Outside of the immediate industry there are examples of technological advancements that could, with a bit of imagination, be applied to any industry, including breakbulk. Advanced robotics, autonomous vehicles, and advancements in materials – such as graphene – all have a role to play.

Maturing cloud technology is a development to watch, according to BBC Chartering’s Fisch: “Although the project cargo industry innovates at a comparably slow pace, cloud technol-

ogy will bring new levels of information sharing, analytics and collaboration to the industry, and we are interested to learn where this can affect our business and represents an opportunity.”

Bomholt sees 2016 as a “breakthrough” year for virtual reality, but feels that innovations will be driven by the business-to-consumer sector before its potential can be realized in the breakbulk industry. Developments in artificial intelligence algorithms may be a more pressing area to watch. Artificial intelligence, or AI, could eventually be deployed to establish

Photos: Shutterstock; Photo Illustration: Catherine Dorrough

industry, sees opportunities where others may not.

“I think it is inevitable that something will come about and shake up the industry, and this will likely be driven by somebody from outside the industry that is able to see through the ‘we’ve always done this’ cloud,” Bomholt said.

He believes this disruption could come from anywhere; it just takes someone with the right idea and enabling technology to “spot a hole and plug it.”

That said, it’s unlikely to be one big disruption, but rather a number of smaller ones each targeting a specific area of the industry.

The main areas ripe for disruption, in his view, are accessibility and accuracy of quotes, linking of the multiple stakeholders involved in shipments, and contracting and finance transactions. At its core, shipping is René Bomholt about transporting cargoes from A to Change Management B, and that comes Specialist with two basic prerequisites: there needs to be goods to transport and a means of transporting them. The rest, said Bomholt, can potentially be changed, so any and every technology comes into play.

If an Uber-style service was created for heavy-lifting and transportation – in essence a crane company without any assets – it would have a significant impact on asset utilization and investments and ultimately value for breakbulk cargo owners. Breakbulk companies should have considered this development, but few have likely discussed it.

“It is inevitable that something will come about and shake up the industry, and this will likely be driven by somebody from outside the industry.” – René Bomholt

14 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2016

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the best market equilibrium based on supply/demand and improve relationships between carriers and shippers.

“Wouldn’t it be great to replace the gut feel pricing and personal relations of today with a powerful calculation engine that could get it right with more stability, less fluctuations, and possible longer term planning than today?” said Bomholt.

Under the AI bracket, Deep Learning is being phased in for Google’s search algorithm, replacing what was formerly done with rules. Think of this as Google search moving up to secondary or high school, akin to a maturing teenager with an insatiable thirst for knowledge.

Machines, it seems, are coming of age and there’s no shortage of machines in the breakbulk industry.

Advancements in and the evolution of technology are not the only potential

“Wouldn’t it be great to replace the gut feel pricing and personal relations of today with a powerful calculation engine.”

– René Bomholt disruptors looming over the breakbulk sector. Political and environmental issues also have the potential to severely disrupt business. The Paris climate accord and increased environmental responsibilities; the refugee crisis in Europe; political issues in Russia; and civil unrest in Northern Africa, to name but a few, all pose a significant threat of disruption. Geopolitical risks cannot be ignored in a global business.

With regards to the global refugee crisis, Bomholt said: “In a number of places this migration brings them onto water, notably in the Mediterranean Sea, in vessels that are not seaworthy. This puts pressure on the carriers as their vessels may be called upon to assist in the rescue of these people, which from a pure planning and financial aspect is a disruptor to daily business.

16 BREAKBULK MAGAZINE www.breakbulk.com

Credit: MX3D

cover story

PRINTING THE PATH TO ENLIGHTENMENT The ability to print in three dimensions isn’t new; the earliest 3D printing technologies first appeared in the late 1980s, known at that time as Rapid Prototyping, or RP, technologies. The first commercially available 3D printer went on sale in 2009.

But it was in 2012 that the real potential of 3D printing was realized, when alternative 3D printing processes were introduced at the entry level of the market. It was then that shipping companies started to take note.

In 2014, a well-known shipping line installed a 3D printer on board one of its ships, with the goal of instantly printing spare parts. It’s been quiet on the printer’s usefulness since then, which in itself speaks volumes.

But 3D printing is an industry in its relative infancy, and its constant development means that it is continually pushing boundaries, and consequently the items being printed are getting progressively larger.

Dutch company MX3D is using the technology to 3D print a fully functional, intricate steel bridge over the water in the center of Amsterdam (pictured above). In technical terms, MX3D is printing with 6-axis industrial robots, meaning it is no longer limited to 3D printing within the traditional square box. The possibilities, the developer claims, are endless.

While the marketing spiel needs

to be taken with a pinch of salt, this project is of serious interest to an industry committed to transporting out-of-gauge cargoes around the world. Can a 1,000-ton reactor, a commercial generator, or perhaps a wind turbine blade be printed?

Mammoet’s Jan Kleijn commented that while it seems like a long shot at this stage as we don’t know the boundaries of this technology, at some point it will “have a serious impact on our business.”

Bertling’s CIO and COO Andre Wedtstein acknowledged that 3D printing has the potential to “significantly reduce our volumes,” since products will be printed on demand at site instead of produced in a factory, shipped halfway around the globe and warehoused somewhere until required, tying up capital at the same time.

But where there is a cloud, there is a silver lining in the form of demand for the 3D printers themselves, which will need to increase in size to create bigger and more complicated products and be moved from production site to the destination. This will offer much needed work for underutilized multipurpose and heavy-lift carriers.

And the cherry on the cake? As 3D printing takes off, so too will demand for the raw materials to feed the printers, which will naturally find a home in containers or in the holds of bulk carriers, averting their attention from the spoils of the multipurpose industry.

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“The key question is: are we driving change, or does change happen to us? We must dare to change perspective and urge ourselves to rethink our business models.” – Jan Kleijn “I think the first call for help is a no-brainer, but once a company’s vessel has been called upon multiple times, it does become a financial/ethical dilemma whether to continuously allow these disturbances to operating a business, and my fear is that we will see vessels ignoring calls for help if the situation continues or worsens.”

WILLINGNESS IN SHORT SUPPLY

Disruptive innovations, technologies and developments are not going away, yet there appears to be limited willingness to pursue the “what if” angle in the breakbulk industry. This could prove to be a pivotal error. The argument is that if the industry does not take the lead on technological improvements, however disruptive they may prove to be, someone else – perhaps with an entirely different agenda – will.

“There are many opportunities,” said Mammoet CEO Jan Kleijn. “They require us to think differently. If we don’t take action somebody else will and be disruptive to us – despite all uncertainties, that is something we can be pretty sure of.

18 BREAKBULK MAGAZINE www.breakbulk.com

Jan Kleijn

Andre Wedtstein

Mammoet

Bertling

Should we worry about the next Uber Transport or Google cranes? I think we should. Should we embrace technology for innovation and improvement of safety in our industry? I think we must.

“The key question is: are we driving change, or does change happen to us?” he continued. “We must dare to change perspective and urge ourselves to rethink our business models. It is an obligation we have for the companies we lead, our customers and the communities we work in. Fact is that disruptive change is here to stay and eventually will

affect our industry too. We are challenged to embrace new kinds of thinking that help us innovate with the use of new technology.”

According to Bomholt, many in shipping have a hard time seeing this need for change and often only see it too late. “One trait of disruptive technology is that it develops exponentially and not in a linear fashion, so when you finally spot the rising water you’re already drowning,” he said.

But just because the appetite for these changes is weak, the arrival of such technology needn’t be viewed as negative. As Bechtel’s Mottola puts it, any disruptor that provides cost, risk and positive outcome improvements should be welcomed in an industry not known for its keen acceptance of technology or innovation improvements.

“I’m not concerned about the arrival of disruptive technology in the breakbulk and project cargo industry, I welcome it,” he said. “The sooner the better.”

Bertling’s CIO and COO Andre Wedtstein recognizes the resistance to change, but believes that as an industry with engineering at its heart, breakbulk and project cargo businesses have a hunger for curiosity that will allow them to adapt to whatever is thrown at them.

This flexibility is the result of some tough lessons learned. In the past the breakbulk industry has been criticized as being too focused on specific segments, in relative ignorance of the technologies emerging in other segments. Wedtstein highlights the failure to foresee the depths of the global downturn in oil and gas as an example of how narrow the focus has been in the past; the same can be said of disruptive technologies.

“The difficulty with disruptive technology is the exponential spread in the market – many new technologies appear on the market; it takes a lot of effort to identify those with ‘disruptive’ potential plus to maintain the flexibility in our organization to line up for the probability that it will change the world we are dealing in,” Wedtstein said. BB ISSUE 2 / 2016

Photos: Shutterstock, DHL; Photo Illustration: Catherine Dorrough

cover story

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2016 energy update

Wind turbines rise above the city of Jaisalmer, India. As global GDP increases, the drive to electrify will increase the shares of power generation that go to renewables.

Credit: Shutterstock

EMERGING DRIVERS BY HERMAN M. TRABISH

Developing Economies Dominate Energy Growth Forecasts

T

ectonic forces are at work in the energy sector this year, shifting the global energy landscape dramatically. A rising population is pushing demand for energy, but not from the traditional sources. That 20 BREAKBULK MAGAZINE www.breakbulk.com

renewables are expected to take up the slack from fossil fuels is not new thinking, but the rising importance of energy efficiency to fulfill some of tomorrow’s energy needs could change the focus for project cargo specialists. The world is beginning to realize the need to cut emissions opens big opportunities.

Global gross domestic product will more than double by 2035, driven by a world population increase of 1.5 billion to almost 8.8 billion, according to BP’s 2016 Energy Outlook (see ‘Macroeconomic Indicators’ graph on page 23). The population

growth accounts for one-fifth of the GDP and four-fifths comes from increased GDP per person.

Unprecedented energy efficiency advances, driven by innovative technologies that have dramatically improved energy intensity, will keep energy consumption growth to an estimated 34 percent in that period, but it still means a significantly increased energy need, especially in emerging economies.

Half the world’s population growth will be in Africa, but half the GDP growth will be in China and India.

Africa’s GDP growth and energy consumption growth to 2035 will be less than 10 percent of the global totals.

China’s slowing economy will reduce its 2025-to-2035 energy demand growth to 30 percent after it grew 60 percent from 2005 to 2015. India, however, will provide more than 25 percent of 2025to-2035 global energy demand growth, twice its 2005 to 2015 contribution.

Fossil fuels will be about 60 percent of the new energy supply and about 80 percent of the total energy supply in 2035, BP forecasted (see ‘Global Energy Production’ graph on page 22). That is a slight drop from 2015’s 86 percent of total energy.

More of the world, especially in India, Africa and Asia (outside China), will have access to electricity in 2035, as the share of global energy used for generation rises from 42 percent to 45 percent, representing half the increase in the world’s energy consumption.

The drive to electrify will increase the shares of power generation that go to natural gas and renewables.

Supplies of natural gas, and especially shale and liquefied natural gas, or LNG, will lead the way, growing at 1.8 percent per year. Oil use will grow at 0.9 percent per year as its share of overall energy use drops and the oil market supply-demand balance will reset.

An almost 20 million-barrels-per-day ISSUE 2 / 2016

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2016 energy update

increase in demand through 2035 will be led by Asia’s consumption in transport and industry. But China’s slowing economy will reduce its role.

Growth in global coal consumption will slow sharply to 0.5 percent per year, less than 20 percent of its rate since 2000. By 2035, coal will have its smallest ever share of global primary energy as natural gas becomes the world’s secondbiggest source of global energy.

Coal’s share of power generation will drop from 2014’s 43 percent to about 33 percent in 2035, while the non-fossil renewables share rises to 45 percent, BP forecasted.

Consumption of renewable energy, including biofuels, will grow at 6.6 percent per year and go from 3 percent of today’s total energy to 9 percent in 2035, according to BP. It will also supply one-third of new power generation in that period.

GLOBAL ENERGY PRODUCTION

Renewables will increase in importance.

5,000

4,000

3,000

2,000

1,000

0

1990

1995

2000

2005

2010

2015

2020

2025

2030

Total Oil Production 1

Total Coal Production

Total Natural Gas Production

Total Hydroelectricity Production

Total Nuclear Production

Total Renewables Production 2

2035

Total Biofuels Production

1. Oil Production is measured in million tonnes; other fuels in million tonnes oil equivalent.

2. Includes wind power, solar electricity and other renewables.

Source: BP Energy Outlook 2035

GLOBAL ENERGY CONSUMPTION Total production and total consumption are virtually identical.

20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

1990

1995

2000

2005

2010

million tonnes oil equivalent Source: BP Energy Outlook 2035 22 BREAKBULK MAGAZINE www.breakbulk.com

2015

2020

2025

2030

2035

FOCUS ON RENEWABLES

There is increasing awareness of the need for renewable energy, and energy efficiency, to address climate change and increasing awareness that this transition offers economic opportunities, according to the Renewables 2015 Global Status Report from the Renewable Energy Policy Network for the 21st Century.

Growth continues to be remarkable, driven by progressively competitive prices and strong, if inconsistent, policy.

Global renewables capacity without hydropower grew from 560 gigawatts in 2013 to 657 gigawatts in 2014. Investment grew from 2013’s US$232 billion to 2014’s US$270 billion and then jumped to US$328.9 billion in 2015, led by China, the U.S., and emerging markets around the world.

Renewables were about 58.5 percent of new global power capacity in 2014, and grew to an estimated 27.7 percent of the world’s electricity generating capacity, which would provide an estimated 22.8 percent of global electricity (see ‘Total Energy Supply’ graph on page 24).

About half of the world’s energy consumption in 2014 went to heat buildings and industry. Renewables, primarily biomass, supplied 8 percent of that. But bioheat production grew only 1 percent.

Liquid biofuel production grew 9 percent, driven by more opportunity in the transportation sector.

Over the last five years, geothermal power capacity has grown at an estimated average annual rate of 3.6 percent.

Here, the high cost of exploration and production continues to impede growth.

Ocean energy was unchanged in 2014 at 530 megawatts. Of these, tidal and wave energy technologies are the most advanced, but new installations continue to be primarily pilot or demonstration projects. The global solar photovoltaic industry added a record-setting 40 gigawatts of new capacity in 2014, bringing the world’s installed solar PV capacity to 177 gigawatts. In this sector, China, the U.S., Japan and the EU are the global market leaders.

Concentrating solar power, which uses different technologies than solar photovoltaic panels and captures the sun’s heat instead of its light, grew 27 percent in 2014 to a worldwide installed capacity of 4.4 gigawatts. Its high ISSUE 2 / 2016

MACROECONOMIC INDICATORS GDP is expected to nearly double through to 2040.

30,000 25,000 20,000 15,000 Real Gross Domestic Product

Real Exports

Real Imports

10,000 5,000 0

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billion 2009 chain-weighted dollars

Energy Intensity 7 Delivered Energy

Total Energy

6 5 4 3 2 1 0

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‘28

‘29

‘30

‘31

‘32

‘33

‘34

thousand Btu per 2009 dollar of GDP

Key Labor Indicators 190

8%

180

6%

170

4%

160

2%

150

0%

‘12

‘13

‘14

‘15

‘16

‘17

‘18

‘19

‘20

‘21

‘22

‘23

‘24

‘25

Left Axis (in millions) Nonfarm Labor Productivity (2009=1.00)

Labor Force

‘26

‘27

‘28

‘29

‘30

‘31

‘32

‘33

‘34

‘35

‘36

‘37

‘38

‘39

‘40

Right Axis Unemployment Rate

Source: U.S. Energy Information Adminstration, Annual Energy Outlook 2015 www.breakbulk.com BREAKBULK MAGAZINE 23

2016 energy update

TOTAL ENERGY SUPPLY

Crude oil production is expected to increase until 2020.

Production 110 100 90 80 70 60 50 40 30 20 10 0

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Crude Oil and Lease Condensate

Natural Gas Plant Liquids

Dry Natural Gas

Coal 1

Nuclear / Uranium 2

Conventional Hydroelectric Power

Biomass 3

Other Renewable Energy 4

Other 5

In quadrillion Btu, unless otherwise noted

ASIA STILL DOMINATES WIND

Consumption 110 100 90 80 70 60 50 40 30 20 10 0

2012

2013

installed cost makes it less competitive in many Western markets, but its ability to include thermal storage and generate power when there is no sun makes it appealing in markets where the cost of electricity is high.

Solar water heating seems to be a declining technology, as costs are not falling fast enough to keep it competitive with the rapidly falling costs of wind energy- and solar energy-generated electricity.

The world’s wind industry grew more new capacity than any other renewable energy in 2014, adding 51 gigawatts to reach a cumulative installed capacity of 370 gigawatts. Offshore wind added 1.7 gigawatts to reach a cumulative installed capacity of over 8.5 gigawatts (see ‘Global Wind Energy Forecast’ graph on page 26).

2014

2015

2016

2017

2018

2019

2020

2021

2022

Petroleum and Other Liquids 6

Natural Gas

Coal 7

Nuclear / Uranium 2

Conventional Hydroelectric Power

Biomass 8

Other Renewable Energy 4

Other 9

2023

In quadrillion Btu, unless otherwise noted Notes: 1. Includes waste coal.

2. These values represent the energy obtained from uranium when it is used in light water reactors.

The total energy content of uranium is much larger, but alternative processes are required to take advantage of it.

3. Includes grid-connected electricity from wood and wood waste; biomass, such as corn, used for liquid fuels production; and non-electric energy demand from wood.

4. Includes grid-connected electricity from landfill gas; biogenic municipal waste; wind; photovoltaic and solar thermal sources; and non-electric energy from renewable sources, such as active and passive solar systems. Excludes electricity imports using renewable sources and nonmarketed renewable energy.

5. Includes non-biogenic municipal waste, liquid hydrogen, methanol, and some domestic inputs to refineries.

6. Estimated consumption. Includes petroleum-derived fuels and non-petroleum-derived fuels, such as ethanol and biodiesel, and coal-based synthetic liquids. Petroleum coke, which is a solid, is included. Also included are hydrocarbon gas liquids and crude oil consumed as a fuel.

7. Excludes coal converted to coal-based synthetic liquids and natural gas.

8. Includes grid-connected electricity from wood and wood waste, non-electric energy from wood, and biofuels heat and coproducts used in the production of liquid fuels, but excludes the energy content of the liquid fuels.

9. Includes non-biogenic municipal waste, liquid hydrogen, and net electricity imports.

Source: U.S. Energy Information Adminstration, Annual Energy Outlook 2015 24 BREAKBULK MAGAZINE www.breakbulk.com

For the seventh year in a row, Asia – led by China – was the biggest growth market. The U.S. led the world in wind energy-generated electricity. GE, Siemens, and Vestas continued as the leading turbine manufacturers.

Asia will continue to dominate the global wind market through 2019, providing 40 percent to 45 percent of the annual global installed capacity and doubling its existing installed capacity by adding a cumulative 140 gigawatts over the next four years, according to the most recent forecast from the Global Wind Energy Council, or GWEC. China is expected to add 100 gigawatts by the end of 2019, reaching its target of 200 gigawatts by the end of 2020 target a year early. India’s target is 5 gigawatts annually through the end of 2020, but it is expected to fall short. GWEC foresees strong growth in Pakistan, the Philippines, Taiwan and Thailand. Japan and South Korea will grow more slowly.

Europe is expected to build about 70 gigawatts of new wind capacity through the end of 2019, led by Germany. The UK market is strong, but could be stalled by politics. Sweden and France are expected to continue a recent growth trend, while Turkey is expected to become a major market. Poland also has important growth potential. The ISSUE 2 / 2016

2016 energy update

GLOBAL WIND ENERGY FORECAST Wind is becoming an increasingly significant energy source.

700

70%

600

60%

500

50%

400

40%

300

30%

200

20%

100

10%

0

0%

2014

2015

2016

Left Axis (in gigawatts) Cumulative

Annual Installed Capacity

2017

2018

2019

Right Axis

Cumulative Capacity Growth Rate

Annual Installed Capacity Growth Rate

Source: GWEC

offshore segment of Europe’s wind industry is likely to continue its steady growth to reach a cumulative installed global capacity of 47 gigawatts by 2020.

Thanks to the five-year extension and phaseout of the U.S. wind industry’s US$0.023/kWh production tax credit, Bloomberg New Energy Finance expects an estimated 44 gigawatts of new capacity from 2016 to 2021.

Canadian growth is also likely to be strong, supported by the new progressive Trudeau government. However, Mexico’s 2 gigawatts-per-year target may be difficult for it to achieve.

Brazil’s existing contracts will lead to 12 gigawatts to 13 gigawatts of new capacity by the end of 2019, but the market is expanding, so that number could grow substantially. There is also likely to be growth in Chile, Uruguay and Peru, while smaller growth will come from Panama and Colombia. Political impediments will continue to make Argentina’s wind an untapped resource. Latin America is expected to add a cumulative 25 gigawatts through 2019.

Africa approached 1 gigawatt of annual installed capacity for the first time in 2014 and 1 gigawatt of cumulative installed capacity in 2015, led by South Africa and Egypt, with Morocco, Ethiopia, Kenya, Tanzania and Ghana emerging. In the Middle East, Jordan has started building, and Iran could be a significant market by the end of the decade.

26 BREAKBULK MAGAZINE www.breakbulk.com

If supporting infrastructure becomes available on schedule, Africa and the Middle East could add 13 gigawatts through 2019. Australia, New Zealand, and the Pacific region will not add more than 4 gigawatts in the same period.

NO ROOM FOR COMPLACENCY Government policies will determine whether the world continues along a business-as-usual path or shifts gears, according to the World Energy Outlook 2015 from the International Energy Agency, or IEA. It offers the most nuanced of the forecasts, but does not underestimate the tectonic changes in play.

World energy demand will grow no matter which way policy goes. Demand for electricity will increase 70 percent by 2040. In the IEA’s New Policies Scenario, in which renewables and energy efficiency are supported by policy and fossil fuel subsidies are withdrawn, global energy demand increases by 32 percent to 2040 but all the growth comes from non-OECD countries and OECD demand decreases 3 percent.

With the new policies, energy demand grows 1 percent per year to 2040, 50 percent below the average annual rate from 1990 to 2015. Greenhouse gas emissions from power generation grow at only 20 percent of the rate of the power generation increase to 2040. Renewables deployment from 2015 to 2040 is 3,600

gigawatts, more than the new generation from all other power sources combined.

Primary energy demand for all fuels grows to 2040, with renewables making up 34 percent of the growth, natural gas making up 31 percent, nuclear providing 13 percent of growth, oil only 12 percent, and coal only 10 percent. Growth of renewables and natural gas accelerates after 2025.

By 2040, renewables add 5 percent of global energy market share and natural gas and nuclear power each add 2 percent. Coal and oil lose 9 percent of their share of the global energy mix. Coal’s share of global electricity generation drops to 30 percent in 2040.

Even with the 70 percent increase in electricity consumption, 550 million people live without access to it. Renewables become the biggest source of power generation by the early 2030s. By 2040, renewables have a 50 percent share of EU power, a 30 percent share of power in China and Japan, and make up over 25 percent of power in the U.S. and India.

There will be an estimated US$68 trillion cumulative investment in the global energy sector through 2040 with 37 percent going to oil and gas supply, 29 percent to power generation, and 32 percent to energy efficiency. In the New Policies Scenario, more than 60 percent of the power generation investment is in renewables. China, the EU, the U.S., and India lead the investment.

Uncertainty continues to characterize oil markets. In the IEA’s Low Oil Price Scenario, oil prices stabilize at US$50 per barrel to US$60 per barrel until well into the 2020s before edging up to US$85 per barrel in 2040.

In this scenario, demand is pushed up to more than 107 million barrels per day by 2040, nearly 4 million barrels per day more than in the New Policies Scenario.

But oil producers and exporters are worse off because gains are more than offset by lower prices. More significantly, an estimated US$800 billion in energy efficiency investments do not happen without further policy development to drive efficiency. This means there is, the IEA notes, “no room for complacency.” BB Herman K. Trabish is a veteran reporter and regular contributor on energy generation, transmission and policy.

ISSUE 2 / 2016

2016 energy update

UNLOCKING A TRADE

East African Oil and Gas Force Corridor Decisions

BY ED OSTERWALD AND TOM DIMITROFF

W

hile United Nations demographic projections show developed country populations are stabilizing, and in some instances falling, Africa, and Sub-Saharan Africa in particular, is projected to grow explosively from slightly more than 1 billion today to 2.5 billion by 2050.

In order for per capita gross domestic product to maintain pace with population growth, Sub-Saharan African countries will need to intensify their ability to attract inward investment and promote trade in commodities including oil, gas and related products and manufactured goods.

Unfortunately, the African continent has the largest collection of landlocked countries in the world, at 16. Developing rail, road and pipeline networks that link “dry inland ports” to coastal ports is therefore essential.

Enabling the import and export of goods from landlocked countries via coastal states requires the development of international and domestic laws targeted to support trade and investment and demonstrating transparency and good governance. It also requires large-scale investment in

The Sasol Petroleum International Gas Pipeline has allowed Mozambique to be an exporting country, sending about 80 percent of its natural gas production to South Africa.

Credit: SASOL / Wikimedia Commons 28 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2016

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2016 energy update

9

10

2

K ENYA 5

4

12

6

L A P SSE T L a mu

14 11 3

KENYA

Tan ga Dar e s S alaam Mtwara 15

M omb a s a

TANZANIA

8

MOZAMBIQUE

16 1 13 7

S as ol P et rol eum In t er na t i ona l Ga s P i p el i ne

LANDLOCKED COUNTRIES IN AFRICA: 1 Botswana 2 Burkina Faso 3 Burundi 4 Central

African Republic

5 Chad 6 Ethiopia 7 Lesotho 8 Malawi 9 Mali 10 Niger

11 Rwanda 12 South Sudan 13 Swaziland 14 Uganda 15 Zambia 16 Zimbabwe

Bag a moy o

MOZAMBIQUE

Africa map via Shutterstock; graphic by Catherine Dorrough

infrastructure needed to support the development of trade and logistics corridors.

The African Development Bank has identified nine trade and logistics corridors, constituting 35,000 miles of roads and related transport infrastructure, as critical to unlocking Africa’s potential for economic growth.

East Africa may be one of the first regions in Sub-Saharan Africa to develop, finance and implement one or more trade and logistics corridors. Oil and gas production, transportation and refining infrastructure will likely function as the anchor investments required to unlock broader investment in port, power, rail, road and related infrastructure that will form the backbone of future East African trade and logistics corridors.

The African Development Bank estimates the scale of combined trade and investment to be about US$1 trillion. In other words, the commercial imperatives of the oil and gas industry 30 BREAKBULK MAGAZINE www.breakbulk.com

will initiate the implementation of legal regimes and the physical infrastructure that will simultaneously enable significant growth in the international trade of agricultural commodities and a host of downstream products. If the requisite infrastructure is developed holistically and managed with constant attention to the needs of the locally impacted communities, the benefits to the region can be transformative.

KENYA’S TRADE LIFELINE Mombasa, Kenya, has the largest cargo port in East Africa. It serves 33 shipping lines and is a lifeline for dry cargo and fuels trade into and out of seven landlocked East and Central African states – Ethiopia, South Sudan, Central African Republic, Democratic Republic of Congo, Uganda, Burundi and Rwanda – to 80 countries. The capacity grew sharply from 2005 to 2014, increasing from 13.2 million tons per annum to 25 million tons per annum.

Unfortunately, Mombasa Port is

congested and inefficient and new port capacity is required. Similarly, the Tanzanian port of Dar es Salaam is also congested and inefficient. According to the World Bank, the trade costs associated with moving cargo between China and Tanzania are 60 percent higher than those between China and Brazil (while Tanzania is half the distance).

The development of additional East African port capacity has been under consideration for some time. In addition to expanding the Mombasa Port, the Kenyan government has promoted the construction of a greenfield port at a site in Lamu, north of Mombasa, and has entered into contractual arrangements with a Chinese contractor to build three berths there. On the other hand, Tanzania is considering expanding capacity at Dar es Salaam, Tanga and Mtwara ports and/or developing greenfield port sites at Bagamoyo.

The Lamu and Bagamoyo sites and the port expansions would require significant cargo in the initial years to underpin their bankability. Additional port capacity would enable trade and logistics corridors to develop to unlock access to export markets for trade in oil and gas products, agricultural products, livestock and other commodities. Road upgrades, a new-build standard gauge railway line to support corridor development and new power generation capacity for the port will all require large-scale investment.

Fortunately, international oil companies have discovered and developed large-scale onshore oil reserves in Uganda along the east coast of Lake Albert. In addition, international oil companies have also discovered, and are now de-risking, what appear to be significant, albeit smaller-scale, reserves in Kenya near Lake Turkana. Each of these production basins is located inland and will require the development of a largescale, cross-border crude oil pipeline to export via the Indian Ocean.

Twenty-one oil and gas discoveries have been made in Uganda’s Albertine Graben located along the east coast of Lake Albert. Three main productionsharing agreements have been signed between the government of Uganda and Tullow Uganda Operations Pty Ltd., Total E&P Uganda and China ISSUE 2 / 2016

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2016 energy update

STEADY GROWTH IN EAST AFRICA 350 300 250 200 150 100 50 0

2000

Ethiopia

2001

2002

Kenya

2003

2004

2005

2006

Mozambique

2007

2008

2009

Sudan and South Sudan

2010

2011

Tanzania

2012

2013

Uganda

1,000 barrels/day / Source: U.S. Energy Information Administration International data, Feb. 23, 2016

LANDED PRICE FOR LNG Prices fell significantly between May 2013 and January 2016.

COUNTRY

MAY 2013

India Korea China Japan Spain US

JAN. 2016

$14.40 $5.70 $14.95 $5.75 $14.55 $5.60 $14.95 $5.75 $11.78 $5.23 $3.79 $2.13

Calculated in US$/millions of British Thermal Units Source: FERC https://www.ferc.gov/market-oversight/mkt-gas/overview/ngas-ovr-lng-wld-pr-est.pdf

National Offshore Oil Corp. Uganda Ltd. Appraisal of 17 of these discoveries has been completed and field development plans for production of the 2.5 billion barrels of recoverable waxy oil are in place and awaiting an export solution.

Moreover, the international oil companies appear to be aligned with the Uganda government on the terms required to execute and fund the requisite crude oil export pipeline.

A QUESTION OF ROUTING Kenya has long promoted a trade and logistics corridor concept to link oil production from neighboring South Sudan and trade export from Ethiopia to a newbuild port at Lamu, known as Lamu Port South Sudan Ethiopia Trade corridor, or LAPSSET. However, with the outbreak of 32 BREAKBULK MAGAZINE www.breakbulk.com

civil war in South Sudan on Dec. 15, 2013 and the discovery of crude oil in the Turkana Rift Basin by Tullow Oil on March 26, 2012, Kenya’s priorities shifted.

A crude oil export pipeline linking Ugandan production to the Kenya production at or near Lokichar and running to the new port at Lamu makes sense.

The geology of the Turkana Rift Basin and the Albertine Graben is similar with both yielding a waxy crude, therefore both requiring and benefitting from the same, heated pipeline solution. Economies of scale associated with adding about 85,000 barrels per day to a heated pipeline from Uganda transporting about 200,000 barrels per day to Lokichar to flow into a pipeline to Lamu – offering a combined capacity of up to 300,000 barrels per day – would result in lower tariffs for all shippers.

Unfortunately for Kenya, the Ugandan upstream development is more advanced and the balance sheets of the international oil companies operating in Uganda are stronger than those in Kenya. In addition, the initial engagement of international oil companies with the Kenyan government and its own engagements with the Uganda government have thus far failed to yield satisfactory results. Meanwhile, press reports suggest that Total has recently raised security concerns with Kenya’s Northern Corridor to Lamu that has called into question the commercial viability of the route.

The Kenyan government now appears to recognize that it needs to reset its approach to the international oil companies, Uganda and related stakeholders to rectify the situation.

Moreover, private sector infrastructure developers have already taken steps with the relevant Kenyan County Governors and the various communities in the Northern Corridor to identify needs and prepare measures targeted to address those needs in terms of opportunities for sustainable social investment, environmental protection and positive social impact.

It is important to note that long stretches of the Kenyan Northern Corridor pipeline route are through arid and sparsely populated areas. Accordingly, routing a pipeline through the Northern Corridor would minimize the disruption to existing agricultural activities, productive land uses, and communities. Assuming that the Kenyan public security forces are deployed in a manner that is responsive to the needs of the local community as well as to those implementing and operating the infrastructure, there is no reason why Total’s security concerns cannot be addressed in a manner that would allow peaceful and safe pipeline operations.

Nevertheless, Total has become frustrated with the lack of progress on the Kenya route. As a consequence, in July 2015 it commenced an analysis of an alternative oil export route from Uganda across Tanzania to an expanded port at Tanga. Significant progress on the development of this route appears to have been made with transit terms reportedly agreed in principle with Tanzania.

However, while the Kenya route may face security challenges, a Tanzanian route raises challenges of its own. For instance, about 38 percent of Tanzania’s land area has been set aside, pursuant to various international protocols and domestic legislation in protected areas for conservation, making the construction of linear infrastructure from the African Great Lakes region to the coast a daunting prospect for private developers, even with government backing. Much of Tanzania’s remaining land is presently under cultivation, complicating access to rights for wayleaves and associated permits to construct and operate.

ISSUE 2 / 2016

2016 energy update

FACING A TOUGH CHOICE

A team of Ugandans and Americans assesses Uganda’s railway infrastructure.

Credit: US Army Africa / Wikimedia Commons

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34 BREAKBULK MAGAZINE www.breakbulk.com

Uganda has a difficult choice, with Total in turn having to then make a commercial decision based upon this Ugandan-led political settlement.

Uganda can snub Kenya – its largest trading partner and regional investor – and pursue the Tanzania route, or it can take whatever terms it agrees with Tanzania and leverage those for a better deal with Kenya.

An overarching set of additional interests will also bear upon this decision. These include an infrastructure memorandum of understanding signed by the U.S. and Kenya on July 24, 2015 during President Obama’s visit to Kenya, which referenced U.S. support for Kenya’s Northern Corridor route to Lamu, and offered Kenya various forms of U.S. bilateral support. Also, a Tanzanian route excludes Ethiopia

2016-01-15 2:43:55 PM

ISSUE 2 / 2016

and potentially South Sudan and the Central African Republic from access to the trade and logistics corridor that will emerge along the same route and with the same terminus as the oil export pipeline.

Whatever decision Uganda makes, the implementation of an oil export pipeline to the Indian Ocean carrying at least Ugandan oil production via Lamu or Tanga is highly likely.

Moreover, the timing for East Africa infrastructure development could not be better with services costs, steel costs and bulk cargo rates all down due to the drop in oil prices. Lower cost frontend engineering design studies may proceed to de-risk the projects in anticipation of final investment decisions on full capital expenditures in two to three years, once the oil and commodity markets have presumably stabilized and recovered.

Unfortunately, international market circumstances and available international institutional debt earmarked for East Africa will not support the development of two parallel and heated crude oil export pipelines. Accordingly, the decisions reached today will not only unlock upstream production, but they will also shape the development of the emerging East African trade and logistics corridor – as well as the countries that may benefit from it.

include Uganda at its Hoima Refinery, as well as in South Sudan. Of these sites, the Ugandan refinery site is the most advanced. The rights to build the refinery have been awarded to a consortium

of companies led by Russian-owned RT Global Resources.

In East Africa, significant natural gas discoveries have been made in only two countries: Tanzania and Mozambique.

EAST AFRICAN REFINING NEEDS East Africa is also short in refining capacity. Since expensive fuel imports are used to balance supplies, it is clear that the development of East Africa’s oil resources should be accompanied by more local refining capacity, together with infrastructure (probably road, product pipelines and rail) to deliver products between countries.

Although these countries have existing nameplate refining capacity of 225,000 barrels per day, that utilization is quite low, based upon publicly available information. Thus very expensive product imports are essential to meet demand. Although numerous greenfield refinery projects have been announced in recent years, progress on implementation has been slow. Locations for future refinery developments being considered

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2016 energy update

Between these two countries, Mozambique has the potential to become a significant and more immediate regional and global player. However, as 150 billion cubic meters per year of liquefied

natural gas, or LNG, has been added to global supplies since 2014, largely from Australia, and an additional 75 billion cubic meters per year is awaiting a final investment decision in 2018 to 2020,

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new LNG projects from East Africa will need to wait, likely behind the U.S., the East Mediterranean and Canada, before coming on stream. The supply situation has also exacerbated the landed price for LNG globally.

In view of foregoing market dynamics, final investment decisions for the full development of the offshore reserves and associated LNG liquefaction, storage and export facilities in Mozambique and Tanzania will likely be delayed into the 2020s.

Tanzania consumes all the gas it is producing – about 35 billion cubic feet in 2013. Since estimated discoveries of 16 billion to 17 billion cubic feet of recoverable resources were made in offshore southern Tanzania in 2010, Tanzania has planned to become an LNG exporter in the future, but so far none of the required development has been sanctioned. Those plans have been delayed, and will most probably continue to be delayed. Moreover, due to the absence of infrastructure to transport natural gas to any of its neighboring countries, LNG seems to be the only viable export solution for Tanzania.

In contrast, Mozambique is already an exporting country, sending about 80 percent of its natural gas production to South Africa via a 900-kilometer crossborder gas pipeline owned and operated

by Sasol Petroleum International Gas Pipeline. Mozambique also has largerscale proven reserves of more than 100 trillion cubic feet, making it Africa’s third-largest country of natural gas reserves, behind Nigeria and Algeria.

Anadarko and ENI have made significant progress to develop and export these reserves via LNG. However, the Mozambique developments still require key milestones to be achieved, such as securing the financing and transforming non-binding Heads of Agreements into binding Sales and Purchases Agreements. These milestones will be particularly difficult to achieve in the current economic environment.

Mozambique is therefore looking to expand its pipeline exports, which could be seen as both a mitigation and diversification from its delayed LNG plans. Earlier this month, Mozambique signed a cooperation agreement with South Africa to build a 2,600-kilometer

36 BREAKBULK MAGAZINE www.breakbulk.com Breadbox_117x187_portrait.indd 1

ISSUE 2 / 2016 02-02-16 11:47

pipeline from the Rovuma basin offshore Mozambique to South Africa. As announced by the project’s partners, this development could also benefit other countries in Southern Africa. The expansion of cross-border gas export capacity will be useful to underpinning expanded port capacity in Mozambique, particularly in Maputo and Nacala as well as greenfield port projects such as Palma.

Considering the scale of discoveries made in Tanzania and particularly in Mozambique in the last six years, gas production could certainly underpin domestic energy needs for Tanzania and Mozambique as well as other Southern African countries, such as South Africa.

While large scale LNG export is only likely to indirectly benefit other East African countries, there is some scope for regional trade in LNG through floating LNG. If managed properly, large scale oil and gas discoveries in East Africa can underpin larger scale trading activities and growth potential for multiple landlocked countries. At a minimum, oil and gas investment will be required to develop the upstream production, one or more newbuild and/or existing refineries and gas export, including by cross-border pipeline as well as LNG. Given prevailing market dynamics, and assuming that the relevant governments are able to make effective decisions and engage constructively with locals, a sequence of infrastructure investments in East Africa should be anticipated.

The oil-related investment will be kicked-off with the definitive selection of an export route, the development of a master-planned port and associated trade and logistics corridor and the development of a newbuild refinery in Homia. The expansion of existing cross-border gas pipeline capacity from Mozambique to South Africa will likely proceed in the short term, although larger-scale gas production and LNG export will likely be delayed into the 2020 timeframe. BB Ed Osterwald is a partner with CEG Europe, based in London with expertise in oil, gas and chemicals.

Tom Dimitroff is a founding partner with IDP and has 18 years of global experience

as a lawyer, negotiator, risk analyst and business strategist working on upstream and mid-stream oil and gas infrastructure projects across Africa, the Middle East, the FSU and North America.

Don’t miss Ed Osterwald’s Energy Outlook at Breakbulk Europe!

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2016 energy update

Power Supply Issues Stymie Progress on Projects

RUNNING ON EMPTY simple enough equation, but one that is causing havoc in Africa.

Lonnie Tiegs, vice president projects Africa for True North Operations Group, puts it plainly: “Power has, is and will likely continue to be a constraining issue to African development for the near future, from the perspective of availability and/or price.”

There are numerous factors affecting the African energy sector.

Many African countries lack base load power and governments and utilities are not in a financial state to fund power projects.

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ISSUE 2 / 2016

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2016 energy update

biggest in the world within the next 10 years with estimates of 12 million tons of platinum being produced annually – was only taken once confirmation had Credit: KIM been received that the LUDBROOK/EPA/ Medupi power station Newscom would be constructed.

This guarantee came after lengthy discussions with the country’s power utility, Eskom. The first phase of mining will start in 2019, he said, in line with when Medupi is expected to finally be up and running.

With its mining sector struggling, this mine is good news for South Africa, as it will allow the country to boost its status as a prime platinum producer.

Friedland said discussions with Eskom were a crucial part of the process to bring the mine to fruition.

“Thank God for Medupi, which is finally starting to get under way,” he said. “Power delivery is critical to a project of this scale. More so, it is critical to South Africa’s economic development.

The country has to have enough electricity to support projects this large.”

A bartender prepares drinks by candlelight as a rolling blackout affects large parts of Johannesburg, South Africa.

Lonnie Tiegs

Asami Miketa

True North Operations Group

International Renewable Energy Agency

While the definition of crisis is relative, as there are vast differences between power supply in the different countries, as many as 30 countries in Africa have recurrent electricity outages and load shedding is the norm.

“One in two firms in sub-Saharan Africa consider electricity supply a major constraint for their business.

Power shortages push industrial plants to resort to expensive diesel generators as a secondary source,” said Asami Miketa, program officer, energy planning for the International Renewable Energy Agency.

It is estimated about 600 million people in Africa do not have access to electricity, particularly in Central and 40 BREAKBULK MAGAZINE www.breakbulk.com

East Africa where three-quarters of the population lack access.

In 2008 South Africa, with one of the most advanced power systems on the continent, introduced load shedding, with intentionally engineered electrical power shutdowns. This resulted in widespread blackouts when power consumption overtook power generation capacity. This was despite the authorization of the construction of two large coal-fired plants at Medupi and Kusile to fill the gap in supply.

With construction of both started in 2007 it was understood that the problem would be temporary. Nine years later and neither the Medupi nor Kusile power stations are yet online. Delayed and grossly over budget, the long-awaited power relief has yet to be introduced.

“The only reason the country hasn’t been experiencing continuous rolling blackouts since 2008 is critical maintenance on existing generation capacity was delayed to increase uptime,” said Tiegs, “and economic growth in the country has slowed sharply.”

The project sector itself has come to a near standstill in the face of uncertainty about power.

Robert Friedland, executive chairman of Ivanhoe Mines, said the decision to move ahead with a new platinum mine in South Africa – set to become the

SHORTAGES ACROSS THE CONTINENT Ghana has been experiencing severe power shortages since 2012. In January, Power Minister Kwabena Donkor resigned after failing to resolve the power crisis. As one of the fastest-growing countries in Africa, this oil producing nation had big expectations. But low commodity prices and its energy crisis has significantly slowed growth. Exports of gold, cocoa and oil have all decreased significantly.

In 2014, Ghana created the Ministry of Power in an effort to address blackouts, but little has happened to really address the challenge and its project sector has suffered as a result. The drop in the oil price has further compounded the issue.

Zambia, as a result of not erecting new hydropower capacity, has been plunged into a power crisis just as its decade-long copper boom came to an end, while Zimbabwe is generating only half the energy its much-reduced ISSUE 2 / 2016

2016 energy update

economic activity requires, effectively stopping any opportunity for the country to move itself forward.

Botswana has seen major energy shortages due to issues with its new coal-fired power plant, and in Malawi there are significant shortages despite its lack of industrialization. Tanzania is experiencing a severe drought affecting its hydropower generation and delays in bringing gas-fired generation capacity online continues. Nigeria has a crisis of its own due to installed generation capacity being out of service, while Cameroon is struggling to end power blackouts on the back of issues with maintenance.

According to Zaheera Ahmed, research associate for energy and environment at Frost & Sullivan, there are many countries actively trying to mitigate the lack of power through the involvement of the private sector, but aged infrastructure and lack of funding remain serious challenges.

“African countries are just not able to operate at design capacities, further decreasing the availability of power,” she said.

According to Miketa, investment needs in the African power sector between 2015 and 2030 are estimated to average US$70 billion per year, which includes US$7 billion for hydro, US$250 billion for other renewable generation technologies, and US$25 billion for transmission and distribution lines.

“Institutional capacity to plan, build, operate, and monitor the energy sector development is key to attracting finance, to use and manage it efficiently, and to avoid expensive short-term solutions,” she said.

POWER CHALLENGES OF PROJECTS

AFRICA’S RENEWABLES FUTURE Modern renewable energy use in the African continent is limited to 5 percent of the total final energy use, and limited to industrial biomass residue use and hydro-power generation, according to Africa 2030, a recent International Renewable Energy Agency analysis.

But by 2030, modern renewable energy could deliver as much as 22 percent of Africa’s final energy demand, quadrupling from the current level.

“Renewable energy can play a role in delivering energy across sectors and across countries.

According to Africa 2030, about 40 percent of renewable energy technology potentials are in the power sector, while the remainder is in heat and cooking,” said Asami Miketa, program officer, energy planning at the agency. “The right technology solutions differ reflecting the different resource potentials. Across the continent, hydro, wind and solar are the three most important technolo-

Wind turbines such as these near Gouda in the Western Cape are becoming a familiar site in Africa.

gies for power generation, while solar thermal technologies, as well as improved cooking stoves, are the key solutions for the heat and cooking technology applications respectively.”

To meet the growing electricity demand and to address the challenges of access to electricity, the installed capacity for Africa – about 160 gigawatts – needs to be significantly scaled up.

“Our assessment is 610 gigawatts of generation capacity is needed. Out of 610 gigawatts, up to 310 gigawatts could be supplied by renewable power – this is eightfold increase from the 2013 level. Wind, solar and hydro would account for nearly 100 gigawatts each. In 2013, only four main sources of electricity were used to generate electricity: coal, oil, gas and hydro. By 2030, wind, solar photovoltaics and concentrated solar power would further help to diversify the mix,” she added.

The role of renewable energy is not just about delivering energy.

It is also an important indigenous energy resource that can contribute to the diversification of energy sources and reduce the dependency on imported fuels.

Decentralized renewable resources can be harnessed locally at a small scale, contributing to rural development and electrification, offering economic opportunities and empowering local communities.

Projects are taking a hammering from this inadequate energy supply market.

“There are a lot of stranded resources and not much is happening to change this as it is just too costly. Power is a concern,” said Paul Runge, director projects and development with African project specialist consultancy, Africa House. “ ‘Mine mouth’ [power generation] projects are increasing and becoming a very strong trend in Africa. This is simply because these projects have no prospects of linking into grids and so they have to 42 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2016

2016 energy update

to support specific projects, and many projects could afford to generate their own electricity. But the end of the commodity supercycle has all but closed this alternative energy generation avenue.

Here, Mozambique is a case in point, said True North Operations Group’s Tiegs. “There have been coal-fired power plants on the drawing board for several years, but construction has been delayed due to the cash crunch the coal industry currently finds itself in.

So even though thermal coal is stockpiled and ready to be fed into a furnace powering a boiler, a turbine and generator, capital funding for building these power plants has not been forthcoming due to the extremely poor economics of coal and, specifically in Tete’s case, the

Power supply is not as connected as it should be in Africa.

find ways and means of generating their own power supply,” Runge said.

But this trend has become problematic in the current tough economic climate.

As commodities boomed there was funding available to develop the necessary electricity and logistics infrastructure

44 BREAKBULK MAGAZINE www.breakbulk.com

complicated logistics of exporting their premium coking coal.”

Coal mine projects have therefore slowed significantly and big players have walked away.

The factors that have impacted the project sector are vast and varied, and while it would be unfair to lay it all on the power crisis, power is certainly a critical element. With more and more projects needing to incorporate power generation into their budgets, it is becoming more problematic to get them off the drawing board where base power is essential and not forthcoming.

“Those projects are just not going up as they are just priced out of the market simply because the element of own power generation makes it too costly,” said Africa House’s Runge.

Hybrid and diesel generator systems, once a cost efficient alternative, are also

ISSUE 2 / 2016

becoming more expensive. Projects that have to pay for power generation pass those costs onto the consumer, leading to a reduction in that project’s competitiveness. Delivering power in remote areas using generators significantly runs up the bills. In the early stages of setting up Anardarko’s Mozambique gas field operations, the project ran off three large generators.

LIGHT AT END OF THE TUNNEL Improvements in technology offer promise, as existing and commissioned projects push to come up with solutions that bring the costs of power generation down.

“Through technology, that will soon be available in Africa, sophisticated batteries and control systems are added to these generator sets running at camps to hybridize it. So excess electricity is stored

in the batteries, ultimately manufactured goods econallowing the project to run off omy or anything else that less generators and to do so requires stability.”

“We have more efficiently,” Tiegs said.

African countries are come up Indeed, people are comgoing to have to deliver with the ing up with answers to the stable electricity supply if answer power crisis in the project they want to continue ecosector all the time, accordnomic growth and develop but it ing to Scott Taylor, project their projects sectors. While precludes manager for Crane Worldthere are major power projgrowth.” wide Logistics. “We have ects underway – Medupi and come up with the answer but Kusile in South Africa being – Scott Taylor, it precludes growth. Right two and the Inga hydroProject Manager, now we are able to sustain electric dam project in the Crane Worldwide our Mozambique operations Democratic Republic of the Logistics on backup generators and Congo being another – the reduced hours, but that is process needs to speed up. based on an economy reliant “We are taking far too on the importation of goods and export long to deliver power projects to the detof raw materials,” he said. “As long as riment of the rest of the power sector and electrical supply is a standing issue we ultimately the economic growth of counwon’t see the opportunity to move to a tries on the continent,” Runge said. BB

www.breakbulk.com BREAKBULK MAGAZINE 45

shipping trends

Interest In Arctic Navigation Wanes

MELTING AWAY

I

t’s been touted as the route with the most potential to impact global trade, but the Arctic’s Northern Sea Route seems to have lost some of its luster.

While the melting of Arctic ice continues to give environmentalists sleepless nights, shipping companies have been able to overlook the global ramifications of climate change to revel in the promise of a shortened shipping route, shaving an average of 4,500 miles off a journey from East Asia to Northern Europe.

However, the initial and swelling hype around this route has eased off just as global oil prices have dropped off a cliff. Crude rates in the mid-US$30s have stymied Northern Sea Route, or NSR, transits on two counts.

Firstly, at this pitiful price oil exploration has been curtailed, particularly in high-cost, high-risk regions such as the Arctic. Less oil exploration equates to less business for breakbulk operators.

Secondly, low oil rates bring lower marine fuel rates: the price for 380 centistoke intermediate fuel oil in Houston was US$154 per tonne at the end of March. It was US$301 per tonne a year previous. This near-halving of bunker fuel costs has meant that breakbulk carriers have throttled back on plans to utilize the NSR. 46 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2016

PhotoXpress/ZUMA Press/Newscom

BY CARLY FIELDS

shipping trends

The first Chinese cargo ship to complete the Northern Sea Route arrives in Rotterdam in 2013. / Credit: ROBIN UTRECHT/EPA/Newscom

48 BREAKBULK MAGAZINE www.breakbulk.com

declining tonnage.” That said, Kinsey expected fuel prices to rebound, and that, in combination with the continued retreat of the ice shelf, will support the concept and the implementation of the NSR going forward.

YEAR-ROUND ARCTIC TRANSITS Hansa Heavy Lift is a carrier that has high hopes for the eventual year-round opening up of the Northern Sea Route.

To date, the carrier has used the route 11 times, saving time, money, fuel and increasing security by avoiding piracy regions. All of its ships are ice classed to E3, the highest ice class for a non-icebreaker. These ships can navigate through one-meter-thick ice and operate in temperatures as low as -19 degrees Celsius.

A “significant part” of HHL’s business in 2016 will involve the NSR, said Joerg Roehl, HHL’s chief commercial officer, especially in light of large projects that are planned in the Russian territory area, where the carrier has won sizeable contracts. A good part of this work will be navigated through the NSR. The time saving is significant: up to

NSR INTEREST WANES Number of NSR transits sinks to low of 18.

80 70

NUMBER OF SHIPS

Data from the Northern Sea Route Information Office confirmed the sharp drop in interest. In 2015 just 18 ships made the transit, carrying a total of 39,586 tonnes; only three were carrying project cargoes. In 2014, those figures were 31 ships and 274,103 tonnes; in 2013, 71 ships made the transit carrying 1.4 million tonnes.

Lower fuel prices have impacted both the expansion and utilization of the Northern Sea Route, agreed Capt.

Andrew Kinsey, Capt. Andrew senior marine Kinsey risk consultant at Allianz Global CorAllianz Global porate & Specialty.

Corporate & Specialty “We are now seeing vessels making the back-haul trip to Asia via the Cape of Good Hope rather than through the canals. If traditional trading routes are being impacted, then the Northern Sea Route will surely see

60 50 40 30 20 10 0

2011

2012

2013

2014

2015

Source: Northern Sea Route Information Office

20 days depending on where you start the voyage.

However, Roehl acknowledges that the savings are not as great as they once were and rock-bottom bunker prices have reduced the need to find innovative ways to slash fuel consumption.

And there are still sizeable expenses to consider: aside from the ice-strengthening of ships – which can add 20 percent to the price of a newbuild – offiISSUE 2 / 2016

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shipping trends

ARCTIC CIRCLE CASUALTIES Number of reported incidents has increased for four years.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 TOTAL

Machinery damage/failure Wrecked/stranded Miscellaneous Fire/explosion Collision Contact (eg Habor wall) Hull damage Foundered TOTAL

3 5 13 14 16 12 13 20 27 46 169 4 10 11 14 9 9 8 10 14 6 95 – 5 1 4 4 2 6 5 5 6 38 – 3 1 2 6 6 1 4 2 4 29 – – 1 4 10 4 4 2 – 3 28 – 1 1 1 3 1 3 6 4 5 25 1 3 1 6 2 2 1 2 1 1 20 – 1 1 2 – 3 1 1 2 – 11 8 28 30 47 50 39 37 50 55 71 415

Source: Lloyd’s List Intelligence Casualty Statistics, AGCS

cers need to be trained in operations in harsh environments and then there’s the critical icebreaker escort costs.

In terms of operational issues, the extreme weather conditions can impact the ballast water tanks and fresh water tanks. Communications are also a challenge. Traditional VHF is out and only one satellite communication system, Iridium, functions beyond 75 degrees north and 75 degrees south.

2015 CASUALTIES Arctic Circle incidents are up 29 percent year-on-year.

Hull damage 1

46 M achinery damage/ failure

Collision 3 Fire/explosion 4

“Most people are not too thrilled with the capabilities of the current Iridium system,” said Tore Morten Olsen, president of maritime communication specialist Marlink Maritime. But developments are taking place: “There is a lot of capital coming to the satellite industry and I think there are trends of development for what we call polar orbiting satellite systems.

“I believe that the demand and the drive for global connectivity which is coming through the web will bring capabilities far beyond what we have seen to the northern regions, quite simply because all of the satellites need to move around the poles to be able to achieve global service, and when they are up there they are, in theory, idle, and there is a lot of capacity available.”

HANDLING CHALLENGES ABOUND

6 Wrecked/stranded 6 Miscellaneous 5 Contact (eg Harbor wall)

CASUALTIES: 71

TOTAL LOSSES: 0

Source: Lloyd’s List Intelligence Casualty Statistics, AGCS 50 BREAKBULK MAGAZINE www.breakbulk.com

There are issues that are specific to the breakbulk sector too. Multipurpose and heavy-lift ships face challenges with the cranes needed for handling the huge and outsized project cargoes, and the forces and ice also influence the lashing and sea fastening necessary for the cargo.

There is also a need for a specialized crew to apply extra lashing and welding.

“You need the right partners in Russia, extreme care in voyage planning, you need to follow icebreakers, you need to have permits in place, you need to have the specialists who know how to apply the permits and documentation – this is a big issue and it needs to be right – and you have to use specialized Russian crew. I wouldn’t call it an art but you do

really need to know what you are doing,” said Roehl.

However, not all operators are as wise when it comes to operations in this hostile region, Kinsey said. “I feel strongly that operators do not fully understand the challenges of the Northern Sea Route.” There are several reasons for this, he explained.

One is lack of experience and knowledge, taking for granted the knowledge built up Tore Morten over centuries on Olsen the more traditional sea lanes.

Marlink Maritime “This route will be very demanding on both the vessels and the crews, the environment and stress levels, and there is a lack of shore side support and infrastructure,” he said.

Another major factor is that regulations covering the Arctic region are still evolving with the IMO Polar Code due to come into force in January 2017.

Adding a further challenge into the mix, the length of the Northern Sea Route shipping season is variable and to a large extent depends on who you are asking.

The Northern Sea Route Information Office gives the official season as from the beginning of July through the second half of November. There are no specific dates for commencement and completion of navigation, as it depends entirely on particular ice conditions that year.

ISSUE 2 / 2016

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shipping trends

LESS DEMAND FOR CARGOES The drop in transits is also reflective of a decline in business from engineering, procurement and construction companies in the region, with one telling Breakbulk that at least one of its Arctic operations had been a “special challenge” due to missing infrastructure, a lack of workforce and the inhospitable climate.

Italian multinational oil and gas company ENI has also felt the sting of the harsh operating environment. Production from Goliat, the first oil field to start output in Norway’s Arctic waters, finally started in March after delays of more than two years. Its investments are recorded as US$5.6 billion, nearly 50 percent more than was initially budgeted for the field. It’s the second field in operation in the cold and remote waters of the Barents Sea, following Statoil’s Snoehvit natural gas field. Eni claimed a break-even price on Goliat of oil prices at less than US$50 per barrel, but whether that included prices down to US$35 per barrel is unclear.

In September 2015, Shell stopped its Arctic oil and gas exploration off the coast of Alaska after “disappointing” results from a key well in the Chukchi Sea. Seven years ago, Shell and other companies — ConocoPhillips, Statoil of Norway, Repsol of Spain and Eni of Italy — together paid US$2.7 billion for leases for the fields off Alaska, but oil prices then were five times the rate they are today.

Despite the negativity, there are still opportunities that support the revival of the NSR as a viable commercial route, but they come in Russian form. Both Gazprom and Rosneft have plans for Arctic exploration this year and next, albeit at a reduced level. Minister of Natural Resources Sergey Donskoy confirmed recently that the rate of issuing licenses for Arctic offshore fields has slowed dramatically, with only three being issued over the past six months.

Kinsey believed that the industry would continue to see Russia pushing the NSR to support its own exploration and extraction goals, but given current trade levels, freight rates and fuel prices he concluded that “we will not see the tonnage numbers increase dramatically in the next five years.” BB 52 BREAKBULK MAGAZINE www.breakbulk.com

The nuclearpowered icebreaker Yamal forges a path along the Northern Sea Route.

Credit: ВикиКорректор / Wikimedia

HOLD OFF ON ICE-CLASS INVESTMENT In exclusive research for Breakbulk magazine, researchers at Copenhagen Business School’s maritime division have applied their Arctic shipping calculation tool to determine when investment in ice-reinforced multipurpose vessels for operation on the Northern Sea Route becomes favorable, in comparison to an ordinary multipurpose vessel sailing along the traditional Suez Canal route.

Inputting variables specific to multipurpose vessels, or MPVs, contributed by Drewry Shipping Consultants, the researchers found that the navigation season on the Northern Sea Route, or NSR, is too short for investments in ice-class MPVs to be economically viable until at least 2029.

The researchers used Ust-Luga, Russia, as the port of loading and Pusan, South Korea, as the destination port, shaving 4,173 miles off the west-east route over the traditional Suez Canal Route.

Newbuilding costs of US$15 million were set against a premium of 20 percent for an ice-strengthened ship. Fuel consumption was adjusted up by 20 percent on the NSR to take account of the different hull shape of an icestrengthened vessel.

In the medium oil price scenario, the investment in an icereinforced MPV would be favorable

from 2032. This reduces to 2029 in the high oil price scenario, whereas in the low oil price scenario it will not be favorable to invest in icereinforced MPVs before 2035.

“The reason that using the NSR will not be favorable in the near future is the incredibly low Suez Canal fee of US$111,000 caused by the low oil prices of late,” explained Peter Grønsedt, senior researcher at Copenhagen Business School.

“This results in the operating expenses of the Suez Canal Route to be significantly lower than those of the NSR despite the much longer voyage distance.”

However, if the Suez Canal fee reverts to its previous levels of about US$300,000, investment in ice-reinforced MPVs becomes advantageous regardless of the oil price scenario, added Grønsedt.

Copenhagen Business School’s tool allows researchers to calculate the comparative costs taking into account more than a dozen variables including vessel specification and size, engine type and capacity, average speed and distance, navigation season, transit fees, and load factors. According to the study’s authors the tool combines an economic framework with applied naval engineering and is the first of its kind specifically designed to compare Arctic shipping to traditional routes.

ISSUE 2 / 2016

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carrier profile

Finding New Ways to Combat Project Problems

SHUNNING THE HERD

W

ith an entrepreneurial management that likes to find its niche where other project cargo companies dare not tread, Teras Cargo Transport LLC, refuses to be pigeonholed as a marine carrier.

“We find the right solution, the right material, the right equipment to get it there,” said President Marc Marling.

The company works in two chief sectors: U.S. preference cargo and complex project shipments, especially for oil and gas, mining, and other infrastructurebased industries.

BY Teras often serves LORI MUSSER areas of the world with limited infrastructure and multiple challenges – war zones, remote regions including offshore, and highly sensitive ecological regions.

“We craft solutions to problems,” said Marling, adding: “We aren’t liner; cell ships don’t offer flexibility. We charter in to meet a customer’s needs if that is 54 BREAKBULK MAGAZINE www.breakbulk.com

largest hover barges ever constructed.

Marling said Teras builds on a diverse fleet with team experience in linehaul and local dray trucking, rail and intermodal transport, warehousing, and marine terminal operations, to assemble customized and integrated logistics solutions from origin through inland destination.

FINDING A NICHE Marc Marling

Joe Sanders

President, Teras Cargo Transport

Owner and CEO, Teras Cargo Transport

best. We don’t try to fit everyone into our own assets.”

Teras does use traditional marine services, where possible, along with partner vessels and its own permanent fleet. That fleet encompasses, in addition to heavylift ships, one of the world’s largest and youngest fleets of ballastable barges, semisubmersible and flat-top barges, AHT/ tugboats, landing craft and even one of the

With one-third of its staff comprised of engineers, Teras has come up with some imaginative solutions.

Teras, its executives say, will never have a lemming mentality. Marling called the company “nichy,” adding: “We aren’t just heavy-lift; we are U.S.-flag heavy-lift.

For other cargo, we don’t concentrate where everyone else gathers. That is a race to the bottom, and since we are too small to be the cheapest solution, we specialize in the most customized solutions.”

He said that by looking at different regions of the world and non-commoditized markets, Teras is able to avoid the extremes of business cycles too.

ISSUE 2 / 2016

carrier profile

Delivering U.S. food aid to troubled areas or moving project cargo for an oil and gas development in a far-flung destination, the company’s bread-andbutter business changes on a dime.

What doesn’t change, according to Teras owner and CEO Joe Sanders, is an ongoing commitment to U.S-flag shipping.

In fact, in a head-turner at October’s Breakbulk Americas last fall, staff explained that Teras Cargo Transport

actually plans to expand its U.S.-flag fleet.

Teras operates two U.S.-flag oceangoing vessels: the Seattle, a 20,406 deadweight ton vessel capable of carrying 1,300 containers and offering a combined lift of 120 tonnes, and the 17,478 dwt Norfolk, added to the fleet in 2015.

The Norfolk is geared with two 400-tonne cranes plus one 120-tonne crane.

The Norfolk is valuable for its flexibility; it can handle out-of-gauge and

ADDRESSING A LAND-LOCKED CHALLENGE Recent Teras projects have spanned the globe. The company developed an idea for the “landlocked” Tiwi Nation on Melville Island in Northern Australia for a floating port. Addressing issues of budget and geology, Teras was able to take a laid-up floating bridge from the U.S. Pacific Northwest and innovatively repurpose it as floating marine berths. It was floated in three sections 14,000 miles across the Pacific using as semi-submersible assist, and at the end of the day, according to CEO Joe Sanders, quickly and affordably positioned at Port Melville, enabling the Tiwi Nation to engage in deep-water operations almost immediately.

The port was up and running within a year. Sanders said, “If it had been built to spec, that wouldn’t have happened.”

Sanders credits early involvement with exceptional outcomes

on many jobs. He said, many of the companies involved in these industries are bound by competitive bid, and although sole sourcing is not normal, bringing a marine transportation specialist in at the outset can prove advantageous.

Teras President Marc Marling talked about another project serving, in tandem with Ezion, the construction of three LNG terminals on the east coast of Australia. “Bechtel was the EPC and contracted with us. We built 15 375-foot-long barges with heavy deck strength, and with integrated auto-ballasting systems, to move modular construction freight from Southeast Asia to Curtis Island.

The process took place in more than 80 moves over several years.

Marling said that two of the projects ranked as the fourth- and sixth-largest ever financed by the U.S. Export-Import Bank.

North Australia’s floating Port Melville was up and running within a year of construction’s start.

Credit: Teras Cargo Transport

56 BREAKBULK MAGAZINE www.breakbulk.com

heavy-lifts, and offers scheduling and routing flexibility with its combination of E3 ice classification, U.S. flag, cranage, tween-deck configuration, size, deck strength and speed. On the Norfolk’s first voyage under Teras’ banner, it carried locomotives financed under the U.S. Export-Import Bank, foreign military sales of MRAPs, and food aid to West Africa.

U.S.-FLAGGED FLEET The size of the U.S. self-flagged, privately owned dry cargo fleet rose from fewer than 400 ocean-going vessels in 1946 to a peak of about 800 in the early 1950s (following the U.S. Merchant Ship Sales Act), but has plummeted in recent decades. Today it numbers closer to 100 vessels. The tanker fleet has suffered an even gloomier fate, according to the U.S. Department of Energy, with the tandem freefall of vessel count and gross tonnage.

Together, the dry and liquid U.S.flag fleet served about 65 percent of U.S. foreign trade in 1946; that figure fell to single digits in the early 1960s and continues to fall, despite the fact that, as the U.S. Maritime Administration points out, U.S. maritime policy clearly defines an ongoing need for U.S-flag vessels for national defense and development of foreign and domestic commerce.

Teras may not make a big dent in the national disparity between U.S.-flag capacity and freight volumes, but it is growing its fleet.

The company has supported U.S. government-impelled cargo, including Ex-Im Bank projects throughout the world, shipping 450-tonne U.S. Navy tugs, gas turbines, LNG modules, helicopters and a variety of other project and heavy-lift cargo.

Teras offers a broad range of compliance and/or pre-qualifications for U.S. cabotage, Jones Act cargo, U.S. Department of Defense programs such as the Voluntary Intermodal Sealift Agreement (VISA) program and peacetime VISA contract awards, the National Industrial Security Program, the Maritime Security Act and Maritime Security Program, as well as Ex-Im Bank moves.

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impelled cargo. Moving those cargoes is seen as a key factor in growing the company and the Teras Cargo Transport brand.

Sanders underscored the importance of maintaining a strong U.S. merchant marine fleet. “We believe in reinforcing the country’s ability to provide a professional merchant marine service.”

Concluding that a shrinking fleet is very dangerous, he cited U.S. Department of Agriculture, U.S. Agency for International Development, and Ex-Im Bank shipments, all of which “are very important and need a very healthy, viable merchant fleet.”

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CAREER GROWTH

Sanders has spent his career managing and holding ownership positions in transportation and logistics initiatives.

He created Teras in 2009 in conjunction with Singapore-based Ezion Holdings Ltd., a major player in marine logistics and offshore oil and gas support service industry. Ezion still enjoys a minority ownership position.

From its base in Gig Harbor, Washington, Teras has developed small branches on most continents, a network of global alliances, and is planning for continued growth.

Sanders sees great potential for marine cargo in general, especially in these days of increased environmental concerns and affordable fuel, and for project and heavy-lift cargo in particular.

Teras President Marling grew up in a ship brokerage and freight forwarding family, running bills of lading to freight

cashiers in lower Manhattan while still in grade school. He eventually became a maritime lawyer, and served with CMA CGM (America) LLC during the company’s fast ascent to among the world’s largest container carriers.

Marling put his regulatory and legal acumen to work as inaugural general counsel to the firm when Sanders set up Teras, and now serves as president.

It is a lean executive organization by any definition, with only a few dozen shore-based individuals scattered around the globe. It is anchored by engineers – civil, electrical, mechanical and ballast, and others – who are routinely tasked with planning and carrying out difficult deliveries.

When asked how the company managed cross-cultural and cross-language communications, Marling said that engineers have a way of bridging those gaps, so Teras puts engineers on the ground in

Singapore or Australia or Mozambique.

“The engineers speak to the engineers.

It works. We pride ourselves on having people around the world and aren’t afraid of new markets and territories.” The company emphasizes developing new partnerships in new regions and then calls upon its network of strategic alliances to get freight where it needs to go.

As for future prospects, Sanders said: “We have projects 40 miles from our corporate office and we have projects halfway around the world that we are looking at today. Personally I have my eye on Africa. It is an emerging market and has been for years, although the stability seems to be better … so the opportunity for their growth and its development as a shipping country is now. We find the need is there and the infrastructure isn’t.” BB Based in the U.S., Lori Musser is a veteran shipping industry writer.

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www.breakbulk.com BREAKBULK MAGAZINE 59

regional review

Reactors are transported from Italy and Poland to Russia for an oil refinery.

Credit: M-STAR

A COLD WINTER

Russia’s Recession Brings Infrastructure Woes

BY MARK WILLIS

F

ollowing a decade of deep financial, political and economic instability in the aftermath of the former Soviet Union’s collapse, the Russian economy enjoyed a significant upturn in fortunes during the 2000s, with a sustained period of solid economic growth, rising wages, and increased living standards.

Buoyed by soaring revenues from oil and gas exports, Russia also saw a wholesale expansion in public sector investment, and modernization of the

country’s outdated industrial, transport and energy sector infrastructure.

However, the last several years have marked a decidedly more challenging period for Russia, with the collapse in global commodity prices and elevated geopolitical tensions with the West seeing the economy move into recession in 2015.

Notwithstanding the recent economic downturn, the Russian market continues to present exciting opportunities for global project cargo operators, with Russia still heavily reliant on imported industrial goods and high-tech machinery to develop domestic infrastructure and the all-important oil and gas sector.

Accompanying these opportunities,

however, is a set of logistical challenges that reflect the vast size, harsh environment, and political and bureaucratic complexities distinguishing Russia from other European countries.

Dutch logistics services provider M-STAR Freight Services has wide operations throughout Russia, and has been particularly active with large-scale industrial projects during recent decades.

With its core operations in Russia related to the oil, gas, petrochemical and energy sectors, M-STAR has delivered breakbulk cargoes consisting of predominantly European and U.S.manufactured machinery and sourced from around the world for major Russian energy sector firms.

“In Russia a lot of things are very complicated, but finally almost everything is possible,” said Jan Euwema, the company’s business development manager. “We are triggered to really go to the limits to find a solution at the end for our clients.”

COPING WITH EXTREMES Euwema highlighted the extreme weather conditions, and in particular the impact of harsh winters on transport infrastructure, as one of the main obstacles facing project cargo forwarders and logistics providers operating in the country.

“Climate can be a challenge, with the long, cold winters frequently damaging infrastructure. In many parts of Russia, you have damaged roads, or no roads at all,” he said.

Obstacles associated with the challenging climate, and differences between operating in Russia compared to the EU or U.S. markets, were highlighted

by M-STAR’s recent contract with a major engineering, procurement and construction company to deliver heavy components for a petrochemical plant

“In Russia a lot of things are very complicated, but finally almost everything is possible.”

– Jan Euwema, M-STAR business development manager

60 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2016

regional review

from Bucharest, Romania, to Kstovo in the Nizhny Novgorod region.

The local road system had been eroded by the previous winter and the firm was forced to undertake considerable road repairs to ensure the successful delivery of a cargo that included a long “pre-demethanizer column,” with dimensions of 33 meters by 3.9 meters by 3.9 meters, and weighing 99 tons.

While Euwema praised the reliability of Russia’s vast train network, and its capacity to operate reliably throughout the cold winter period, he also outlined that severe temperatures restrict the capacity of project cargo firms to utilize the country’s waterway, canal and river networks for up to six months of the year.

“The river and canal system in Russia is frequently blocked during winter months, and open from only April until October. So you definitely need to prepare projects with consideration of the climate,” he said.

Complexities relating to Russia’s vast size, transport infrastructure and cold winter temperatures were also highlighted by Sergey Godlevskiy, general director at the Moscow-based office of freight forwarder deugro.

“The majority of the industrial plants are located very far from the entry seaports. So the biggest and heaviest cargoes can be delivered only through internal waterways to the nearest river port. But the period of navigation through these waterways is limited,” he said.

“Many construction sites in Russia are located in Siberia. The only way to deliver the heaviest and biggest cargoes to there is through the Northern Sea

Reactors moved from Poland to East Siberia.

Credit: M-Star

62 BREAKBULK MAGAZINE www.breakbulk.com

RUSSIA’S GROSS DOMESTIC PRODUCT 2015 and 2016 are forecasted in the red.

12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8%

‘00

‘01

‘02

‘03

‘04

‘05

‘06

‘07

‘08

‘09

‘10

‘11

‘12

‘13

‘14

‘15

‘16

*2015 and 2016 are forecasts Source: International Monetary Fund, World Economic Outlook Database, October 2015

Route by heavy-lift vessel, with further reloading onto barges either at the existing ports or at the roads, and further barging up to the jetty nearest to the construction site.”

Added to which, infrastructure in Russia is not well developed, and it is sometimes necessary to build a jetty at the bank of the river or to prepare roads for transportation. “All these works involve a lot of permits and procedures quite often are very bureaucratic,” said Godlevskiy.

TIED UP IN BUREAUCRACY Notwithstanding these complications, the main challenge facing international project cargo operators remains Russia’s time-consuming, complex and inflexible bureaucratic system. The current process necessitates paperwork being presented

at both the border crossing into Russia, and also at the point of final delivery. It is further complicated by the need for cargo transporters to adhere to local as well as national regulations.

Failure to comply with the exact letter of these regulations can result in cargo entry being delayed or denied entry altogether, with Russian customs officials also less flexible than those within the EU. Byzantine bureaucracy is also related to a complex domestic political landscape, with the often-fraught relationship between Russia and its neighboring countries leading to periodic restrictions and delays in crossborder trade, as highlighted by recent military conflicts with Georgia and Ukraine.

Geopolitical tensions have soured relations between Moscow and the West during the last decade, with Russia’s 2014 annexation of Crimea in particular resulting in EU and U.S. sanctions that have restricted exports to the Russian energy sector, and brought an additional layer of complexity for project cargo firms.

In conjunction with a dramatic decline in global energy prices, Western sanctions saw the Russian economy move into recession last year. The International Monetary Fund estimated that real gross domestic product contracted by about 4 percent.

Deteriorating underlying economic conditions have led to the postponement or cancellation of infrastructure ISSUE 2 / 2016

regional review

A 99-ton, 33-meter column is moved from Romania to Russia for a petrochemical plant near Nizhny Novgorod.

Credit: M-STAR

projects and other major investment initiatives in Russia.

According to Alina Zaborovskaya, partner and head of project finance and infrastructure services in the CIS at Ernst and Young, the collapse in global energy prices over the last 18 months has had a particularly pernicious impact on government investment expenditure.

“Oil and gas revenues are the main parts for the federal budget income. The fall in prices has led to a decrease in the value of budget funds available for financing of public and private partnerships,” she said.

“This resulted in a stricter approach to the selection of infrastructure projects that can obtain government financing.

Implementation of many announced projects have been postponed repeatedly.”

INSTABILITY AND RETRENCHMENT While government investment prospects have been hit by the widening gulf between realized revenues and pre-planned expenditure, private sector investment has also retrenched in recent years, with the enhanced political risk associated with the souring relations between the West and Moscow creating a less stable environment for domestic and foreign investors.

Currency market instability is another factor that has discouraged 64 BREAKBULK MAGAZINE www.breakbulk.com

Alina Zaborovskaya

Michelle Karavias

Ernst and Young

BMI Research

investment, with the sharp fall in the ruble seeing a correspondingly significant rise in the cost of imported goods and services.

Stabilization in energy prices, following the precipitous fall of last year, led to a moderation in the Russian recession in early 2016. Analysts nevertheless expect that weak fundamentals will continue to hold back the Russian economy and disrupt investment flows over the short term forecast horizon.

According to Michelle Karavias, global head of infrastructure at BMI Research: “Russia’s construction industry has been in recession since 2013. We expect it reached its deepest point in 2015, with an estimated 6.6 percent contraction, and with a mild improvement

for 2016 as a result of low base effects and the adjustment of the economy to the new ‘norm’ of low oil prices.

“Nevertheless, we still expect a contraction of 1.8 percent for 2016, before a return to modest growth from 2017 onwards.”

Karavias added that up to US$100 billion of Russian construction projects have been put on hold due to the worsening economic and fiscal outlook, with a similar volume also under risk of delay or possible cancellation.

Notwithstanding the weak outlook, analysts identify a number of important investment projects that are set to proceed over the coming years, which will necessitate a significant volume of imported goods and are likely to present opportunities for the international project cargo industry.

According to Ernst and Young’s Zaborovskaya, the Russian government, at federal and regional levels, has planned for modernization and construction of a number of large-scale infrastructure projects, including highways, high-speed rail networks and airports.

Planned future projects include the Moscow Central Ring Road, and a 770-kilometer high-speed rail line from Moscow to Kazan, China, that represents wider efforts to strengthen economic ties between the Russian and Chinese governments.

Preparations for Russia’s hosting of the 2018 football World Cup will also represent another focal point for public and private sector investment over the next two years. The government has earmarked about US$10 billion for updating and constructing new stadiums and transport infrastructure.

With operating costs and wages for the most part denominated in domestic currency rather than U.S. dollars, the fall in the ruble’s value will also help to cushion the balance sheet impact for Russian energy firms from the wider slide in global oil prices, boosting their capacity to carry out future investments. BB ISSUE 2 / 2016

PREVIEW HOT TOPICS @ BREAKBULK EUROPE:

CG GLOBAL’S JURGEN HUYGH ON EU TRANSPORT CHALLENGES

EUROPEAN SHIPPERS PANEL

» Featuring GE, ArcelorMittal, INITEC P.I. – Técnicas Reunidas Group, BASF

ENERGY Q&A WITH CEG’S ED OSTERWALD NEW

PROJECT FREIGHT MANAGEMENT WORKSHOP

» For EPCs, Cargo Owners, Forwarders

+ MICRO-SEMINAR:

LOGISTICS CONTRACT NEGOTIATIONS

MARKET INTELLIGENCE IN ADVANCE OF EUROPE’S

LARGEST EVENT

FOR TRANSPORT AND LOGISTICS SPECIALISTS

BREAKBULK EUROPE 2016 23-26 MAY, ANTWERP EXPO, ANTWERP, BELGIUM

event preview

04

Dear industry colleagues, I hope your preparations for Breakbulk Europe 2016 are going well.

In just a few weeks’ time, we will be opening the doors to the 11th edition of Breakbulk Europe. After last year’s milestone event, it was important that the event continue to grow and develop, so I’m happy to announce that this year’s event is shaping up to be the largest, most well attended event to date!

We appreciate the market is experiencing very tough times at present but I think everyone recognises, more than ever, the importance of business promotion, industry networking and gathering market intelligence.

With this in mind, I’m really looking forward to seeing all of our returning exhibitors, sponsors and supporters and welcoming so many new organisations to the event.

On the education and information side, I don’t want to miss a minute of Janet’s fantastic programme -- such a wide range of esteemed speakers offering so much vision and insight to soak up. And of course, all the networking that the event brings with it, from all the action on the show floor to the great evening functions in the old town.

The countdown is on and on behalf of the Breakbulk team, we look forward to extending you a very warm welcome!

Sincerely,

06

CONTENTS 04 E XPERIENCE

11 P REVIEW: SUPER SESSION

06 PREVIEW:

16 2016 FLOOR PLAN 19 BREAKBULK EUROPE 2016

BREAKBULK EUROPE 2015 Photo & Video Gallery

EUROPEAN SHIPPERS PANEL

08 P REVIEW:

ENERGY MARKET OUTLOOK Ed Osterwald, CEG Europe

10 B REAKBULK EUROPE

BY THE NUMBERS

One Europe For Exceptional Transport?

AGENDA AT-A-GLANCE

22 N EW! PROJECT FREIGHT

HANDLING WORKSHOP Interview with Peter Bouwhuis

22 M ICRO-SEMINAR: LOGISTICS CONTRACT NEGOTIATIONS

CONTACTS

Poland Sales Monika Brzóska / +48 61 662 7244 brzoska@ite-poland.com

Breakbulk Europe Event Director Mark Rimmer / +44 (0)20 7596 5260 +44 (0) 7717 848 953 mrimmer@breakbulk.com

Middle East Sales Rafiq Sayyad / +971 568083029 rafiq@breakbulk.com

Europe Sales Serge Ndoping / +44 207 596 5142 serge@breakbulk.com

East, West, North Africa Sales Kingsley Ekweariri / +353 1 5311624 kekweariri@breakbulk.com

Germany Sales Pieter Grebe / +44 (0)20 7596 5152, +44 (0)75 03939390 pgrebe@breakbulk.com

Turkey Sales Hale Corbaci / +90 532 522 09 52 hale@viola-events.com

Americas Sales Christian Blair Thompson / +1 281 416-4672 cthompson@breakbulk.com Russia & CIS Sales Vladislav Pisklov / +7 (495) 935 73 50 x 4142 vladislav@breakbulk.com

Mark Rimmer Event Director Breakbulk Europe

14

Advertising Kathleen Pinson / +1 423 598 2264 kpinson@breakbulk.com Editorial Director Gary G. Burrows / +1 904 535 5460 gburrows@breakbulk.com Chief Designer Catherine Dorrough

Cover image courtesy of Collett & Sons Ltd.

EU2 BREAKBULK EUROPE PREVIEW www.breakbulk.com/europe

ISSUE 2 / 2016

Visit us at booth #109H2

3,133 tonnes modules for the oil and gas industry.

Martin Bencher Group transports all kinds of cargo - and specializes in the handling of projects and oversized/heavy cargo from many different industries; from paper mills, power plants, oil and gas projects to wind turbines and luxury yachts, Martin Bencher Group can handle the transportation of your cargo. Our +140 employees are ready to create competitive solutions tailored to your needs.

www.martin-bencher.com

2015 event gallery

MEET THE WORLD AT BREAKBULK EUROPE

Breakbulk Europe is the largest exhibition and educational forum in the world addressing the needs of traditional breakbulk and project cargo logistics professionals. In 2015, Breakbulk Europe celebrated its 10-year anniversary and gathered 350 exhibitors and sponsors and nearly 7,200 qualified attendees.

Over four days the breakbulk community participates in workshops and other education sessions, conference sessions featuring the industry’s top leaders, and networking activities.

EU4 BREAKBULK EUROPE PREVIEW www.breakbulk.com/europe

ISSUE 2 / 2016

www.breakbulk.com/europe BREAKBULK EUROPE PREVIEW EU5

event preview

‘WE’RE ALL IN THIS TOGETHER’

Shippers Panels Become Integral to Breakbulk Events

S

tarting with Breakbulk Americas in Houston last fall, Breakbulk Events & Media has introduced an ongoing panel discussion of logistics experts, including EPCs, project owners and transport specialists.

These highly successful sessions feature leading executives offering analysis and perspectives on issues such as Incoterms, port selection, and how much of the “transport envelope” do cargo owners want or need to control, and how much should they hand over to their subcontractors.

Within the framework of these questions-and-answer sessions – with questions prepared and supplied by the

audience – each session takes on the unique challenges of the event’s market, industries, competitors, and trade and economic landscape.

If there’s a common theme among shippers during these panel discussions – and a message to those they do business with – it’s that “we’re all in this together.”

As recent at Breakbulk China in Shanghai, executive panelists emphasize the value of logistics partnerships with freight forwarders and logistics service providers.

“We don’t communicate only when a problem happens,” said Liangli Ma, Asia logistics manager, Air Liquide Global E&C Solutions Hangzhou Co. Ltd.

EU6 BREAKBULK EUROPE PREVIEW www.breakbulk.com/europe

“Since we are a team, we know about each other’s procedures, products and processes. Exchange of information is very important from the early stages to execution so there are no problems.”

“We shouldn’t think of them as suppliers,” said Ronny Zhang, logistics head for Fluor Shanghai. “We are a team with a common goal: the execution of a project. We mutually support each other.”

As partners, it’s important for forwarders and logistics providers to be part of the process “as early as possible,” said Zhilv Zhang, project logistics manager/senior logistician, Shanghai Electric Power Generation Group.

The partners’ expertise is key in transportation management, discussions of ISSUE 2 / 2016

» 2016

Conference Session

Shippers Panel at Breakbulk Americas 2015: Phillip B. Brown, Fluor; Dennis Mottola, Bechtel Oil Gas & Chemical; Alex Strogen, GE Global Operations; Frank Imbruglia, Technip USA, Inc.; Daniel Fahringer, Air Products & Chemicals, Inc.

cargoes and sizes, vehicles and equipment involved, including heavy-lifts, route planning, safety and contingencies.

At the inaugural shippers panel at Breakbulk Americas last year, conversation centered on when and where to outsource.

Bechtel Oil Gas & Chemical’s Dennis Mottola said the degree to which his company retains control of a project’s transportation varies by business unit, type of equipment or shipment, capacity to deliver in-house, and cost.

“We think we have a robust logistics function in the company, but we do the evaluation of cost and scheduling on a case-by-case basis,” Mottola said.

Frank Imbruglia, of Technip USA, said an EPC’s decision to hand off logistics management is always dependent on the client and its budget, while Daniel Fahringer, of Air Products & Chemicals Inc., said his company looks closely at vendor capabilities. “The decision of who is best to manage the risk and cost comes into play,” he said.

Alex Strogen, of GE Global Operations, offered a different per-

Thursday, 26 May, 12:00 – 12:50

Shippers Panel – Shaping the Transport Envelope » MODERATOR:

» William Moyersoen,

» Cesar Martin Pereda,

» Dieter Busam,

Thierry Dantec, Global Logistics Pole Leader, GE Power – Gas Power Systems

Global Logistics Manager, INITEC P.I. – Técnicas Reunidas Group

CEO, ArcelorMittal Logistics

Procurement Global Forwarding Industrial Projects, BASF

spective. “We have a pretty robust Again, trust and partnerships were logistics organization from a manpower key points raised, but their role expanded perspective. We can add a lot of value to to government and customs authorities, projects if we control the logistics. Our who need to trust that rules, regulations clients have found that their experience and processes are understood. in managing these projects doesn’t run One challenge facing project shippers as deep as ours,” he said. is an aggressive track in the kingdom The theme of partnership, though, to employ Saudi Arabians. This “Saudireverberated from Shanghai to Houston. arization” is a challenge, said Stefaan Bechtel’s Mottola said the decision to Mestdagh, director of business developmanage using internal resources, versus ment, logistics, at DHL, because many outsourcing, should of the jobs required be driven by the are not wanted by the anticipated outcome. local people. “There “We are a team with “Our forwarders are is also a real shortage an extension of our of skilled laborers,” a common goal: the logistics department. execution of a project. he said.

That is how we see Having a local We mutually support partner was essential it. If they succeed we succeed; if they fail, for success in the each other.” we fail.” market, said DouAt Breakbulk glass Dries, project – Ronny Zhang, Logistics Head, Middle East last fall, logistics and materiFluor Shanghai shippers and logistics als manager, Jacobs executives stressed Engineering. “You the need to undercannot go and knock stand the unique challenges in the region on the government agencies’ doors by that impact the ability to deliver on projyourself. You need to build a good relaects, especially complex and large ones. tionship with local partners who can do “In Saudi Arabia you are not given this on your behalf,” he said. the opportunity to make mistakes more In the can-do attitude of a highly prothan once. They will hold up cargo for digious industry, Henry told Breakbulk six months if need be. You will learn the delegates that none of the challenges rules very quickly,” according to Corey were insurmountable in a market that Henry, senior logistics specialist for provides major opportunities for the CB&I Oil & Gas. logistics sector. BB www.breakbulk.com/europe BREAKBULK EUROPE PREVIEW EU7

event preview

Q+ A with Ed Osterwald

Q: How long do you expect oil prices to stay in the doldrums?

A: A couple of years ago I was known as an oil price bear, and everybody thought I was completely out of my mind. Now its gloom and doom in the industry and projects are getting cancelled. But I suspect that there will soon be an accommodation between national oil companies, governments and shale producers which will ultimately stabilize prices. But I suspect we’re close to the bottom now, and as always a lot of people think again that I’m probably off my rocker.

But I see lots of signs around that some sort of accommodation is going to be taking place over the next few months, which will have to be good for investment in the industry and of course for breakbulk cargoes.

Preview these sessions at Breakbulk.com/Europe, under Event Details > Agenda.

»

Wednesday, 25 May, 10:30 – 11:20

Energy Outlook: Industry Dynamics in a World of Surplus

2016

Conference Session to maintain production, but I think now that the hedging programs have started to disappear some of them will get into trouble, which will probably reduce production, create some opportunities, and somewhere in there will be a level where production will equilibrate with the market. What’s happened is production has continued at such a rate for so long that it’s had an impact on prices. But I think stability in the market and some stabilization in production is inevitable now, because it’s really in everyone’s interest in the industry, expect the refiners, of course, who are having a good time right now.

Q: Do you see any signs we’re

actually moving towards decarbonization or a renewable energy future?

A: No. My own view is that we will

that you see?

be dependent upon hydrocarbon fuels for many decades to come, and partly because there’s been a technological change which has made production from shale, especially gas, allows us to access resources that we didn’t know were there 10 to 15 years ago. And that has been a technological shift which is really behind what’s happened in the oil market.

A: I think first of all there are discus-

Q: When can we see renewed

Q: What are some of the signs sions taking place at the government level between the Russians and members of OPEC that they would like to consider stabilizing production in some form, which is quite unprecedented if that’s actually true.

The other point is to the case of shale oil producers. They’ve managed

investment? You’re sounding more optimistic than a lot of the industry.

A: Yes, I probably am. But it’s quite

interesting to me, when you hear people chat about oil prices, they will immediately in the next sentence talk

EU8 BREAKBULK EUROPE PREVIEW www.breakbulk.com/europe

» Ed Osterwald,

Senior Partner, CEG Europe

about oil reserves. Oil reserves really have very little to do with price. What has to do with price is the amount that actually gets to market. And that’s actually quite finely balanced. So it wouldn’t take much change in supplies getting to market to make a difference in price expectations, and that’s totally unrelated to reserves.

What has happened is we now have two swing suppliers in the industry, one is the low-cost OPEC producers, and the other is the shale producers, in the United States particularly, which are effectively a manufacturing operation. And what that means is the balance in the market that sets prices is going to change, but it will reach some sort accommodation. It’s for that reason that I’m not as gloomy as some people. The decline in prices from US$100-plus a barrel was inevitable, it was clear it was going to happen. But I don’t see how we can stay at US$20 a barrel, or whatever it is, because ultimately that will impact investment in the industry and that would probably be crippling in a few years, and I don’t see that happening.

Q: In the long run are emerging markets still the place to be?

A: Absolutely. I think when we talk

about emerging markets, it isn’t just their ability to produce hydrocarbons, but these are where high rates of economic growth are going to come from, which means they are attractive markets to use fuels. And even though in a lot of these so-called emerging markets the majors have gotten out, there are still a lot of opportunities there for major investments. BB ISSUE 2 / 2016

VISIT US AT

It’s in our character

Break Bulk Europe 23-26 MAY 2016 Antwerp, Belgium Hall 1, Booth 411

TITI

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CO M

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CE

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VE SE

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The port is our life. Hands-on mentality, hard work and accessible people, that’s our character. Anyone who gets to know Zeeland Seaports becomes acquainted with professionals who are proud of their ports. We understand that your interests are also our interests. Clients come first. Always.

We know what’s important to your company. That’s all in our character, and one of our many strengths: location on open sea draft of 16.5 metres congestion-free connections with the hinterland no nine-to-five mentality accessible ports and people dedicated terminals for a broad range of cargo you can reach us 24/7 at +31 115 647400

“Experienced breakbulk movers with room to grow.”

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ports of vlissingen and terneuzen www.zeelandseaports.com

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BBEU BY THE NUMBERS 1,500

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construction and support crew to build the exhibition

GET SOCIAL! Extend your conversations from the exhibition floor to all of our social media channels. Feel free to promote your company and share your experiences!

EXHIBITORS

10X increase in attendance over 10-year history

700

2006 2015

17,086 SQUARE METERS

for Breakbulk Europe at the Antwerp Expo #bbeu2016

pro tip:

more than 100 countries represented 95

22,423 steps

REGISTER EARLY AND ACCESS 2nd ENTRANCE FOR SPEEDY CHECK-IN There will be two entrances for Breakbulk Europe 2016.

Entrance One (at Hall 3) is the main registration entrance for all exhibitors, pre-registered visitors and onsite registrations.

Entrance Two is ONLY for pre-registered visitors and exhibitors.

Bring your registration code to scan and print your badge for quick access into Halls 4 and 1.

To register, visit breakbulk.com/europe

Âť

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to walk the show floor

350 catering staff to feed delegates

( Last year we saw pommes frites, Belgian waffles, ice cream, pretzels, beer, traditional British tea treats and even made-to-order pizza in stands on the show floor.)

100% of transport sectors

Farthest distance traveled to attend Breakbulk Europe last year:

1 8 3 6 1 EU10  BREAKBULK EUROPE PREVIEW

km

05

00

Preview these sessions at Breakbulk.com/Europe, under Event Details > Agenda.

EXCEPTIONAL EXPECTATIONS ‘One Europe’ Still Many Headaches for Exceptional Transport

C

reation of the European Union has brought an amazing shift in trade among the region’s disparate governments, allowing the comparatively free movement of goods from one country to another.

But borders and regulatory obstacles 2016 remain for exceptional cargoes, or those goods with extraordinary dimensions.

Conference “Although we are one global Europe, the organization of exceptional transSession port is still a national legislation, meaning when you want to do a transport from one European country to another European country, and you have Wednesday, 25 May, 14:00 – 14:25 to pass through a third European counOne Europe? For Exceptional try, you have to have to be in line with Transport, Still the Exception legislation with permits on the individual country level,” said Jurgen Huygh, » Jurgen Huygh, head of shipping and central purchasing Head of Shipping for CG Global, a large manufacturer of and Central power transformers.

Purchasing, “There is no such thing as one EuroCG Global pean legislation for exceptional transport.

So that makes it extremely difficult Huygh will also participate in a round because all countries are using different table panel discussion transport issues rules, different application processes. So and solutions for Europe, immediately sometimes it’s really a nightmare to keep following his presentation. the overview of that process,” he said.

“Although the frequency of exceptional transport is negligible compared to normal road transport, the impact of it can be extremely huge,” Huygh said in an interview.

The obstacles aren’t merely regulatory, he explained.

“First, a lot of plants producing large units of breakbulk are located near cities and not to the water, which today Transport of a CG Global transformer. / Credit: Wijngaard Natie is the favorite place.

Second, the size of the goods we ship with exceptional transport are growing and growing,” he said.

From CG Global’s Mechelen plant in Belgium, Huygh oversees the transport of transformers, ranging in sizes small enough to fit into trucks and containers, up to 280 tons, throughout Europe, the Middle East, Africa, and increasingly, the American market.

“Fifty years ago a typical transformer was 50 tons; today a transformer of 50 tons is considered a small transformer,” he said. On average, CG Global ships power transformers of 100 to 200 tons, which cannot be easily transported by road.

“So often we first use the road to get to the nearest port and then starting from that port we use vessels,” he said.

“When it’s only inland transport we use barges. When it’s more to the near countries we use coasters. And when it’s really for exports we use the big ocean vessels to bring the transformers to the closest port to the site, where it’s then offloaded and brought by road transport to the site.”

Thus, using road infrastructure is unavoidable.

“If we don’t take care of it in our road infrastructure, in our further development of cities, we really make the transport of exceptional cargo very difficult, so difficult that having a plant in certain locations may no longer be applicable, and without taking care of exceptional transport we really bring certain parts of our economy in danger,” he said.

Finally, beyond local manufacturing, exceptional goods are being made worldwide, so exceptional transport will continue to grow more challenging.

“You cannot ship them by normal transport means. You need to apply exceptional transport means to transport them around the globe,” he said. BB

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event preview

Preview these sessions at Breakbulk.com/Europe, under Event Details > Agenda.

‘INVISIBLE BORDERS’ Seeking Solutions for Europe’s Oversized Transport Issues

W

hile countries and governments in Europe have spent years strengthening cooperation and eliminating borders between most European Union members, for abnormal transportation there remain “many invisible borders, including administrative and business ones,” said Łukasz Chwalczuk.

Europe faces many issues concerning oversize transport, including individual procedures in each country, differing regulations, and a variety of health and safety standards.

And Chwalczuk should know. He’s helped write the book on best practices for exceptional transport in Europe.

Chwalczuk is CEO and board president, Polish Heavy Transport Association; and transport section executive, European Association of Abnormal Road Transport and Mobile Cranes, or ESTA. “ESTA is a group of people highly specialized in extraordinary transport

in Europe,” he said. “A couple of years ago the experts from ESTA and the European Commission published a best practices guide – we can call it an ‘abnormal bible.’”

ESTA’s Best Practice Guide became Europe’s first step toward standardization of its abnormal transportation. The 70-page book is translated into six languages.

“So if someone is searching for specific information about a regulation in each country in Europe, it’s very possible to find professional information,” he said.

While European regulations established common rules and terms for conventional truck, trailer and container transport, “when it comes to exceptional transport, each country deals with a different story,” Chwalczuk said in an interview with Breakbulk Content Director Janet Nodar.

“There are no common rules concerning axle pressure or maximum dimensions of the transportation unit as well as heavy transport corridors,” he explained. “Only the most experienced countries with a wide network of companies that provide extra services like escorting or getting permissions can handle the most impressive breakbulk cargoes.”

High bureaucracies, and human

Credit: ESTA

resource issues, including training and health and safety issues on public roads, are other concerns, he noted.

In addition to helping to craft ESTA’s Best Practice Guide, Chwalczuk spent eight years involved in many legislative processes in Europe. “We revolutionized permits, rules and requirements,” he said.

Now, Chwalczuk is working on expanding ESTA’s presence in Central and Eastern Europe.

“By the end of 2014 most ESTA members were hauliers or associations from western Europe. As CEO of the Polish Heavy Transport Association, I was chosen to put as much effort as possible to gather new members,” he said.

Chwalczuk anticipated the first results of those efforts at an April meeting in Munich, Germany, with expected attendance from companies in Poland, Ukraine, Belarus, Czech Republic, Austria and Croatia.

“It will be a great day for ESTA,” he said in early April. BB

» Round Table Discussion: Oversized Transport Issues and Solutions For Europe Wednesday, 25 May, 14:30 – 15:30

2016

Conference Session

» Łukasz Chwalczuk,

President of the Board, Polish Heavy Transport Association; Transport Section Executive, ESTA

» Satoshi Kurihara,

Senior Manager Business Development, Hitachi Transport Systems Europe

EU14 BREAKBULK EUROPE PREVIEW www.breakbulk.com/europe

» Jurgen Huygh, Head of

» David Collett, Managing

Shipping and Central Purchasing, CG Global

Director, Collett & Sons; President, European Heavy Transport & Mobile Crane Association

» Patricia WiesiollekTkocz, Managing Director, TAG Spezialtransporte & Projektlogistik

ISSUE 2 / 2016

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BBEU2016 FLOOR PLAN (continued on next page)

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EU16 BREAKBULK EUROPE PREVIEW www.breakbulk.com/europe

ISSUE 2 / 2016

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www.breakbulk.com/europe BREAKBULK EUROPE PREVIEW EU17

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BBEU2016 FLOOR PLAN

DOWNLOAD THE BREAKBULK APP TODAY You’ll gain access to the floor plan, full agenda, speaker bios, exhibitor list, and a bunch of other stuff.

It’s the ultimate pocket-size event guide.

(continued from previous page)

ENTRANCES:

SECURITY:

Breakbulk aims to make your onsite experience as smooth as possible. Therefore, we’ve created two entrances for Breakbulk Europe 2016. Entrance One (at Hall 3) is the main registration entrance for all exhibitors, pre-registered visitors and onsite registrations. Entrance Two is for pre-registered visitors and exhibitors only. Bring your registration code to scan and print your badge for quick access into Halls 4 and 1.

Ensuring the well being of our visitors and exhibitors is a top priority for Breakbulk.

We’ve added bag checking staff at both entrances as well as surveillance in all halls.

This means that Breakbulk can respond quickly in the unlikely event of an emergency.

Added precautions will also take place during build up and tear down of the event.

EU18 BREAKBULK EUROPE PREVIEW www.breakbulk.com/europe

ISSUE 2 / 2016

BBEU2016 AGENDA

event preview

MONDAY, 23 MAY 2016

WEDNESDAY, 25 MAY 2016

08:00 – 17:00

07:15 (Meet Time) 07:30 (Start Time)

Registration (for workshop delegates only) Antwerp Expo, Exhibition Hall 3 08:30 – 17:00

Heavy Lift Technical Workshop: Land & Barge Transport EDUCATION

Antwerp Expo, Red Room, 2nd Floor » Instructor: Dirk Verwimp, EPCM Advisor, Oceania, Sarens Group 08:30 – 17:00

EDUCATION

Project Freight Management – The Shippers’ Perspective Antwerp Expo, Yellow Room, 2nd Floor » Instructor: Petrus “Peter” Bouwhuis, iBrabble B.V. Education & Events

TUESDAY, 24 MAY 2016 08:00 – 20:00

Registration (for all participating delegates, exhibitors and sponsors)

Antwerp Expo, Exhibition Hall 3 08:30 – 17:00

EDUCATION

Heavy Lift Technical Workshop: Ocean Transport Antwerp Expo, Red Room, 2nd Floor » Instructor: Cees Coppens, Heavy Lift Ocean Transport Lecturer/Consultant 08:30 – 17:00

EDUCATION

Project Freight Management – The Shippers’ Perspective Antwerp Expo, Yellow Room, 2nd Floor » Instructor: Petrus “Peter” Bouwhuis, iBrabble B.V. Education & Events 17:00 – 20:00

Welcome Reception Antwerp Expo, Exhibition Halls 1-4 21:00 – 24:00

Ports America Happy Hour Café “Den Engel” – Grote Markt 3, 2000 Antwerpen, Belgium SPONSORED BY

Breakbulk Business Run Hilton Antwerp Hotel – Groenplaats 32, 2000 Antwerpen, Belgium 08:00 – 18:00

Registration Antwerp Expo, Exhibition Hall 3 10:00 – 18:00

Exhibition Halls Open Antwerp Expo, Exhibition Halls 1-4 10:15 – 10:30

CONFERENCE SESSION

Welcoming Remarks

» Port of Antwerp » Janet Nodar, Content Director, Breakbulk Events & Media

10:30 – 11:15

EXHIBITOR-LED SESSION

Why Promoting a Positive Safety Culture Makes the Difference

» George Geddes, Head of HSSE, SAL Heavy Lift » Daniel Duniec, General Manager Training Department, SAL Heavy Lift

10:30 – 11:20

CONFERENCE SESSION

Energy Outlook: Industry Dynamics in a World of Surplus Contrary to popular opinion, there is no such thing as a “fossil fuel.” Also contrarily to many: hydrocarbon fuels will continue to power the world for the foreseeable future. Realities must be dealt with, however. The extractable reserve base is many times larger than expected only a few years ago – and it continues to expand.

Meanwhile, prices are driven by the ability to deliver supplies to market, not by reserves in the ground. Thus, we are probably at the low point in the price cycle. Fortunately for the project sector, increased capital investment cannot be far behind, according to our seasoned industry expert, returning to Breakbulk to share his expertise during this challenging period for the project industry. » Ed Osterwald, Senior Partner, CEG Europe 11:30 – 12:20

CONFERENCE SESSION

EPC Outlook for CIS, Russia, Africa and Turkey In 2011, Renaissance Construction created its Renaissance Heavy Industries division and moved decisively into the EPC and industrial construction realm. The company, with primary markets in Russia, Turkmenistan, Libya and Iraq, is consistently busy despite global geopolitical and economic pressures, with an average annual backlog of approximately US$7 billion in projects www.breakbulk.com/europe BREAKBULK EUROPE PREVIEW EU19

event preview

BBEU2016 AGENDA

including petrochemical, energy and others. Deputy General Manager Evren Ayral will share his outlook for EPC construction in Renaissance’s markets. » Ateş Evren Ayral, Deputy General Manager, Renaissance Heavy Industries 14:00 – 14:25

A key feature of the European Community is free traffic of people and goods, allowing shippers to transport goods easily from one country to another. But this is not the case for exceptional cargo, or goods with extraordinary dimensions. This transport is regulated by the boundaries and legislations of the different countries, resulting in a very complex process from administrative and technical viewpoints. High costs, long lead times and huge amounts of paperwork are often the outcome of EU crossboundary transport. A key question: how can we facilitate this from a shipper’s perspective, so that our competitiveness can increase compared to non-European shippers? » Jurgen Huygh, Head of Shipping and Central Purchasing, CG Global MICRO-SEMINAR

Untangling Incoterms – Practical Applications Incoterms are a set of rules that define the responsibilities of sellers and buyers for the delivery of goods under sales contracts.

Sounds easy to use, right? Well, not so fast…our presenters will provide an informed session on which party is responsible for what actions under Incoterms. He will also demonstrate the use of Incoterms in a practical manner in our business.

Instructors: » Ralf Keller, Managing Director, LOG CONNECT AG » Michael Gruen, Vice Managing Director, LOG CONNECT AG 14:30 – 15:30

Hitachi Transport Systems Europe

» Patricia Wiesiollek-Tkocz, Managing Director,

TAG Spezialtransporte & Projektlogistik » David Collett, Managing Director, Collett & Sons; President, European Heavy Transport & Mobile Crane Association

CONFERENCE SESSION

One Europe? For Exceptional Transport, Still the Exception

14:00 – 16:00

» Satoshi Kurihara, Senior Manager Business Development,

CONFERENCE SESSION

Round Table Discussion: Oversized Transport Issues and Solutions For Europe Europe faces many issues concerning oversize transport, including individual procedures in each country, differing regulations, and a variety of Health and Safety standards. ESTA’s Best Practice Guide was Europe’s first step toward standardization.

Unification of escort rules, semi-trailer registration procedures and enhancement of driver skills are the most important next steps. On this dynamic panel, representatives of the European abnormal transport community will discuss the best ways to improve these regulations. » Łukasz Chwalczuk, President of the Board, Polish Heavy Transport Association Transport Section Executive, European Association of Abnormal Road Transport and Mobile Cranes » Jurgen Huygh, Head of Shipping and Central Purchasing, CG Global EU20 BREAKBULK EUROPE PREVIEW www.breakbulk.com/europe

15:30 – 15:50

CONFERENCE SESSION

Closing Remarks

» John Amos, Program Advisor, Breakbulk Events & Media

18:00

Exhibition Hall Closes

THURSDAY, 26 MAY 2016 09:00 – 16:00

Registration Antwerp Expo, Exhibition Hall 3 10:00 – 16:00

Exhibition Halls Open Antwerp Expo, Exhibition Halls 1-4 10:00 – 12:00

MICRO-SEMINAR

The Tangled Web of Logistics Contract Negotiations – Achieving Improved Results for Capital Projects Large and complicated capital projects require contracts for logistics between many different service and materials providers.

Each of the contracts has details that may be negotiated, generally through a global contract and for the specifics of a project. The experienced speakers will discuss these issues, the benefits of global contracts and the negotiations for project specific contracts for ensuring the focus on the project for improved results.

Instructors: » Juergen Osmers, ​Former President, KOG Transport, Inc. and founding partner of KOG WORLDWIDE AG » Ruediger Fromm, Head of Global Project Logistics and Head of Logistics Transmission Solutions, Siemens AG, Energy Management Division 11:00 – 11:10

CONFERENCE SESSION

Opening Remarks

» Janet Nodar, Content Director, Breakbulk Events & Media

11:10 -11:50

CONFERENCE SESSION

Iran and the Middle East: Oil and Gas Perspectives and Potential Effects on Capital Investments Iran is gradually rejoining mainstream markets as sanctions ISSUE 2 / 2016

BBEU2016 AGENDA

CONFERENCE SCHEDULE TUESDAY

end. The Middle East is reeling from rock-bottom oil prices.

What opportunities will arise in these regions? Will NOCs take the opportunity to invest now that prices are so low? What are the implications for new regional projects and expansions? An expert from A.T. Kearney’s Middle East practice shares his insights leveraging advanced modeling of global oil economics. » Eduard Gracia, Principal, A.T. Kearney Energy Practice Middle East 12:00 – 12:50

CONFERENCE SESSION

Shippers Panel – Shaping the Transport Envelope From Incoterms to port selection, how much of the ‘transport envelope’ do cargo owners want or need to control, and how much control should they hand over to their subcontractors?

Logistics executives from EPCs, project owners and OEMs discuss their perspective in this shippers panel. » Moderator: Thierry Dantec, Logistics EMEA Pole Leader, GE Energy Power & Water » William Moyersoen, CEO, ArcelorMittal Logistics » Cesar Martin Pereda, Global Logistics Manager, INITEC P.I. TECNICAS REUNIDAS Group. » Dieter Busam, Procurement Global Forwarding Industrial Projects, BASF 14:00 – 15:15

2 1:00 – 24:00: PORTS AMERICA HAPPY HOUR SPONSORED BY

WEDNESDAY 10:30 - 11:15: WHY PROMOTING A POSITIVE SAFETY CULTURE MAKES THE DIFFERENCE (Exhibitor-led Session)

1 0:30 - 11:20: ENERGY OUTLOOK: INDUSTRY DYNAMICS IN A WORLD OF SURPLUS (Conference Session)

1 1:30 - 12:20: EPC OUTLOOK FOR CIS, RUSSIA, AFRICA AND TURKEY (Conference Session)

1 4:00 - 14:25: ONE EUROPE? FOR EXCEPTIONAL TRANSPORT, STILL THE EXCEPTION (Conference Session)

CONFERENCE SESSION

Ocean Currents Super Session Part I: No Let-up: MPV/HL Fleet Still Under Siege Will scrapping, repurposing, plummeting bunker rates or other market forces offer any relief to the beleaguered HL/MPV carrier sector in the coming year? Our expert from Drewry will supply the latest assessment of the supply of and demand for specialist multipurpose and heavylift vessels, including a look at the continuing competition for breakbulk and project cargo and the ongoing difficulties being faced by the major players. » Susan Oatway, Senior Analyst, Drewry Shipping Consultants

Part II: Breakbulk Operators – Fighting Over the Same Bones Breakbulk is in a state of flux. Dynamar delves into the fleets of the world’s major operators of multipurpose/project/heavy-lift ships, and at those carrying the same cargoes with vessels not specifically designed for the task. » Dirk Visser, Senior Shipping Consultant and Managing Editor, Dynamar BV – Shipping Information and Consultancy 15:15 – 15:30

17:00 – 20:00: WELCOME RECEPTION

CONFERENCE SESSION

Closing Remarks John Amos, Program Advisor, Breakbulk Events & Media

1 4:00 - 16:00: UNTANGLING INCOTERMS – PRACTICAL APPLICATIONS (Micro-seminar)

1 4:30 - 15:30: ROUND TABLE DISCUSSION: OVERSIZED TRANSPORT ISSUES AND SOLUTIONS FOR EUROPE (Conference Session)

THURSDAY 1 0:00 - 12:00: THE TANGLED WEB OF LOGISTICS CONTRACT NEGOTIATIONS – ACHIEVING IMPROVED RESULTS FOR CAPITAL PROJECTS (Micro-seminar)

1 1:10 - 11:50: IRAN AND THE MIDDLE EAST: OIL AND GAS PERSPECTIVES AND POTENTIAL EFFECTS ON CAPITAL INVESTMENTS (Conference Session)

1 2:00 - 12:50: SHIPPERS PANEL – SHAPING THE TRANSPORT ENVELOPE

16:00

Exhibition Halls Close

(Conference Session)

1 4:00 - 15:15: OCEAN CURRENTS SUPER SESSION (Conference Session)

event preview Preview these sessions at Breakbulk.com/Europe, under Event Details > Agenda.

DEFINING ROLES

2016

Micro-seminar Covers Logistics Contract Negotiations Thursday, 26 May, 10:00 – 12:00 The Tangled Web of Logistics Contract Negotiations – Achieving Improved Results for Capital Projects

» Juergen Osmers, ​Former

President, KOG Transport, Inc. and founding partner of KOG WORLDWIDE AG

» Ruediger Fromm, Head of Global Project Logistics and Head of Logistics Transmission Solutions, Siemens AG, Energy Management Division

NEW! Micro-seminars are 2-hour intensive sessions held in their own theater on the exhibition floor in Hall 3. Free to attend, but space is limited so arrive early to get a seat.

While logistics contracts are vital to clarify each party’s role, responsibilities and benefits, their terms are growing in complexity to match the increasing sophistication of projects.

“As these projects are becoming bigger and bigger, our clients, the shipper/ EPC are getting more and more conditions put upon him by his client, the project owner in most instances,” said Juergen Osmers, former CEO of KOG Transport Inc. and founding partner of KOG Worldwide.

While such conditions are common in project extensions, where a plant’s continued operation is a priority for the project owner, they are increasingly included in negotiations for greenfield installations, he said.

“Many of the rules put upon the shipper/EPC by the project owner also refer to transportation, particularly, but not

Education

limited to, the final delivery,” Osmers said in an interview with Breakbulk.

Osmers is the main presenter of the Breakbulk micro-seminar on logistics contract negotiations for moving project cargo.

“We want to talk about two kind of contracts, first the global or frame contracts which spell out everything from liabilities to penalties, and second the individual project contracts which became an addendum to the global or frame contract if a such a contract is in existence. Many large companies do not consider service providers, unless they have such a global or frame contract in existence,” he explained.

Osmers will be joined in the microseminar by Ruediger Fromm, head of global project logistics and head of logistics transmission solutions for Siemens AG in Erlangen, Germany.

MORE THAN A SHIPPER’S PERSPECTIVE Two-day Master Class in Project Freight Management Monday, 23 May, 08:30 – 17:00 Project Freight Management – The Shippers’ Perspective

» Petrus (Peter)

Bouwhuis, iBrabble B.V. Education & Events

Register for the Project Freight Management course online at Breakbulk.com and click on the Europe event. For a discount on the registration fee, use Promo Code BBE20. Registration is on a firstcome, first-serve basis, so register now to ensure your space.

If there’s one thing that Peter Bouwhuis can offer, it’s perspective.

Bouwhuis, of iBrabble BV, formerly with ABB, is a 34-year veteran of project freight, a certified customs broker, customs compliance expert and senior logistician.

Yet one of the first things he’ll point out, in discussing his two-day course at Breakbulk Europe, “Project Management – A Shipper’s Perspective,” is that it’s not strictly a shipper course.

“It’s a master class for people dealing with project freight,” he explained in an interview. “For instance, shippers that manufacture and ship oversized and heavy-lift as well as any other project related freight.”

Bouwhuis points to value for “EPC companies that design, procure and construct plants and structures that demand

EU22 BREAKBULK EUROPE PREVIEW www.breakbulk.com/europe

project freight management, and project freight forwarders that take care of these projects and shipments.”

Furthermore, add perspective for carriers – “ocean carriers and land carriers as well that are dealing directly or indirectly with this type of projects and freight.”

“People will get a more profound understanding of how and why shippers or freight owners do what they do in an effort to prepare, plan, organize, price, monitor, and execute their heavylift shipments or handle their capital projects,” Bouwhuis said. “It will help people in future dealings as a shipper or as a project freight forwarder involved in heavy-lift and projects. People will gain a clearer understanding and improve on communication and collaboration in favor of project success.”

ISSUE 2 / 2016

OUR NETWORK IS THE KEY

BARNHART’S NETWORK OF BRANCHES AND EXPERTS IS YOUR KEY TO UNLOCKING AMERICA. Burdened with laws and regulations that differ from state-to-state, and inconsistent road and bridge infrastructure, the US is a very difficult place to navigate super heavy and over-dimensional cargo. But Barnhart can simplify these problems. In addition to having America’s largest network of branches, and heavy lift terminals, we offer customers the ideal combination of experience, equipment and engineering to insure the job is done on time and on budget. WHEN YOU ADD OUR REPUTATION FOR INNOVATIVE AND ORIGINAL PROBLEM SOLVING WE ARE “A LOCK” AS THE RIGHT TEAM FOR THE JOB.

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ECL cargo discharge at the Port of San Francisco.

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Early bird pricing available through May 20, 2016

Breakbulk Americas 2016 September 26-29, at the George R. Brown Convention Center in Houston, Texas, USA

regional review

FALL FROM GRACE Brazil Seeks to Regain Footing Amid Scandals

BY ALAN M. FIELD

O

nly a few years ago, Brazil was the darling of the global boom in infrastructure and construction, thanks to strong growth and a series of spectacular plans to expand the country’s infrastructure in preparation for the 2016 Olympic Games in Rio. No one could have anticipated that Brazil – the brilliant “B” in the BRIC bloc of emerging nations – would undergo a series of economic and political crises that would not only effectively put new infrastructure projects in a deep freeze, but lead to the impeachment of President Dilma Rousseff and her likely removal from office this year.

In the world of project engineering and infrastructure development,

ABOVE: Brazilian President Dilma Rousseff delivers a press conference on April 18 in Brasilia, declaring that she is “the victim of a great injustice.”

She made her remarks after members of Brazil’s Chamber of Deputies voted to impeach her. The impeachment motion passed by 367 votes in favor, 127 against, seven abstentions and two not voting. / Credit: Fernando Bizerra Jr./EFE/Newscom 66 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2016

regional review

BRAZIL FOREIGN DIRECT INVESTMENT

BRAZIL ECONOMIC INDICATORS

FDI In Brazil Increased by US$5920.40 In February 2016.

GDP is contracting as companies cut investment plans.

16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000

INDICATOR

M

2015

A

M

J

J

A

S

O

N

D

J

F

2016

In $US millions / Source: Banco Central Do Brasil/Tradingeconomics.com

GDP Growth Rate Unemployment Rate Inflation Rate Interest Rate Balance of Trade Government Debt to GDP

-1.40% 8.20% 10.36% 14.25% US$3043 Million 66.23%

Dec. ‘15 Feb. ‘16 Feb. ‘16 March ‘16 Feb. ‘16 Dec. ‘15

Source: tradingeconomics.com

these crises have cast an ever-deepening Economics, a firm that aggregates statiscloud over the reputation of Grupo Odetics from various official sources. brecht SA, Brazil’s fifth-largest private “Brazil’s economy will remain in enterprise and its largest infrastructure recession in 2016 after dipping below zero firm, with some 180,000 employees. In in 2015, for the first time in seven years,” March, Marcelo Odebrecht, grandson of wrote BMI Research in a recent report. its founder Norberto Odebrecht, was sen“We forecast real GDP to contract by -0.8 tenced to 19 years in prison, after being percent in 2016 following a contraction convicted of paying more than US$30 of -2.7 percent in 2015.” Major headwinds million in bribes. The bribery scandal to robust private consumption and fixed involved illegally siphoning away money investment include the protracted resolufrom state contracts for various infration of the corruption scandal at national structure construction projects, including oil company Petrobras, dubbed “Operathe lion’s share of infrastructure projects tion Car Wash,” a 10-year high in the for the Rio Summer country’s unemployment Olympics. rate, and the deterioraIn the oil sector, tion of Brazil’s image “In every sector, Petrobras has halted as a good place to do payments on many business, said the BMI there is overall projects and prohibited report. paralysis; people some service providers “This goes very are waiting to see from signing new condeep,” said Paulo Sotero, tracts, bringing projects director of the Brazil what are going like an ambitious refinInstitute at the Woodto be the new ery in the suburbs of Rio row Wilson Center developments; all but to a stop. in Washington, D.C. “In every sector, “Eleven other conthings are there is overall paralysis; struction firms were escalating.” people are waiting to implicated in the invessee what are going to be tigations, and some of – Felipe Monteiro, the new developments; the people from other professor of management at INSEAD business school things are escalating,” companies have also in Paris said Felipe Monteiro, signed plea-bargaining professor of management agreements.” at INSEAD business By mid-March, school in Paris, and a former senior analyst Brazilian authorities had made some 80 at Banco do Brasil, where he advised forarrests, but, essentially, “it’s all directed eign firms about investing in Brazil. against one company: Odebrecht.” The Inward foreign direct investment largest construction company in Brazil in Brazil amounted to US$5.92 billion operates in 22 countries, including the in February 2016, far below the recordU.S. Noting such examples, Sotero said: high figure of US$20.4 billion achieved “They are a very successful company, but in December 2010, according to Trading they are also very corrupt.”

68 BREAKBULK MAGAZINE www.breakbulk.com

CHANGE DATE

SCALE OF THE PROBLEM

The multiple crises have left Brazil’s breakbulk and project cargo sectors searching for new ways to grow, as the country’s overall economy continues to slide downhill. “People knew that corruption was widespread, but no one had any real idea of the scale of the problem,” said a Brazilian-born analyst at a major global infrastructure firm. “Until there is new leadership [in the federal government], it is hard to get optimistic about the future of Brazil.”

“I don’t think there will be a lot of new investments this year” in the infrastructure sector or elsewhere, added a former vice president of a joint venture funded by Odebrecht and Petrobras, which involved construction of a petrochemical plant. The executive, who insisted on anonymity, said: “The economy is in a very sensitive position, which has influenced international trade and investments” in Brazil. More hopefully, he added: “I have friends who are still at Odebrecht, which has just agreed to negotiate with prosecutors with immunity, so all the corruption will come to the surface.”

Getting out all the details will be a prolonged process, but it will help the country and the company emerge from this crisis and reform its practices for managing project procurement.

“All of the directors [at Odebrecht and other firms involved in the bribery scandal] will support the efforts of the federal police in tracking down the guilty parties,” this executive added.

“This should translate into a quick impeachment of Dilma Rousseff, possibly followed by her imprisonment. Her predecessor Lula [Luiz Inácio Lula da ISSUE 2 / 2016

Silva], who ruled from January 2003 to January 2011, will probably be jailed for his acts after he became president.”

The faster this all proceeds, the quicker Brazil can move on to finding solutions for its economic and political ailments, analysts agreed.

According to Brazilian prosecutors, bribery was so endemic at Odebrecht, the company established a special department within the firm dedicated to tracking the flow of bribes and their recipients. However, the executive cautioned against exaggerating the extent to which bribery is endemic at Odebrecht, which recorded revenues of US$45.8 billion in 2015, up 11 percent from 2014.

“I don’t think that bribery is widespread at the firm,” he said. “The area that was predominantly charged was the industrial engineering group, which was less than 5 percent of all Odebrecht’s revenue. The remaining areas are still

clean.” When Brazilian investigators later audited the procurement process concerning the naphtha plant engineered by the Odebrecht and Petrobras joint venture, it was verified that there were no irregularities in the procurement process.

With Brazil’s economy in deep freeze, Odebrecht is expanding a lot more rapidly outside Brazil than it is within its home country. In 2015, Odebrecht’s operations outside Brazil grew 21 percent. With its Ethylene XXI Petrochemical Complex in Mexico and its Chaglla Hydropower Plant in Peru scheduled to begin operations outside Brazil, projections call for 55 percent of Odebrecht’s entire revenues to come from abroad in the next few years, according to its own figures. Outside Brazil, Odebrecht’s other major projects have included a US$1 billion port project in Cuba and one of Africa’s largest hydroelectric dams in Angola. In Colombia, it

Anti-government protestors demonstrate in the Cinelandia neighborhood in Rio de Janeiro.

Credit: Fabio Teixeira/Polaris/Newscom

is completing construction work for the 528-kilometer Ruta del Sol Highway and the Boyacá Transversal Corridor, rehabilitating 49 kilometers of roads. In Cuba, it is also remodeling and expanding Havana Airport.

OPPORTUNITIES ON THE HORIZON What looms ahead for the infrastructure sector at home in Brazil? Brazil grew at an average rate of 4 percent during the eight years of Lula’s presidency, riding the very favorable wave of commodity prices.

But there has been a collapse of the markets, which coincided more or less with the end of the commodity “super-cycle.” www.breakbulk.com BREAKBULK MAGAZINE 69

regional review

“Cup, whom for?” is graffittied close to Arena Corinthians stadium, known as Itaquerão, in Sao Paulo, Brazil, in 2014. This stadium, which hosted the opening match of the FIFA World Cup in 2014, was built by the embattled Odebrecht company. / Credit: Sebastião Moreira/EFE/Newscom

“That super-cycle is over, and we need to reorient our economy towards becoming more attractive to investment; rather than rely more on consumption

by Brazil’s growing middle class and consumption by China,” said the Brazil Institute’s Sotero. Rousseff “is a dogmatic person, who comes from the hard left. She believes in state intervention for everything. For her, there’s no problem that can’t be solved by state intervention.”

Sotero added that foreign companies are reluctant to launch any new engi-

neering projects in Brazil at this time, given the multiple uncertainties swirling around the economy and its political leadership.

Riordan Roett, professor and director of the Latin American Studies Program at the School of Advanced International Studies at Johns Hopkins University, agreed with that assessment. “Everything is negative in Brazil. Some see some growth in 2017, but that depends on resolving the political issues, which are very complicated. And you can’t move on to fiscal problems until you

BRAZIL MINING CONTRACTION Mining production decreased 16.85 percent In January 2016 year-on-year.

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Jul

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Sep

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Source: Tradingeconomics.com/Instituto Brasileiro de Geografia e Estatística 70 BREAKBULK MAGAZINE www.breakbulk.com

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solve the political problems. All three ratings firms have downgraded Brazil debt to junk; worsening the challenge for investors. And the so-called ‘Car Wash’ scandal will probably grow as more and more people give testimony.”

For his part, Sotero noted that even the multinational companies that have long done business in Brazil because of the huge size of the Brazilian market – such as Ford and GM – are not expanding their physical plants now “because they want to see the resolution of this political crisis.”

Once Rousseff is replaced, Brazil would be faced with the same challenges that have been obvious to analysts for the last quarter-century.

“Brazil has lousy infrastructure and the government doesn’t believe in paying for it; it’s at the bottom of the World Economic Forum listings for any country,” said Roett, the John Hopkins professor.

“These problems have been there for 25 years, but were hidden by the Chinese boom in commodities. China replaced the U.S. as Brazil’s major trading partner a couple of years ago, and Brazil is a very closed economy – with lots of protection and lots of subsidies. Brazil can’t rely on Mercosur, which is an absurd organization and doesn’t function since Venezuela joined it. So the outlook in the short term is totally negative.”

ISSUE 2 / 2016

SHORT-TERM, LONG-TERM

Nevertheless, INSEAD’s Monteiro sees two kind of opportunities emerging for Brazil’s industrial sector, and its suppliers of breakbulk cargo: short-term opportunistic openings and long-term strategic openings.

The short-term opportunities will come from efforts that the government will be making to survive, becoming more generous, more flexible, and offering better conditions to attract foreign involvement in the ongoing projects that are essential for the economy. These include extensions and modernizations of industrial plants, power plants and key bridges and highways. Some of these projects will involve bidding for work from Petrobras, which requires 30 percent domestic content in its projects. These opportunities stem from the government’s pressing effort to keep the economy moving – at a time when the

domestic players are not capable of doing it because of the disarray caused by crackdowns against Petrobras, Odebrecht and other Brazilian firms.

Opportunities should also arise because of the appreciation of the U.S. dollar, Monteiro added, now that some assets are cheaper than they used to be.

“I recommend that foreign firms watch out for some specific opportunities coming up,” he said. “They might find that they are in a very strong position to negotiate with the government because the government really needs them” to supply critical funding and expertise.

In its eagerness – or perhaps desperation – to attract capital, added Monteiro, Brazil’s traditionally protective government might be changing its position, which has held that foreign firms have limited opportunity to win contracts to supply equipment for Petrobras projects.

In the past, Petrobras’ best projects were reserved for Brazilian suppliers, he added.

“Now that might be changing,” if the local content regulations are softened.

The longer-term opportunities will come when the market has more clarity about what is coming next, Monteiro added. “The demands of the infrastructure in Brazil are huge. But when it comes to long-term investments, you need to have some assurances about the institutional environment. At a moment like this, there are a lot of things that are put on hold – not because the demand is not there, but because people are looking for a better institutional environment and situation.”

Once there is clarity about the new institutional environment created by the new government that follows an impeached Rousseff, there would likely be a rush to retake and restart a number of stalled projects. BB

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Credit: Hatch

project spotlight

FROZEN, BUT FAST-GROWING Project Cargoes Support Canada’s Diamond Mining Aspirations

72 BREAKBULK MAGAZINE www.breakbulk.com

I

n mid-winter, the temperatures in Canada’s Northwest Territories average about -30 to -35 degrees Centigrade. But that hasn’t prevented a joint venture of De Beers Canada (51 percent) and Mountain Province Diamonds Inc. (49 percent) from carrying massive amounts of machinery each day along the “winter road” to a site about 170 miles northeast of Yellowknife, the largest town in Canada’s Northwest Territories.

In a remarkable feat of project cargo management, the construction equipment and all materials for the Gahcho

BY ALAN M. FIELD

Kué mine have been trucked to Yellowknife first, and staged in marshalling yards before being shipped to the mine site using the same winter road used by other mines in the area, including the Snap Lake Mine. This Tibbitt-toContwoyto road is operated via a joint venture between De Beers Canada’s Snap Lake and Gahcho Kué mines, BHP Billiton Diamonds’ EKATI mine, and Diavik Diamonds’ mine.

Jeff Bourque, logistics manager for engineering, procurement and construction company Hatch, noted that the only alternative to the winter road is air ISSUE 2 / 2016

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project spotlight

PROJECT CARGO ON DEMAND

Mine development calls for infrastructure imports.

23.3 million liters

22 million liters

» Planning routes and multimodal transportation modes.

» Coordinating traffic and logistics. » Administering the contracts of freight forwarders and carriers.

» Performing off-site cargo

consolidations, storage and preservation in the city of Yellowknife.

5 million liters

CONDITIONS PRESENT CHALLENGES Winter Road 2014

Winter Road 2015

Amount of fuel delivered to site

100 loads delivered to site

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RUSSIA BOTSWANA CANADA ANGOLA SOUTH AFRICA NAMIBIA ZIMBABWE LESOTHO SIERRA LEONE TANZANIA GUINEA

0

5

10

15

20

25

2014 (in millions of carats) Source: USGS Mineral Yearbook

freight, but “when you go air freight, you are quite limited in terms of space, and you are restricted in your dimensions,” he said.

The first winter road to service these projects was created in 2014. Most of the equipment that year was so-called “hurt work” equipment for doing preliminary stages such as quarry and crushing equipment, Bourque said. Last year alone, 2,226 loads were delivered to the mine site, including 23.3 million liters of fuel, process plant equipment, heavy mining equipment, bulk piping material, structural steel, explosives supply, general contractor equipment, and cement. This year, 1,383 loads are scheduled to supply almost as much fuel 74 BREAKBULK MAGAZINE www.breakbulk.com

Winter Road 2016 Source: Hatch

and equipment, as well as bulk cargo and operational spare parts.

In the process plant, the kimberlite ore, from which diamonds are naturally mined, will be treated via crushing, screening, dense media separation and X-ray sorting, to produce a diamond-rich concentrate. Projected annual production of kimberlite ore will be 3 million tonnes or about 250,000 tonnes per month. Over the projected 13-year life of the mine, 33.3 million tonnes of ore will be mined at an average grade of 156 carats per hundred tonnes, for a total of 51.84 million mined carats.

Bourque explained that Hatch’s role in the project includes the design and development of the crushing circuit, the process plant, the mine truck shop, the warehouse and explosives facility, as well as the fuel tanks and the 14-megawatt power generation plant. Hatch has also provided support facilities for 560 personnel in a full engineering, procurement, construction and management mode.

The scope of Hatch’s logistics management activities included: » Writing and implementing the logistics execution plan. » Reviewing the logistics data supplied by vendors to the project in order to confirm the data and consolidating it into the list of materials. » Issuing transportation release notes, air-freight releases and shipping instructions. » Selecting carriers and freight forwarders.

Bourque said his checklist of challenging factors at Gahcho Kué includes: » The remoteness and limited accessibility of the job site. » Managing North American domestic and overseas transportation to the site. » Managing oversize and heavy-haul equipment. » Dealing with packaging and marking specifications of shipments. » Managing the availability of specialized transportation equipment. » Coordinating winter road operations according to transportation milestones. » Producing reports that update the status of project logistics.

Catherine Harrison, Hatch’s logistics materials manager for the Gahcho Kué mine, stressed the enormous amount of planning and preparation necessary to bring all the equipment up to the mine site each year.

“The objective was to get a year’s worth of freight up the winter road in the 52 days of each year when weather permitted. It’s very important to know many months in advance what kinds of freight you are going to send and how heavy that piece is, its volume and its dimensions,” Harrison said.

“We started to consolidate the freight in Yellowknife in October; looking for getting a thousand loads in there by the end of the following January. So if you back that up, we started planning for the winter road of 2015 in May or June of 2014.” She added that it’s the construction phase that brings in heaviest and/or widest pieces.

Constructing the Gahcho mine has required years of worldwide planning, involving choosing from the many bidders from suppliers, negotiating contracts with ISSUE 2 / 2016

suppliers and coordinating logistics services for transporting supplies—not just by land and sea, but also from locations in North America.

Suppliers for the Gahcho Kué mine include manufacturers in China, South Korea, South Africa, Mexico, Germany and Switzerland. Not surprisingly, a large volume of those supplies have come from locations within North America, especially Canada. Since February 2014, almost 3,000 truckloads have come from Western Canada alone.

For the mine to maximize its profit potential, everything will need to keep running like clockwork. Harrison explained that the project engineers at Gahcho Kué have been able to ensure that everything is engineered and sized well in advance, especially those items with long lead items. Freight supplied from South Africa and China must start moving

Access to the mine is via a winter road that is only accessible 52 days per year. / Credit: Hatch

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project spotlight

an additional six to eight weeks in advance. In 2015, Hatch was able to Credit: Hatch plan for the arrival of a crane in Yellowknife by creating enough laydown areas to store the anticipated volume of heavy equipment shipped.

Ice engineers will continue to play a Canada’s Gahcho Kué mine has been 10 years in the making.

76 BREAKBULK MAGAZINE www.breakbulk.com

critical role after the mine is launched during the fourth quarter of this year. Noted Harrison, “With a winter road program, you are limited by the amount of ice. Every year, a group of ice engineers profile the ice starting in December. That’s important because it determines the weight of the load [that is authorized to be safe to transport], and the trailer axle types that you use for specific pieces of freight.

“You want to make sure that you are maximizing your volume; and still achieving the maximum weight. That’s one of the reasons you have to have some upfront information, months in advance, so you can make sure that you have those [appropriate] load types available to you when the road opens. That way, you are as efficient as possible with what you ship. Each load is costing a fair bit of money, so you want to make sure you’re getting value.

Last year, we were really constricted because of the thickness of the ice.”

DIAMONDS A NEW CANADIAN COMMODITY

A quarter-century ago, Canada – a major producer of oil, natural gas and gold – had no output of diamonds. That began to change in 1991 when two geologists found evidence of diamond-bearing kimberlite pipes about 200 miles north of Yellowknife, in the Northwest Territories. One of these pipes was developed

by BHP Billiton into what is now known as the Ekati Diamond Mine, which produced Canada’s first commercial diamonds in 1998.

What’s remarkable about diamonds is the long lead time to put into production: a decade, versus a gold or copper mine, which can be as little as a few years. This long lead allows for a fairly accurate assessment of the supply and demand situation over the coming decade.

Currently, the two largest diamond producers in the world are Russia,

ISSUE 2 / 2016

which ranks first by volume and carats produced; and Botswana, where the diamonds tend to be very high value. This is where De Beers primarily operates from. Right behind them, in third place, is Canada, the fastest-growing diamondproducing nation.

To put it in context, Gahcho Kué will produce 4 million karats a year, while there are fewer than 15 projects a year that produce more than 4 million karats, said diamond consultant Paul Zimnisky.

According to a 2014 feasibility study, the price of a karat was then US$150; since then prices have come down 15 percent to 20 percent. “Gahcho Kué is going to be definitely in the top 15 mines in the world; probably pretty close to the top 10 of Paul Zimnisky the largest diamond mines in the world,” Diamond Consultant said Zimnisky.

He believed Canada is the best-positioned country in the industry given the quality of the current projects. “Looking at the NWT’s Ekati and Diavik mines, for instance, they are still quite profitable projects, even in a weaker price environment. I think Dominion Diamond, which owns 89 percent of Ekati and 40 percent of Diavik, could generate almost US$250 million in free cash flow next year and almost double that the following year, using what I would consider a conservative diamond price. The company’s market cap is only US$750 million.”

While Ekati has become the seventh most valuable mine in the world, Diavik, which is in the same region as Gahcho Kué, is the third most valuable mine in the world, and is on track to produce US$800 million worth of diamonds this year, compared with US$500 million to US$550 million from Ekati, forecasted Zimnisky.

“These Canadian mines are extremely significant in the global production context,” he said, and they will continue to be so in the future. Ekati’s production will increase 70 percent this year, he predicted.

Overall, the market is seeing a ramp up in Canadian production, which is expected to continue to the end of the

decade. “Gahcho Kué will probably produce a 500,000 to a 1 million karats this year. It will probably get close to reaching the 4 million karat production market next year and going forward.

That will make Gahcho Kué one of the

top 15 most valuable. And it is probably going to continue to move up that list as some of the other mines on the list will see depletion take effect. So it will be one of the top 10 or 15 throughout its life,” Ziminsky said. BB

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BY V L SRINIVASAN

WRECKING BALL Challenging Times For Marine Salvage Industry

W

hen the Panama-flagged Modern Express roll-on, roll-off vessel, en route from Gabon to Le Havre, France, with 3,600 tons of cargo, lost stability due to rough seas in January and started drifting through the Bay of Biscay in the French waters, it was successfully salvaged in less than a week.

Compare this with the salvage of the Bahamian-flagged car carrier Baltic Ace. 78 BREAKBULK MAGAZINE www.breakbulk.com

On its way from Belgium to Finland, it collided with a containership and sank in the North Sea in December 2012, resulting in the death of 11 sailors and loss of more than 1,400 Mitsubishis.

The distressed car carrier sank in the busy shipping route off the coast of Rotterdam and posed a grave threat not only to other vessels but also to the environment as it had some 540,000 liters of fuel onboard at the time of incident.

Wreck removal operations began in March 2014 and took 19 months at a cost of US$73 million. While high, this sum is a drop in the ocean in comparison with the salvage operations of cruise ship Costa Concordia, which sank near Tuscany in Italy in January 2012: its salvage was the industry’s most expensive to date at about US$1.2 billion.

Ships in all sectors are getting larger to cater for increases in world trade, but that trend is challenging the role of the global salvage industry as it faces the

retrieval of ever-larger ships involved in casualties on high seas. Increasingly, traditional salvors are turning to the specialist heavy-lift sector to aid in recovery efforts, offering a lucrative sideline for carriers that can be in the right place at the right time.

Besides legal issues, fighting the vagaries of Mother Nature and mounting operational costs including the everincreasing expenditure of recovering pollutants from the seabed to preserve the environment, salvage companies are also struggling to upgrade their technologies and the sector is witnessing consolidation in some areas as never before.

Former International Salvage Union President Andreas Tsavliris estimated that about 200 salvage operations take place around the world every year alongside a large number of wreck removals.

At the same time the sector is facing commercial pressure due to the unpredictable nature of business and a decline ISSUE 2 / 2016

in the number of salvage cases, making investment in equipment and vessels difficult.

“Salvage is a highly capitalintensive business.

It cannot be done without large, powerful tugs and an array of expensive Andreas Tsavliris equipment. And collectively that Former International equipment needs to Salvage Union President be spread globally in order to be at the ready for casualties that, naturally, do not happen close by to salvors’ wharves and depots,” Tsavliris remarked.

In most heavy industry investment, decisions are based on analysis of the return on capital employed. In classical market economics, if the capital in which

a firm invests does not generate more cash than other opportunities, there is no entrepreneurial incentive to invest in that sector, he added.

HEAVY-LIFT OPPORTUNITIES

The role of heavy-lift operators is undeniably vital in ship salvaging operations, especially when the ill-fated vessel is of huge size and weight. In the past, semi-submersible heavy-lift ships have been used to transport damaged vessels such as USS Cole and HMS Nottingham for repairs. USS Cole was damaged in terror attack in Yemen, while HMS Nottingham ran aground off the coast of Australia due to a navigational error.

Clarksons Platou (Offshore) Divisional Director Shaun Frestle said that heavy-lift ship operators could prove to be of great benefit to the salvage industry, particularly in respect to wreck removal contracts, which are quite

LEFT: SAL heavy-lift vessels work on the wreck

of the Costa Concordia.

RIGHT: SAL’s heavy-lift vessels Svenja and Lone

install sponsons on the wreck of the Costa Concordia.

Credit: SAL Heavy Lift

often in remote locations and have a need for heavy equipment to be on site.

Unlike salvage operations, speed is not so critical, which allows for the transportation of equipment by sea using multipurpose ships.

There are also the options of utilizing onboard heavy-lift cranes on site for the removal or using an MPV or heavy-lift ship as a base for the operation, avoiding the need for additional tonnage, Frestle said.

Recalling the salvage operations of Costa Concordia, London Offshore Consultants Associate Director Andrew www.breakbulk.com BREAKBULK MAGAZINE 79

case study

Johnstone said the group was associated with its wreck removal and participated in a feasibility study to use the Dockwise Vanguard, the world’s largest semi-submersible heavy-lift vessel, to transport the wreck to an appropriate recycling facility outside Italy, too far away for the ship to be towed.

“Costa Concordia was exceptional; but then every major casualty is exceptional, so heavy-lift vessels, particularly those with dynamic positioning capability, are likely to be considered whenever large salvage aids are to be transported and installed,” he said. “Availability will always be a challenge as lead times are short in salvage operations and heavylift vessels generally have pre-arranged schedules. The engineering of the salvage operation or wreck removal will be adjusted to suit vessels of opportunity that are available in the right region,”

Johnstone said.

Justin Archard, SAL Heavy Lift’s corporate director commercial, said that depending on the salvage scope, a heavy-lift operator could also provide lifting power and subsea work to place salvage strucJustin Archard tures on a capsized SAL Heavy Lift vessel.

SAL too was involved in the salvage work of Costa Concordia, where its heavy-lift vessels Lone and Svenja proved key to lifting and positioning the subsea structures and the heavy ballasting tanks. Its experience of handling heavy and oversized structures was a key selling point, Archard said.

CONSOLIDATION CREATES OPENINGS

Demand for MPV and heavy-lift operators in salvage operations could also increase to fill a widening gap in traditional infrastructure. The maritime salvage industry is undergoing a significant round of consolidation with many companies integrating with larger ones, selling assets and transferring their personnel to other salvors: » Florida-based global salvor Titan Maritime LLC was sold to Crowley Maritime Corp., also in Florida, last year. » Netherlands-based Svitzer Group and Crowley Maritime merged their salvage divisions – Svitzer Salvage and Titan Salvage – and formed a new company, Ardent. » Alaska-based Magone Marine merged with Resolve Marine Group.

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ISSUE 2 / 2016

» Mammoet Holding B.V. sold its

salvage assets to Koole Contractors in February this year under an agreement that included transfer of Mammoet personnel to Koole.

Under a reinvention of their business models, some of these companies are looking at diversifying their activities offering different services such as towage, spill response and marine construction to stay afloat in the business.

“With the recent consolidation in the salvage industry, there are fewer players in the market, but this should not have any impact on the heavy-lift operators as the driving force will be the number of jobs available to the salvors rather than the number of salvage companies,” Frestle said.

LOC’s Johnstone agreed that the consolidation was unlikely to change demand for heavy-lift vessels. “What is driving consolidation in the salvage industry is

the costs associated with low utilization of salvage assets. The numbers of salvage tugs acting as Emergency Response Towing Vessels have reduced over the years partly for this reason. It is unlikely that owners of heavy-lift vessels would be likely to keep a vessel available for salvage operations at short notice, with the associated disruption to booked slots.”

Archard agreed that heavy-lift vessel operations for salvage work would remain a niche business, and only a limited amount of salvage operations require the capabilities of a heavy-lift vessel. But when salvage operations do require huge lifting and dynamic positioning capabilities, companies such as SAL have a major role to play.

While the demand for future salvage jobs cannot be predicted, Frestle said the industry was going through relatively quiet times, both with salvage and wreck removal work. But the use of MPVs with

large capacity cranes is something that they continue to encourage salvors to consider when they have equipment that needs to be transported for operations where time is not so crucial.

Johnstone added that salvors are adept at engineering salvage solutions with limited available resources and companies are always on the lookout for non-traditional solutions that may require employing resources that salvors might not have considered in the first instance.

In the future, MPVs operators could increasingly offer that previously overlooked “non-traditional” solution. BB V L Srinivasan is a senior journalist based in Hyderabad, India, covering finance, infrastructure, energy, shipping, transportation, IT, environment and political and regional developments in India and the Gulf Cooperation Council region.

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special focus

A VIP SHIPPER’S TALE The Many Actors of Breakbulk’s Story

A

good conference, like a good story, has at its core a plotline that pulls everything together and creates coherence and momentum. For Breakbulk Events & Media, that core is its VIP Shippers.

Who are they? “Cargo owners, for the most part. Those responsible for acquiring, or directing to be acquired, whatever goods and services are needed to build a given project,” explained ElizaBY beth Wetzel, Breakbulk’s JANET NODAR education manager. “These are the people who buy everything our exhibitors sell, directly, or indirectly through their forwarders, agents, chartering companies – and I really mean everything.”

Until this spring, Wetzel ran Breakbulk’s VIP Shipper Club, in addition to managing Breakbulk’s Education Day and workshops and assisting with conference programming. Before joining Breakbulk’s staff in 2010, Wetzel was an executive in the shipping industry and an educator in logistics and transportation.

Although Breakbulk’s VIP Shippers are at the center of Breakbulk’s story, they are not necessarily easy to spot. Key logistics and procurement executives, they may work for engineering, procurement and construction firms, original equipment manufacturers, construction firms, oil and gas majors or oil and gas service providers.

These companies build or participate in the construction of multimillion or multibillion-dollar projects for governments, national oil companies, national 82 BREAKBULK MAGAZINE www.breakbulk.com

and global manufacturers, joint ventures and other entities.

Moving the often very complex, large, expensive, heavy and/or outof-gauge project cargo needed for these projects is a complicated, Elizabeth Wetzel nerve-wracking, niche business, and Breakbulk Education Manager is the specialty of those who dwell in the breakbulk world. This is not retail; the job is never the same twice, and it is as far from commodified as it gets.

The level of industry knowledge in Breakbulk’s VIPs is extremely high, Wetzel said, which is why she relies on them as teachers for Breakbulk’s Education Day program, workshops and new micro-seminars. “Most of it does not come from textbooks,” Wetzel said. “It’s from experience.”

Dennis Mottola, corporate traffic and logistics process owner, manager with Bechtel, has been a part of Breakbulk since the conference first began back in the 1980s. Breakbulk was then focused on dry bulks, lumber, steel and industrial cargoes rather than project cargo.

Mottola has taught and presented at Breakbulk events many times, and been a member of the VIP Shipper Club since its inception six years ago. He cares deeply about sharing his professional experience with younger generations in the industry.

ISSUE 2 / 2016

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Possibility

special focus

“The best teachers are the ones that have been there and done it, and can put together a message sharing their experience. They can focus it on what they would have liked to have been taught [when they were] just starting in the industry. I’d have made a lot fewer mistakes. I feel it’s so important to get in front of students and provide them with some lessons learned,” he said.

Mottola sees Breakbulk as a channel for opening the door to a new generation of industry members, particularly since Breakbulk’s teachers and presenters are subject matter experts. “You get in front of the students and tell them about the opportunities in our area of business; it’s an exciting story.” The highly technical aspects, the travel, the mega-projects.

The budgets. “Think about that,” he said: on projects that are worth billions, “the freight spend will be a quarter-billion, a half-billion. You talk to somebody coming out of college and tell them that they might be on a team that’s going to manage US$300 million, US$400 million in logistics spend — that’s pretty exciting.”

A FORUM FOR INDUSTRY Margaret Vaughan, manager of traffic and logistics and export compliance for Wood Mustang Group, has also been part of Breakbulk’s VIP Shipper club since it began. She considers Breakbulk a wonderful forum for being heard and for contributing to the industry, for herself and for her team.

“We can trade our body of knowledge and pass it on. That’s why I really enjoy Education Day. Most of what we do, you can’t go to school for. It’s unique and takes

Greg Gowans CH2M Hill

Margaret Vaughan Wood Mustang

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a long time to learn. A lot of students don’t even understand that project logistics is an option. It’s different from what anybody else does. It’s nail-biting at times. It can even make you queasy. It’s never the same,” she said.

Breakbulk provides one of the few broad-based opportunities to introduce new people to the project transportation industry, and also provides an educational service to midstream and higher levels of the community, said Greg Gowans, director of logistics and expediting with CH2M Hill and long-time Breakbulk VIP and attendee. “I participate in it because I see a role for myself, in my place in my career and my company, to assist in this effort that you are championing.”

Breakbulk’s diversity and breadth of programming expands the experience at multiple levels, and provides value to a broader stream across the industry, said Gowans. The VIP Shipper Club also per-

The JGC-Fluor team erects the C2 splitter at the Chevron Phillips Chemical U.S. Gulf Coast Petrochemicals Project site in Baytown, Texas. The splitter, part of the ethane cracker, weighs more than 570 tons and is more than 250 feet tall.

Credit: Fluor

forms a distinct function, he said, aligning the shippers as a community within the conference venue. The shippers benefit from being identified as a group. The club promotes networking and creates a collegial, fraternal atmosphere, he said.

Alex Azparrent, Fluor’s global director of logistics operations, has served as a keynote speaker at several Breakbulk events and has been a member of the VIP Shipper Club since 2010, when he was running Fluor’s operations in Chile for mining. For him, it’s the Breakbulk ISSUE 2 / 2016

ENGINEERED HEAVY LIFTING, RIGGING & TRANSPORT

Offshore & Marine Petrochemical Power Civil

www.burkhalter.net

800-748-9950

special focus

“ecosystem” that matters most. Many “Even above and beyond Education Day connections are made casually, during and the class sessions, the exhibition gives the social get-togethers that make up an them an opportunity to network. We have important part of all events. Breakbulk some project logistics managers who don’t is a people industry, he said. “No have as many networking opportunimatter how complex or simple ties, so this is a big opportunity to your project is, it’s all about network outside of the normal day-to-day.” the person on the other end – and Similarly, their capability to Gowans pointed out that cargo owners, troubleshoot. That’s “The first time I walked into or buyers of serwhat makes the difBreakbulk ... every single booth and vices, and sellers of ference.” services, i.e. exhibiAzparrent said every single person had something that Breakbulk of value to me. The connections that tors, are budgeted very differently. events are often we’ve made are invaluable.”

“Buyers cannot an opportunity for – Margaret Vaughan, spend the way sellshippers, vendors Wood Mustang ers can spend … and and service providthe VIP club allows ers to meet face to face more participation (from after months or even years shippers) from a purely practical of doing business virtually. “It’s standpoint,” he said. funny, but I will have people in our Networking at Breakbulk is also crugroup in Houston who are doing business cial to Wood Mustang’s Vaughan. “The with people in Europe or South America, first time I walked into Breakbulk,” she and at Breakbulk they finally get to meet said, “it was, ‘Oh, my gosh.’ I’d been to in person. I find that very positive.”

OTC, but this … every single booth and INCENTIVES FOR every single person had something of value ATTENDANCE to me. The connections that we’ve made are invaluable. We are utilizing those Breakbulk gives VIP Shippers two connections by creating regional banks things, Azparrent said: an opportunity of service providers. We only get that to be active at events and an incentive because we met them through Breakbulk.” through complimentary access for VIPs Gowans always takes away value and reduced costs for education. These from the exhibition halls, he said. “I like are very important to EPCs, OEMs and the diversity of the participants, from manufacturers with extremely tight equipment providers to service providtravel and education budgets. Those extra ers to physical services, i.e. the ports and incentives make it easier to justify the manufacturers, the new products and travel spend and make it worthwhile. offerings to be introduced and explained.

“They give opportunities to our I get something out of that. I like the people, give them extra training,” he said.

Students attend workshops at Breakbulk Americas 2015.

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exhibitor-led sessions. The hall is an important part of this experience.”

Management of Breakbulk’s VIP Shipper Club is transferring from Elizabeth Wetzel to a new member of the Breakbulk team, Mark JakobMark Jacobsen sen. He joined the company as head of Breakbulk Head of VIP portfolio marketBuyers Programme ing and the VIP buyers program for Breakbulk’s parent company, ITE Transportation and Logistics, early in 2016. His goal is to create a one-club community that Breakbulk’s VIP shippers will use in their day-to-day lives. The program will “engage constantly with the VIPs to know their concerns and their success stories, and to share best practices,” he said.

Jakobsen, who has an extensive background in events and marketing, said that other concepts include creating a streamlined VIP events registration process and ensuring that VIPs receive all industry, show news and content updates timely, as well as all the tools Breakbulk can provide to help them progress in their jobs. His goal is to increase VIP Shipper club membership by 10 percent over the coming year.

Jakobsen is interested in creating a series of webinars based on what the industry most wants to know about: education topics and training, industry updates, cutting-edge speakers, and so on. These could be presented live or on demand — “whatever suits the VIPs’ busy schedules,” Jakobsen said. “We are running the VIP Club for them, and so it needs to be directed by them.”

The Breakbulk story is about all of its participants: the VIP Shipper Club, the exhibitors, the students, the Breakbulk team: all of those who make up the cast of characters.

Breakbulk creates an opportunity for people to come together and share this common interest, regardless of which side of the table – shipper or service provider – they’re on. At Breakbulk they meet, learn together, serve on panels together, party together. “It’s just a wonderful forum for our industry,” Bechtel’s Mottola said. BB ISSUE 2 / 2016

trade notes

ON T HE SIDEL I N E S:

CHINA RIDES ON STEEL WHEELS Expertise, Financing Key in Securing Rail Projects

S

omewhat lost amid China’s economic downturn is that rail remains a particular bright spot from a project perspective, home and abroad.

“China has developed the most modern and expensive rail network so far in the shortest possible time, in the last eight years,” said Teresa Lehovd, head of market intelligence at Höegh Autoliners, who specializes as a rail analyst. China will seize on that expertise to develop new markets for rail.

“China is going to do the same in other parts of the world now,” Lehovd said at Breakbulk China in Shanghai. “China’s rail exports will reach an estimated US$102 billion by 2020, an indication of how big the potential is outside of China for rolling stock and other equipment to build rail.

We’re talking serious money here.”

And that means serious business for companies like Höegh Autoliners, which handles rolling stock aboard its roll-on, roll-off vessels. It also means markets for shipping steel, industrial equipment and other oversized cargoes required for such massive undertakings.

China has an advantage in competing for business in foreign markets because it has proven expertise in delivering largescale projects within its huge domestic market, she said. “They’ve mastered the technology of rolling stock production and

BY GARY BURROWS

infrastructure as well as any country.”

It is a broader Chinese strategy to develop exports of more sophisticated technologies than the more basic manufactured goods that have driven its economy thus far, analysts say.

Teresa Lehovd The country’s plans remain ambiHöegh Autoliners tious for developing its own rail networks. China is expected to spend US$460 billion on new railways, US$123 billion on upgrading trains, add 30,000 kilometers of new track and develop 44 bullet train lines covering 5,000 kilometers, Lehovd said.

ABOVE: Chinese workers walk inside a tunnel for the track-doubling project on Huangyuan county’s Xining-Golmud line in northwest China’s Qinghai province. / Credit: ANGHAI JIN/EPA/Newscom 88 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2016

trade notes

PROJECTED CHINESE RAIL IMPROVEMENTS

US$460 billion expected expenditure on new railways

US$123 billion expected expenditure on upgrading trains

In addition to its project expertise in rail projects, China also does it cheaper, as much as 30 percent lower than its competitors for high-speed rail projects, according to Lehovd.

In addition to that expertise at lower cost, China offers cheap financing for projects that other countries simply can’t compete with, she said.

A core financing mechanism is China’s Belt and Road Initiative, an ambitious undertaking that proposes to connect 64 countries and 4 billion people.

China’s Belt and Road Initiative “means increasing demand for rolling stock for all kinds of project-related business, including from a global forwarding perspective,” said Even Zhang, senior project manager for DHL Global Forwarding – Industrial Projects.

Lehovd detailed more than 600 ongoing rail projects worldwide as of February, with about two-thirds of them for for light rail and metro projects. Within Asia Even Zhang the number of rail projects has jumped DHL Global Forwarding 378 percent since – Industrial Projects September 2009, with 140 on the books as of February.

China’s emergence as a force in rail projects “is totally changing the dynamics of the industry,” Lehovd said. “It is affecting the competition with other players.”

European, Japanese and other international competitors, struggling with their own local economies, find China’s ability to finance projects puts them at a disadvantage. Lehovd envisions some industry consolidation taking place.

“Existing players are suffering now, and will probably have to join hands to survive,” she said.

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30,000 km of new track

Along with slower economic growth, the rail industry faces pressure to produce more project-related equipment within the local markets, she noted.

“We already have assembly in Turkey, Kazakhstan, Mexico, South America.

There are a number of plants growing with a number of projects,” she said.

EURASIA Within Eurasia, “Russia is increasingly turning to China for cooperation of Far East transport corridors,” she said.

One project is a high-speed railway that China is designing between the Russian cities of Moscow and Kazan.

Russia’s state-owned JSC Russian Railways signed a contract with China Railway Group’s design unit for US$383 million project. Once drawn up, actual construction of the 770-kilometer project will cost an estimated US$19.5 billion, with China expected to win that bid as well.

More expansive is a proposed 7,000-kilometer, US$242 billion highspeed system connecting Moscow with Beijing, a project Lehovd compares to the Suez Canal “in terms of complexity and importance.”

Turkey is another key market for China rail, with US$46 billion on the books. “It is a huge transit country for oil and gas pipelines, and also for transport of all equipment and business moving through Europe,” Lehovd said.

Projects within Turkey include a 1,000-kilometer mainline, 24,000 kilometers of upgrades, a 3,500-kilometer high-speed rail line and extending urban networks in all major cities, she said.

Within Eurasia, China is also pursuing projects in Uzbekistan, Kazakhstan and Mongolia.

EUROPE Europe is the largest market for rail projects, aimed largely at connecting various networks together within the continent. The United Kingdom

44

bullet train lines covering 5,000 km

is a key market within Europe with 19 projects planned or underway, including upgrading the London Underground and construction of a high-speed mainline link to improve connections between London and cities in the north of the UK. The UK “will become a very important battleground for European, Japanese and Chinese businesses,” Lehovd said, adding that the UK government invited China to bid for the high-speed train project.

“Countries don’t have enough funds to pay for the projects and that’s why Chinese businesses focus on this area, and will use it as a gateway to western Europe,” she said.

In the Middle East, the six Arab countries of the Gulf Cooperation Council have US$250 billion in proposed rail projects, with about US$100 billion in Saudi Arabia alone. Central to this is the Gulf Railway, a 1,940-kilometer regional network expected to be operational next year, connecting Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates.

Despite such ambitious plans, the low oil prices create challenges in financing for Middle East projects. “We’ll see some of the projects secure financing and be carried out, ones farther away will be postponed or scaled down,” Lehovd said.

Elsewhere in the Middle East, rebuilding Iran’s infrastructure is a priority, and the region will also be a focus of competition for about US$25 billion in various rail projects, she said.

In Pakistan, the US$46 billion China Pakistan Economic Corridor is under construction, as part of the Road and Rail Initiative.

In Africa, the needs to develop rail are keen, and most projects will happen along commercial corridors, Lehovd said. China has an initiative to build a railway from Angola to Dar es Saleem, Tanzania and Kenya, connecting the two oceans.

“Chinese business dominates the market,” she added. BB ISSUE 2 / 2016

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best practices

RECRUIT AND RETAIN Breakbulk Carriers Angle to Get, and Keep, Top Talent

BY PAUL SCOTT ABBOTT

G

ood people can be hard to find – and even more challenging to keep – but breakbulk and project cargo carriers are finding ways to maintain strong, dedicated workforces with hiring practices that may include personality analysis and retention efforts that go far beyond solid paychecks.

Industry executives see a strong corporate culture and a nurturing work environment as key ingredients of the personnel equation. Loyal employees are developed by making sure they understand that their work and, overall, that of the company makes a difference and that their ideas are valued throughout the organization. People with a passion for business and a willingness to learn are rewarded.

92 BREAKBULK MAGAZINE www.breakbulk.com

Jacksonville, Florida-based Crowley Maritime Corp assigns stimulating work, which is supported by an “empowering management philosophy where high performance is supported,” said Bryan Lee, vice president of the company’s human resources. Here, open communications are in and top-down messaging is most definitely out. The company boasts careers that are “challenging, energizing and rewarding,” coupled with a “very generous benefits package, endless development opportunities across our various business units, encourage work/life balance and concentrate on creating an industry-dominant safety culture.”

Crowley is not alone in seeing the benefit of quality personnel. Houston-based Intermarine LLC believes that a company reputation built around quality service is imperative. The relationship between employee and employer is symbiotic in

Bryan Lee

Fernando Maruri

Crowley Maritime Corp

Intermarine

that respect. People protect their position in the job market and reputation, and their choice of employer is to an extent an identification of themselves.

“Our people have understood the value in being associated with a quality company, and as a company we underISSUE 2 / 2016

Intermarine loads tendons in New Orleans, Louisiana for Pasir Gudang, Malaysia.

Credit: Intermarine

stand that we are nothing without the quality professionals that run our business on every level,” said Fernando Maruri, director of sales in the Americas for Intermarine.

An overarching commitment to delivering for clients and meeting their needs is a drive that employees can buy into, which helps to develop positive relationships and reputations for the company, as well as for individual employees. Significantly, it also provides for a positive working environment.

INVESTMENTS IN TRAINING Maruri noted that Intermarine has made significant investments in training and providing opportunities for professional growth of employees. Notably, the company has developed some upand-coming talent through its two-year shipping and chartering trainee program,

which has produced a number of employees who have grown in the organization and now hold integral positions within the company.

Robust training programs are certainly a prime driver of employee development in the breakbulk industry, unsurprising given the technical nature of the industry. Rickmers-Linie gives employees access to training and qualification lectures through its Rickmers Academy, as part of the broader Rickmers Group. While training and lectures vary a lot in accordance with the demand, places are highly sought after by staff.

Rüediger Gerhardt, chief administrative officer of the Hamburg-based carrier, said his company maintains a close dialogue between management and employees, as well as between team leaders and their team members, and prides itself upon an excellent working environ-

ment. As a result, it has a pool of loyal staff with a long tenure.

But it’s not just shore-based staff that need technical expertise. Ship-based jobs call for more specialized training. The industry has a limited number of crewing resources with heavy-lift experience at its disposal, so has to think outside the box to fill onboard positions.

Hansa Heavy Lift uses Europe-based crewing organizations for the recruitment of most of its sea staff. Its existing seafaring pool is ring-fenced, and new candidates are screened and profiled and their previous experience examined before considering them for employment.

Its fleet is relatively young, which helps in attracting forward-thinking seafarers.

Seafarers also share the same support with human resources as onshore staff, with inductions, probationary period follow ups, feedback interviews, and beyond.

Support of employee development and next career steps is constant at Hansa, according to Joerg Roehl, chief commercial officer and managing director: “We are a company with flat hierarchies and open communication, and we encourage out-ofthe-box solutions and thinking.”

In addition, the company offers special services for all employees worldwide, such as sponsored sports club memberships Joerg Roehl and other workplace health and Hansa Heavy Lift fitness promotions.

“With offshore staff, there is an appreciation of our focus on safety in what is an inherently dangerous occupation,” Roehl said, noting that Hansa’s officer retention rate has been 99 percent for the past three years. “Through the provision of additional training and eduwww.breakbulk.com BREAKBULK MAGAZINE 93

best practices

cation in the ‘Hansa Heavy Lift way,’ we offer the opportunity to individuals to learn and advance themselves in the field of heavy-lift and project shipping.

“Most of our promotions to more senior ranks are made from existing junior staff, so there is a way to the top of all ranks. We also focus on the human element in offering benefits to our senior staff and their families to encourage retention and have recently commenced direct employment of our ship staff so individuals become part of our family.”

MORE THAN A PAYCHECK So there are options available for finding talent, but what about keeping them? Is it enough to wave greenbacks under their noses? Definitely not, said Marek Orent, president of Chipolbrok America Inc. “A popular belief is that the primary reason people quit their jobs is because of

94 BREAKBULK MAGAZINE www.breakbulk.com

pay. It is not necessarily always true, at least in our industry.

A bad boss or supervisor is often the reason people leave.

“My experience of managing Chipolbrok America for over 11 years has taught me just how much depends on Marek Orent the environment Chipolbrok America Inc. created by people managers. It’s all about how the team members feel they’ve been treated,” Orent said.

Employees need to be embraced as the organization’s most valued asset, and they need to know that they are not less valued than customers. They also need to be aware that their work is very important

and has a momentous impact on projects that they are involved in.

Leadership is also essential in engaging people and delivering results.

“This translates into setting clear goals and priorities, regularly providing feedback, and evaluating how our team members fulfill those goals,” Orent said.

“There needs to be trust built between employees and management. People need to have possibilities to grow and learn new things in their work.”

These aims make employees feel confident about the importance of their role in the organization, which gives them a feeling of self-satisfaction – often more important than higher salary. Benefits are also critical and that should be extended to employees’ families as well, Orent added.

Comfortable working conditions tick another box. Chipolbrok Americas is equipped with a pantry and a bar, and

ISSUE 2 / 2016

employees can relax playing table tennis in the office or going running on the green belts surrounding the office. Flexible working hours can also make or break the retention of an employee.

INDIVIDUAL APPROACH Importantly, there isn’t a one-sizefits-all approach when it comes to recruitment and retention.

BBC Chartering prides itself on offering worldwide opportunities via a personalized methodology, making use of an individualized approach when it

Crowley Maritime Corp. delivers equipment for the Jack/St. Malo facility in the U.S. Gulf. The company boasts careers that are “challenging, energizing and rewarding.”

Credit: Crowley Maritime Corp.

www.breakbulk.com BREAKBULK MAGAZINE 95

best practices

comes to personnel recruiting and human resources development issues.

Its HR strategy focuses on continuity and securing junior staff in what is a relatively young company employing about 400 people in 32 offices worldRaymond Fisch wide. Securing trainees is a central BBC Chartering element, according to Senior Vice President Raymond Fisch, so shipbrokers are educated via an attractive vocational training program in Germany. And BBC Chartering looks to hire accomplished professionals and

experienced technical staff at various levels and locations as needed.

“In our efforts, we have always focused on international possibilities, such as cross-office, cross-cultural engagements, collaboration beyond shipping projects and a direct contact with customers and business partners,” Fisch said. “Such an open and global environment has helped create high levels of identification within the company and gives our people the possibility to assume responsibility right from the start.

“Of course, some appreciate the possibilities we can offer as a global organization, too, for example, if they want to experience life and work at one of our global locations within BBC Chartering.”

Such personnel priorities have helped reduce talent-hopping, even in a chal-

lenging market, and frequently have led top talent to return.

“We listen to our people, assess their needs and try to accommodate what’s reasonable and possible,” Fisch said.

And while no company can prevent an employee from leaving once their mind is set, he believes that BBC Chartering remains an attractive employer even to those who left for the competition. And in such a tight knit industry, it’s sometimes only a matter of time before those ex-employees find their way back to the fold, especially when they realize that the grass is not necessarily greener on the other side. BB A veteran transportation writer for the past 40 years, U.S.-based Paul Scott Abbott specializes in maritime topics.

PICKING OFF THE BEST TALENT While a global shortage of crew to serve the general shipping industry is still a threat on the horizon, the lull in business brought about by the worldwide downturn has relieved some of the pressure.

But in a sector as specialized as heavy-lift, there simply isn’t a wide pool of talent from which to choose.

“No wonder we have only a couple of methods of recruiting employees,” explained Marek Orent, president of Chipolbrok America Inc. “The best and most reliable technique is acquiring experienced personnel who are known to us from other shipping companies.

We have our own database of most successful fellows in our industry, and we try to keep it updated by regular advertising either on our own website but also using LinkedIn and by keeping direct contacts with the local maritime society.”

Using specialized companies to headhunt employees is an option, but not one heavily favored by carriers. Here, the downturn does have its benefits: as the weaker carriers head for bankruptcy or streamline their businesses, trained experts suddenly become available in the industry and at 96 BREAKBULK MAGAZINE www.breakbulk.com

market rate, rather than at an inflated premium through a headhunter.

“Our current recruitment, while giving a helping hand to our colleagues in the industry, is aimed at building a strong team to be ready when the market wakes up,” said Orent. “To be perfectly honest, we are benefitting from current market conditions, as it is normally very difficult to hire top industry specialists without paying extra premium and possibly stepping on our competitors’ toes.”

Another hiring approach sees graduates from local universities employed and put into entry-level training programs. “Last year, we employed two such graduates,” Orent said. “One has already successfully completed his initial training and continues to gain his experience. The other one will soon be ready to work without permanent supervision, too. We invest in young and promising individuals, provide them extensive tuition and always try to keep open a clear career path for them.”

Chipolbrok America Inc.’s Houston headquarters building is seen as a selling point in attracting and retaining valued personnel.

Credit: Chipolbrok America Inc.

ISSUE 2 / 2016

port profile

A CENTRAL ROLE Port Corpus Christi’s Location Boosts Prospects

BY LORI MUSSER

E

nergy industry investors are swarming the Texas Coastal Bend. Up to US$40 billion in new plant and infrastructure is on the table or in the ground, ready to sweeten the region’s future prosperity.

Iain Vasey, president and CEO of Corpus Christi Regional Economic Development Corp., or CCREDC, said: “In the last five years, there has been close to US$300 billion in major industrial investment from Mobile, Alabama, to the Mexican border. In Corpus Christi, we are on track for north of 10 percent.”

According to CCREDC, energy is Corpus Christi’s driving force. The state of Texas produces 4 quadrillion British Thermal Units of crude oil and 8 quadrillion BTUs of natural gas annually.

It boasts 29 percent of U.S. oil refining capacity and is served by an immense web of short- and long-distance pipelines. It also leads the U.S. in wind energy capacity.

Port Corpus Christi is propelled by energy too, said Executive Director John LaRue. “It shouldn’t come as a surprise. Our focus is on energy – oil, gas and wind.”

The port’s role as a primary economic engine along the Coastal Bend is predicated on a 45-foot channel, fast Gulf access, proximity to Mexico, and easy inland access. Three on-site ClassI railroads, an intracoastal barge system to reach the Midwest, and uncongested 98 BREAKBULK MAGAZINE www.breakbulk.com

Interstate and state highways make a competitive package for shippers.

The port is also a conduit for the inbound project cargo needed for the big builds, and will see new plants and facilities through the long term, handling import raw materials and export product.

“The port is tied to energy industries,” said David Dismukes, executive director of the Louisiana State University Center of Energy Studies. “There are opportunities because the plants and investments are there.”

Dismukes explained that the most cost-effective investment will occur where industries already have scale and capacity. “In petrochemical production, economies of scale are particularly important and are leveraged and expanded. Because you have investment in the Corpus Christi region today, any investment in the future is likely to locate there as opposed to a Greenfield site.”

CATTLE TO COMMERCIAL CARGOES Corpus Christi evolved from a sleepy little cattle port in the late 1800s to a first-class commercial port. It is the fifth-largest U.S. port by tonnage. With a 100-million-ton commodity list that reads like the table of contents in a petrochemical primer, it has more than two-dozen docks dedicated to fuel oils, gasoline, crude and natural gas from numerous local refineries and pipelines. But it also handles large volumes of ores and aggregates, cotton, grain sorghums and wheat.

Today, the port is poised to break out as a breakbulk hub. Billions of dollars of ongoing construction in its backyard – everything from ethane crackers to liquefaction facilities to iron ore reducers – bring potential cargo. Port Corpus Christi has already enjoyed an upswing in project cargo.

Breakbulk cargo in 2015, including heavy and over-dimensional freight, grew 50 percent to 405,000 tons, compared to 2014.

And once built, heavy industrial plants usually continue to require and/or produce ongoing shipments of varying types of bulk, containerized, or other general cargo, according to LaRue. New heavy-lift capacity is on the drawing board following recent successful experiences moving conISSUE 2 / 2016

Vessels discharging wind turbine components at a Port Corpus Christi general cargo dock.

Credit: Port Corpus Christi

PIPING IN THE BUSINESS

struction modules over bulk docks, ond phase will invest US$22 million to he said. And, long-awaited channel increase capacity to eight, 8,000-foot improvements are coming parallel ladder tracks. to fruition. A US$58The new 205-foot-high million project is under Harbor Bridge is expected “The regional way to widen the Corto accommodate larger investment pus Christi channel and vessels and spur economic boom in this deepen it to 52 feet, among growth for decades, other improvements.

LaRue said. “We were area is not A two-phase rail yard fairly aggressive in getcoincidental. project geared toward ting the highest possible It is all tied expediting freight of all clearance.” back to the kinds is proceeding. The Its timing will help the first phase, at US$17.8 milport accommodate upsized forward-thinklion, includes a 7,800-foot ships coming through the ing leadership unit train siding, and the expanded Panama Canal, of the port Nueces River Rail Yard. especially those carrying and the EDC.” It has four parallel ladexport LNG and grain, and der tracks for a total yard import and export con– Robbin Goodman capacity of 15,400 feet tainers and project cargo, and 223 rail cars. The secaccording to CCREDC.

China-based Tianjin Pipe Co., or TPCO, the world’s fifth-largest manufacturer of pipe, is investing more than US$1 billion in a seamless oil and gas pipe plant, opening in 2016. Importing iron ore, pig iron, and other raw materials through port facilities, TPCO will then sell finished product in the U.S. and Canada, with perhaps 20 percent going further afield.

“The regional investment boom in this area is not coincidental,” said Robbin Goodman, with TPCO’s business operations division. “It is all tied back to the forward-thinking leadership of the port and the EDC. “Investments of this size demand the type of reliable transportation infrastructure Port Corpus Christi offers to handle the large cargo volumes required in both construction and production,” said Goodman. TPCO chose its site “to be closer to our customers in the Americas.”

TPCO America has a designed capacity to produce 500,000 tonnes of pipe per annum, the majority of which is expected to pass through the port.

A second billion-dollar investment, by privately held Italian conglomerate M & G Group, will develop a PET resin and purified terephthalic acid plant, described as the world’s largest.

LaRue anticipates this project will help the company expand its sales to U.S. plastic bottle markets. M & G is the largest producer of PET resin for packaging applications in the Americas. The plant will be located next to the Nueces River Rail Yard facility. M & G, whose facility will open in late 2016, has already routed a great variety of construction components for the plant through the port. www.breakbulk.com BREAKBULK MAGAZINE 99

port profile

Specialty steelmaker voestalpine Group is building an US$800-million iron plant on the La Quinta Ship Channel in Corpus Christi, with operations starting later in 2016. It will make 2 million tons of hot briquetted iron and directreduced iron for the company’s Austrian steel production sites. The plant will heat iron ore pellets, making use of the abundant supply of natural gas, and increase iron content. The process makes shipping more economical.

According to LaRue, the U.S. site was selected for voestalpine’s largest foreign investment to date, due primarily to logistics, energy supply, a well-educated workforce, and the political environment. The group plans to move 2.5

million tons of iron ore into the port, and initially, export about half that volume back to the auto industry in Europe.

Structural shipments of steel columns, frames, beams, bracings and other components for the construction of the facility have moved through Port Corpus Christi in a two-year lead-up.

Among the remaining regional investments that tally up to more US$30 billion, some standouts include the US$10 billion Cheniere Energy LNG liquefaction/export terminal, the US$2 billion Pangea LNG liquefaction facility, and the US$1 billion Oxy Ingleside Energy Center.

Port Corpus Christi itself is investing about US$35 million in various projects

related to Eagle Ford Shale, including new and upgraded docks and barge mooring facilities.

CAPTURING WIND GROWTH Wind energy is of growing importance to the port, LaRue said. “Years ago the railroads reconfigured and we invested in basic infrastructure. Last year, we had close to 70 wind energy vessels.”

The port credits Texas’ renewable electricity standards with driving increased demand, and federal production tax credits with invigorating the investment climate.

Large public wharves, foreign trade zone benefits, and well-lit, paved storage

ITALIAN GIANT MAKES TRANSATLANTIC MOVE The Corpus Christi region’s new facilities are spawning some large and diverse project cargo movements. A 500-ton, Italian-built Bedeschi shiploader was delivered to Corpus Christi in late 2015, bound for the voestalpine Texas dock. It will load bulk hot briquetted iron onto Panamax vessels for export.

UTC Overseas Inc. handled the delivery.

“This was a somewhat unique experience for us,” said Martin Stitz, UTC project manager. “Our vessel was calling a brand new private terminal in the Corpus Christi area – specifically designed by voestalpine for this processing facility. Our charter was only the second ship to call at the facility. Our advance planning included arranging for a port pilot to bring the vessel to berth, for Coast Guard inspections of the vessel on arrival and for area stevedores … All phases of the roughly four-day process of cargo discharge for this very large system went very smoothly.” voestalpine commissioned the loader from Group Bedeschi Limena in Padua, Italy, some 40 kilometers inland from Venice.

The challenge, according to UTC, was finding a way to construct and move the giant structure to Venice 100 BREAKBULK MAGAZINE www.breakbulk.com

A pair of shipboard cranes perform a tandem lift of the assembled voestalpine shiploader onto the deck for lashing at port in Venice.

Credit: UTC Overseas Inc.

for ocean transport. The solution saw components of the loader trucked to port in nearly 100 shipments, and assembled over three months. The assembled tower stood more than 37 meters high and weighed 320 tonnes.

The loader’s 100-ton conveyor boom was 44 meters long and nearly 8 meters high.

Intermarine’s Ocean Globe, with dual-crane heavy-lift capacity, handled transport to the U.S. UTC said the assembled tower was moved to the ship on two 12-axle self-

propelled modular transporters and lifted aboard. The boom was moved with a 24-axle modular trailer. The tower structure was lashed to the deck following a detailed securement plan verified by independent engineering experts. It required the use of more than 3,000 meters of steel cable and 200 meters of textile strapping. The loading and lashing process took more than two days to complete before the vessel was ready to sail.

The Ocean Globe arrived in Corpus Christi in mid-November.

ISSUE 2 / 2016

port profile

PETROCHEMICAL INVESTMENT

Air Liquide

Gulf Compress

Nustar

ADM Grain Elevator

M&G

TPCO Sherwin Alumina Oxy Ethylene Dupont

Voestalpine Nueces Bay

Excalibur Valero Flint Hills

Plains

Cheniere Condensate

Haliburton

Trafigura Buckeye

Corpus Christi Bay Gulf Marine Fabricators

Corpus Christi

Lyondellbasell Celanese Bishop, TX

Cheniere

Martin Midstream Superior Weighting

Castleton

AEP Texas

Petrochemical and heavy industry investment in Corpus Christi region amounts to US$40 billion.

Plains Plains

Texas Lehigh/ Northern Whitesand Elementis

Citgo West

Citgo East

BTB Refining

Topaz Power Group

Source: Port of Corpus Christi

areas, make the port attractive to wind.

Interstate links and rail capability at each storage facility speed the clearance of components to project sites. These strengths, as well as competitive pricing, service and convenient access to the Joe

The first phase of the Nueces River Rail Yard offers four parallel tracks, facilitating port rail links for three Class I railroads – Union Pacific, BNSF and Kansas City Southern – and Corpus Christi Terminal Railroad.

Credit: Port Corpus Christi 102 BREAKBULK MAGAZINE www.breakbulk.com

Kiewit

Flint Hills Ingleside Oxy Energy Ingleside

Magellan

Plains Interstate Grain

Emas

Flint Hills East Markwest Javelina

Bay

Fulton International Trade Corridor, have attracted more wind turbine shippers to Corpus Christi than any other Texas port. The port also hosts a wind farm on industrial port property.

Much of the impetus for the massive slate of development in the Corpus Christi region is linked to natural gas and oil pricing and availability. LSU’s Dismukes said the Gulf Coast’s advantages relate to the differential between the price of crude oil and natural gas, the available supply of those products, and transportation and access to market.

Although these factors have triggered growth in the region on a grand scale, Dismukes cautioned that three developments – the narrowing crude-gas differential, the slowdown in the Asian market, and the strong U.S. dollar – are creating hiccups.

“When you have all three going against you at one time you have problems. There is a short-run cyclical challenge right now. We are not seeing cancellations, just postponements. The

long-term trend is still good. Supply is abundant and infrastructure is in place and there is great water access and rail,” said Dismukes. “Problems related to hyper-development, like engineering and labor issues, and cost and scheduling problems that come from volumes and levels we haven’t seen in history, may welcome a cooling down period. We are still bullish in the long term.”

While uncertainty exists in crude oil energy markets, pricing and global demand, Corpus Christi has worked hard to insulate itself from slumps, according to the CCREDC’s Vasey.

Diversification will help the general buoyancy of the regional investment market.

That bodes well for Port Corpus Christi, whose project cargo future rides on the coattails of all of the region’s heavy industries, but especially the full spectrum of energy industries. BB Based in the U.S., Lori Musser is a veteran shipping industry writer.

ISSUE 2 / 2016

thought leaders

INNOVATE, DON’T STAGNATE Price-only Focus a Strategy of Diminishing Returns

I

t will come as news to nobody that the breakbulk shipping industry is enduring tough times. The reasons why are many and varied, and include economic, regulatory and political factors. Together these contribute to the idea of a “VUCA” market, meaning “Volatile, Uncertain, Complex and Ambiguous.”

The term has military origins, but the business world has embraced it in recent years because it captures the dynamics of certain industry sectors, including breakbulk shipping, so well.

The underlying question is how do we as an industry cope with this VUCA market? From the perspective of carriers, the reflexive reaction is often to batten down the hatches and hope to ride out the storm. The better option, in my view, is to innovate ourselves out of it, as it would not only help us deal with the current situation, but also create strategic benefits for the longer term.

There are many ways to innovate, but, in this most practical of industries, thoughts quickly turn to vessels. Larger vessels have been the name of the game these past years in the roll-on, roll-off industry. However, a vessel only delivers on its economy of scale if it has a high utilization factor. Since ever-larger vessels are more challenging to fill, there is effectively an upper size limit.

That limit was reached for Wallenius Wilhelmsen Logistics, or WWL, 104 BREAKBULK MAGAZINE www.breakbulk.com

with its previous newbuild series, the Mark V. Hence, its new “HERO,” or High Efficiency RoRo, newbuild series are of a similar size, but have an

BY ROGER STREVENS advantage in WALLENIUS terms of versaWILHELMSEN LOGISTICS tility. They are shorter, wider and have more hoistable decks, making them easier to adapt to the cargo needing to be carried. These characteristics have the added benefit of being able to extend service to ports with shorter, shallower berths. In summary, they are vessels for a VUCA world.

Another practical take on innovation is to look at the equipment used to carry cargo. Of course there are numerous new kinds of equipment that could be developed, but it is also true that existing equipment could be used in a wider range of ways. Success with this approach WWL’s HERO design means a carrier is its answer to an can maintain a uncertain industry. more homogenous Credit: WWL equipment profile.

For customers that means it is more likely the carrier has the equipment necessary for a job in the location where they need it. WWL is in the process of developing a Breakbulk Centre of Excellence, which will open in Bremerhaven later this year, to continue this innovation on cargo solutions.

Shifting focus from steel to software, information technology holds great innovative potential with immediate benefits to shippers. In this day and age, one might think rapid response times, continuous cargo visibility, e-documentation and system integration would be the industry standard, yet that’s only available from a relative few carriers. Customer oriented IT innovation can effectively create a new (and improved) normal.

It’s tempting to think that today’s situation is unprecedented, but to the old hands of the industry, we’ve been in similar waters before. What may be different this time is that the VUCA dynamics could be here to stay. I would argue that – even leaving the economic, regulatory and political factors aside – the underlying improvement in the breadth and depth of data available to shippers is supporting a more analytical procurement approach, one that can lead to less stability in commercial relationships. Also, unlike the other factors, it is not a cyclical phenomenon. The upshot is that carriers are presented with a choice of either getting drawn into price-only focus, with the associated risk to service quality, or finding new ways of creating value for their customers. The former is literally a strategy of diminishing returns for all concerned, so I believe that embracing innovation on every front is really the best and only tool for those with a long-term perspective. BB Roger Strevens is vice president and global head of key accounts at Oslo-based Wallenius Wilhelmsen Logistics.

ISSUE 2 / 2016

REACHING FURTHER Need for Pacific Northwest High-and-heavy Corridor

W

hile cars and electronics are getting smaller, breakbulk and project cargoes are getting bigger, challenging port and infrastructure capabilities. The Port of Vancouver USA has long recognized these needs and has invested in the right equipment and training to respond to the modern challenges of moving cargo like wind energy components and oil modules.

In its work with original equipment manufacturers and freight forwarders around the globe, the port understood the growth in the project industry and learned that these components were going to continually grow in size and weight. Shore cranes needed to be able to handle these oversized and heavier shipments, such as wind energy blades, which can now exceed 200 feet in length.

In 2006 the port invested in its first heavylift crane, a Liebherr with 140-tonne lifting capacity.

BY ALASTAIR SMITH As components PORT OF VANCOUVER continued USA to grow ever larger, the port invested in its second heavy-lift crane.

The port, Jones Stevedoring and its local longshore union agreed to partner on a new crane operator training program to certify every Port of Vancouver crane operator and ensure they were fully certified in tandem and engineered lifts.

Today, the port has a pool of qualified operators to run these massive mobile

cranes, which can each pick 100 tons at 100 feet, and 210 tons in tandem.

Stevedores Jones Stevedoring and Ports America have also invested in trailers, reachstackers and other equipment to ensure they can efficiently move cargo off the docks to waiting trucks or railcars. Both companies have continued to adapt and modify equipment as necessary to suit industry needs.

The maritime industry as a whole has invested in labor and equipment to keep cargo moving, but it’s becoming clear that these individual investments aren’t enough to keep the U.S. West Coast competitive. The entire system of moving these cargoes from point A to point B has to change.

The Port of Vancouver is partnering with the ports of Longview and Portland, Jones Stevedoring, Foss Maritime, Omega Morgan, the Oregon Trucking Association and others to develop a highand-heavy corridor from the Columbia River to the Midwest and Canada. The corridor would be a dedicated route to further increase the efficiency of moving cargo between the U.S. West Coast and the Pacific Rim. The U.S. Gulf Coast already has a high-and-heavy corridor, which helps provide surety to shippers that they can permit and move their over-dimensional and heavy loads. This kind of surety is

why shippers – despite added time and fees shipping through the Panama Canal – are willing to use Gulf Coast ports to move their products from Asia. They know they can get their cargo to its destination, which is not something they can say about using West Coast ports today.

The West Coast ports and partners mentioned above have established a steering committee to address this issue, starting with clearly defining the issues surrounding the need for a corridor like this and determining next steps. One of those steps includes identifying and reaching out to other potential partners to develop support for this critical effort.

Through development of a high-andheavy corridor in the Pacific Northwest, we can make our regional ports more competitive and move more cargo, helping support U.S. competitiveness in the global market. BB Alastair Smith is chief marketing and sales officer at Port of Vancouver, Washington, and has more than 30 years of extensive maritime experience from practical shipboard work to marine terminal operations.

Vancouver is connecting with stakeholders.

Credit: AAL www.breakbulk.com BREAKBULK MAGAZINE 105

trade notes

WEIGHING IN

BY RICK BRIDGES AND JACOB FISHER

S Rick Bridges

Jacob Fisher

ince the International Maritime Organization’s Safety of Life at Sea Convention, or SOLAS, applies exclusively to containerized freight and doesn’t pertain to the movement of breakbulk cargo, one may not expect to read about it in this magazine. However, it’s important for breakbulk shippers to be aware of the rule and to be adequately prepared should the need arise to ship in containers as part of a larger project cargo shipment.

In 2014, the IMO amended SOLAS to require shippers to verify container weights.

This change was brought about by accidents resulting from overweight containers – by road and at sea – as well as studies showing that an unacceptably large percentage of significantly overweight containers are regularly tendered to carriers.

As the July 1, 2016 deadline for implementation approaches, there have been an increasing number of questions, few answers and genuine concern among stakeholders regarding the serious potential impact of the rule on global trade and competitiveness.

From the date of implementation, the shipper named on an ocean bill of lading will be responsible for providing the verified

As the ... deadline for implementation approaches, there have been an increasing number of questions, few answers and genuine concern among stakeholders.

106 BREAKBULK MAGAZINE www.breakbulk.com

Raising Awareness of SOLAS Impact gross mass, or VGM, of all packed containers to the carrier and terminal operator. According to the SOLAS convention, carriers are prohibited from loading any container for which they have not received a VGM from the shipper far enough in advance to complete the vessel stow plan. As defined by the IMO, the shipper is “a legal entity or person named on the bill of lading or sea waybill or equivalent multimodal transport document as shipper, and/or who (or in whose name or on whose behalf) a contract of carriage has been concluded with a shipping company.”

By this definition, the shipper could be either the actual cargo owner or the non-vesseloperating common carrier.

Calculating VGM can be accomplished in two ways. The first option is to weigh the packed container prior to delivery at the port of loading. Alternatively, the second option is to weigh the contents including all cargo, packing materials and dunnage and add the tare weight of the container. Some terminal operators have already indicated they will not offer weighing services, as they do not have the room for scales and the queues that will be created. In most cases, the VGM will need to be certified at an off-port location.

Shippers will need to utilize certified scales and/or weighing services to obtain the VGM. SOLAS does not define “certified” precisely, but suggests the requirement would be satisfied by using a scale or weighing service that is certified and/or inspected as accurate in accordance with local or state law.

RESPONSE TO ENFORCEMENT SOLAS does not dictate an international regulatory framework, so signatory countries will independently create unilateral enforcement protocols that may include fines or penalties against the responsible parties and possibly even the detention of vessels in extraordinary circumstances. Since very few countries have released regulatory guidance so far, significant uncertainty is anticipated around the globe for some time to come.

ISSUE 2 / 2016

Containers sit at the bow and stern of the general cargo ship BBC Europe.

The new SOLAS rules apply exclusively to containerized freight, which will affect breakbulk carriers who carry containers as part of a larger project cargo shipment.

Credit: BBC Chartering

In the U.S., SOLAS enforcement is the responsibility of the Coast Guard.

However, a senior official recently indicated that the Coast Guard has no intent to engage in any VGM enforcement activities. Instead, it has stated its belief that the current processes of submitting container weights to carriers is adequate as long as shippers and carriers have properly done their jobs.

While these sentiments may be welcome by some within the trade, the Coast Guard’s enforcement (or lack thereof) does not relieve U.S. shippers or the ocean carriers which they engage from compliance with the rules contained in this international convention.

Ultimately, it is the responsibility of the vessel’s flag state to ensure SOLAS compliance and failure to enforce the VGM requirements could result in loss of the vessel’s SOLAS certification. In some jurisdictions, SOLAS VGM requirements may ultimately be enforced by individual carriers by simply not loading containers if the proper VGM documentation is not provided by the shipper in a timely manner.

From a risk management perspective, shippers and transportation intermedi-

aries should consider the added liability exposures linked to VGM calculations and declaration to carriers. Declaring an inaccurate VGM exposes shippers to third-party bodily injury and property damage claims. For example, in the event an accident occurs in transit in which the VGM was deemed as a contributing factor, the shipper may be liable for ensuing bodily injury and property damage claims. Commercial General Liability, or CGL, insurance may respond to these types of claims, especially within the territorial boundaries of the U.S. However, since many CGL policies include a geographical scope which limits coverage to suits brought within the U.S., it may be necessary to pursue enhanced coverage or purchase a separate foreign third-party liability policy to address this exposure. Transportation intermediaries should additionally be concerned about increased exposure to professional liability claims. If their failure to report the VGM to the vessel/terminal operator(s) results in additional costs or financial injury to their client – such as demurrage or delay – they may face professional liability claims which could prove difficult to defend.

Government authorities, carriers, terminal operators and consolidators will be communicating their intentions and expectations in the coming weeks and months. While the VGM requirements are simple and straightforward, questions regarding jurisdictional enforcement and the path to compliance are not. In order to maintain the stream of commerce, it is vital that industry proactively prepares for the worst, even if continuing to hope for the best.

All shippers should decide how they will calculate the VGM for containerized freight, document the process, allocate the necessary resources, understand their carrier’s requirements and communicate the plan with all stakeholders. Most importantly, it is essential that all shippers review their specific exposures to liability in a post-VGM environment and work with a knowledgeable insurance professional to develop a risk management program which adequately addresses those exposures. BB Rick Bridges is vice president of Roanoke Trade; and Jacob Fisher is partner at Scopelitis, Garvin, Light, Hanson & Feary, P.C. www.breakbulk.com BREAKBULK MAGAZINE 107

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ALMAJDOUIE LOGISTICS Named ‘2016 Logistics Service Provider of the Year, KSA’ 10TH FEBRUARY 2016, DAMMAM, SAUDI ARABIA:

Frost & Sullivan hosted the Best Practices Awards ceremony at its global conference - Growth Innovation Leadership 2016 (GIL) Middle East, acknowledging outstanding performances by companies from diverse industries.

The global research and consulting organization with more than 55 years of history announced Almajdouie Logistics as the ‘2016 Logistics Service Provider of the Year, KSA’.

The ‘GIL 2016 Middle East’ executive event took Mr. Baheej I. place at the Holiday Inn, Biqawi, CEO of Almajdouie Al Khobar. At the conferLogistics, stated in a oneence, Frost & Sullivan on-one interview with We have just recognized Almajdouie Frost & Sullivan, “We have celebrated our Logistics’ achievements just celebrated our 50th 50th anniversary… in continually enhancing anniversary… The golden services, meeting clients’ jubilee reminded us of the The golden jubilee expectations and latremarkable success story reminded us of est technologies in the of Almajdouie enterprise’s industry. The event hosted establishment. In 1965, the remarkable global C-level participants, Sh. Ali Almajdouie founded success story senior analysts and excluthis enterprise with a single of Almajdouie sive invitees discussing truck land transport while featured business develsimultaneously providing enterprise’s opments and future techcustoms clearance servic  establishment.         nologies and Mega trends This story seems more            es.  impacting industries. and more like a distant

  

108

                                               

memory with the increasing developments amounting to our diverse and integrated logistics and supply chain services, provided not only in Saudi Arabia, but also across the GCC.”

A recipient of another international award, Almajdouie sets forth with its mission in delivering innovative services to maintain reliability upholding to exceed clients’ expectations.

    

                                                                         

    

ADVERTISERS’ SUPPLEMENT

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We serve overseas markets through its global offices, which work in tandem in cooperation with the worldwide network of the NYK Group and a number of agencies to meet all kinds of ocean transportation needs.

We operate a fleet of 200 vessels having craneequipped MPP and project vessels, module vessels, and Handy/Handy-Max vessels that can transport a wide range of cargo used in industry, agriculture, energy supply, and urban infrastructure — “bringing value to life,” as emphasized by the NYK slogan.

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110

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breakbulk china 2016 EVENT COVERAGE

GOLDEN

WATERWAY Shipping on Yangtze Changing China’s Economy

BY ERIC JOHNSON

C

hina’s “golden waterway” – the Yangtze River – is living up to its name as the preferred transportation channel for an economic restructuring that’s moving families, companies and entire industries to inland provinces from the nation’s coast.

Managing transportation on the Yangtze is thus vital to China’s “inland vision” for upgrading the nation’s economy through urban, port and industrial development along thousands of river kilometers from Shanghai to Sichuan Province, according to Wang Xuefeng, a professor at Shanghai Maritime University and an advisor to the central government.

Wang described the river’s vital development role and its impact on the breakbulk industry while delivering the keynote speech at Breakbulk China in Shanghai.

The Chinese government’s ongoing effort to encourage growth in the largely underdeveloped interior complements efforts to integrate import-export shipping in five regions: » The Yangtze basin. » Southern China’s Pearl River basin. » The Fujian Province-Taiwan region.

112 BREAKBULK MAGAZINE www.breakbulk.com

» The Bohai Rim and seaports such as

Dalian and Yantai. » The far south including Hainan Island.

Integration efforts include boosting international trade capacity by expanding ports, installing new river navigation systems and coordinating rail-road-sea transportation networks in each region.

The Yangtze basin stands out as a unique sea-to-inland route for commercial development. The river can handle large ships and offers low fuel costs as well as other advantages that save shippers money, Wang said.

It’s a “golden waterway,” he said, “that’s a key to promoting development along the river’s economic belt and building a comprehensive transportation corridor that provides important support for coordinated development.”

For the breakbulk sector, the river facilitates heavy equipment transportation including ships carrying foreign-made industrial machinery to factories upriver from Shanghai-area ports.

However, Wang noted, port access restrictions prevent international carriers from serving many upriver ports.

As a result, bulky cargo must often be transferred to domestic ships or barges

Keynote Speaker from international Wang Xuefeng carriers in the Shanghai area.

More work is needed to improve the Yangtze’s ability to contribute to China’s inland development, Wang said. Transportation bottlenecks “persist (because) the convergence of shipping and other transportation modes remains sluggish,” he said. Moreover, there’s an “urgent need to improve” mechanisms for managing river traffic.

Under a central government plan, Wang said, the Yangtze’s ability to support the shipping industry including heavy-lift haulers should markedly improve over the next four years.

The 2016-2020 plan calls for “significant improvements to navigation conditions, optimization of port designs and structural function, enhanced security for ship transportation, and perfecting ship management mechanisms,” Wang said.

But even before the plan is fully implemented, the nation’s longest river will continue to serve the carriers and shippers whose business is increasingly connecting China’s inland provinces and the rest of the world. BB ISSUE 2 / 2016

A MATCH MADE IN BREAKBULK Building Project Cargo Relationships to Last

L

ike a successful marriage, communication and shared expectations are the secrets for a successful relationship between project cargo shippers and their service providers.

Anything less and the relationship is heading for a breakup – or a marriage counselor. That was the assessment of shippers during a panel session at Breakbulk China in Shanghai.

For freight forwarders who feel they only hear from their shipper customers when there’s trouble, Liangli Ma suggested there’s a problem with the relationship.

“We don’t communicate only when a problem happens,” said Ma, Asia logistics manager, Air Liquide Global E&C Solutions Hangzhou Co. Ltd. “Since we are a team, we know about each other’s procedures, products and processes.

Exchange of information is very important from the early stages to execution so there are no problems.”

Leading engineering, procurement and construction, or EPC, management firms like Fluor choose from the top service providers in the industry in order to cultivate a business relationship.

“We shouldn’t think of them as suppliers,” said Ronny Zhang, logistics head for Fluor Shanghai. “We are a team with a common goal: the execution of a project. We mutually support each other.”

To gain that trust and support, the EPC puts potential partners through an arduous screening process, selecting one from 10 potential prospects. To survive a partner has to be experienced, professional and qualified.

One shipper said his company puts potential partners through the paces, starting with an initial appraisal, and a trial order. “After a time of cooperation, if we think the supplier meets our demands in all aspects, including quality, fast response and their capacity in terms

of project management, we will look long term,” he said.

“A good forwarder has a fast response, can handle emergencies, mitigation plans and has solutions for contingencies,” Fluor’s Ronny Zhang said.

“WE DON’T COMMUNICATE ONLY WHEN A PROBLEM HAPPENS. SINCE WE ARE A TEAM, WE KNOW ABOUT EACH OTHER’S PROCEDURES, PRODUCTS AND PROCESSES.” –L iangli Ma, Asia logistics manager, Air Liquide Global E&C Solutions Hangzhou Co. Ltd. Another key to success is for forwarders and logistics providers to be part of the process “as early as possible,” said Zhilv Zhang, project logistics manager/senior logistician, Shanghai Electric Power Generation Group. The partners’ expertise is key in transportation management, discussions of cargoes and sizes, vehicles and equipment involved, including heavy-lifts, route planning, safety and contingencies.

“The earlier the logistics provider is involved, the better the result will be, for us and them,” he added.

Cultivating relationships with foreign suppliers is a challenge, and a

local presence is practically mandatory, shippers agreed. Without a direct, local presence, response time is delayed even if a vendor operates through a local agent, Zhilv Zhang said.

“In our experience, we’ve encountered that an overseas agent’s response is slower,” he explained. Already starting with a time difference, an agent’s mediatory function requires it to contact the other vendors involved, adding time and potential for miscommunication to the process.

What’s more, that agent usually means adding another layer of cost.

“Accuracy of the budget quote is a problem as well,” he said. “Working with an agent’s markup, the price is different than the market price.”

Upon entering a relationship with a forwarder or logistics provider, trust is as hard to embrace as control is to relinquish.

“When we evaluate the plan, the logistics provider may have actually through about all the logistics solutions and transportation approaches,” Zhilv Zhang said.

To ensure the secure execution of a plan and safety in the process, approval must past through all partners in the process, he said.

“If we accept the solution and reach consensus, and then during implementation if the supplier can find an optimized cost-saving solution, then we would not reject them. Win-win is our target,” he added.

Ronny Zhang points back to the vetting process Fluor undergoes to select its partners in ensuring its trust. Communication continues throughout the process between the logistics company’s project manager and Fluor’s in-house staff.

“So they specifically liaison with the provider working within the company to ensure management,” he said. Processes are documented through daily reports, including safety reports, and measured against key performance indicators. BB www.breakbulk.com BREAKBULK MAGAZINE 113

breakbulk china 2016 EVENT COVERAGE

IN 2016, BREAKBULK CHINA CELEBRATED its five-year anniversary and gathered 160 exhibitors and sponsors and 6,041 qualified attendees at the Shanghai World Expo Exhibition and Convention Center.

Breakbulk China is the largest exhibition and educational forum in 114 BREAKBULK MAGAZINE www.breakbulk.com

Asia addressing the needs of traditional breakbulk and project cargo logistics professionals. This year’s event included three professional workshops including Education Day, seven conference sessions, and four micro-seminars and exhibitor-led sessions.

ISSUE 2 / 2016

Networking opportunities included the welcome reception, VIP Leadership Summit and Shanghai International Port Group Luojing Terminal Tour, as well as chances to walk the exhibit hall floor and interact with exhibitors, colleagues and potential business partners.

SAVE THE DATE: BREAKBULK CHINA 2017 March 13-16, 2017 Hall 3, Shanghai World Expo Exhibition and Convention Center

www.breakbulk.com BREAKBULK MAGAZINE 115

breakbulk china 2016 EVENT COVERAGE

BBCH BOOTH WINNER

MOST CREATIVE STAND

CMA CGM CHINA BOOTH 816

CONTACT INFORMATION CMA CGM China 222 Yan’sn Road (East), Shanghai, China 200002 Contact: Leslie Wang, Scarlett Wu Phone: +86 21 23069539, +86 21 23069605 shg.lewang@cma-cgm.com, shg.scwu@cma-cgm.com www.cma-cgm.com

116 BREAKBULK MAGAZINE www.breakbulk.com

Invested by CMA CGM Group and headquartered in Shanghai, CMA CGM Logistics China has established a well-developed network with 12 branches throughout the country, supported by an extensive and strong worldwide service network. Founded in 2006, CMA CGM’s global network, professional staff and team are ready to offer its customers a full range of tailor-made, one-stop logistics services, including ocean/air/land/multimodal transportation, freight forwarding, NVOCC services, insurance, consulting and integrated logistics solution design. With its customer focus, dedication to cost saving and added value creation, CCLOG is always working to be a reliable global logistics partner worthy of your trust.

ISSUE 2 / 2016

BBCH BOOTH WINNER

MOST INTERACTIVE STAND

CONTACT INFORMATION SOHAR PORT AND FREE ZONE Contact: Marc Evertse Phone: +968 2685 2700 marc.evertse@soharportandfreezone.com, www.soharportandfreezone.com

SOHAR PORT AND FREE ZONE BOOTH 224

SOHAR Port and Freezone is a deep sea port and free zone situated in the Sultanate of Oman. With current investments of US$25 billion, it is one of the world’s fastest-growing port and free zone developments, and lies at the center of global trade routes between Europe and Asia. SOHAR provides unequalled access to booming Gulf economies while avoiding the cost of passing through the Strait of Hormuz. The existing road network and airport and future rail system provide direct connectivity to the U.A.E. and Saudi Arabia, as well as the rest of the world. Equipped with deep-water jetties capable of handling the largest ships, SOHAR has leading global partners that operate its container, dry bulk, liquid and gas terminals including Hutchison Whampoa, C. Steinweg Oman, Oiltanking Odfjell and Svitzer. SOHAR is managed by Sohar Industrial Port Company (SIPC), a joint venture between the Port of Rotterdam and the Sultanate of Oman. www.breakbulk.com BREAKBULK MAGAZINE 117

breakbulk china 2016 EVENT COVERAGE

BBCH BOOTH WINNER

BEST IN SHOW

SINOTRANS & CSC HOLDINGS BOOTH 808

CONTACT INFORMATION SINOTRANS & CSC Holdings Co., Ltd Sinotrans Plaza, A43 XizhimenBei Street, Beijing, China 100082 Phone: +86 10 5229 5900, +86 10 5229 5901 www.sinotrans-csc.com

118  BREAKBULK MAGAZINE  www.breakbulk.com

SINOTRANS & CSC is a large-scale modern corporate group with world-wide businesses in logistics, shipping and shipbuilding industry, and is the largest integrated logistics service provider in China. In logistics, it provides individual and customized logistics solutions across all industry sectors. With all ships owned and held, its overall shipping capacity is more than 18 million dwt. It can provide integrated shipping services in offshore, port, Changjiang River and canal. Its shipbuilding business includes ship manufacturing and repairing, port machinery producing, motors producing, etc. In resource cultivation, Sinotrans actively explores the development of logistics real estate, commercial real estate, financial services and other new business types.

ISSUE 2 / 2016

F R E E

CLIMATE CHANGE Wind Energy Cools in Eastern Europe

Moving Targets ■ All in the Energy Mix ■ Solving a Global Puzzle ■ Starting From Scratch

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Loss of Confidence ■ Serious About Infrastructure ■ Iran: A Re-emerging Power ■ Crossroads of Asia, Europe

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Lesson In Banking ■ Back To The Future ■ Breaking The Mold ■ Crunch Time

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PROJECT CARGO CASE STUDIES REGIONAL REPORTS MARKET ANALYSIS AND COMMENTARY PORTS & TERMINALS TAKING THE FAST TRACK ■ TRADING PLACES ■ RIDERS ON THE STORM ■ SHORE SOLUTIONS

ENERGY ISSUE 1 / 2016

INFRASTRUCTURE OCEAN CARRIERS ROAD/RAIL/BARGE/AIR TECHNOLOGY & EQUIPMENT BREAKBULK EVENTS

Cargoes Show No Loyalty To Multipurpose Sector

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breakbulk africa 2016 EVENT COVERAGE

NAVIGATING ECONOMIC POTENTIAL Stunted Commodity A Temporary Hurdle to Growth Africa’s path to rapid urbanization and economic growth is being obstructed by lower commodity and oil prices and slow economic growth in China, according to Lyal White, professor and director of the Centre for Dynamic Markets at the Gordon Institute of Business Science, or GIBS. Political stability and labor are also concerns, White said during the opening keynote address at Breakbulk Africa in Johannesburg.

Africa’s economy is expected to double in the next 10 to 12 years, nearing US$4 trillion by 2025. That growth requires significant infrastructure spending for power, water and transportation. An estimated US$5 billion to US$10 billion is required each year.

White argued that there is a skewed perception of Africa in the global con-

text. He said that publicized data is often not a true reflection of the continent’s economic achievements. This is mainly due to the fact that many achievements and opportunities go unnoticed.

“Another major issue we have is that people tend to view Africa as a homogenous whole,” he said. “This is even though we are made up of individual countries, with individual circumstances, opportunities and challenges.”

In order to paint a more accurate picture, GIBS has developed a Dynamic Market Index, which looks at emerging markets contextually. It measures institutional change over seven years and deems countries as either moving forward, remaining static or going backwards. Botswana and Mauritius are regarded as the most dynamic markets on the continent. The index can be accessed at www.gibs.co.za.

White advised there is no “one Africa” strategy, and stressed the need to embrace the disruption that leads to progressive change and set realistic timelines.

Africa’s ever-growing energy needs also face logistics challenges ranging from lack of infrastructure and security

concerns to lack of resources, another session heard.

Africa’s economy will stagnate without adequate power, Breakbulk Africa attendees were told, as this will discourage new investment as current investors become more apprehensive. Power is the key driver of growth and change on the continent. On the other hand, Africa’s energy requirements spell opportunities for power producers and their logistics companies, particularly in the sphere of alternative energy.

Initial investment in wind farms on various parts of the continent is high, said Sanette Venter, head of indirect material cluster Africa, Siemens RSA. However, the wind turbines require specialized equipment, including cranes that aren’t sufficiently available for installation and maintenance of wind turbines. Accessibility remains an issue; there is a need for roads and infrastructure that can handle large cargo.

The need to deliver on demand translates into opportunities for logistics partners who are to get equipment to site on time. Clients can land projects but cannot deliver without a reliable logistics partner. Venter advised that each energy delivery project be assessed by country, to determine logistics capabilities. There also is a need for continuous communication between all stakeholders – especially the logistics partner and client – to manage expectations, she said. BB

AFRICA PORTS NEED TO UNCORK BOTTLENECKS African countries need to adopt a service-orientated approach to their port systems in order to improve breakbulk handling, agreed panelists discussing the continent’s shipping challenges at Breakbulk Africa in Johannesburg.

Concern was raised about the ideology behind many African port operations. Many see it as a mere function, rather than an important production line that has an impact on the growth of the country. As such, cargo operators are left frustrated by differing regulations, long clearance waiting periods, inadequate cargo handling equipment and insufficient storage capacity.

120 BREAKBULK MAGAZINE www.breakbulk.com

As the need for infrastructure to fuel Africa’s growth increases, the panel recommended that governments and private enterprises create a platform to investigate ways to streamline port operations and efficiencies.

Among the possible solutions discussed was the option of cabotage, or coastal shipping, a system that is paying dividends in Nigeria. Cabotage has helped encourage local participation in the country, thereby creating a more stable environment in the ports.

Pre-clearance, a stronger focus on security, streamlined processes and the creation of corridors and reliable ancil-

lary services (road and rail) into the hinterland were also suggested as ways to ensure smoother operations in breakbulk cargo handling.

Participants in the session were moderator Ralf Franke, general manager PROM Southern Africa, Kuehne+Nagel (Pty) Ltd.; Oritsematosan Edodo-Emore, managing partner, Edodo, Thorpe & Associates; Napo Ramodibedi, CEO, Mendi Maritime; James Lewer, line manager, SAFWAF MPV; and Gerald Hagemann, director, business development, Meihuizen International, as agents for Angola South. BB ISSUE 2 / 2016

BACK TO BASICS FOR AFRICAN RAIL Unlocking the potential of regional African railways should be a top priority, said Kudzanayi Bangure, rail project manager at Nepad Business Foundation, during his keynote address at Breakbulk Africa in Johannesburg.

While Africa is earmarked for rapid growth and urbanization, there is concern that the continent’s existing rail network cannot keep pace with growing demand for moving large volumes of cargo over long distances. Countries are also having to rethink their industrialization ambitions as a result of the global economic slowdown, drought and power supply concerns.

However, Bangure is optimistic that targets can still be achieved if key players adopt a more incremental approach to improving rail networks.

“We need to look at maximizing existing infrastructure before embarking on major improvements. This approach has worked well in South Africa,” he explained. “It makes sense when you consider that most railway lines only carry 15 percent of cargo throughout the continent. In fact, most only operate at 10 percent capacity. So why not maximize their potential?”

Addressing the high-level audience, Bangure stressed the need for a balance in transporting breakbulk by road and rail. Moving traffic off road onto rail also lowers the carbon footprint, he added.

Using the North South Corridor, or NSC, Railway Lines as a case in point, Bangure explained that given the funding challenges, the incremental approach is helping to achieve a seamless logistics offering between the two regions. The current NSC rail service is anticipated to deliver up to 1.3 tonnes per annum by the end of 2016. The masterplan aims to investigate and develop an infrastructure investment plan that will allow rail to tap into a total freight volume market estimated to be 26 mtpa. BB

Paul Runge gives an interview at Breakbulk Africa.

Watch the video at Breakbulk.com/Africa.

TAPPING INTO FRANCOPHONE AFRICA Understanding Traditions, Cultures Key to Maximizing Opportunities

If businesses want to leverage opportunities in French-speaking West and Central African countries, they need to immerse themselves in their cultures, advised Paul Runge, managing partner at Africa Project Access.

Runge, speaking at Breakbulk Africa, explained that companies must realize that merely overcoming the language barrier in Francophone Africa will not necessarily increase their bottom line. What is needed is a complete understanding of the traditions, cultures and the way business is conducted there.

Runge, considered an expert of the region, highlighted a host of opportunities that exist in Francophone Africa, all of which require the infrastructure and logistics to get off the ground: » Development of the Mayumba Deepwater Port in Gabon. » Renovation of the Kinshasa-toMatadi Rail Line in DRC. » Upgrading Felix Houphoë-Boigny Airport, Côte d’Ivoire. » Establishing a new multi-facility bulk port in Bargny-Sendou, Senegal. » Fuel import and gas export pipelines in Djibouti.

Apart from language barriers and cultural differences in business negotiations in Francophone Africa, there are also stringent custom control methods that differ throughout the region. The only commonality is the custom code. While these can be frustrating, there are solutions to overcome such challenges, said Hubert Tollin de Rivarol, an expert in export and collateral management in Africa for Bolloré Logistics Group, also speaking at the event.

Authorities impose harsh penalties if the letter of the law is not followed and Rivarol advised that companies conduct intensive research about custom controls in each country they wish to operate in. He further added that forging partnerships with local experts is pivotal to understanding and profiting from business there.

The potential of expanding into rapidly developing countries such as the Democratic Republic of Congo, Gabon and Senegal was also noted by Cedric Chauvet, commercial development manager, Europe for Africa Service at Intermarine.

“Widen your horizons and look further than English-speaking countries,” he said.

According to Runge, forming partnerships is the key to tapping into these lucrative projects. “In Africa, we hunt in packs. You will need to work closely with local partners as well as industry experts in order to secure your share of the market,” he said. BB www.breakbulk.com BREAKBULK MAGAZINE 121

bb index

INDEX Breakbulk cargo is an eclectic mix, encompassing forest products, steel, pressure vessels, windmill blades, rolling stock and out-of-gauge items.

With this in mind, BREAKBULK INDEX data ranges from steel production to details of planned capital projects.

The global nature of today’s breakbulk and heavylift sectors requires transportation professionals to be on top of economic trends worldwide, which calls for inclusion of focused macro-economic data on prices and events that affect EPCs, the breakbulk community and the multipurpose fleet.

PIRACY WEST AFRICA MARITIME SECURITY INCIDENTS Incidents from Senegal to Angola have increased since December 2015 with 33 attacks in the fourth-month span. Efforts to combat piracy off the Horn of Africa have been largely successful, with only a single hijacking in November 2015.

Total Failed Attacks Hijacking Attempts Theft Robbery

July ‘14 3 August 7 September 5 October 9 November 13 December 9 January ‘15 7 February 6 March 10 April 7 May 12 June 5 July 8 August 5 September 0 October 1 November 2 December 7 January ‘16 11 February 8 March 7

1 3 1 6 5 2 1 1 0 0 0 0 1 1 0 1 2 1 4 2 3

2 0 0 3 0 1 1 0 3 3 0 0 7 1 0 5 1 1 2 1 2 1 0 1 4 2 1 4 0 0 5 0 4 3 0 1 2 1 4 3 0 1 0 0 0 0 0 0 0 0 0 2 1 3 4 0 3 4 0 2 2 0 2

Note: “Failed” includes attempted robberies/thefts as well as hijackings. “Hijackings” include kidnappings from vessels.

122 BREAKBULK MAGAZINE www.breakbulk.com

SOUTHEAST ASIA MARITIME SECURITY INCIDENTS Attacks continued to decline dramatically, with only 11 attacks through the first quarter of 2016 compared with 20 in October 2015 alone.

Total Failed Attacks Attempts Hijacking Theft Robbery

July ‘14 14 5 August 14 6 September 8 2 October 26 7 November 20 9 December 16 7 January ‘15 18 6 February 11 3 March 15 6 April 16 9 May 22 7 June 18 4 July 12 4 August 25 12 September 22 5 October 20 11 November 8 5 December 10 2 January ‘16 5 2 February 1 0 March 5 1

2 1 6 1 4 3 3 2 1 4 8 7 0 5 6 1 3 5 2 4 6 2 3 3 2 2 5 1 4 2 2 11 1 3 5 6 0 5 3 2 3 8 1 7 9 0 5 4 0 1 2 1 6 1 0 2 1 0 1 0 1 2 1

Note: “Failed” category is for attempted robberies/thefts, not hijackings.

Source: Risk Intelligence, www.riskintelligence.eu

ISSUE 2 / 2016

ECONOMY, EUROPEAN UNION GDP FORECAST Economists forecast flat to slight declines in GDP in 2016 and slight improvement in 2017.

4% 2014 2015

3%

2016* 2017*

2%

1%

0%

ZO NE EU RO

UN ITE DK ING DO M WE ST ER NE UR OP E EU RO PE AN UN IO N

SW ED EN

SP AIN

NO RW AY

INFLATION FORECAST

SW ITZ ER LA ND

*Forecast

NE TH ER LA ND S

ITA LY

GE RM AN Y

FR AN CE

BE LG IUM

-1%

Inflation rates are projected to steadily increase through 2017.

3% 2014 2015 2016*

2%

2017* 1%

0%

ZO NE EU RO

SW ITZ ER LA ND

SW ED EN

SP AIN

NO RW AY

UN ITE DK ING DO M WE ST ER NE UR OP E EU RO PE AN UN IO N

*Forecast

NE TH ER LA ND S

ITA LY

GE RM AN Y

FR AN CE

BE LG IUM

-1%

CURRENT ACCOUNT FORECAST Current account balances are the difference between a given nation’s imported and exported goods, services and transfers and are an indicator of foreign trade trends.

500 400 300

2013 2014 2015* 2016*

200 100 0 -100

ZO NE EU RO

SW ITZ ER LA ND

SW ED EN

SP AIN

UN ITE DK ING DO M WE ST ER NE UR OP E EU RO PE AN UN IO N

*Forecast, in US$ billions Source: Consensus Economics, www.consensuseconomics.com

NO RW AY

NE TH ER LA ND S

ITA LY

GE RM AN Y

FR AN CE

BE LG IUM

-200

www.breakbulk.com BREAKBULK MAGAZINE 123

bb index

FOREST PRODUCTS: PULP INDEX EUROPE Pulp prices cost, insurance and freight to main European ports were normalized to 100 in January 2000 and are based on average euro prices of northern and southern bleached softwood and eucalyptus kraft and northern bleached hardwood kraft pulp weighted by production volume.

150 125 100 75 50 25 0

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFM 2010

2011

2012

2013

2014

2015

2016

NORTH AMERICA Delivered pulp prices were normalized to 100 in January 2000 and are based on average US$ prices of northern and southern bleached softwood kraft, bleached eucalyptus kraft, and northern bleached hardwood kraft pulp weighted by production volume.

200 150 100 50 0

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFM 2010

2011

2012

2013

2014

2015

2016

ASIA Pulp prices cost, insurance and freight to main East and Southeast Asian ports were normalized to 100 in January 2003 and are based on average US$ prices of northern, southern and Russian bleached softwood, radiata, eucalyptus and mixed tropical hardwood pulp weighted by production volume.

250 200 150 100 50 0

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFM 2010

2011

2012

2013

2014

2015

2016

Source: RISI, www.risi.com

EUROPEAN FREIGHT FORWARDING INDEX The index is based on European forwarders’ actual and expected freight volumes. Values below 50 on the zero-to-100 scale indicate a decline.

100 90 Actual

80

Forecast

70 60 50 40 30 20 10 0

M J JA SO N DJ FM A M J JA SO N DJ FM A M J JA SO N DJ FM A M J JA SO N DJ FM A M J JA SO N DJ FM A M J JA SO N DJ FM A 2010

2011

2012

2013

2014

2015

2016

Source: Danske Market Equities, www.danskebank.dk 124 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2016

CORRUPTION PERCEPTIONS INDEX 2015 Transparency International ranks the perceived levels of public sector corruption in 168 countries/territories around the world. More than two-thirds of the countries score below 50.

1 Denmark 2 Finland 3 Sweden 4 New Zealand 5 Netherlands 5 Norway 7 Switzerland 8 Singapore 9 Canada 10 Germany 10 Luxembourg 10 United Kingdom 13 Australia 13 Iceland 15 Belgium 16 Austria 16 USA 18 Hong Kong 18 Ireland 18 Japan 21 Uruguay 22 Qatar 23 Chile 23 Estonia 23 France 23 UAE 27 Bhutan 28 Botswana 28 Portugal 30 Poland 30 Taiwan 32 Cyprus 32 Israel 32 Lithuania 35 Slovenia

91 90 89 88 87 87 86 85 83 81 81 81 79 79 77 76 76 75 75 75 74 71 70 70 70 70 65 63 63 62 62 61 61 61 60

36 Spain 58 37 Czech Republic 56 37 Korea (South) 56 37 Malta 56 40 Cape Verde 55 40 Costa Rica 55 40 Latvia 55 40 Seychelles 55 44 Rwanda 54 45 Jordan 53 45 Mauritius 53 45 Namibia 53 48 Georgia 52 48 Saudi Arabia 52 50 Bahrain 51 50 Croatia 51 50 Hungary 51 50 Slovakia 51 54 Malaysia 50 55 Kuwait 49 56 Cuba 47 56 Ghana 47 58 Greece 46 58 Romania 46 60 Oman 45 61 Italy 44 61 Lesotho 44 61 Montenegro 44 61 Senegal 44 61 South Africa 44 66 Sao Tome and Principe

42

66 The FYR of Macedonia 42 66 Turkey

42

69 Bulgaria 69 Jamaica 71 Serbia 72 El Salvador 72 Mongolia 72 Panama

41 41 40 39 39 39

72 Trinidad and Tobago 39 76 Bosnia and Herzegovina 38 76 Brazil 76 Burkina Faso 76 India 76 Thailand 76 Tunisia 76 Zambia 83 Benin 83 China 83 Colombia 83 Liberia 83 Sri Lanka 88 Albania 88 Algeria 88 Egypt 88 Indonesia 88 Morocco 88 Peru 88 Suriname 95 Armenia 95 Mali 95 Mexico 95 Philippines 99 Bolivia 99 Djibouti 99 Gabon

38 38 38 38 38 38 37 37 37 37 37 36 36 36 36 36 36 36 35 35 35 35 34 34 34

99 Niger 103 Dominican Rep. 103 Ethiopia 103 Kosovo 103 Moldova 107 Argentina 107 Belarus 107 Côte d´Ivoire 107 Ecuador 107 Togo 112 Honduras 112 Malawi 112 Mauritania 112 Mozambique 112 Vietnam 117 Pakistan 117 Tanzania 119 Azerbaijan 119 Guyana 119 Russia 119 Sierra Leone 123 Gambia 123 Guatemala 123 Kazakhstan 123 Kyrgyzstan 123 Lebanon 123 Madagascar 123 Timor-Leste 130 Cameroon 130 Iran 130 Nepal 130 Nicaragua 130 Paraguay 130 Ukraine 136 Comoros

34 33 33 33 33 32 32 32 32 32 31 31 31 31 31 30 30 29 29 29 29 28 28 28 28 28 28 28 27 27 27 27 27 27 26

136 Nigeria 136 Tajikistan 139 Bangladesh 139 Guinea 139 Kenya 139 Laos

26 26 25 25 25 25

139 Papua New Guinea 25 139 Uganda

25

145 Central African Republic 24 146 Congo Republic 147 Chad

23 22

147 Democratic Rep. of the Congo 22 147 Myanmar 150 Burundi 150 Cambodia 150 Zimbabwe 153 Uzbekistan 154 Eritrea 154 Syria 154 Turkmenistan 154 Yemen 158 Haiti 158 Guinea-Bissau 158 Venezuela 161 Iraq 161 Libya 163 Angola 163 South Sudan 165 Sudan 166 Afghanistan 167 Korea (North) 167 Somalia

22 21 21 21 19 18 18 18 18 17 17 17 16 16 15 15 12 11 8 8

Source: Corruption Perceptions Index 2015, Transparency International, www.transparency.org/cpi2015

www.breakbulk.com BREAKBULK MAGAZINE 125

photo contest

BREAKBULK CITY TRANSPORT PHOTO CONTEST WINNER:

deugro

LOCATION: Malacca, Malaysia YEAR: 2011 DESCRIPTION: deugro Singapore successfully transported five overlength and heavy columns by way of two consecutive barge voyages from Malacca to Sakra Jetty on Jurong Island, Singapore.

The main challenge in Malaysia was the difficult route from the factory to the nearby jetty in Malacca. Although the route was only 20 kilometers long, there were seven very narrow turns to navigate. Major road improvements and civil works were needed, in addition to removing obstacles, before operations could begin. Extensive advance meetings with the respective authorities and town councils were necessary to ensure that all required permits were in place prior to beginning the transport.

Because the route was so difficult, equipment could only be transported during daylight hours. It also required many support vehicles, local police, and third-party security to keep spectators at bay and allow for safe passage with no incidents.

NEXT ISSUE: The Last Mile / Submission Deadline: May 17 / Submit entries at Breakbulk.com/submit-last-mile.

126  BREAKBULK MAGAZINE  www.breakbulk.com

ISSUE 2 / 2016

The RTM Difference:

When Bigger Isn’t Always Better:

It seems the whole shipping world is bent on super-sizing. It’s a veritable sea of mega ships and mega-mergers. But bigger is not always better, especially when problems arise requiring timely personalized service. At RTM our customers appreciate the fact we are as resourceful as we are experienced.

We have earned an industry-wide reputation for solving challenges, creating value and finding more efficient ways to get our clients’ cargo to their destination safely, swiftly and securely. For all your trans-ocean cargo and logistics needs, look to the lighthouse.

RT MLINES. co m • 800. 847. SH IP

BREAKBULK CONTAINER HIGH & HEAVY MILITARY PROJECT RO/RO