Breakbulk Magazine Issue 2 / 2018

ISSUE 2 / 2018

THE PUBLICATION FOR THE INDUSTRIAL PROJECT SUPPLY CHAIN INDUSTRY

IN THIS ISSUE:

GREAT LAKES, SEAWAY TO BENEFIT FROM AUTO-MOORING GREEK WIND ENERGY SECTOR SET TO SOAR HEAVY HAND OF ANTI-BRIBERY LAWS

HIDDEN RISKS Project Cargo Vulnerabilities Stretch Beyond Theft

ENGINEERED MARINE TRANSPORT SINCE 1980

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IN THIS ISSUE Cover Story

20

12

26

12 HIDDEN RISKS Project Cargo Vulnerabilities Stretch Beyond Theft

08 THOUGHT LEADER

26 ENERGY UPDATE

Protection from Insider ‘Pirates’

Greek Wind Energy Sector To Soar

THE DATA BOUNTY

RIDING THE THERMALS

10 THOUGHT LEADER

32 REGULATION

China’s Project Demand Potential

Heavy Hand of Anti-bribery Laws

AMBITION FOR GROWTH

PAYING THE PRICE

20 REGIONAL REVIEW

POTENTIAL UNLOCKED Seaway, Great Lakes to Benefit From Auto-Mooring

38

06 E DITORIAL 38 M IDDLE EAST VOLUMES ON THE MEND

42 UP-FRONT INPUT ELEVATES MEG PROJECT

ON JAPAN’S BRI INVOLVEMENT?

56 S OUTHEAST ASIA PLAYS

CATCH-UP ON INFRASTRUCTURE

58 M CDERMOTT, CB&I JOIN FORCES

46 ZIMBABWE’S NEW PRESIDENT

60 L EGAL SPOTLIGHT: FIX DISPUTES

50 U.S. EXPORTERS PUSH FOR

62 B REAKBULK MIDDLE EAST

SUPPORTS ECONOMIC DRIVE

NEW EX-IM BOARD

4 BREAKBULK MAGAZINE www.breakbulk.com

52 P OSTURING OR ENGAGEMENT

WITHOUT LITIGATION

CONFERENCE RECAP

ISSUE 2 / 2018

RICKMERS-LINE

EDITORIAL

RISKY BUSINESS Supply chain logistics has come a long way in its approach to security and risk management since the dark tragedy of 9/11.

However, to your company’s security experts, it feels like the nightmare where you’re helplessly running in place while your nocturnal demon is rapidly catching up.

Cyber-attacks, terrorism, corruption, piracy, protection seems to stretch far beyond merely protecting the assets; it requires the integrity of each step, of each handoff, and each partner. The bad guys always seem one step ahead so companies invest heavily to allay their Gary Burrows worst fears.

As Carly Fields points out in this issue’s cover story (“Hidden Risk,” page 12), the biggest threat can be complacency. While project cargo faces different risks than conventional supply chains fed by containerization and perhaps a more expansive flow of data, Fields outlines the many aspects that aren’t top-of-the-head thinking, but are as significant to a successful cargo move.

As a regular feature now, Breakbulk offers its Legal Spotlight, with this issue featuring commentary from Martyn Haines, a master mariner and accredited mediator (“Take Time to Talk,” page 60). Well-reasoned processes, knowing your partners, consistent communication, defining expectations and meeting them. It all sounds so simple.

Imagine then, ratcheting up the degree of difficulty, handling projects in a current hotspot or post-conflict region? Such high risk usually also means greater reward. That was the topic of a highlight session at Breakbulk Middle East in Abu Dhabi. Moderator Tina Benjamin-Lea, logistics manager, SNCLavalin, walked with her panel through the process – logistics, infrastructure, security, and ethics and compliance.

“Regardless of whether you’ve operated in an environment before, or its your first 6 BREAKBULK MAGAZINE www.breakbulk.com

time, we can’t over-emphasize the planning phase prior to bringing assets into country,” Wilcox said. “Even from a timeline perspective, you can’t over-estimate or over-plan or over-contingency.”

Certainly the session was as much veterans swapping war stories as insights on securing a project supply chain. But threaded through it wall was the consistent blueprint of steps necessary regardless of the level of risk.

“We’re not reinventing the wheel when we get to what might be described as a frontier location, but we do it legally, ethically and efficiently as we can,” Wilcox said.

A conservative approach is also required, especially for a customer who needs to align expectations with realities.

“Things just don’t happen quickly in any of these countries,” Wilcox said. “There are no systems in place, just someone with a typewriter. In some of the ports, militia is controlling, and when one militia moves out and another moves in the total order is changed.

One of the challenges for engineering, procurement and construction, or EPC, companies and breakbulk operators entering a post-conflict region for the first time is understanding the value of the costs associated with making sure an operation is “gas-tight, stress-tested in every regard to security,” Wilcox said. That requires due diligence and background checks on partners.

While projects routinely go to the most austere, far-flung locales, the conditions of bridges, roads and infrastructure present huge challenges, said Alberto Pittaluga, director Iraq and Italy, ALE Middle East LLC. Route decisions are impacted by destroyed roads and bridges, mines and river options snarled with debris. There are health and safety risks, financial risk, as well as the physical challenges.

Simply surveying bridges and roadways for the move brings risk of arrest and confrontations from local government that doesn’t understand what’s going on, Pittaluga said.

“Early engagement is key,” he said. “It’s a combination of effort between EPCs, forwarders, IOCs (international oil companies) and the central government.” For the latter, impressing the project’s value upon that government would create buy-in.

A great obstacle, though, is when stakeholders like risk management or security are outside of decision processes, said Martin Rudd, senior vice president, commercial, of security group Constellis.

Regardless of risk, collaboration is key.

EDITORIAL DIRECTOR Gary G. Burrows / +1 904 535 5460 gburrows@breakbulk.com NEWS EDITOR Carly Fields cfields@breakbulk.com HEAD DESIGNER Catherine Dorrough DESIGNER Mark Clubb REPORTERS Paul Scott Abbott Thomas Timlen Kerry Dimmer Mark Willis Lori Musser

BREAKBULK EDITORIAL BOARD John Amos Amos Logistics

Ed Bastian

BBC Chartering

Murray Cooper

McDemott International Inc.

Dennis Devlin DB Schenker

John Hark

Bertling Project Logistics

Dennis Mottola Bechtel Corp.

William Moyersoen

ArcelorMittal Antwerp Logistics

Albert Pegg

Atlas Breakbulk Alliance

Dirk Visser

Dynamar D.V.

Grant Wattman

Agility Project Logistics

PORTFOLIO DIRECTOR Nick Davison Nick.Davison@ite-exhibitions.com ACCOUNT MANAGER Robert Janusauskas / +353 21 477 3808 rjanusauskas@breakbulk.com SUBSCRIPTIONS To subscribe, email gburrows@breakbulk.com, or call from inside the U.S. +1 904 535 5460 between 8:00 am and 5:00 pm EST. You can also subscribe at www.breakbulk.com/subscribe.

A publication of ITE Group plc Transport & Logistics business 105 Salisbury Road London NW6 6RG, UK.

ISSUE 2 / 2018

THOUGHT LEADERS

THE DATA BOUNTY

PROTECTION FROM INSIDER ‘PIRATES’

T

BY ISAAC KOHEN TERAMIND

YOU CAN’T PROTECT WHAT YOU DON’T KNOW ABOUT, SO TAKE TIME TO ASSESS SENSITIVE DATA.

he June 2017 NotPetya ransomware attack disrupted global shipping and brought down systems for numerous transport providers, including Maersk, a carrier of out-of-gauge cargo.

The attack highlighted how a new kind of “pirate” can wreak havoc within your project cargo supply chain, potentially disrupting schedules, damaging reputations, and impacting customer retention.

All points in the supply chain – carriers, shippers, freight forwarders – run networks that enable modern business, but also pose the risk of penetration from the outside. A ship is no longer disconnected at sea but, rather, has a robust ship-to-shore network capability.

The NotPetya attack featured outside hackers driven by greed. However, negligent or malicious insiders onboard a vessel or onshore at headquarters pose risks as well. Those insiders have access to sensitive data via the network. Sensitive data can include customer information, commercial agreements, intellectual property, forward-looking business plans, and employee data.

The International Maritime Bureau reported that more than 80 percent of offshore cyber, information and operational technology security breaches were the direct result of human error.

The report also highlighted how the insider threat is being ignored. Only 12 percent of maritime crew in the world had received any form of cyber security training, and only 43 percent of crew were provided a cyber security guideline for personal use of IT systems on vessels.

Breakbulk and project cargo specialists can take steps to protect sensitive data from that negligent or malicious insider.

• You can’t protect what you don’t know about, so take time to assess sensitive data: what data are you storing, where is the data, who has access to the data, and what would be the impact if the data is breached? Protection investments should be prioritized based on the data that would be most harmful if divulged.

• Review access privileges and administration accounts, and institute a policy of least privilege. If an employee does not need access to the data to do his/her job, revoke that access. If

8 BREAKBULK MAGAZINE www.breakbulk.com

CREDIT: SHUTTERSTOCK

you are using default administrator accounts and passwords, stop. Change defaults and prohibit the sharing of accounts/passwords.

• Create security guidelines and education for employees and train employees on how to spot email phishing scams. IHS Fairplay’s 2016 Maritime Survey found that phishing, the fraudulent practice of sending emails purporting to be from reputable companies to induce individuals to reveal sensitive data, was the second most common form of cyberattack, after malware software. Instruct employees on the importance of limiting corporate computers to corporate use.

The stakes are high when it comes to data protection. Of the respondents to the 2016 Maritime Survey who acknowledged that their systems had been compromised, 67 percent experienced IT downtime, 48 percent lost corporate data, such as email, personal data, payroll, or human resource information, and 21 percent endured some form of financial loss.

Fortunately, the topic of data protection is receiving more attention within the breakbulk and project cargo community, and resources are available to help. Search for these free guides online to raise cyber awareness levels in the sector: Be Cyber Aware At Sea, The Guidelines on Cyber Security Onboard Ships Version 2.0, and the CSO Alliance - Maritime. BB Isaac Kohen is founder and CEO of Teramind, an employee monitoring and insider threat prevention platform.

ISSUE 2 / 2018

THOUGHT LEADERS

AMBITION FOR GROWTH

CHINA’S PROJECT DEMAND POTENTIAL

T

BY BORGE KIBO BODOGAARD

WALLENIUS WILHELMSEN LOGISTICS ASA

BY HANDE ARI

WALLENIUS WILHELMSEN LOGISTICS ASA

he Chinese economic miracle witnessed over the last decades has been tremendous and hard to comprehend in terms of scale. The Chinese economy has been driven by exports, primarily for consumer goods.

Exports of breakbulk cargo, on the other hand, have not risen by the same amount. Why is this the case? Up to now, the Chinese economy has consumed all that it can produce, but we believe this situation is about to change as the Chinese economy slows. This will mean that its ambition for growth must be met outside its home market.

Consequently, we expect China’s demand for project cargo to grow significantly over the next few years, and there will be an increasing need for project logistics services in China from around the world. The wind energy sector is a good example of this trend, but other similar cases can be found in transportation and other energy sectors.

As stated in China’s 13th Five-Year Energy Plan, the government aims to reduce wasted wind energy and phase out subsidies for onshore wind power development. These objectives are expected to result in a slowdown in production of new wind installations in China over the next five years. This will increase pressure on the wind makers and their reliance on overseas markets as a substitute for the stagnant domestic market.

TOP-FIVE RANKING

PHOTO: People work

at a production base of Goldwind, China’s largest manufacturer of wind turbines, in this file photo from 2012.

CREDIT: POLAT NIYAZ/ FEATURECHINA/NEWSCOM

Today, five of the top 10 wind manufacturing companies are Chinese and are active in overseas markets. One example is Goldwind, one of the world’s largest turbine makers. At the end of 2016, it reached 2 gigawatts in international contracts and delivered more than 700 units of wind turbine generators across six continents and 20 countries, including the U.S., Panama, Turkey, Chile, Australia and Thailand.

Nevertheless, despite this growing Chinese presence, multinational wind turbines makers are ahead of their Chinese competitors with a wider global coverage and consolidation activities, for example the merger of Siemens Wind Power and Gamesa. We believe that the Chinese will be very keen to close this gap and increase their presence and global competitiveness.

10 BREAKBULK MAGAZINE www.breakbulk.com

In order to increase competitive advantage in the overseas wind market, logistics excellence will be the key for Chinese makers. Cargo for wind energy equipment can be very large and heavy, with pieces in excess of 300 tonnes. Such cargoes require in-depth logistical experience and tailored equipment to ensure safe and secure transportation. Any delay in shipment or cargo damage can result in significant increase to the total cost and disruption to the global business.

To avoid this, original equipment manufacturers must partner with experienced logistics expertise. This will create opportunities for logistics companies who have a strong base in China and abroad and are experienced in handling large and heavy breakbulk project cargo, not only in the wind energy market, but in the wider breakbulk space over the coming years. BB Borge Kibo Bodogaard is head of breakbulk and marketing, and Hande Ari is the shipowning and market intelligence manager at Wallenius Wilhelmsen Logistics ASA.

ISSUE 2 / 2018

COVER STORY

HIDDEN RISK

BY CARLY FIELDS

Project Cargo Vulnerabilities Stretch Beyond Theft

12 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2018

KS

hen a global insurer deems the project cargo sector as “generally low-risk from a theft perspective,” it is tempting to kick back and check the security box off as complete.

As one of the most closely monitored cargo sectors, pilfering is almost unheard of, but that doesn’t mean that project cargo movers can avoid security risks altogether.

Instead, Kevin Wolfe, global head-project cargo in the chief underwriting office-marine at Allianz Global Corporate & Specialty, or AGCS, points up the security risks inherent in risk management and stowage of project cargoes, among other things.

While the scale of many project cargoes might make them a low-theft risk, the actual move itself can present security challenges. Wolfe flags up the handover pinch points in a move as the areas that throw up the highest security risks, and accordingly, the insurer ensures that a member of its loss control team is present at the various transfer points.

From the supplier’s premises to the truck/rail interface and from loading on to a ship to the discharge port and transit to the project site, loss control experts are physically in attendance to ensure proper lifting, packaging, stowing, lashings and bracings. All this in addition to vetting the ship itself in advance.

“Transfers from conveyance to conveyance are extremely critical points for us during the course of a project cargo move,” Wolfe said. “They are the most exposed points of a move for us.”

QUESTIONABLE VESSEL SUITABILITY

The flat ocean freight market has also thrown up challenges in securing project cargo moves. With an abundance of unemployed tonnage, some general cargo ships have jumped into the project cargo sector with gusto, offering their services to haul heavyweight, oversized and critical project cargoes.

However, this trend presents problems.

“General cargo vessels are not built to the same specification as a heavy-lift,” Wolfe said. “There are also some bulk carriers out there that are advertising, ‘We can do project cargo as well,’ but they are not designed to support proper lashing arrangements and the deck load capacity required for project cargo.”

To mitigate the risk, AGCS’s loss control team has to educate clients on the suitability of vessels, which do not always lend themselves to the proper bracing and blocking of heavy cargo. “So, if you get into some heavy weather the cargo will just bounce around in there if not stowed properly – that’s clearly not something we want to happen,” Wolfe said.

With a finite number of specifically tailored heavy-lift ships in the market, the nomination of vessels has to be done early in the project process to make sure that shippers have the proper vessel in the right part of the world to move that critical piece of cargo.

www.breakbulk.com BREAKBULK MAGAZINE 13

COVER STORY

SECURITY SHOULD BE TAKEN VERY SERIOUSLY WHEN REFERRING TO CARGOES THAT ENTER OR EXIT OUR PORT TERMINALS AND TRANSIT THROUGH PUBLIC AREAS.” – Jessica Thomas, director of security, Port Houston

CREDIT: PORT HOUSTON

Port Houston takes a proactive approach to physical security of project cargoes in its environs. It deploys numerous protective measures throughout its terminals to ensure key principles of physical security are in place for the delay, detection, deterrence and/or interdiction of terrorist or criminal behavior. Its security department utilizes a multifaceted and layered security approach to mitigate physical security vulnerabilities, with physical security access managed through a hybrid of manned access points, automated vehicle access points, and automated pedestrian turnstiles.

But, ultimately, it is up to the individual shippers and cargo owners to secure their own cargoes, Jessica Thomas, director of security, Port Houston, said. “Security should be taken very seriously when referring to cargoes that enter or exit our port terminals and

transit through public areas.”

One option to strengthen security standing of project cargo stakeholders would be to participate in supply chain security initiatives, such as the Customs-Trade Partnership Against Terrorism, or C-TPAT, ISO 28000, or any other security program. Some carriers, trucking companies and freight forwarders serving the port are already trusted partners in the C-TPAT program.

Port Houston has been a trusted partner of C-TPAT since 2005, when it became the first port in the world to receive the international supply chain security designation. Three years later, its Port Security & Emergency Operations Department Security Management System was certified to ISO 28000:2007, the international standard setting out stringent requirements for a security management system that incorporates all aspects of business management.

14 BREAKBULK MAGAZINE www.breakbulk.com

BEYOND THE PHYSICAL

Phil Tinsley BIMCO

Aron Sørensen BIMCO

But project cargo security is about more than the physical challenges; virtual threats are keeping more and more shippers and forwarders awake at night now. While their size often precludes physical theft, hackers do not need to concern themselves with dimensions – all they need is the knowledge that that cargo is valuable to someone in the chain, giving them an opportunity to extort for cyber-inflicted delays.

“Although it is difficult to predict globally, there is potential for information to be leaked regarding high-value cargo loads. This information can then be utilized by criminal gangs to target specific loads,” Phil Tinsley, manager of maritime security at BIMCO, told Breakbulk.

While some project cargo movers take cyber security seriously, there are more that don’t – a trend typical of the ISSUE 2 / 2018

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Through this approach we help our customers reduce transport risks and increase delivery precision. Find out more about how we can create value together at bit.ly/WWLcases

FROM AN INSURER’S PERSPECTIVE, SHIPPING FULL MODULES MEANS THAT YOU NOW HAVE THE FULL VALUE OF A CRITICAL ITEM AT SEA.” – Kevin Wolfe, AGCS

An oil refining module is unloaded at the Port of São Sebastião. / CREDIT: POLO PORT OPERATORS

whole maritime industry, Aron Sørensen, head of maritime technology and regulation at BIMCO, noted. Transferring responsibility for cyber security to someone else in the project cargo logistics chain is irresponsible, as it is the weakest link in the chain – which is normally an individual – that exposes the threat, he added.

Project cargo movers should read version 2 of the “Industry Guidelines,” available for free at www.bimco.org, to help protect their shipments from cyber attacks. Crews serving on multipurpose and heavy-lift ships should also receive adequate and frequent training to ensure they are aware of the threat and how to deal with incidents, BIMCO recommends. Further, industry standards on software maintenance should be followed and cargo information should be secure and not shared. “It should be dealt with as classified information,” Sørensen said.

While BIMCO is aware of cyber attacks that have specifically targeted project cargoes on trucks, it has yet to hear about an attack on ships. But Tinsley warned that there may be a shift of the criminal’s business model to ships in the future, albeit it would be more difficult to enact.

NEW RULES COMING

There is change afoot in addressing cyber security vulnerabilities in the wider maritime sector. From January 2021, the International Maritime Organization – the United Nations’ agency responsible for regulating global shipping – will enforce that cyber risks are appropriately addressed in future safety management systems no later than the first annual verification of the company’s International Safety Management Code’s Document of Compliance. Any onboard cyber security concerns should be addressed in ship security plans. This will have a bearing on MPVs and heavy-lift ships.

Tinsley noted that virtual security risks do not yet outweigh physical security risks in the sector, but as automation and automated processes increase, less crews, drivers and operators will be needed, raising opportunities for more virtual crimes on project cargoes.

Port Houston is strengthening its cyber security protection and has contracted a cyber security specialist to help develop a comprehensive cyber security program, in line with the U.S. National Institute of Standards and Technology Framework.

16 BREAKBULK MAGAZINE www.breakbulk.com

RISKS OF MODULARIZATION Running counter to its popularity, the move to modularization has thrown up new security challenges for the project cargo world.

Kevin Wolfe, global head-project cargo in the chief underwriting office-marine at Allianz Global Corporate & Specialty, or AGCS, explained that the switch from stick-built to modularization presents problems of scale.

“Previously, shippers would send piping, valves and so on, and all these individual components would be delivered to a project site to be built on site. But over the last 10 years, there’s been a dramatic shift to building Kevin Wolfe these modules in lowlabor-cost countries.”

Allianz Global Corporate & Specialty Now, the component parts get shipped to a fabrication yard in one of these countries, where they get assembled into large modules, which is then shipped directly to the project site.

“Some of these modules can be half the size of a football field. Height and weight then becomes an extreme challenge because of the stress forces that are exerted upon the modules during the ocean voyage,” Wolfe said. “From an insurer’s perspective, shipping full modules means that you now have the full value of a critical item at sea, versus 10 years ago when it was stick-built. This has changed the risk exposure for project cargoes.

ISSUE 2 / 2018

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COVER STORY The program is being developed in close collaboration with the port’s security department so that the cyber security program and the physical security program can complement one another.

“Physical security and virtual security risks are always going to be present in any environment,” Thomas said. “In the security department, we conduct risk assessments to identify any possible risk that we may be exposed to and mitigate the findings as best we can. Collaboration with other departments is key to implement new innovated physical security options and any new technology that might be available.”

However, Thomas did concede that she saw the risk of cyber security-related threats to project cargoes as “relatively low” at this time due to the nature of the industry and the cargo.

AGCS’s Wolfe saw project cargoes as “somewhat less

COLLABORATION WITH OTHER DEPARTMENTS IS KEY TO IMPLEMENT NEW INNOVATED PHYSICAL SECURITY OPTIONS AND ANY NEW TECHNOLOGY THAT MIGHT BE AVAILABLE.”

– J essica Thomas, Port Houston

CREDIT: SHUTTERSTOCK

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www.aishipping.com ISSUE 2 / 2018

vulnerable” to cyber issues in comparison with other cargo sectors: “We track the vessels moving these critical components through our risk consulting group, ARC, and risk management team. For liner trades, you may know where those vessels should be, but in project cargo, we track the route and the position of those ships during the voyage.”

GETTING ROUND THE TABLE EARLY

Whether the goal is to ensure physical or cyber security protection of a project cargo, good, inclusive communication and comprehensive kick-off meetings are a must, Wolfe added. “When a project begins, long before anything’s shipped, our loss control team, the broker, the transport and logistics people involved, and the client will have kick-off meetings.

There’s a lot of dialogue that goes

NEXT UP: ENERGY Energy remains at the core of the project industry, and its rollercoaster ride has dramatically affected the industry and those businesses that serve it. In Issue 3, Breakbulk presents our annual analysis of the prospects for conventional and renewable energy across the world markets.

Some Shippers Just Can’t Contain Themselves

on long before anything is actually fabricated and ready to ship.”

Wolfe views the trend of more information being made available at an early stage of projects today as positive: “There’s much more technical information being provided to us and our loss control team which is extremely helpful for us as underwriters. We get a lot of information early on that we can review, which allows us to formulate a proper quotation, terms, conditions, pricing and design specific marine insurance programs for these projects.”

Early dialogue also flags up problems before they actually become problems. A client may suggest a ship without adequate lifting gear, but fail to appreciate that the port of discharge might not have the capacity to unload the cargo. The dialogue must not end at those kick-off meetings, though.

“We’ve had incidents where a certain vessel has been nomi-

nated for a lift and then our guys find out two weeks prior to that loading that a different vessel has been chosen which can’t accommodate the weight, or size, or whatever it may be, of the cargo,” Wolfe said. “They have to work through that whole process again to make sure that it is being carried in a safe manner on its way to the project site.

“A lot of early dialogue helps to eliminate some of those onsite discharge questions that will come up, but not all of them. So, there needs to be dialogue going on constantly, even during the lift, to make sure that project cargo moves are done safely, securely and properly.” BB Carly Fields has reported on the shipping industry for the past 18 years, covering bunkers and broking and much in between.

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www.breakbulk.com BREAKBULK MAGAZINE 19

REGIONAL REVIEW

POTENTIAL UNLOCKED Seaway, Great Lakes to Benefit From Auto-Mooring

I

n what is being hailed as the greatest positive development for St. Lawrence Seaway and Great Lakes shipping in more than a half-century, a soon-to-be-completed hands-free mooring program will open access to 10 times as many vessels while delivering impressive time, money and safety benefits.

From port executives and Seaway marketers to carrier operations managers and ship captains, enthusiasm abounds as the innovative program to ease passage through Seaway locks has been finished at all 14 Canadian installations and advances toward mid-2019 completion at the two remaining locks, both in the U.S. 20 BREAKBULK MAGAZINE www.breakbulk.com

BY PAUL SCOTT ABBOTT

The program, alternatively referred to as automooring and self-mooring, is the world’s first to deploy a hands-free solution at locks, thus eliminating the timeconsuming, labor-intensive and hazardous traditional method of transit.

At the same time, vessels going through the Seaway locks no longer will need to be equipped with special securement fittings. That means waterways that had been restricted to handling only the 800 or so Seaway-fitted ships in today’s fleet will see their accessibility unlocked to the approximately 8,000 vessels small enough to pass through the lock system.

ISSUE 2 / 2018

LEFT: A vessel transits hands-free-mooring-equipped Lock 7 along the Welland Canal on the

St. Lawrence Seaway.

ABOVE: Hands-free mooring units at St. Lawrence Seaway locks rely upon vacuum pads used

to secure ships during filling and emptying of chambers.

CREDIT: THE ST. LAWRENCE SEAWAY MANAGEMENT CORP.

‘HUGE OPPORTUNITY’ SEEN “It opens up a huge opportunity for us in terms of additional vessels that can enter the Seaway system,” Bruce Hodgson said. Hodgson is director of market development for The St. Lawrence Seaway Management Corp., the St. Catherines, Ontario-based not-forprofit Canadian entity that teams with the U.S.-based St. Lawrence Seaway Development Corp. in promoting St. Lawrence-Great Lakes passage under the Hwy H2O banner.

Whereas the vast majority of the more than 80,000 vessels in the current

world fleet remain too large for such passage, the number of ships able to go through the St. Lawrence Seaway and on through the Great Lakes will increase 10-fold with the automooring system in place.

“We know there is cargo moving via other gateways, but we don’t have enough capacity to service all that cargo,” Hodgson said. “Now, this gives us the capa- Bruce Hodgson bility to do so.”

The St. Lawrence And the Seaway Management Corp. benefits extend well beyond the ability to potentially accommodate 10 times as many ships, encompassing significantly reduced transit times, less demand for manual labor at locks, enhanced safety and concomitant cost savings.

Among leaders of Canadian and U.S. ports excited about the automooring program is Tim Heney, CEO of the Port of Thunder Bay, Ontario, situated on Lake Superior, about 2,300

miles inland from the mouth of the St. Lawrence.

“It’s probably the biggest technological leap since they built the Seaway system,” Heney said. The St. Lawrence Seaway opened nearly 60 years ago, in 1959.

Heney said he sees primary benefits including the elimination of safety concerns related to the use of cables no longer needing to be deployed, and the potential for lower operating costs and faster transits through the locks.

While Thunder Bay is the leading export port along the Seaway and Great Lakes, its import activity is minimal, according to Heney, who noted that just 15 of 400 ships calling at Thunder Bay in the past year handled imports of project cargo. He said he sees substantial opportunity, with auto-mooring in place, for wind turbines, power generators, oil-sands-destined pressure vessels and other oversized cargoes to come to his port from Europe and other places, to which Thunder Bay exports grains, potash and coal head.

“You have to run loaded in order to be competitive,” Heney said, pointing out the importance of vessels carrying cargo in each direction along the lengthy Seaway supply chain. “You can’t afford many empty miles.” www.breakbulk.com BREAKBULK MAGAZINE 21

Wind energy units and other project cargoes transiting the Port of Duluth-Superior are tabbed for growth with Seaway auto-mooring in place.

CREDIT: DULUTH SEAWAY PORT AUTHORITY

CREW LOVE NEW SYSTEM Niels Groen, captain of Wagenborg Shipping’s Taagborg, who has called the St. Lawrence Seaway and Great Lakes for decades, said the automooring system “saves manpower and is safer for the crews.

“Crew in general love the system,” Groen said. “It has made their lives easier and safer, and it also guarantees they have more rest periods when transiting the Lakes. “In the past, crews on ocean vessels would be called out in each lock, with some crewmembers being very tired indeed by the time the vessel was back in Montreal.

“Nowadays,” he said, “due to the fact that less crew is required to moor the ship, they can take longer and more effective rest periods. This can also help to reduce steering errors, as the same crews would have to take steering watches in the past.”

Groen, commenting that the handsfree mooring “has worked very nicely for most of our ships,” did offer one suggestion for improving the system.

“For future updates, it would be a good idea to increase the outreach of the mooring pads, so they can also catch smaller vessels and pull them across the lock chambers to their mooring positions,” he said.

22 BREAKBULK MAGAZINE

GAINS SEEN FAR-REACHING

About 200 miles farther inland than Thunder Bay, the Port of Duluth-Superior, the No. 1 total tonnage port on the Great Lakes and farthest inland port accessed by way of the St. Lawrence Seaway, is looking forward to handling additional project cargoes as well.

“Anything that widens the net of opportunity is a good thing, and that’s what the auto-mooring program does,” said Vanta E. Coda II, executive director of the Duluth Seaway Port Authority.

Historically a “natural resources port,” the twin Port of DuluthSuperior, respectively encompassing Minnesota and Wisconsin facilities, is a solid mover of mined, forested and agricultural products. Coda said he sees the current flow of some 35 million short tons a year being augmented by more breakbulk and project cargoes with the advent of hands-free mooring.

With greater vessel availability providing better pricing opportunities, Duluth-Superior becomes more competitive in reaching upper Midwest destinations with heavy-lift and breakbulk cargoes, Coda said, adding: “Typically, when we lose an

opportunity, we lose it to Houston.”

The auto-mooring also is creating a somewhat less tangible benefit, that of generating an overall buzz about Seaway-Great Lakes shipping, according to Coda. “The biggest handicap of the Seaway has been that people don’t readily recognize it as an option. The ability of building awareness is very important.”

Peter Hirthe, senior trade development representative at Port Milwaukee, Wisconsin, on Lake Michigan, Vanta E. Coda II said he believes Great Lakes Duluth Seaway Port ports may well Authority begin receiving calls from additional carriers following completion of the auto-mooring endeavor.

“Now, you’ve removed a barrier to entry,” Hirthe said, honing in on the elimination of the need for special Seaway fittings. “I think there’ll be an interesting period of time with more carriers testing the waters, ISSUE 2 / 2018

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including some Asian- and Indianbased carriers bringing themselves into the system.”

While declining to name names, Hirthe said he has had conversations with decision-makers of carriers “kicking the tires” on Hwy H2O who have balked when faced with the need to invest in Seaway-fitted ships, but who now may enter the market with removal of that significant “speed bump.”

“I just think you’re going to see more traffic,” Hirthe said. “It just opens up opportunity.”

OPERATORS ENCOURAGED

A wind mold is lifted off a Fednav bulk vessel at Port Milwaukee, which looks to see an increase in project cargo activity. / CREDIT: PORT MILWAUKEE

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Operations management at Fednav, the largest vessel operator on the Great Lakes, pointed to a number of advantages offered by the auto-mooring program.

Philippe Roderbourg, senior manager of Fednav’s operations department, said self-mooring devices

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ISSUE 2 / 2018

“have definitely been an advantage,” as handling of mooring wires prior to they have meant fewer Fednav crewhands-free implementation resulted in members must be engaged in the lock a wire breakage every 10 days on avertransit process. age, imperiling employees on the lock Colleague Ross Gordon, manager and on vessel decks. and Lakes coordinator Furthermore, for Fednav operations, Hodgson quanticited a trio of benefits: fied time savings TIME SAVINGS “Efficiency, saving associated with autoASSOCIATED WITH mooring could add time and resources, as AUTO-MOORING the maneuver is faster one extra voyage per than mooring manually COULD ADD ONE navigation season per with wires, with fewer vessel, with transit EXTRA VOYAGE crewmembers needed of the Welland Canal PER NAVIGATION for the procedure; alone achievable in 40 safety, with appreciable to 48 fewer minutes.

SEASON PER progress of personWhen the idea of VESSEL. nel safety both ashore auto-mooring was first and onboard, since explored more than incidents with moora decade ago, it was ing wires are prevented; and stability, viewed from the safety perspective, as vessels remain in position during the according to Hodgson, with recognition lockage.” of the further benefits coming later.

According to The St. Lawrence Cavotec teamed with Seaway manSeaway Management Corp.’s Hodgson, agement beginning in 2007 to develop

the hands-free solution, innovatively using vacuum pads to secure ships in position during filling and emptying of lock chambers.

By the end of 2017, all 14 of the hands-free installations in Canada, including three twin locks, had been completed, at a cost to Transport Canada of CAN$95 million (US$76 million), while the work at the two U.S. locks, both at Messina, New York, the responsibility of a unit of the U.S. Department of Transportation, is targeted to be done by the middle of 2019.

Captains and crews of vessels transiting the Seaway are eager to see the full extent of the program completed, but already are seeing benefits at the Canadian installations. BB A professional journalist for nearly 50 years, U.S.-based Paul Scott Abbott has focused on transportation topics since the late 1980s.

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www.breakbulk.com BREAKBULK MAGAZINE 25

ENERGY UPDATE

Greek Wind Energy Sector To Soar

RIDING THE THERMALS

BY ANDREW WILLIS

J

ust as Greek winds helped propel Jason and the Argonauts on their epic voyage to find the Golden Fleece thousands of years ago, today the same gusts are driving the southern European country’s wind energy industry.

Total installed capacity of wind power in Greece reached 2,500 megawatts in the fourth quarter of 2017, according to figures from the Hellenic Wind Energy Association. That compares with 850 megawatts a decade ago and less than 40 megawatts 20 years ago.

“The wind sector has evolved significantly over the past 10 to 15 years from a practically non-existent industry to a mature one,” Minas Kitsilis said, “and I’m confident the growth will continue.” Kitsilis is a senior associate with Norton Rose Fulbright, a legal firm that has advised banks providing funding to wind projects in Greece.

A number of factors appear to be driving the sector’s impressive growth, including ambitious national

Minas Kitsilis, Norton Rose Fulbright

26 BREAKBULK MAGAZINE www.breakbulk.com

and European Union targets to reduce carbon dioxide emissions and increase the amount of electricity being generated from renewable sources.

Greece’s improved macroeconomic situation is also spurring wind investments. The country suffered a severe crisis following revelations in 2009 that government debt and deficit levels has been underreported, sparking a loss of confidence and higher borrowing costs for the government that proved unsustainable. The country was forced to receive bailout loans in 2010, 2012 and 2015 from the International Monetary Fund, the Eurogroup and the European Central Bank, provided on condition that Greece correct structural weaknesses in its economy.

The resulting reforms included government spending cuts and tax increases, leading to a loss of income and worse living conditions for many Greeks that sparked occasional riots and nationwide protests. After years of recession, the economy finally returned to growth in 2017, and is forecast to keep growing this year, spurring the construction of new wind parks as energy consumption increases.

The projects are proving to be a fillip to breakbulk shippers transporting turbines and other machinery from manufacturers in countries including Denmark, Germany and Spain.

“There are no wind turbines being manufactured in Greece, so they’re all imported,” Kitsilis said.

“Another 500 wind turbines will need to be shipped into Greece during the next couple of years. This has resulted in a new market evolving alongside the wind industry itself.”

KEY PLAYERS

Companies with operating wind parks across Greece include the renewable subsidiaries of two major construction groups – Terna Energy of GEK Terna Group and Eltech Anemos of Ellactor Group. The list of key players also includes renewable subsidiaries of three major European utilities: EDF EN Hellas, Iberdrola Renovables and Enel Green Power.

Last year, Enel Green Power started construction of the Kafireas wind power complex located on the southern part of Evia island, close to Athens and a popular destination for Greek holidaymakers. Once completed, the new facility will have a total installed capacity of 154 megawatts and will be the country’s largest wind farm.

Kafireas is expected to enter into operation in the first quarter of 2019 and will feature a high voltage interconnection line to the mainland comprising overhead, submarine and underground cables. The complex will generate enough energy to supply about 129,000 Greek households, while avoiding the emission of nearly 433,000 tons of CO2 each year, the company says.

Amid all the optimism and recent growth however, it’s worth remembering that Greece still remains a small player in the wind energy sector, far behind many other jurisdictions.

ISSUE 2 / 2018

THE WIND SECTOR HAS EVOLVED SIGNIFICANTLY OVER THE PAST 10 TO 15 YEARS FROM A PRACTICALLY NON-EXISTENT INDUSTRY TO A MATURE ONE.” – Minas Kitsilis, Norton Rose Fulbright

CREDIT: SHUTTERSTOCK

www.breakbulk.com BREAKBULK MAGAZINE 27

ENERGY UPDATE

Enel Green Power, for example, develops and operates renewable energy projects across the globe, with a presence in Europe, the Americas, Asia, Africa and Oceania.

Its installed wind capacity is about 3 gigawatts in the U.S., 2 gigawatts in Spain and 1 gigawatt in Italy, the company says. In comparison, it manages a mere 200 megawatts of wind power in Greece.

COAL DEPENDENCE

The existence of coal deposits in Greece has contributed to the relative underdevelopment of its wind industry. The country remains heavily reliant on coal for much of its electricity production, and still has an active coal mining industry and vocal lobby supporting the fossil fuel.

The country’s location on the periphery of Europe, where it is less well connected to supranational grids, is also seen as a hurdle.

Another is its fragmented and mountainous topography, with thousands of islands scattered in the Ionian and Aegean seas, making it harder to construct wind farms and distribute the electricity.

Ironically, it is these mountains and long coastline that provide Greece with its large wind energy potential. As well as the transportation of wind turbines, projects to improve the connections between mainland Greece and its many islands proffers to be another boon

for companies transporting and installing undersea cables and other equipment in the coming years, according to the Hellenic Wind Energy Association, or HWEA. “Greece is at the edge of Europe, so we face some technical challenges,” said Panagiotis Papastamatiou, CEO of HWEA, which is the main body representing Greece’s wind industry. “The infrastructure we need to meet renewable targets is also driving investments.”

One innovative project Panagiotis that involved Papastamatiou significant infrastructure HWEA hurdles was the development of a wind farm on Greece’s St. George Island, located in the sea area south of Cape Sounio.

The project, developed by Terna Energy with a capacity of 73.2 megawatts, incorporates a submarine connection between the uninhabited island and the continental system.

The project is described by its developers as the first onshore wind park with characteristics of an offshore wind park, using the island’s location to exploit the high wind potential of the Aegean Sea.

FLEXIBILITY TO CAPITALIZE ON GROWTH Coli Schiffahrt & Transport is one breakbulk specialist that has experience transporting equipment to Greece’s wind energy industry, including machine heads, blades and towers from manufacturers in Germany.

Shipping wind turbines requires a high degree of precision, coordination and special equipment, including onboard cranes and port facilities. Greece’s ports are up to the task however, and Coli has not experienced problems offloading breakbulk goods for clients there.

And while the southern European country’s wind industry remains small, there’s “no doubt” that its continued growth will benefit shippers including Coli which counts several major wind producers among its clients, said Alain Akavi, director of the company’s Bremen office.

Flexibility and alertness to changes in the industry will be key to the success of shippers. Traditional transit routes from wind turbineproducing countries in northern Europe to Greece may gradually change as new players enter the market, opening new routes for breakbulk transporters.

For example, LM Wind Power, a subsidiary of GE Renewable Energy, announced the start of production at its wind turbine blade factory in Turkey last year where it has about 450 technical employees.

“Turkey now has a big production of windmill blades,” Akavi said. “Being a neighboring country of Greece, this makes the transit time very short and potentially cost effective.”

Eltech Anemos Wind farm at Gropes-Raxi Gkioni, Greece, with a capacity of 18.9 megawatts. / CREDIT: ELTECH ANEMOS 28 BREAKBULK MAGAZINE www.breakbulk.com

CREDIT: SHUTTERSTOCK

ISSUE 2 / 2018

HEAVY LIFT LEADERS.

ENERGY UPDATE

LEFT: Enel Green Power’s 6.4-megawatt

wind farm Monastiri I.

RIGHT: Enel Green Power’s 6-megawatt wind

farm Martino. Enel Green Power is present in Greece with 308 megawatts of installed wind capacity, solar and hydro power.

CREDIT: ENEL GREEN POWER

The wind park constructed on the island is an autonomous electricity production unit, connected to the National Transmission System via a new substation that was also constructed on St. George Island and located near the wind generators. The wind farm will

supply energy to the National Transmission System via the submarine cable connection ending at the Mikro Lavrio substation.

Not every windy island is suitable for the development of wind parks however. In the case of the uninhabited

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St. George Island, the first project of its kind in Greece, a small harbor had to be built to receive the wind turbines. Other locations are so remote that developments there may remain unviable for years to come.

“The economics of the project supported the installation of a harbor and other infrastructure to transport the turbines,” Papastamatiou said of the wind park on St. George Island. “The morphology of Greece, its many islands, creates some constraints. Each project needs to be examined case by case.”

wealth of data to track trends in the cost, performance, and growth of wind energy. It concluded that wind energy will continue to be one of the lowest cost electricity generation technologies available as turbines become cheaper, bigger and better.

“As long as wind energy offers good returns and security of income, I think that new money will continue

to come into the sector,” Papastamatiou said. “The potential is there for Greece to be the next success story in Europe.” BB Andrew Willis has worked as a journalist for more than a decade in countries including Argentina, Belgium and Colombia.

BRIGHT SPOTS REMAIN

Perhaps unexpectedly, much of Greece’s growth in installed wind capacity over the past decade happened right in the middle of the worst turmoil, as investors looked for safe havens to put their money.

“THE MORPHOLOGY OF GREECE, ITS MANY ISLANDS, CREATES SOME CONSTRAINTS. EACH PROJECT NEEDS TO BE EXAMINED CASE

BY CASE.” – Panagiotis Papastamatiou, HWEA

“The data shows that during the crisis years, renewables as a whole attracted significant amounts of investments,” HWEA’s Papastamatiou said. “It was considered a safe investment. Energy is a product with low elasticity.”

Now he’s confident that Greece’s return to growth and the considerable untapped potential along the Aegean Sea mean growth in installed wind capacity is ready to grow further. The ever-lower costs of producing wind energy are also an important factor driving the industry.

A U.S. Department of Energy report last year pulled together a www.breakbulk.com BREAKBULK MAGAZINE 31

REGULATION

PAYING THE PRICE

BY THOMAS TIMLEN

Heavy Hand of Anti-bribery Laws

32 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2018

L

ast year ended with the surprising news that Keppel Offshore & Marine Ltd. and its wholly owned U.S. subsidiary, Keppel Offshore & Marine USA Inc., had agreed to pay a combined total penalty of more than US$422 million to resolve charges with authorities in the U.S., Brazil and Singapore arising out of a decade-long scheme to pay millions of dollars in bribes to officials in Brazil.

The penalty resulted from Keppel’s violations of the U.S. Foreign Corrupt Practices Act, or FCPA, anti-bribery provisions and similar provisions of Brazilian and Singaporean law.

This case and others coming to light prove that today’s anti-bribery laws are unflinching in their pursuit and conviction of those that pay bribes and facilitation payments to get project cargoes moving. Like Keppel, shippers, carriers and forwarders in the project cargo transportation sector can also be exposed to anti-bribery laws in multiple jurisdictions during the scope of a single move.

EVERYONE HERE KNOWS

While some project cargo companies might have taken the threat on board, many more have yet to codify their anti-bribery policies. The message to all staff needs to be unequivocal: high ethical standards must be upheld and there is zero tolerance regarding any illegal activities, including involvement with bribery of any kind. In other words, if an employee is caught offering or receiving a bribe, they should expect to be fired.

A spokesperson for logistics specialist A2M Global told Breakbulk that intermediate staff act as the gatekeepers holding “dishonest” people at bay.

A2M prompts employees to remain cautious when new leads arise and that due diligence must be undertaken. Although specific anti-bribery training and whistle-blower policies are not in place, the company said it relies on staff being aware of current market “habits” in commercial situations, with intensified scrutiny being applied on a caseby-case basis depending upon the specific owner, charterer and circumstances involved.

A key measure that A2M Global has implemented to ensure that employees fully appreciate the consequences relating to bribery is the inclusion of related terms in staff employment contracts, where one condition of employment is to agree to refrain from all questionable practices, in particular, accepting monetary gifts.

NATIONAL LAWS

Although it did not play a role in the Keppel enforcement actions, the UK Bribery Act is one of numerous national laws with far-reaching impact. It joins hard-hitting anti-bribery laws in the U.S., Brazil and Singapore, as well as a similar law that is now being enforced by China.

David Zhou Yi, a senior partner at Co-Effort Law Firm LLP in Shanghai, explains that China has been vigorously improving its legislation with respect to anti-corruption David Zhou Yi and anti-bribery activities Co-Effort Law Firm LLP in order to regulate and enhance corporate governance and compliance, both internally and externally.

“In some industries involving big-ticket transactions such as construction, banking and transportation, particularly for project and heavy-lift cargo, anti-corruption, anti-bribery and anti-monopoly issues are kept in focus and fought against by both market players and law enforcement authorities alike,” Zhou said.

“For example, the Anti-unfair-competition Law of the People’s Republic of China, or PRC, specifically includes clauses tackling bribery in business, which could result in confiscation of illegal incomes, penalties, revocation of business licenses up to criminal liabilities. The State Administration for Industry and Commerce of the PRC has promulgated the rules prohibiting commercial bribery, which provisions are generally referenced and quoted in judicial practice. Shipping is an

Workers build an offshore platform for Keppel Corp. on Bintan Island, Indonesia in this 2014 file photo. Keppel has since agreed to pay a penalty of US$422 million to resolve charges with authorities in the U.S., Brazil and Singapore arising out of a scheme to pay millions of dollars in bribes to officials in Brazil.

CREDIT: YULI SEPERI/ZUMA PRESS/NEWSCOM

www.breakbulk.com BREAKBULK MAGAZINE 33

A worker cuts steel for an offshore platform for Keppel Corp. on Bintan Island, Indonesia.

CREDIT: YULI SEPERI/ZUMA PRESS/NEWSCOM

international business that may be governed by the laws of multiple jurisdictions. Therefore companies in this industry should be aware of the legislation, not only in the port of loading, but also at the places of transshipment, destination and more.”

Complacency is not an option, as Zhou pointed out: “As we know, the U.S. has the FCPA, the UK enacted the Anti-bribery Act, and there are additional countries and regions having their own rules and regulations regarding anti-corruption and anti-bribery issues. We suggest that operators engaged in cross-border business be more serious on these topics, train the staff from time to time, and set up an effective compliance mechanism imperatively.”

CONTRACTUAL PROTECTIONS

For the heavy-lift and project cargo transport sector, an effective compliance mechanism could include use of the BIMCO Anti-Corruption Clause in contracts of carriage such as Heavycon 2007, Heavyliftvoy, Projectcon, Supplytime, Windtime and Bargehire.

“I can’t see any reason not to include the clause in any particular charter, including the standard forms mentioned,” HFW Partner Daniel Martin explained. “The clause is intended to cover both time and voyage charters, and to set out some general principles which should be applicable across all charters.”

From Martin’s experience, trade has Daniel Martin embraced use HFW of the BIMCO clause as an effective preventative measure. “I tend to see the clause, or equivalents, in most charters which come across my desk. To that extent I think the clause has been well received.” That said, he conceded that there are the usual issues about whether it is too owner- or charterer-friendly.

The clause was published in 2015, but still remains relevent as stakeholders

34 BREAKBULK MAGAZINE www.breakbulk.com

REDUCING RISK OF BRIBERY HFW Partner Daniel Martin lists ways to reduce bribery in the project cargo sector: • Advance knowledge through, for example, due diligence or informationsharing about ports or other locations where there is a heightened risk of bribery.

• A clear corporate approach, for example, zero tolerance to bribery that is communicated to all workers in a way which they can communicate to anyone who requests a bribe, so that it is clear that there is no prospect of a bribe being paid. Some owners have notices of their corporate policy translated into the appropriate language and placed on assets and equipment.

• A consistent zero tolerance approach by multiple market participants. This way no one is being pushed back in the queue purely because they refuse to pay bribes.

• Due diligence on agents (and others) who may pay bribes on their principal’s behalf. Contracts with agents should include anti-bribery language.

ISSUE 2 / 2018

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REGULATION

A robot cuts steel for an offshore platform for Keppel Corporation on Bintan Island, Indonesia.

CREDIT: YULI SEPERI/ZUMA PRESS/NEWSCOM

can tailor the clause with their own wording to fit their particular niche.

K. Murali Pany, managing partner at Joseph Tan Jude Benny LLP, noted that the BIMCO clause provides clarity, certainty and aligns the interests of the owners and charterers to take a stand against corruption.

“There is a clear contractual remedy for the consequences of bribery and corruption,” Pany said. “In short, the clause allows the innocent party 36 BREAKBULK MAGAZINE www.breakbulk.com

to terminate the charterparty without any liability and without prejudice to its other rights if a breach of the clause causes the innocent party to also be in breach. Further, whichever party fails to comply with any anti-corruption legislation, that party shall defend and indemnify the other party against any fine, loss, damage and cost including court and legal costs to the other party arising from the breach.”

The clause also allocates the risk

and cost of compliance, he added. So if any official, contractor, sub-contractor, or person not employed by the owner or charterer demands payment, goods or anything of value from the master or the owner, the master or the owner must take reasonable steps to resist the demand.

“If despite reasonable steps, the demand persists, the master or the owner may issue a letter of protest to the charterers,” Pany said. “Once the letter is issued, any delay to the vessel is deemed to be the result of resisting the demand and; a) the vessel remains on hire or; b) any time lost shall count as laytime or if vessel is on demurrage, count as time on demurrage.”

With a widespread policy approach K. Murali Pany at a national and international level Joseph Tan Jude Benny LLP against bribery and corruption, many international and multinational company contracts already incorporate anti-bribery and corruption provisions. For project cargo shippers, this should be seem as part of prudent risk management, especially if the project is taking place in a region where there are bribery and corruption risks.

However, project cargo movers should not rely solely upon protections found in contracts. Perhaps the time has come for a more robust implementation of anti-bribery policy among all stakeholders, large and small, as Keppel has learned the hard way. BB Thomas Timlen is a Singapore-based freelance researcher, writer and spokesperson with 28 years of experience addressing the regulatory and operational issues that impact all sectors of the maritime industry.

ISSUE 2 / 2018

VISIT US AT STAND 732

STEELING THE SHOW www.fednav.com

PORT FOCUS

BY CARLY FIELDS

Healing The Wounds Middle East Volumes On The Mend

I

n a region beset with political rifts and civil wars, and suffering from an unhealthy dependence on oil price revenue, ports and terminals in the Middle East have risen above the tribulations.

The recovery has been spurred by improvements in project and breakbulk cargo volumes in line with better oil and gas prospects, as countries in the region take advantage of oil price improvements. Plus, post-war rebuilding and more immediate humanitarian roles aiding those still locked in conflict have given further impetus to cargo growth.

Breakbulk and project cargo has been the Port of Duqm’s core business since its inception in 2012, primarily driven by oil and gas-related movements. Duqm claims to be the only port 38 BREAKBULK MAGAZINE www.breakbulk.com

in Oman that can handle the largest of the project cargoes, putting it in a “good position,” according to Erwin Mortelmans, commercial director.

However, the mega-cargo sector makes up only a small percentage of project cargo business handled at Duqm, which includes project cargoes for BP’s Khazzan gas field project in Oman, a mega power plant, and a plastics project. “These projects have Erwin Mortelmans secured us a large Port of Duqm share of movements over the past year,” Mortelmans said. There are projects supplying cargo in the Duqm area as well, with a petrochemical facility under construction.

Duqm has also been successful in attracting structural cargoes, including oil country tubular goods, or OCTG pipes, used for oil and gas exploration. “This is a very large market in Oman with more than 200,000 tons of pipes imported per year,” Mortelmans said. “These structural cargoes will increase our handling this year, from the 500,000 tons handled in 2017.”

Further, Duqm refinery is expected to reach financial close by the end of the first quarter and Mortelmans expects to see cargoes related to that project moving through the port by the end of the year.

Capacity-wise, Mortelmans said the port still has ample room to grow.

It will have access to a 2.2-kilometer quay in the first phase; currently, 1.2 kilometers is operational, the remaining part is being finalized by a contractor. The full quay is expected to be completed by the end of 2019.

Duqm will then be the single operator ISSUE 2 / 2018

CREDIT: PORT OF DUQM

CREDIT: PORT OF DUQM

of five cargo streams: multipurpose; roll-on, roll-off; containers; naval; and dry bulk. The port utilizes two 120-ton mobile harbor cranes, which is “largely sufficient” for breakbulk and container business, with gear on ships used for larger cargoes.

Port of Duqm is managed by Port of Duqm Co. SAOC, a 50:50 split between the Omani government and a Port of Antwerp consortium. Under an agreement signed with the Omani government in April 2011, the joint venture was granted a 28-year concession to co-invest, operate, manage and market the Port of Duqm.

SALALAH’S GROWTH MARKETS

At Oman’s other project cargo and breakbulk hub, Salalah, handling projections for this year are also on an upward trajectory. General cargo through the port was 14 million tons in 2017 and is expected to rise 5 percent

to 10 percent this year. The projected increase has prompted plans to expand the cargo terminal, bringing two mobile ship loaders into service that will double productivity and effectively increase capacity.

For breakbulk, cargoes through East Africa and India are fastemerging growth markets. Ahmed Suhail Qatan, COO of the port’s General Cargo Terminal, added that the stable political and social situation in Oman has encouraged investment and prompted an increase in overall cargo demand.

Specifically for project cargo, Qatan believes that Salalah has the right experience to receive the pipes and equipment necessary for the Petroleum Development of Oman facilities under construction near Oman and for the planned Salalah LNG ammonia and power plant.

Additionally, the port takes its responsibility as a gateway to wartorn Yemen seriously. “We are close to Yemen and are involved in the humanitarian effort there,” Qatan told Breakbulk. “Food is moving through Dubai and Salalah and we are trying to support as much as possible, not as a business opportunity. We see it as our responsibility to assist.”

SUPPORTING IRAQ’S REBUILD

Another terminal in the region is supporting a war-related infrastructure rebuild as well as the growth being seen throughout the Middle East.

In Iraq, Basra Gateway Terminal, or BGT, part of the global International Container Terminal Services Inc. terminal operating group, signed a contract with the General Company for Ports in 2014 to operate, develop and expand the container-handling facilities at the Port of Umm Qasr. The concession included rehabilitation and operation of the port’s existing facility at Berth 20 and construction of three new berths at Berth 25, 26 and 27. In 2017, BGT was extended operation of Berth 19 and 21 for general cargo and ro-ro cargo, respectively, giving BGT a platform to launch itself in the project cargo sector for oil and gas sector business.

Marko Miskovic, BGT oil and gas project development executive, said the terminal is the only one working 24/7 in Iraq and the best equipped to handle oil and gas related cargoes. He added that prospects for cargo from that sector look promising: “Iraq’s oil production is nearing 4.3 million barrels per day, www.breakbulk.com BREAKBULK MAGAZINE 39

PORT FOCUS

and it is looking to more than double production by 2020. There is reconstruction related cargo as well.”

Iraq’s 2017 budget assumed an oil price of US$42 per barrel. With West Texas Intermediate trading at US$58 per barrel in mid-February, Iraq now has more margin to pay off debts and fund new projects. Consequently, “forwarders are telling us that there’s large project cargo on the way,” Miskovic said. “New tenders are already coming out now in the oil and gas sector.”

Phillip Marsham, CEO of BGT, added that BGT is halfway through a US$250 million investment in terminal infrastructure and is fully committed to further assist Umm Qasr to develop the port to even higher international standards.

“Although already a market leader in the container business, BGT is now expanding in project and roll-on, rolloff cargo,” Marsham said, “In the last four months we have noticed a big increase in such cargoes.”

There is space to expand further if volumes demand it. “Phase 1 of development covered 800 meters of quay and the development of a further 400 meters is about to start. We have 50 hectares of yard available presently and we are commencing development of an additional 15 hectares. If we need space in the coming years, we can develop further as we are not constrained by space,” Marsham said.

BGT is responsible for six berths at the port: Berths 19, 20, 21 and 27, all operational with 200-meter berths; and under-construction Berths 25 and 26, also with 200-meter berths.

CREDIT: BASRA GATEWAY TERMINAL

SAUDI’S POPULATION PROMISE

Farther south in the Gulf, King Abdullah Port, on the Red Sea, is part of King Abdullah Economic City and one of the world’s top 100 ports by throughput. At full build-out, the privately owned port will have ro-ro capacity to handle 1.5 million vehicles annually. The port’s first phase of general cargo terminals, to be operated

by AMSteel, is expected to open in the second quarter of 2018.

Breakbulk volumes in Saudi Arabia are being driven by a large and young growing population, competitive energy prices and a strategic location, according to Rayan Qutub, CEO of King Abdullah Port. Cargo growth will be further boosted by Saudi Arabia’s ambitious Vision 2030 project and the Kingdom’s move to diversify its exports to reduce dependency on oil in the future.

Breakbulk handling operations at Saudi Arabia’s King Abdullah Port’s stand at almost 20 million tonnes, made up of general cargo at 46 percent, steel at 39 percent, cement at 8 percent and timber at 7 percent.

But more is to come, with Qutub expecting a “hyperInternational Container Terminal Services Inc. formally growth situation” through to opens the first phase of its greenfield terminal 2020 with predicted growth development at Basra Gateway Terminal in the North of 15 percent in breakbulk Port, Umm Qasr, Iraq, in October 2016. / CREDIT: ICTSI 40 BREAKBULK MAGAZINE www.breakbulk.com

volumes, spurred by the unlocking of certain sectors, such as steel, which is expected to grow from 8 million tonnes to 11 million tonnes by 2020.

By 2020, King Abdullah Ports expects to be handling 29.5 million tonnes of breakbulk, up from 19.6 million tonnes in 2017. “King Abdullah Port is already ‘walking the walk,’ ” Qutub said.

King Abdullah Port is the first private port in Saudi Arabia and is owned

by Ports Development Co., a joint venture between Emaar Economic City and Bin Laden Group. A total of US$2.7 billion has already been invested in the port by the private sector. Total investment is expected to be US$5 billion.

King Abdullah Port signed an agreement with AMSteel, a company specialized in operating ports and handling steel shipments, in October 2017, appointing AMSteel as operator of the port’s first bulk and general cargo terminal berth for a period of 25 years.

The agreement not only marks the start of a new chapter in breakbulk handling in the kingdom, it also reflects the renewed optimism evident in the Middle East as a whole when it comes to improved project cargo and breakbulk prospects. BB Carly Fields has reported on the shipping industry for the past 18 years, covering bunkers and broking and much in between.

ISSUE 2 / 2018

Logistics UnLimited Innovative solutions for your project logistics demand.

Creating chains of trust.

CASE STUDY

Direct Dealings Up-front Input Elevates MEG Project

BY LORI MUSSER

I

t’s a rare day when a global engineering, procurement and constructing company, or EPC, manages a massive project cargo move halfway around the world without a freight forwarder in sight, but Samsung Engineering did just that.

And although forwarders are typically irreplaceable in project logistics, in this case an EPC-carrier’s direct relationship allowed end-design tweaks and engineered transport solutions that cut lead time and elevated the supply chain experience.

The Samsung Engineering project featured monoethylene glycol, or MEG, modules fabricated by Hanjin Engineering in Seoul, Korea, as well as other MEG plant components totaling 120,000 freight tons.

The cargo moved on 10 consecutive Rickmers-Line voyages in 2017 from Seoul to Lake Charles, Louisiana, destined for Lotte Chemical’s US$1.1 billion MEG plant.

At the Port of Lake Charles, the Rickmers vessels were met by barges for a short move upstream, then offloaded on the bayou at a provisional company jetty and hauled to the adjacent plant site. Heavy-lift and transport specialist Fagioli Inc. managed the barge and truck movements. Global logistics provider FNS Inc. provided import customs brokerage and associated services.

SUPPLY CHAIN CHOICES

Samsung Engineering’s tender process for ocean carriage for the Lotte LA MEG project began in 2015.

Rickmers-Line was contacted mid-2015 to gauge its interest in participating in the pre-tender qualification. The carrier quickly recognized a strong match, submitted documentation, and was invited to participate in the tender. Following a string of meetings in Korea and the U.S., a contract for the over-dimensional cargo, logistics and heavy-lift was awarded at the end of 2016. In mid-2017, RickmersLine was also awarded the contract for the module transport.

Rickmers-Line had capacity, capability and services in place from the start. “Our Rickmers-Line liner service concept was a great advantage for Samsung Engineering, as we were able to offer regular sailings with our Asia to U.S. Service (part of Rickmers Line Round-the-World East Bound Pearl String Service). Schedule reliability was paramount to the client, and we were able to deliver all cargoes on time to Lake Charles within the required lay-cans with no delays,” said Benjamin Joithe, director of global sales and marketing from Rickmers-Line.

Suranjoy Das, who at the time was the Samsung Engineering project head for the Lotte LA MEG project, added: “The deal makers in this case were the value of the cargo, the cost of transport, and the business line that Rickmers-Line was in – their trade lane. My purpose was to ship these modules from South Korea to the U.S., and their trade lane covered exactly that. That kept costs down.”

Das recognized that EPCs don’t usually work directly with their carriers, but that very factor turned out to be exactly what was needed to work around pre-existing project execution limitations. For example, together, the carrier and the EPC identified potential lifting issues related to the modules. Das went back and was able to incorporate minor module design

changes that eliminated the problem.

Similarly, a lifting frame was needed for the modules, but it had to be designed and fabricated from scratch.

Working with Rickmers-Line’s vessel specifications, and a mutual goal of safe and effective handling, a solution was engineered.

Although the EPC considered other carriers, Rickmers-Line’s engineering strength helped secure the business. Samsung’s modules were in end-design. Some other carriers were out because they did not have the right vessels for the cargo, could not optimize stowage, or could not offer engineering solutions.

Rickmers-Line assembled a global team for the Samsung project. The team put communications first and foremost, internally addressed questions as they arose, and provided tailor-made solutions. They did their homework, with the cargo transport engineers producing method statements, 3D simulations and assisting in preparation of the spreader for loading of the modules.

“Rickmers-Line’s 30,000-deadweight-tonnes Hamburg Class liner vessels with combined gear capacity of 640 tonnes, flexible ’tween decks and large deck space turned out to be a great fit for the MEG project cargoes,” Joithe said.

Monoethylene glycol module frame drawing with bespoke lifting frame.

CREDIT: RICKMERS-LINE

OPPOSITE: A monoethylene glycol module fabricated by Hanjin Engineering is lifted with the aid of a specially fabricated lifting frame. Samsung

Engineering worked directly with Rickmers-Line to create tailor-made solutions to the move’s challenges. / 42 BREAKBULK MAGAZINE www.breakbulk.com

CREDIT: SAMSUNG ENGINEERING

ISSUE 2 / 2018

CASE STUDY

The move’s last mile.

CREDIT: FAGIOLI INC.

IMPROVING PROJECT EXECUTION

Samsung Engineering’s successful MEG project design and logistics generated interest on a number of levels.

The EPC worked directly with the carrier, which is unusual. It conferred with Rickmers-Line engineers before module end-design, and was able to take the MEG module design back for minor modifications to optimize transport, epitomizing an emerging best practice among global project managers. And it created a tailormade module lifting frame. Samsung Engineering was thereby able to reduce its project lead time and transportation bill through cutting-edge, collaborative and clever engineering, according to Das. Das recalled that, at the time, Samsung was looking for ways to improve their project execution, and he was called in as a U.S. project cargo engineering and logistics expert, with lengthy experience with several EPCs. “I looked into issues involving project execution and at expertise available in-house. I looked for costeffective solutions,” Das said. To minimize risk, cut costs, eliminate a layer of communication (and possible miscommunication) and go straight to the decision maker, he determined this project needed a more hands-on approach than usual, and he reached out to ocean carriers and transportation vendors directly.

Das was familiar with numerous 44 BREAKBULK MAGAZINE www.breakbulk.com

project cargo carriers, but said, “The project transport was not easy to shop.”

Das had dealt with Rickmers-Line for a decade and a half. He said: “I knew them, have friends there, knew what the carrier could do and couldn’t do.” That comfort and knowledge base underpinned negotiations and eventually led to a “win-win solution.” Das placed a lot of value on the fact that Rickmers-Line was “very responsive and cooperative” during negotiations, which telegraphed their responsiveness and communications style for the entire project.

TRICKY LAST MILE

Francesco Mazzei is project manager with global heavy-lift and heavy transport company Fagioli Inc. He saw Samsung Engineering’s different approach as a better way of approaching the move in this case.

Fagioli’s “last mile” role in this massive project was substantial, and Mazzei said exceptional communication and diligence geared it for success. Bolstered by “great quantities of engineering work,” Fagioli was able to optimize transportation, staging and securing. The company was in constant communication with the U.S. Coast Guard, port and pilots. The barges were prepared in advance for the stowage and lashing, and brought alongside at the Port of Lake Charles’ dock. Stevedores transferred the components to barge – using the bespoke lifting frame to transfer the MEG

modules – and Fagioli’s personnel lashed and secured the cargo.

“The main challenge was the modules [which weighed up to 400 tons], but with proper planning and communication, the operation went quickly.” Mazzei said. The cargo was delivered to the client’s jetty, over an undredged Louisiana bayou that customized surveys confirmed would allow, in places, a mere one- to two-foot margin of safety on a nine-foot loaded barge draft.

Another challenge was provided by the channel itself. “To move from the Calcasieu Channel to the small bayou required a 90 degree turn. We had to maintain a certain draft to prevent dragging and had to keep distance between the barge and a pipeline that ran alongside the bayou,” Mazzei said.

Once the barges docked, Fagioli used SCHEUERLE’s self-propelled modular transporters for offloading and inland transport of the modules. It was a short move – less than 1,000 feet – complicated by an ‘S’ curve in the road after exiting the dock.

“For the biggest modules we used up to 36 axles,” Mazzei said. That required the combined expertise of some of Fagioli’s most seasoned operators, supervisors and spotters.

Though challenging, the MEG project shipments went very well, according to all the transportation players. “We looked at every possible scenario, evaluated them, and did things the right way,” Das said. But there is always room for improvement from, for example, providing more information to the carriers early on, spending less time on the contract, even better communications, and optimizing carrier lifting capacity.

In the end, however, Samsung Engineering’s unique approach to defining and executing this project radically cut costs, minimized risks, pleased the client and may well spark new supply chain scenario and strategy debate. BB Based in the U.S., Lori Musser is a veteran shipping industry writer.

ISSUE 2 / 2018

Experience the progress.

maritime.cranes@liebherr.com facebook.com/LiebherrMaritime www.liebherr.com

REGIONAL REVIEW

Zimbabwean President Emmerson Mnangagwa at the World Economic Forum in Davos, Switzerland, in January 2018.

CREDIT: WEF/SIKARIN THANACHAIARY/NEWSCOM

Zimbabwe’s Revival New President Supports Economic Drive

W

ithin weeks of becoming President of Zimbabwe, Emmerson Mnangagwa made it clear that he is the man that will drive the revival of the country’s economy.

“My government is committed to open Zimbabwe up to investment by building a free and transparent economy which benefits Zimbabweans and is welcoming to outsiders,” he said.

Mnangagwa no doubt realizes how difficult this task will be. And to maintain the level of optimism that followed the ousting of Robert Mugabe – who was responsible for introducing the land reforms that ultimately led to the 46 BREAKBULK MAGAZINE www.breakbulk.com

BY KERRY DIMMER

collapse of the once fertile land, its economy and currency – he will need to prove progress on his statement – and quickly – which is why he has to hit the ground running.

In that context, Mnangagwa has given assurances that foreign investment will be safe in Zimbabwe, and will be introducing reforms to facilitate this.

However, it’s a hard journey, with almost four Mugabe decades of country mismanagement haunting him, inclusive of corruption, some US$1.8 billion debt to multilateral lenders like the World Bank alone, 85 percent unemployment, hyperinflation, to name a few concerns. But at least he has opened the door.

INVESTMENT WITH RISKS

So, is now the time to invest in projects in Zimbabwe? The answer lies in an individual investor’s appetite for risk, said William Attwell, practice leader, sub-Saharan Africa at Frontier Strategy Group.

“For those that have operated in the sub-Saharan region’s riskier markets for years and are willing to continue along that path, then yes, this is a great time because assets are relatively cheap and because such risk-takers can benefit from firstmover advantages, particularly if they are seeking to sell to under-served customer segments.”

ISSUE 2 / 2018

THIS PAGE: The inauguration of Zimbabwean President Emmerson Mnangagwa at the National Sport Stadium in Harare on November 24, 2017.

CREDIT: BELAL KHALED/NURPHOTO/SIPA USA/NEWSCOM

But, Attwell warned, those seeking to invest must do their homework.

“Companies can certainly capture the opportunities in Zimbabwe if they base their market entry or expansion plans on realistic assessments of the scale and nature of demand from the target segments, while taking care to identify and build relationships with the right local partners,” he said.

“While it is advisable to stay clear of sectors where political interests are involved, having a strong government relations function is nevertheless important for success, so you have a good idea of new opportunities that are opening up.”

Moreover, he added, that Mnangagwa is very eager to attract foreign investment, meaning there is scope for proactive companies to influence the policy agenda by engaging with government, something that would further enhance the opportunity landscape.

That landscape will include sectors like agriculture, manufacturing, consumer goods and retail, technology and infrastructure.

Availing itself is South Africa’s Guma Group, having signaled its intention to invest some US$1.2 billion in information technology and infrastructure, the impact of which Attwell said is “enough to move the investment dial into positive territory, proving as well that the appetite is certainly there.”

REFORMS STILL NEEDED

Attracting investment on a larger scale is, however, going to require extensive reforms to reduce the risks international companies face, and improve the operating environment while also addressing systemic difficulties, such as the liquidity crisis, all of which hinders business transactions. This translates into larger projects, particularly infrastructure, remaining on hold for the time being, except of course for those longtime-awarded commissions being undertaken by the Chinese, such as the Kariba South Power expansion.

It’s a positive though that in comparison to the rest of the region, Zimbabwe’s logistics environment is relatively developed featuring an extensive highway network, as well as rail and air links.

“The capacity is there,” Attwell confirmed, “though the overriding challenge has been that without adequate funds, maintenance has been poor, leaving much of it to decay.

“According to World Bank estimates, 80 percent of Zimbabwe’s road networks – which include critical arteries linking Harare and other major towns and cities to ports such as Beira in Mozambique and Durban in South Africa – are in need of rehabilitation, so I expect this will be a major focus for

infrastructure spending in the future. In terms of sourcing logistics suppliers, there are several service providers with a strong local presence, as well as South African and international logistics operators.”

MINERALS’ POTENTIAL

Bertling Logistics, with various offices in South Africa, Kenya and Mozambique, is ready to offer multiple routings to cover the whole of Zimbabwe, said Lars Greiner, business development manager.

“Particularly for exports of minerals given we anticipate seeing the mining sector opening up fairly soon, the development of new mines, and upgrade/refurbishment of existing infrastructure,” Greiner said.

The Zimbabwe Investment Authority’s announcement that the mining sector has produced the highest number of recent projects, chimes with the fact that global prices for several of Zimbabwe’s mineral exports (platinum and chrome) are on the rise. Minerals account for more than half of Zimbabwe’s export earnings.

“Certainly, logistics firms and their service providers would do well to assess the scale of higher demand for transport services required to help export mineral products and make decisions around adding additional capacity accordingly,” Attwell said. www.breakbulk.com BREAKBULK MAGAZINE 47

LOCALS GETTING AHEAD OF THE HERD While foreign investors contemplating Zimbabwe sit on the fence – many waiting on the outcome of a national election anticipated later this year – local logisticians are not.

Freight World, a wholly owned Zimbabwean shipping, forwarding and Customs-clearing organization, had been steadily growing its business until a liquidity crunch in 2015. Reverting back to its original growth trajectory is what is now being projected.

Ben Mukandi, Freight World’s executive chairman, anticipates this increase to become more pronounced during the forthcoming year, “especially as Zimbabwe reintroduces itself to the global village.

Our government is doing its best to engage the international community, and provide a more conducive business platform for investors.

“Internally our government is looking at revamping our rail network and to elevate the steel industry to become the largest in Africa. There has also been massive investment made by international organizations in mining, solar and hydroelectricity,” Mukandi said.

Geographically, he continued, the company is in a good position to distribute cargo to other parts of Africa, especially given its bonded warehouse resource, and Mukandi has visions of Zimbabwe becoming the distribution hub into Central and sub-Saharan Africa “sooner or later.”

48 BREAKBULK MAGAZINE

THIS PAGE: Zimbabwean and Chinese workers work on the site of Kariba South

Power Station expansion project in Kariba, Zimbabwe, Nov. 14, 2014.

CREDIT: XINHUA NEWS AGENCY/NEWSCOM

Bertling has put plans in place to allow it to operate and carry cargoes of all nature into the country, and looked at a variety of routings in order to counter any potential surge.

“The massive requirement for growth and the related need for power and its generation, and mining, are likely to drive the project market in Zimbabwe, if the country continues to open up,” Greiner said.

“The fact that links to South Africa have not been further developed and that South African ports have become among the most expensive in the world, without significant increases in productivity, coupled with developments in Beira and Nacala ports, likely means that eventually cargoes through Mozambique will provide huge opportunities for Zimbabwe. And not just for the import of project and breakbulk cargoes, but also for the export of bulk and large contain-

erized parcels of minerals.

“We believe Mozambique will prove to be the more effective route for Zimbabwe, although if the large volumes anticipated materialize, Mozambique and South Africa will be required to achieve acceptable transit times,” Greiner said.

This is a pertinent point given that the transit times from South Africa through Beit Bridge have become onerous over the past decade, both from a time and corruption perspective. “This has to come under close scrutiny and be addressed to alleviate congestion and other anticompetitive practices that exist at this crossing,” Greiner said. BB Kerry Dimmer is an award-winning freelance journalist, focused on African business affairs.

ISSUE 2 / 2018

CREDIT: SHUTTERSTOCK

TRADE NOTES

Time of the Essence US Exporters Push for New Ex-Im Board

T

he National Association of Manufacturers, or NAM, and exporters across the country want the U.S. Senate to move quickly to get the Export-Import Bank of the United States, or Ex-Im, back up to full speed. But to achieve that will take a senate vote and a bank board quorum.

Time, exporters say, is of the essence.

Without a quorum, the bank can’t make deals above US$10 million. Ex-Im last had a quorum in 2015, and it has been unable to operate at full capacity since, frustrating U.S. businesses competing for global projects, and ultimately send50 BREAKBULK MAGAZINE www.breakbulk.com

BY LORI MUSSER

ing U.S. jobs to other countries with better access to financing.

More than US$30 billion in U.S. export contracts are stuck in bank limbo, according to then acting chairman of the Ex-Im Bank, Charles J. Hall, during an interview last fall. He retired from his position in December 2017. The lack of national-level export credit agency financing has essentially forced U.S.-based multinationals to use expatriate supply chains for big export deals, including the global projects that comprise the heavy-lift, breakbulk and project cargo industries.

NAM URGES MOVEMENT

The U.S. manufacturing population represented by NAM are fighting hard to reinstall an Ex-Im Bank board. In a letter dated Jan. 9, 2018 to the senate majority leader and senate whip, NAM pressed for the speedy approval of the current board nominees.

NAM CEO Jay Timmons wrote: “I urge you to act expeditiously to process these four nominees on the floor and ensure a fully functioning Ex-Im Bank before month’s end.” The letter maintained that doing so would benefit “manufacturers of all sizes and types ISSUE 2 / 2018

that rely on the tools that the Ex-Im Bank provides and will advance U.S. competitiveness in the global economy at a critical moment when overseas opportunities are increasing at a renewed pace.”

In December 2017, the Senate Banking Committee approved four nominees to the Ex-Im board: Spencer Bachus, Judith Pryor, Kimberly Reed and Claudia Slacik. These nominations, though not confirmed before the end of the first session of the 115th Congress, received unanimous consent to remain in the Senate for consideration during the second session, which began in early January.

The nomination for a fifth and highly controversial candidate, former New Jersey Republican lawmaker Scott Garrett, was sent back to the White House. While serving in Congress, Garrett opposed the Ex-Im Bank, branding it as a form of “crony capitalism.” The administration would have to re-nominate Garrett for him to go through to the confirmation process. It has not done so.

NAM is urging the administration to find a different Jay Timmons nominee.

The assoNAM ciation contends that a fully functioning Ex-Im Bank supports tens of billions of dollars in exports and millions of U.S. jobs by enabling businesses throughout America to compete more successfully in the global economy. This includes larger manufacturers that will lose projects to foreign competitors, and also the smaller companies that comprise project supply chains. A level playing field helps U.S. businesses secure new customers, “particularly in emerging markets, through a transparent and open process through which all exporters that meet the eligibility requirements can seek Ex-Im Bank services,” said the NAM letter.

Ex-Im board nominee Kimberly Reed testifying during a Senate Banking, Housing and Urban Affairs Committee hearing last November.

CREDIT: TOM WILLIAMS/ CQ ROLL CALL/NEWSCOM

“While the United States sits on the sidelines, China has provided more trade-related investment support than the rest of the world combined. Together, the BRICS countries (Brazil, Russia, India, China and South Africa) provided a combined total of more than US$51 billion in medium- and long-term export credit in 2016 – nearly half of the total official export credit provided worldwide,” Timmons said.

NUMBERS ON TABLE

The US Exporter’s Competitive Maritime Counsel, or ECMC, has also voiced its concerns.

In a letter dated Jan. 10, 2018, to the U.S. Department of Commerce Office of Supply Chain, ECMC President Jake Swanson, said: “The urgency of achieving a fully functioning Ex-Im Bank, with pro-export leadership, has never been greater. The U.S. exporters would like to see an Ex-Im Bank that is strong, competitive and working on behalf of all U.S. exporters, regardless of size.”

The ECMC’s position was backed by powerful numbers. Its members represent US$100 billion annually in project cargo value. The letter said information from a recent survey of five engineering, procurement and

construction, or EPC, contractors indicated that they lost the opportunity to include US$67.6 billion in U.S. goods and services in their competitive bid tenders in the past 12 months.

It said: “The bids covered a wide range of capital projects including refineries, petrochemical facilities, transportation projects, oil and gas, and renewable projects. Further, as a condition precedent to submitting a valid bid proposal, the project sponsors required the EPC bidders to include a total of US$51,694,015,450 of supply chain goods and services that met export credit agency (ECA) eligibility.

Since U.S. Ex-Im Bank was not a viable ECA during the past 12 months, no U.S. companies were included in the bids, and the supply chain was moved outside the U.S. to countries with active ECAs.” The same supply chain companies will also likely lose out on decades of follow-up operations and maintenance activities. Permanent inroads are being made by other economies’ supply chains while the U.S. supply chain twiddles its thumbs awaiting an Ex-Im Bank quorum. BB Based in the U.S., Lori Musser is a veteran shipping industry writer.

www.breakbulk.com BREAKBULK MAGAZINE 51

REGIONAL REVIEW

vice president at supply chain optimization specialist Quintiq, noted Japan already actively provides financial and engineering assistance on many infrastructure projects favoring Japanese designed and manufactured technology, as well as construction services. Considering the potential gains from Japan’s involvement with China’s BRI, Kosmala believed that joint delivery of BRI projects could make sense for some projects, however, “approvals and the division of responsibilities and revenues processes still need to be tested.

“Let’s not forget that in many cases the recipient country is responsible for financing, but might not have total control over the purpose of the construction,” he said, noting the Thailand-China high-speed railway.

Funded as passenger-only service, Thailand would prefer to share it between freight and passenger traffic.

PROJECT CARGO BOOM?

CREDIT: SHUTTERSTOCK

Japan’s Ambiguous Commitment

Posturing or Engagement on BRI Involvement?

BY THOMAS TIMLEN

C

hina is widely perceived as the broader region’s beacon of hope for economic development and trade expansion, largely because of its ambitious Belt Road Initiative, or BRI, previously known as the One Belt One Road project.

As such, reports towards the end of last year indicating that Japan had decided to add its weight and money to China’s BRI received notable attention.

52 BREAKBULK MAGAZINE www.breakbulk.com

Such a move by Japan was seen to have the potential to fast track infrastructure projects throughout the region.

Reported plans included Japan’s intentions to boost cooperation with China on industrial modernization and logistics and financially support private sector partnerships, including loans through government-backed banks.

Such moves were expected to remove reluctance among Japanese businesses to commit to the BRI in the absence of clear signals from its government.

Speaking to Breakbulk, Kris Kosmala,

Taken at face value, the reports would suggest that Japan’s involvement with China’s BRI could accelerate projects, ultimately benefiting all project cargo stakeholders. Yet, with multiple nations already engaged with China on the project, how much additional momentum will Japan’s involvement generate?

“Even though the project guidelines provided by the Japanese government talked about ports as something of a lesser area of interest, some port projects might be interesting areas of collaboration between Japanese and Chinese enterprises,” Kosmala noted.

“The Thai government would like to see acceleration of projects in the Eastern Economic Corridor and interconnecting those developments with its own Laem Chabang port and port projects in Myanmar’s Dawei, Cambodia regarding Sihanoukville port and Vietnam regarding Vung Tau port. Thailand is a historically important destination of Japan’s foreign direct investment and is interested in seeing Chinese FDI grow as well. All in all, it’s a neutral ground for testing Sino-Japanese collaboration under the BRI funding.”

Beyond the impact Japan’s involvement would have on the pace of the ISSUE 2 / 2018

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REGIONAL REVIEW BRI’s development, is Japan looking at the BRI as a central economic driver for the region, or simply hedging its bets?

“I would think it is premature to talk about solid commitment,” Kosmala said. “Most recently, Japan indicated preference for economic cooperation of the private sectors of both China and Japan in the fields of energy generation, solar power, wind power and gas or coal-fired power generation, industrial progress, and distribution of goods, but suggested that projects of potential dual purpose, for example ports and maritime terminals, might not be viewed positively. We need to see a few test case projects to demonstrate firm commitment and deep collaboration.”

OPEN AND TRANSPARENT

Such caveats appear well founded in view of statements made by Japanese and Chinese officials. During an address at Japan’s Kanagawa Prefecture in November, Japanese Foreign Minister Taro Kono reportedly said that China’s BRI will be “highly conducive to the global economy if carried out in an open manner that is available to all.”

At the time the “if” was seen as significant, possibly as an expression of Japan’s concerns that not all nations were equally welcome to partake of the BRI’s development, implementation and eventual benefits. Among observers, such phrasing used by Japanese officials is known as “Aimai,” translated as “ambiguous” in English, and not accidentally.

Chinese foreign ministry spokesperson Lu Kang downplayed Kono’s inference when informing journalists that BRI “is an important international public good China has offered in a bid to promote development cooperation, and it is set to be an open and inclusive cooperation platform from the very beginning. China always upholds the principle of wide consultation, joint contribution and shared benefits and acts in the silk-road spirit of peace and cooperation, openness and inclusiveness, mutual learning, and win-win cooperation to deepen mutually beneficial cooperation with various parties.”

Masahiro Kawai, representative director of the Economic Research Institute for Northeast Asia, discussing Japan’s perspective on the BRI last year, pointed out that in June 2017, Prime Minister Shinzo Abe gave support to the BRI with four conditions, 54 BREAKBULK MAGAZINE www.breakbulk.com

namely that the BRI should be: • Harmonious with a free and fair trans-Pacific economic zone.

• Make infrastructure facilities open for use to anyone.

• Have transparent and fair procurement rules.

• Should finance only economically and financially viable projects so that the borrower country can repay related debt.

Japan’s continued hesitation to join the Asian Infrastructure Investment Bank, or AIIB, would indicate that there is still a need for more robust commitments from China on these concerns.

India, despite its concerns regarding the BRI’s encroachment on the disputed territory of Kashmir, has joined the 64 other AIIB members, however neither Japan nor the U.S. have yet joined. In the meantime, both countries do sit on AIIB’s International Advisory Panel.

‘SOLID’ AGREEMENTS

There are no delusions among observers or the respective officials involved that there is still a challenging road ahead before China and Japan can reach a solid agreement on the BRI. As China’s Foreign Minister Wang acknowledged in late January, telling his Japanese counterpart that “there is positive progress, but many disturbances and obstacles remain.”

Those obstacles include territorial disputes and the threat of nuclear war, which tend to elbow the BRI aside. The East China Sea dispute between China and Japan regarding the islands of Senkaku/Diayu, nationalized by Japan in 2012, is an ongoing source of resentment.

Then, at the start of 2018, Japan urged China to take a more robust approach to address Pyongyang’s ambitions with nuclear weapons.

Although Japan’s Prime Minister Shinzo Abe has been quoted saying that “Japan will be able to cooperate well with China,” ample signs of hedging remain.

In November, Japan’s Bank for International Cooperation and Nippon Export and Investment Insurance signed memorandums of understanding with the U.S. government’s development finance institution, the Overseas Private Investment Corp. The MoUs highlight the countries’ joint commitments to tackling development challenges and bolstering investment in infrastructure, energy and other critical sectors throughout Asia and the

Indo-Pacific, as well as in the Middle East and Africa.

President Donald J. Trump described the agreements as “a major development that will advance our shared interests in the region.”

The MoUs followed 2017’s Japan-U.S. Economic Dialogue, at which the governments committed to bolster energy and infrastructure projects in emerging markets. Similarly, Japan and India agreed to work together to elevate their partnership “to advance common strategic objectives at a time when the global community is faced with new challenges.”

In September 2017, Prime Minister Shinzo Abe met with India’s Narendra Modi. The two affirmed their strong commitment to their “values-based partnership in achieving a free, open and prosperous Indo-Pacific region, where sovereignty and international law are respected, and differences are resolved through dialogue, and where all countries, large or small, enjoy freedom of navigation and overflight, sustainable development, and a free, fair, and open trade and investment system.”

LEVEL OF INFLUENCE

How involved will Japan’s engagement with China’s BRI be in the absence of a solid agreement?

“It depends on the level of influence that Japan gets at the AIIB, as well as level of joint participation between specific companies in both countries,” Kosmala said. “From comments made by the Japanese side, there is clear desire to be part of the largest and most strategic projects, but I could see Japan balancing participation in BRI funding mechanisms with their own direct engagement favoring Japanese-only technology, know-how and products.”

Whether Japan’s overtures towards engagement with China on the BRI are nothing more that diplomatic “Aimai,” the multitude of initiatives riding on the coattails of China’s BRI leave little doubt that interconnectivity throughout Asia, and beyond to Europe and Africa, is to get a significant boost. BB Thomas Timlen is a Singapore-based freelance researcher, writer and spokesperson with 28 years of experience addressing the regulatory and operational issues that impact all sectors of the maritime industry.

ISSUE 2 / 2018

TRADE NOTES

Powered Up Growth Southeast Asia Plays Catch-up on Infrastructure

S Mark Yong is the keynote speaker at a conference session entitled “Asian Ports Rising to Meet Project Cargo Demand” at Breakbulk China 2018. In this session, Yong will identify the demographic trends and most promising areas for breakbulk professionals, as well as focusing on how to introduce Chinese companies and make them aware of what is happening in ASEAN. The event takes place in Shanghai, March 26-28.

PICTURED: New

cranes arrive at Sabah Ports in Malaysia.

CREDIT: BMT ASIA PACIFIC

outheast Asia has a great deal of catching up to do when it comes to infrastructure – good news for breakbulk and project cargo service providers.

Speaking in an interview with Breakbulk, Mark Yong, director of BMT Asia Pacific, said that infrastructure development and demographics were powering the growth of all types of cargoes between the region and China.

“When you look at Southeast Asia, there is still a lot of work that needs to be done,” he said.

“Indonesia has about 10 times the population of Malaysia, but only one-tenth of the infrastructure, so they have a lot of catching up to do, and catch up means they need equipment to help. “ ‘I need equipment’ equals ‘I need to ship lots of equipment’ – equals ‘I need lots of breakbulk services.’ ” In the interview, Yong gave the example of how Indonesia, with a population of 250 million, has a growing middle class with an income that is increasing quickly, and that growing infrastructure was necessary because the country was falling behind.

Indonesia has therefore been importing a lot of capital equipment, goods and big bulk materials for infrastructure programs, said the director of the consultancy firm, a subsidiary of BMT Group.

“This trend is happening across Southeast Asia: Vietnam, Malaysia, and, to some extent, Laos and Cambodia,” he explained. “These governments need to spend US$7 trillion on infrastructure over the next few years.”

GROWTH ON TWO PILLARS

Yong said there were two aspects to the growth of cargoes between China and Southeast Asia.

First, free trade flow exists within the Association of Southeast Asian Nations (ASEAN), with Thailand, for example, having had success in exploiting free trade areas between ASEAN nations with its car part manufacturing.

Indonesia was also beginning to take advantage of this, Yong explained, mainly to import cars as ready-made kits and add some local components to them.

“So, there is a lot of breakbulk stuff, plus local, small supply chain niches, which involve

56 BREAKBULK MAGAZINE www.breakbulk.com

many stakeholders – typical of the ASEAN itself,” he said.

The second part of the growth, Yong continued, was the result of the China link in Southeast Asia. Compound growth here has been 20 percent per annum as a result of the Anti-Counterfeiting Trade Agreement between China and ASEAN. “China now has moved from basic shoe and garment manufacturing to large capital equipment and to advanced technologies. These require breakbulk shipping,” Yong said. “These units are less inclined to be containerized, and they need ships chartered to handle them, or container vessels with breakbulk handling facilities to handle them.”

ASSOCIATED PORT DEVELOPMENT

Asked how the leading ASEAN ports and operators are adjusting to the growth, Yong said that Sabah Ports had become an international port in Kota Kinabalu in northern Borneo, and was positioned to serve the Brunei DarussalamIndonesia-Malaysia-Philippines East ASEAN Growth Area, a remote part of Southeast Asia, to handle breakbulk and containerized goods.

In the southern Indonesian part of Borneo, Kijing Port was moving towards construction, something that will involve capital equipment and imports in the short and medium-term, while long-term, big equipment will be needed for a free trade zone, he said.

He also highlighted the new port in Jakarta, Indonesia – Kalibaru – and said there were “pockets of port development in Malaysia.” BB

ISSUE 2 / 2018

EPCs

Tip The Scales McDermott, CB&I Join Forces

BY LORI MUSSER

T

he greater scale mantra is resonating with engineering, procurement and construction companies, or EPCs, around the world.

As projects become more complex and contract values approach the point of colossal, scale is becoming an EPC prerequisite. It can offer a depth of resources and facilitate best solutions for the biggest of projects.

Buying into the need to upscale, CB&I and McDermott International are the latest to initiate a merger.

David Dickson, president and CEO of McDermott, said the two companies are a natural fit. “Customers worldwide increasingly seek a single company that can offer end-to-end solutions.”

This transaction, he said, combines highly complementary businesses to create a leading engineering, procure58 BREAKBULK MAGAZINE www.breakbulk.com

The newly integrated company will be better suited to design and construct some of the largest and most technologically advanced facilities in the world from start to finish.”

Bill Hanson heads up U.S. business development for Illinois-based Great Lakes Dredge & Dock, a company that has supplied services to both CB&I and McDermott in the past. He believed that the merger trend has a lot to do with the ups and McDermott’s Littoral downs in global markets. project in the Bay of Campeche, Mexico.

“Being publicly traded, shareholders want consistent CREDIT: MCDERMOTT value and growth, and sometimes the way to growth is through mergers and acquiment, construction and installation sitions.” He added that mergers can flatten out the low spots, providing company, responding to evolving extra value for shareholders. customer needs. The scale, and diversification across onshore and offshore, Stuart Spence, McDermott’s chief financial officer, said the new company upstream and downstream, and in power markets, will help the new will have a strong capital structure, company capitalize on global growth “with combined expected revenues of approximately US$10 billion,” allowing it opportunities, Dickson said.

CB&I typically tackles onshore to invest more in growth, and leverage its pursuits, while McDermott has a fixed-cost base across a bigger business.

He added that enhanced scale will strong offshore business. McDermott is an established presence in the help mitigate risks, at a time when the Middle East and Asia, while CB&I has competitive landscape is in transition. “Most of the [largest] companies broad operations in the U.S. … have become more fully integrated, motivated by many of the same factors SMOOTHING OUT driving our combination,” Spence said.

CYCLICALITY Other companies that have recently In an opinion issued by Bloomberg on Dec. 19, the day after the proposed chosen to further integrate their EPC services include Paris-based Technip merger was announced, analysts said and Houston-based FMC Technolothe catalyst for McDermott’s CB&I bid was clearly price. CB&I had a large gies, now TechnipFMC; as well as Dallas-based Jacobs Engineering with write-down last year, stock prices slid, Denver-based CH2M. and the company declared that it was planning to sell its “crown jewel” techLarger, more vertically integrated companies may have greater appeal for nology platform. Bloomberg said at the energy production companies. time that by selling the whole company instead, “CB&I shareholders will get Speaking to Breakbulk, C.A. Shields, at Bay Area Houston’s Economic Parthigher-valued McDermott paper and nership, said: “The merger of these two keep a stake in that important technology business, with a chance to benefit powerhouses is part of the ongoing M&A trend.” He said larger companies from a cyclical recovery in general.” are more competitive in this era of new GOOD FOR THE REGION methods and technologies. “Separately, the two companies have long been Roger Guenther, executive director respected for their specialized engiof the Port of Houston Authority, said the port has been monitoring the EPC neering and construction expertise.

ISSUE 2 / 2018

consolidation trend, especially within the energy sector. He said, insofar as a merger helps maintain efficiencies in organizations, it is a positive sign.

“There are billions of dollars of investment in our region and in some of the shale plays. The price of oil is going back up,” he said. That spells opportunity for EPCs and for the Houston area.

Guenther added that oil and gas developments bring project cargo to the port, drilling brings pipe and other cargo to the port, and increased production capacity brings export product to the port. Any industry efficiencies predicated by mergers are a win-win for the port community. Having more of the world’s largest energy EPCs in the backyard of the largest breakbulk port in the country may be telegraphing greater prosperity for the energy sector. “We see a very bright future,” Guenther said.

Shields pointed out that M&As can trigger untoward impacts, such as layoffs. However, he believed that any adverse effect for Houston appeared to be minimal, with many of those indemand employees finding work back with the newly minted company or at a competitor.

“Houston is set to benefit from this union, not just because we are the nexus of upstream, midstream, down-

stream, and global distribution, but the new technologies that will result from this marriage will continue to grow and diversify the region’s booming economy,” he added.

Competitors are quietly watching McDermott-CB&I’s, and other EPC consolidations, unfold.

Many EPCs have struggled in the wake of the oil bust. The combined company will undoubtedly have synergies and cost savings, but, it will still have risk related to its focus on fixedprice contracts, according to Bloomberg.

However, its greater scale and geographic diversification will offset some of that volatility.

The merged McDermott-CB&I entity will rank sixth in the world – after Fluor, Jacobs CH2M, TechnipFMC, SAIPEM and Wood – according to McDermott.

FROM WELLHEAD TO STORAGE TANK

If size does give an EPC the wherewithal to fight cyclicality, enhance competitiveness, and leverage fixed costs across a larger base of business, project owners will benefit. Dickson said the new company will realize the full value of the combination by effectively managing risk, focusing on people and customers, and maintaining operational excellence.

While smaller companies are often known for their ability to nurture a close connection between sales force and engineering staff – one that prevents informational silos and generates opportunities for collaboration and innovation – McDermott and CB&I may yet retain their innovative edge and a passion to serve niches and small projects. Dickson said the new company’s operational expertise is scalable and will be leveraged across the organization to maximize its ability to execute for customers and unlock value.

“Together, we will service customers from the wellhead to the storage tank. Combining our operations will give us a presence in both upstream and downstream markets. It will make us the single source provider offering project development support across onshore, offshore, subsea, LNG, petrochemicals, refining and power markets,” Dickson said.

The McDermott-CB&I deal, with McDermott owning 53 percent of combined company and CB&I 47 percent, is expected to close in the second quarter of 2018. The new company has yet to be named. BB Based in the U.S., Lori Musser is a veteran shipping industry writer.

CREDIT: MCDERMOTT

www.breakbulk.com BREAKBULK MAGAZINE 59

LEGAL SPOTLIGHT

Take Time to Talk

Fix Disputes Without Litigation THE SCENE • • • • •

200-ton cargo lifts.

2 x 100-ton safe working limit cranes.

Specialist equipment.

Cargo damage.

Reputation under threat.

THE FACTS

Three pieces of a project cargo, each weighing 200 tons, were to be shipped from the U.S. South Coast to Mexico. The shipper contracted a reputable shipbroker in London and a description of the cargo was distributed, but a later email amendment was deleted by mistake by the shipbroker. A shipowner offers a vessel which is Martyn Haines fitted with two Master Mariner deck cranes each capable of lifting 100 tons and 200 tons in tandem. The vessel is fixed on a voyage charter.

Upon arrival at the U.S. load port, the master noted each piece of cargo was irregularly shaped and the center of gravity unknown. The vessel’s tandem spreader beam was unsuitable for the lift, so the longshoremen used shore cranes to load each piece.

The master assumed, without checking, that the stevedores would have a similar shore crane at the discharge port in Mexico. However, upon arrival nothing was available. With no alternative the cargo receivers instructed a local firm to design and fabricate a suitable crane tandem beam. The total cost of the beam, including design and fabrication

60 BREAKBULK MAGAZINE www.breakbulk.com

BY MARTYN HAINES

was US$75,000. The cost was significantly high due to limited options available. The vessel waited five days for the beam to be ready for the discharge to commence.

The stevedores used the vessel’s wires connected to the beam, however, during discharge the wires parted, causing one piece to fall on the quay.

Cargo damage valued at US$500,000.

THE DISPUTE

The receivers invoiced the charterers for the cost of fabrication of the beam, and lodged a cargo claim with the shipowner.

The charterers alleged the vessel was wrongly described by the shipowner and should not have agreed to the fixture as it was incapable of lifting the cargo. They accused the master of being incompetent for allowing the cargo to be loaded knowing that a specialist beam would be required at the discharge port and for providing uncertificated wires.

The shipowner accused the charterers of inadequate cargo description; they were aware of the characteristics and that specialist equipment was required for loading and discharge. They also submitted a demurrage claim for US$60,000 for detention at the discharge port waiting for the beam to be fabricated by the charterers. They also denied any liability for the failure of the wire.

The delayed delivery of the project cargo caused the receiver to suffer consequential losses so they in turn accused the shipper of breach of the sales contract and using an incompetent broker.

The shipper accused the broker of incompetence and the receiver threatened to cancel his contract with the shipper.

THE RESOLUTION

The shipowner and charterer instructed English lawyers in compliance with the voyage charter dispute resolution clause. The receiver instructed a U.S. attorney in accordance with the sale contract. The broker’s Errors & Omissions insurer instructed an English lawyer.

All the lawyers were confident in their client’s claim and available defenses but it was recognized there were cost implications and litigation risk compounded by multi-jurisdictions. A speedy court judgement would be unlikely with the possibility that the result would jeopardize reputations.

All the parties agreed to the appointment of a mediator for one-day mediation. An authorized representative of each party attended with full settlement authority.

A mediation agreement was signed by all representatives confirming the meeting was private and confidential and without prejudice to any subsequent legal action if no settlement agreement was reached.

The mediator held separate meetings with each party and when appropriate a joint meeting. The process allowed all parties to freely argue their case and eventually reach a confidential commercial settlement with the emphasis on looking to business in the future. All parties signed the settlement agreement.

LESSONS LEARNED:

• Cargo description must be accurate.

• Vessel’s lifting capabilities must satisfy expected requirements.

• Master must consider load and discharge program, and ensure all equipment is certified and operational. BB

Martyn Haines is a master mariner and an independent accredited mediator.

He can be contacted on mhaines@ mhmarine.co.uk and +44 7475 866 813.

ISSUE 2 / 2018

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NEWS FROM BREAKBULK MIDDLE EAST

Cause for Optimism in GCC

BY GARY BURROWS

At long last, 2018 will be a “very optimistic year” for energy projects in Gulf Cooperation Council, or GCC, countries, predicts Terry Willis, director Middle East, Africa and CIS of the Energy Industries Council, or EIC. Following 2016, which saw the lowest level of project completion in dollar value, according to the EIC, 2017 flipped the script, with the highest number of projects completed, Wells said during a keynote address at Breakbulk Middle East in Abu Dhabi.

“I think we’ve turned a corner compared to the downturn of 2016.

A lot has to do with the investment in power,” he said.

The EIC is a non-profit energy trade association representing UK companies supplying goods and services to global energy industries.

It studies oil and gas upstream, downstream and midstream projects, as well as power and renewables. Oil and gas account for upwards of 75 percent of total energy capital expenditure.

2017 saw 177 projects awarded, up from 148 in 2016. Wells said an increase in feasibilities, FEED (frontend engineering and design) and PMC (project management consultancy) contracts bodes well for activity in 2018 and 2019.

Wells anticipates a broader mix of projects across energy sectors. Forecasting 2018-2022, the EIC sees 352 energy projects proposed or under development with total CAPEX of US$599 billion. Oil and gas projects total 262 and contribute US$456 billion to the mix, he said.

“There’s certainly a rise in the number of financial decisions to move projects forward,” Wells said.

FOUR CHALLENGES

Despite the optimism, Wells warned there are challenges ahead.

Perhaps most obvious is the current geopolitical climate, particularly with Iran, Qatar, Yemen, Libya and Syria.

“Iran is one of the largest opportunities for companies to do business, but of course there are difficulties in doing that,” he said. Due diligence is required as the potential for reward is great.

Financial issues could also temper GCC success, he said: “We have delayed financial investment decisions (FID) taking place. Financing can be a bit tight, but hopefully as we move forward in 2018 there’s more financing available than in previous years.”

Structure of contracts is another potential issue, such as combinations of lump sum and turnkey or sharing the risk. “Some of the major operators are trying to find relationships with their contractors to share the

risk and provide reimbursement and then move to a firm price afterward,” he said.

The role of export credit agencies is coming into play as well, he said.

“People think that it’s just exporting and providing financing for projects,” Wells said. “It’s a lot more than that. They’re providing help on secured payment, bonding and various financial challenges that some of the project supply chain find themselves in.”

Finally, local content rules are having an impact, he said. “You can’t be a registered supplier for Saudi Aramco unless you have an element of local content that you can propose over a program.” He noted Iraq, Iran, Oman and Saudi Arabia as “all going down the same path.

“That’s something that you need to consider when you’re doing any due diligence in this part of the world,” he concluded. BB

Coverage from Conference Session “Capital Project Outlook for the GCC”.

62 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2018

EXHIBITION SNAPSHOTS

New Thinking Supports Middle East Projects

BY CARLY FIELDS

“New thinking for the new normal” across the Middle East is changing the face of the region’s project market, said Jennifer Aguinaldo, transport and technologies editor at MEED. Gulf Cooperation Council, or GCC, countries have embraced the fact that oil prices will remain low for a very long time and have made adjustments in policies to ensure healthier fiscal standings.

This includes considering alternative financing models for projects.

Speaking at Breakbulk Middle East, Aguinaldo said Dubai and Qatar had already created public-private partnership, or PPP, law and that the remaining GCC countries were planning or working on PPP laws to facilitate infrastructure-related projects.

“The most important factor over the last two-and-a-half years in the Middle East region has been the oil price, as the majority of countries in the region are oil exporters,” she said. “While we are seeing some level of stability in oil prices at the moment, we predict that it will stay at the US$55 per barrel level and will not likely go higher.”

Aguinaldo noted the challenging year for 2017, expecting 2018 to be one of recovery. MEED calculates that there is a US$2 trillion pipeline of planned, unawarded GCC projects and US$3.4 trillion of projects planned or underway in the Middle East Gulf, a 10.7 percent increase year-on-year.

But there are challenges and risks to the revival of the Middle East region’s project cargo industry, including rising political risks, slow pace of reforms, oil market volatility, rising costs, security issues, variable U.S. policy on the Middle East, tight cash flow, and digital disruption.

That said, while regional government spending is weaker, there seem to be better defined goals on where to direct investments, Aguinaldo added.

There are also emerging drivers for investment in oil and gas, including a renewed quest for gas and enhanced oil recovery in the region. MEED noted that Abu Dhabi National Oil Co. is investing US$109 million to raise output to 4.5 million barrels per day by 2030, KPC has confirmed a US$112 million investment program, and Aramco Is investing US$414 billion over 10 years. BB

Coverage from Conference Session “Envisioning the GCC”.

NEWS FROM BREAKBULK MIDDLE EAST

Bridging The Skills Gap

BY CARLY FIELDS

The talent gap between developed and developing countries, changing requirements and the need to manage and retain recruits were critical employment-related issues put forward during a panel discussion about recruitment in the project logistics industry at Breakbulk Middle East 2018.

With project logistics industry stakeholders worried about a seeming “hollowing-out” of experienced project logistics practitioners, the panel discussed a set of pertinent themes for today’s logistics landscape.

The panel considered how challenging it is for engineering, procurement and construction companies, plus project owners, to find their preferred level of talent and experience – whether for their own teams or for subcontractors; whether a dwindling supply of practitioners is due to indiscriminate downsizing during the economic downturn; and how hard it is to attract new project logistics recruits.

“We have to facilitate the mobility of talent.

We need to equip the developing countries with the right tools to facilitate training for logistics.”

– Randa Hakim, GE Power Panel member Randa Hakim, regional fulfilment and logistics leader for the projects area of GE Power’s Gas Power Systems business, noted the developed/ developing countries’ talent mismatch. While developed nations are characterized by a mature workforce which has left employers wondering where the next workforce will come from, Hakim said that in developing nations there are ample young people, but the education in these nations fails to support their logistics aspirations.

“How are we going to solve that gap?” she asked. “We have to facilitate the mobility of talent. We need to equip the developing countries with the right tools to facilitate training for logistics. Ideally, educators, governments and companies have to support the next generation. This needs to be coupled with international standards of how to measure qualifications.”

NEW DEMANDS

During the discussion, Hakim also noted that a changing skill requirement was another factor driving a lack of talent, explaining that “now, we need someone who is operational but also has interpersonal skills as well.” The aging workforce is a problem – one-third is near or beyond retirement age, she added.

“There’s also a lack of development or career paths from companies, which drives people to leave. There’s also a perception that this [industry] is not as prestigious as other industries.”

Paula Boast, partner in construction, engineering and projects for the law firm Charles Russell Speechlys, said that more stringent working standards in the project logistics industry meant that the right people were needed for jobs in the sector.

“Project cargo work is complex and dangerous and has to adhere to international health and safety rules,” she said. “In doing that, we have created a new standard. You have to have the right people in the market to take these jobs. There’s a domino effect if you don’t have the right people from a legal perspective.”

Fellow panelist Chris Kent, global project director for Pentagon Freight Services, added that retention policies also need to be considered. BB

Coverage from the Conference Closing Forum, “Is a Talent Gap Hurting the Project Industry?” Pictured L-R: Paula Boast, Randa Hakim.

64 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2018

DP World: Breakbulk ‘Most Promising Sector’

BY CARLY FIELDS

A senior executive at global port operator DP World described breakbulk as one of trade’s “most promising sectors” at Breakbulk Middle East.

Abdulla Bin Damithan, commercial director – UAE Region at DP World, said that while the sector possesses its own share of challenges for 2018, the overall outlook was “encouraging” and that breakbulk remained a “source of opportunity for the region.”

To aid growth he urged industry in the region to “work together” to promote the industry and to further simplify the supply chain.

Regionally, Bin Damithan said,

the market was looking at recovery.

Growth in infrastructure investment in Dubai in particular was being driven by construction for Expo 2020. “DP World is preparing to handle an increase of project cargo in connection with the Expo,” he said.

Predicted growth in breakbulk and roll-on, roll-off cargoes in the region has seen DP World expand its dedicated facilities at Jebel Ali, extending the quay, yard and storage facilities. Jebel Ali operates 27 general cargo berths with a storage spread of 1.4 million square meters.

“DP World continues to focus on breakbulk and we continue to raise our benchmarks,” Bin Damithan said.

“We will continue to invest when and where our customer needs us. ‘Future ready’ is the motor that has driven our strategy from the beginning.” BB

Coverage from Breakbulk Middle East Conference Welcoming Remarks.

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ASIA-PACIFIC ECONOMIC FORECASTS

In anticipation of Breakbulk China, March 26-28 in Shanghai, Breakbulk magazine looks at economic forecasts for the Asia-Pacific region, courtesy of Consensus Economics Inc.

GDP FORECAST

Economists largely forecast GDP growth among Asia-Pacific countries to be consistent with 2017.

8% 2017 2018*

6%

2019* 4% 2%

TH AIL AN D

TA IW AN

SO UT HK OR EA

SIN GA PO RE

PH ILIP PIN ES

ZE AL AN D

MA LA YS IA

JA PA N

IND IA

IND ON ES IA

NE W

*Forecast

HO NG KO NG

CH INA

AU ST RA LIA

0%

INFLATION FORECAST

Inflation rates are expected to grow marginally through 2019, led by Southeast Asian countries.

5% 4%

2017 2018*

3%

2019*

2% 1%

TH AIL AN D

TA IW AN

SO UT HK OR EA

SIN GA PO RE

PH ILIP PIN ES

ZE AL AN D

MA LA YS IA

JA PA N

IND IA

IND ON ES IA

NE W

*Forecast

HO NG KO NG

CH INA

AU ST RA LIA

0%

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.

$250 2017

$200

2018*

$150

2019*

$100 $50 $0 -$50

TH AIL AN D

TA IW AN

SO UT HK OR EA

SIN GA PO RE

PH ILIP PIN ES

ZE AL AN D NE W

MA LA YS IA

JA PA N

IND ON ES IA

IND IA

HO NG KO NG

CH INA

AU ST RA LIA

-$100

*Forecast, in US$billions

66 BREAKBULK MAGAZINE www.breakbulk.com

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OVES DM WIN PE’S EURO

L STIL CTS OJE n PR

ER POW YDRO n H

RY GLO THE AND

/ 2017

E3 SUPPLY CHAIN ISSU SECURITY n APPALACHIAN PETROCHEMICALS n BOOSTER FOR PROJECT CARGO

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I N D UST RY DIRECTORY

2018

Breakbulk Magazine Print Edition

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ND S N DE A TRA ULATIO B I r e R T m Yet Anobthuff o Re ulis Pop ct Carg je Pro

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