GCC Collaboration Sorely Needed

COVER STORY

GCC Call for Shake-up of MENA Project Delivery BY CARLY FIELDS COLLABORATION SORELY NEEDED

Project delivery in the Gulf Cooperation Council region would benefit greatly from collaboration, and stakeholders need to think innovatively to make it work, according to specialists operating in the region.

Speaking at a seminar hosted by Middle East business intelligence consultant MEED, industry specialists spoke about how project delivery could be refashioned in the GCC region, specifically through collaborative forms of contracting.

Sean McQue, operations director at Dubai-based ALEC Engineering & Contracting, saw collaboration as a mindset. “It’s not necessarily the words written down in a contract,” he said. Key things such as being clear on responsibilities and risk apportionment and making sure that the right behaviors are incentivized can go a long way. “Trust doesn’t exist because you write it somewhere; it’s developed over time. You learn to trust people because of the way in which you interact with them and the way that they behave – and that comes from all sides.”

Raymond Hector, director – commercial contracts, procurement at Abu Dhabi real estate specialist Aldar Properties, said that collaboration works well for large complex infrastructure projects. He added that while there might not be formal agreements on collaboration in place in the GCC, that does not mean that collaboration is not taking place.

“You may not see collaboration in a formal sense because when you’re establishing good working relationships, there doesn’t necessarily need to be a formal contract naming something as an alliance for it to work.” For collaboration to work there must be trust and aligned goals and objectives, Hector said. “Alliances allow us to continue to be sustainable, allow us to continue to be innovative, and allow us to deliver quality products to the market.”

GCC MATURITY CHALLENGES

Faisal Butt, project delivery director at The Red Sea Development Co., said his company procured about US$4 billion in contracts in 2020 and plans to continue contracting at that

The Red Sea Development Co. is expecting to match 2020’s US$4 billion contracts procurement value in 2021. CREDIT: THE RED SEA DEVELOPMENT CO.

scale in 2021. For him, the challenge in the GCC has been the maturity of the market, which has made it difficult to deliver aspirational projects within project deadlines. “To deliver with the aspirations of the design we’re trying to deliver and the quality we’re trying to deliver, you need to think outside the box of how to structure your models, how you put your contract together, and how you collaborate with the market,” he said. Modularization and speed of delivery are both important elements.

McQue noted that early contractor engagement has been “missing for a long time” in the region. “We’ve always felt as contractors that we do have a lot of value to add in that respect as we do end up being major stakeholders in these projects when they kick off.”

Paul Abbosh, managing director, GCC (excluding UAE and Saudi Arabia) at Atkins, a member of the SNC-Lavalin Group, echoed the importance of early collaboration. He stressed the importance of a good, robust and well-coordinated design stage, which can solve a lot of a contractors’ problems.

“It’s vitally important that designers have early access to all of the parties that have an influence on that particular design,” he said. “By working earlier with the client to understand goals and mapping your procurement process and the sequence of your fulfilment, you optimize getting as much of the key information that you need for the design as early as possible.”

Abbosh referred to a study he was involved in which examined why major projects fail. The key finding was that the majority of projects fail because they simply have not been set up properly.

Digital tools can help to facilitate collaboration and allow a project to succeed where it might otherwise have failed, he added. However, ALEC – an early adopter of collaboration platforms – has faced challenges getting employers to buy into them. “We invest in them and then push them onto projects, providing them free of charge to employers – then we see uptake,”

Digital tools can help to facilitate collaboration and allow a project to succeed where it might otherwise have failed. CREDIT: SHUTTERSTOCK

McQue said. “If used correctly they can be very, very powerful.”

He added that all stakeholders need to get in front of this. “The new digital tools that are coming along are no longer these point solutions. More and more of these things are integrating so well with one another that the opportunities are endless.”

While ALEC initially focused on the return on investment on digital tools, that strategy has evolved. “The more we’ve looked at it, it’s a no brainer. We don’t need to think about it anymore. When a new technology tool comes along that plugs into what we do, we get it and start using it,” McQue said.

AT THE ‘SHARP END’

Regarding the pandemic, McQue noted that contractors are at the “sharp end” of the downturn. There have been fewer tenders and there have been spin-off problems including defaults on payments. Big players have disappeared from the market, which has had a cascade effect on the supply chain. “It has been pretty desperate,” he said.

ALEC has also witnessed some developers using the pandemic as an opportunity to take advantage of contractors. “On some of the tenders that are coming up, we’re starting to see some quite difficult terms and conditions being pushed out,” he said. “For example, even worse payment terms than before – in terms of timing – which makes things pretty challenging when contractors and the supply chain are already struggling for cash.”

Meanwhile, Abbosh said that the current delivery models in the GCC are failing – evidenced by builders becoming more risk averse. This is creating an opportunity to improve the whole supply chain, whether that is through the client, contractor, consultant or all the way down to the subcontractors, material and equipment.

Abbosh also flagged up a reluctance to own up to problems in the GCC project chain, which causes greater problems down the line in the project. “One of the problems we encounter at the moment is that you’re not encouraged to identify a problem. So, generally, people sit on it, and it eventually comes out. And when it does come out, it’s much more difficult to deal with.”

He suggested that the industry strive to foster a level of trust and openness which allows people to put their hand up and admit to a problem, and then work together with everyone else to resolve it as quickly and as early as possible. “To do that you need to make sure that everybody is incentivized. This is all about trust and encouraging people and motivating them to work outside of the narrow sort of contractual silos that they sit in,” Abbosh said.

Ultimately, it is about creating the right culture, he said. “The more you do that, the more confidence is built into the system, and the further you can go. Ultimately you can get to the type of all-singing all-dancing system that you get in, say, Australia and Western Europe,” Abbosh said. However, he acknowledged that the region is a “long way off that” today. BB

Carly Fields has reported on the shipping industry for more than 20 years, covering bunkers and broking and much in between.

ENERGY UPDATE

New Energy Push Powering Project Opportunities

The worldwide push toward cleaner energy, including a shift to electric vehicles, is powering a dramatic rise in global mining opportunities and concomitant demand for project cargo moves.

In a world rocked by the Covid-19 pandemic and committed to greater supply chain self-sufficiency, new mines are anticipated to be developed in places beyond longstanding sources, resulting in a need to bring oversize equipment to sites nearer to end users of lithium and other critical minerals. Furthermore, additional infrastructure, such as rail lines and natural gas pipelines, may have to be built to support the new activity.

A World Bank Group report released in May 2020 projects production of

BY PAUL SCOTT ABBOTT

minerals such as graphite, lithium and cobalt could increase by nearly 500 percent by 2050 to meet growing demand for clean energy technologies, which rely much more heavily upon minerals than fossil-fuel-based power generation. The report estimates that more than 3 billion tons of minerals and metals will be needed to provide energy storage and deploy wind, solar and geothermal power.

DEMAND ‘SNOWBALLING’

“It’s really something that’s snowballing,” George Miller, an analyst who handles assessments for lithium and related materials for London-based Benchmark Mineral Intelligence, told Breakbulk.

“We’re looking at huge compound growth rates in terms of material mined for a wide variety of critical minerals – ranging from graphite, nickel, cobalt and lithium to manganese and lead – that at the moment are not mined as commodities in a large George Miller sense whatsoever,” Miller said. Benchmark Mineral For example, Intelligence he said, the amount of graphite mined worldwide for the electric vehicle sector alone is expected to rise from 180,000 tons in 2020 to 1 million tons in 2025. Over the same five-year span, annual electric vehicle demand for

Left: A lithium mining operation in Argentina’s salt desert – part of the extraction process of minerals to be used in advancement of energy transition initiatives. CREDIT: SHUTTERSTOCK

lithium is predicted to go from 150,000 tons to 700,000 tons, and it portends to reach 1.5 million tons by 2030.

Meanwhile, according to Miller, the number of lithium producers globally has grown from 16 in 2016 to 26 currently, with 48 new projects in the pipeline to go into production over the coming decade. Worldwide, the number of mega-factories making electric batteries has increased from 28 in 2016 to 88 now, with 72 expansion projects and at least 29 new plants in the offing over the next 10 years.

“For the next 20 years, this is going to be potentially a quite important focus for project cargo participants, very much so for those engaged with critical minerals and electric vehicles,” Miller said.

“In terms of shipping the equipment needed to build those mines, the demand is going to absolutely be huge,” he said, adding that, further downstream, there will be skyrocketing demand for processing of minerals, cathode and anode production, cell manufacture and making of electric vehicles, as well as recycling. “There’s a whole new supply chain that needs to be built around these critical minerals, and that would certainly play into the hands of those focused on project cargo.”

The equipment involved, Miller said, is “incredibly expensive and voluminous, and that has to move all over the world.”

Primary lithium suppliers are now in Australia and South America, but he said: “There’s more of a trend toward supply chain localization as well. People are interested in building lithium mines all over the world. Graphite mines, too.”

Miller said projects for mining lithium and related minerals are under way in such diverse locations as Serbia, Sweden, the Canadian province of Quebec and the U.S. state of North Carolina. In each case, deposits have been pinpointed.

“These resources are quite common geographically but just really haven’t been exploited until now and haven’t been looked at as commercially viable until now,” he said.

“Genuinely, I would say there’s no regional geographic focus of the supply chain,” Miller added. “Nowadays, people are looking to develop these minerals within the end markets for electric vehicles. That way, you can keep the supply chain localized and cut down on some of the shipping costs. That would increase the proportion of equipment being shipped around the world.”

LITHIUM ‘HERE TO STAY’

Andrew Bowering, founder and director of American Lithium Corp., based in Vancouver, British Columbia, Canada, told Breakbulk that two trends are advancing simultaneously on the lithium front – rapidly escalating overall demand and a propensity toward development of resources closer to end users. “Lithium is here to stay,” said Bowering, who has been involved with numerous mineral exploration and development undertakings over the course of three decades, including as Andrew founder of MilBowering lennial Lithium Corp. and American Lithium executive vice Corp. president of Prime Mining Corp., both also headquartered in Vancouver.

“It’s very clear that the United States does not want to be dependent on the Asian economy for their future with lithium, as it has been with oil” from other nations, Bowering said.

Not surprisingly, then, lithium production ventures are springing up in Nevada, within a couple hundred miles of the Tesla battery gigafactory just outside Reno, Nevada. Tesla, launched by Elon Musk, the same South African-born magnate behind SpaceX, made 81 percent of battery electric vehicles sold in the U.S. in the first half of 2020.

“There will be some big equipment moving into Nevada,” said Bowering, who said construction of lithium mining operations is likely to be augmented by building of natural gas pipelines and perhaps, to handle mineral shipments, railroad lines as well.

MORE MINES NEEDED

A recent report prepared for U.S.based not-for-profit Earthworks by Australia’s Institute for Sustainable Futures at the University of Technology Sydney, also cites burgeoning demand for lithium and other metals required by cleaner energy technologies. Lithium is a key raw material in manufacture of lithium-ion batteries, which are used in laptop computers and smartphones in addition to electric-powered vehicles.

An exploratory test well is part of Millennium Lithium’s Pastos Grandes endeavor to produce battery-grade lithium carbonate in Argentina. CREDIT: MILLENNIUM LITHIUM CORP.

“The transition toward a renewable energy and transport system requires a complex mix of metals – such as copper, cobalt, nickel, rare earths, lithium and silver – many of which have only previously been mined in small amounts,” states the report, coauthored by Elsa Dominish, Sven Teske and Nick Florin. “Under a 100 percent renewable energy scenario, demand for these metals could rise dramatically and require new sources of primary and recycled metals.”

According to the report, batteries for electric vehicles are the main driver of such need, with rapidly increasing demand for cobalt, lithium and rare earths far exceeding availability via recycling, and thus precipitating the need for more mining. The report also cites a trend toward a greater globalization of sourcing to help secure ongoing worldwide supply while reducing vulnerability to price fluctuations.

On the flipside, mining and processing of metals, if not managed responsibly, can have significant negative environmental repercussions. In the case of lithium, water contamination is of great concern in the traditional South American “ABC” mining triangle of Argentina, Bolivia and Chile. Therefore, new ventures may be subject to intense environmental scrutiny.

EUROPE TAKES ACTION

In September, the European Commission launched a new industry alliance for building a complete

Mammoet’s recent transport of a 7,100-tonne, 80-meter-long Kenmore Resources plc mining plant within Mozambique is demonstrative of the enormity of project cargo moves associated with mining operations. CREDIT: KENMARE RESOURCES PLC.

GREENER TECH SPARKS PLATINUM GROUP METALS DEMAND

Demand for platinum group metals used in environmentally friendly hydrogen fuel cells is propelling increasing mining activity, particularly in South Africa, requiring more project moves of enormous equipment.

The metals, known as PGMs for short, are already the leading mined product in the southern part of Africa, outstripping coal, gold and iron ore, and demand is on the upswing, according to Henry Viljoen, manager of South Africa sales for Netherlandsbased heavy-lift transport specialist Mammoet.

PGMs, which include platinum and iridium, represent an essential part of next-generation fuel cells, Viljoen told Breakbulk, adding: “The demand for these hydrogen fuel cells, of which PGMs are a major component, is driven by the energy transition and in making progress toward global decarbonization.”

As the call for platinum-catalyzed fuel cells grows over the next seven to nine years, PGM mining facilities are anticipated to proliferate across South Africa, Viljoen said.

“In order to upscale production,” he said, “this will mean increasing demand for project cargo moves. This process starts with the modernization of plants, which has in fact been under way since 2018.”

Implementation of strict carbontax laws within South Africa is further incentivizing this activity, according to Viljoen.

DeepGreen Metals is looking to the ocean floor to provide a source for metals used in the production of batteries for storing energy and powering electric vehicles. CREDIT: DEEPGREEN METALS INC.

SEA FLOOR OFFERS NEXT SUPPLY FRONTIER

While terrestrial mines are typi- social costs,” Barron told Breakbulk. cally looked to for furnishing metals “Furthermore, there are currently used in batteries for electric vehicles too few projects in the pipeline to and similar green applications, the meet demand for nickel and cobalt, next frontier for sourcing may lie and shortages are looming.” 3 miles beneath the ocean surface, DeepGreen has already enlisted 1,200 miles into the Pacific Ocean several partners, including Danish off the North American coast. integrated shipping leader Maersk, Whereas regulatory hurdles still which has provided a research need to be cleared via the Interna- vessel and crew. The vessel, the tional Seabed Authority, DeepGreen Maersk Launcher, is outfitted with Metals has its sights on deep ocean an array of deep-sea equipment, beds of a trio of sponsoring states including box and multicore sam– Nauru, Kiribati and the Kingdom of plers and underwater autonomous Tonga – for providing polymetallic vehicles. rocks rich in nickel and other key Robotic collector vehicles – “our base metals. gentle giants” – are to be used to

Gerard Barron, CEO and chair- lift rocks from the seabed without man of British Columbia-based actually touching them before sendDeepGreen, said deep-sea mining ing them up a nearly 3-mile-long offers a “gentler” option that does flexible riser to the surface vessel, not involve destructive machinery which in turn is to transfer tens of removing aboveground ecosystems thousands of tons of nodules to and blasting and shore for processing, Barron said. drilling into hard “In the case of nickel, industry rock below. commentators have been asking for “Miners are quite some time where the next big staring down the play is going to come from, and barrel of falling DeepGreen’s contract areas collecore grades, tively represent the largest which means they undeveloped nickel resource on the must dig deeper planet,” Barron said. “All told, we and wider to pro- expect to be among the two cheapduce the same est sources of battery metals on the Gerard Barron amount of metal with high enviplanet, with enough resource to electrify over 255 million electric DeepGreen ronmental and vehicles.” European Union supply chain for lithium and other raw materials seen as critical for the bloc’s digital and green transitions. Environmental sustainability is one of the new alliance’s cornerstones.

In announcing the establishment of the European Raw Materials Alliance, with more than 150 stakeholder partners, Maros Sefcovic, vice president of the European Commission, said: “Our strategic foresight shows clearly that the demand for critical raw materials is only going to rise, especially given the ongoing transition toward a green and digital economy.

“The pandemic has also highlighted the criticality of raw materials for our recovery,” he continued, adding that, in addition to rapidly rising demand driven by electric vehicles and energy storage, demand for rare earths critical for products like wind turbines could increase tenfold by 2050. “To secure a sustainable supply of raw materials, we need to join forces across Europe, as we have done for the EU Battery Alliance.”

Whereas top lithium producers and refiners worldwide are now primarily outside Europe, including in Australia, Chile and China, Sefcovic said Europe could be “pretty self-sufficient” by the middle of the current decade. Portugal is Europe’s main lithium producer, but costs there remain comparatively high. Thus, the race to electrify Europe’s vehicle fleet has triggered a flurry of plans to open new mines. For example, in April, investors gave the green light to a lithium and tin project in the Czech Republic.

US EYES SELF-SUFFICIENCY

In the U.S., which relies upon China for about three-quarters of its supply of rare earths, the push toward self-sufficiency in sourcing of lithium and other commodities also is intensifying – along with the desire to advance more environmentally friendly technologies.

With Joe Biden assuming the U.S. presidency from Donald Trump, the nation is focusing on a far-less-carbonized energy future, as indicated by the naming of John Kerry, who served as U.S. secretary of state from 2013 to 2017, to the new post of U.S. special presidential envoy for climate under the Biden administration. Biden also

is returning the U.S. to participation in the Paris Agreement on climate, from which Trump had withdrawn the nation.

Biden is an advocate of boosting domestic mining while promising federal spending of US$1.7 trillion over the next 10 years to support build-out of American clean energy infrastructure as part of efforts to achieve a 100 percent clean energy economy – with net zero emissions – by 2050.

Biden’s US$700 billion-plus “Buy American” initiative plans to shift to the U.S. more production of numerous commodities, including batteries used in electric vehicles. At present, according to Benchmark Mineral Intelligence, China has 130 mass-scale battery mega-factories in operation or in the pipeline, while Europe has 16 and the U.S. just 10.

Mainstream U.S. automakers, with GM and Ford leading the way, have pledged to work with Biden to reduce climate-warming emissions from cars and trucks by delivering “an all-electric future.” GM, for example, announced in November plans to launch 30 new electric car models by 2025 as part of a US$27 billion commitment to electric and autonomous vehicles, including a US$4.2 billion investment to build electric cars in Detroit and in Spring Hill, Tennessee.

And the electric battery market optimism is by no means limited to passenger vehicles. London-based market research firm Interact Analysis reported Nov. 11 that, after a Covid19-induced 7 percent decline in the market for battery electric commercial vehicles in 2020, continuing a downward trend in 2019 related to Chinese subsidy policies, the sector is poised for a stunning 47 percent growth in 2021, driven by big gains in Europe and North America.

TILTING AWAY FROM CHINA

According to an Oct. 21 report from Scotland-based global natural resources consultancy Wood Mackenzie, more than US$1 trillion of investment will be needed in key energy transition metals such as aluminium, cobalt, copper, nickel and lithium over the next 15 years just to meet the growing demands of decarbonization – almost double the figure invested over the previous 15 years.

China represents about 85 percent of global rare earth elements production. CREDIT: SHUTTERSTOCK

Julian Kettle, Wood Mackenzie’s vice chairman for metals and mining, told Breakbulk he expects much of the growth to be focused on China, which typically supplies more than half of global demand for these energy transition metals.

“But,” Kettle said, “as New Green Deal-type consumption starts to build in developed nations – including the EU, U.S. and Japan – these countries will pick up the mantle. There will also be a tilt away from China supplying critical raw materials and products given an increased desire for supply security post-pandemic.

“There will be a tilt during the second half of the decade toward self-reliance and the extraction and processing of raw materials in the West,” he said, “so we will potentially see raw materials trade flows rising within the rest of the world, as opposed to between the rest of the world and China.”

PROJECT MOVES TO RISE

Clearly, what all of this means is that the mammoth equipment used for extraction and processing of these high-demand minerals will need to be transported to a growing number of sites throughout the world, including locations where such operations have not before now been present.

Among project cargo transport leaders expressing sanguinity is Ivan de Souza, corporate vice president for global key account management for the mining and metals sector at Germanybased specialized freight forwarder deugro group.

“We should expect an increase in the demand for rare earth elements, or REEs, since these are essential raw materials for emerging renewable energy resources and smart electronic devices,” de Souza told Breakbulk. “Additionally, the current high growth worldwide in renewable energy projects as well as the increased demand in smart elecIvan de Souza tronic devices will deugro group require a steady supply of REEs.”

Today, China represents about 85 percent of global REE production, de Souza said, commenting: “It is a monopolistic supply situation.”

Global production of lithium, driven by electric vehicle sales, is expected to double by 2024, he said, with China leading global demand due to the increase in lithium-ion battery manufacturing capacity within China. Lithium demand also will continue to be driven by electric vehicle sales.

“There is definitely growing demand for lithium, and forecasts show that the market is going to experience increased demand over the next couple of years,” de Souza said. “Consequently, there will be a necessity to build new lithium mines around the world. The construction of these projects will require the movement of heavy and over-dimensional project cargo, to be executed by well-experienced freight forwarders.” BB

A professional journalist for nearly 50 years, U.S.-based Paul Scott Abbott has focused on transportation topics since the late 1980s.

ENERGY UPDATE

SAILING CLOSER TO THE WIND

Nearshoring of Manufacturing Increasing in Popularity

BY LORI MUSSER

The world needs a concentrated rush on new wind farm installations if it is to meet or beat renewable energy production and carbon offset targets. And sourcing wind farm components close to the project site may expedite the delivery of those projects.

If the price is competitive, project owners may appreciate near-sourcing, also known as near-shoring or localized supply, for its role in ensuring the timely and safe delivery of valuable or technologically complex components. Governments typically embrace this as well, as they can insert local content requirements, or LCRs, into the auction process, and then take a bow for jobs and economic benefits created locally.

It can be an uphill battle because each wind project has unique supply chain needs, but carriers and logistics providers are closely monitoring the near-shoring trend, and some have already rejigged their services and capacity in anticipation of new, more local business.

OPPORTUNITY FOR LOCALIZED PRODUCTION

Ulrich Elmer Hansen, senior researcher for the UNEP DTU Partnership – a collaboration of the United Nations Environment Program and Technical University of Denmark, has conducted research related to local production of wind turbine components in developing economies. Hansen said: “The localization of production activities … is fundamentally related to the strategies and activities of the main wind turbine suppliers, such as Siemens and VesDr Ulrich Elmer Hansen tas.” Multinational UNEP DTU

Block Island Wind Farm is the first commercial offshore wind farm in the U.S., located 3.8 miles (6.1 kilometers) from Block Island, Rhode Island. CREDIT: AWEA

manufacturers are constantly optimizing global production and sourcing arrangements to be competitive in light of the costs of production, logistics and transport.

In order for a wind project to source locally, there has to be investment in local production facilities. “Local sourcing of wind turbine components generally depends on the following four determinant factors: (i) the nature of the components; (ii) the size and stability of the market; (iii) the strengths of the local supplier base; and (iv) industry localization policies, including local content requirements,” Hansen said, citing his own research and other recent studies.

The literature review indicated that higher-tech components, such as blades and gearboxes, are likely to be produced in advanced countries. Less complex components or bulkier items, such as towers, may find production/ assembly opportunities in lower and middle-income countries. Items that are in high demand, or ones that are costly to transport long distances, may be appropriate for local production. Foreign wind turbine technology suppliers may be able to reduce costs by building up a local supply base and achieving economies of scale over time.

Decisions to invest locally depend heavily on forecasted stability in the market, perhaps driven by strong political signals encouraging a steadily growing market. Another factor that may encourage local investment is experience in parallel industries, such as steel or heavy equipment production, because that experience generally makes it easier for foreign firms to recruit local employees to their factories and/or to source high-quality standard components from local suppliers, Hansen said.

But one of the most important drivers of local investment in manufacturing capacity may simply be governmental policy: “Local content requirements have been a particularly important and largely efficient measure to promote local production of components,” Hansen said.

U.S. BOOM TO TRIGGER PRODUCTION

According to the American Wind Energy Association, or AWEA, the U.S. is now home to more than 60,000 wind turbines with a combined capacity of 111.8 gigawatts, or GW.

John Hensley, AWEA vice president of research and analytics, said: “Landbased and offshore wind supply chains are global and complex. As the offshore wind industry gets underway, many inputs will be domestically sourced right away – for example, concrete. As the industry grows and with a foundation of a stable policy environment, a robust domestic supply chain will be established.”

Offshore wind companies have announced investment in new manufacturing facilities, port infrastructure, and shipbuilding in the U.S. “The large potential size of the U.S. offshore wind market, combined with the scale of equipment, provides a strong rationale for domestic production,” Hensley said. Fortunately, the industry has an opportunity to lean on existing expertise and manufacturing capabilities from related industries, such as offshore oil and gas.

Hensley predicted that a robust domestic supply chain supporting offshore wind will emerge in the U.S. “Companies like Siemens Gamesa are already considering investing in U.S. manufacturing sites … and while a lot of the focus is on blade, tower or nacelle production, there are many opportunities beyond these large components. Concrete, electrical cabling, bolts and steel foundations are just a few of the thousands of components that comprise an offshore wind turbine and can be domestically sourced.”

EU WIND OEM MARKETS UNIQUE

The European Union case for nearsourcing is evolving too. Christoph Zipf, press and communications manager at Wind Europe, said that five of the top 10 wind industry OEMs are headquartered in the EU, along with 248 factories producing components for wind turbines.

Zipf said: “Europe remains the technology leader for wind energy. European OEMs are dominant in thirdcountry markets, even though Chinese OEMs are gaining increasing market share in markets like Australia, Pakistan, South Africa and Central Asia. European turbines will continue to sell all over the world for the foreseeable future.”

European wind OEMs depend on global supply chains to source components and raw materials, and allow them to serve several markets and compete on a Christoph Zipf global scale. WIND EUROPE

Half of the top 10 wind industry OEMs are headquartered in the EU, including Vestas. Shown here are Vestas’ wind turbines at Rødby Fjord, Denmark. CREDIT: VESTAS WIND SYSTEMS A/S

Zipf said the top determinants for a supplier of a particular project are costs, project size (in megawatts or MW), deadlines, technical specifications, component size, and availability of manufacturing capacity.

“A big and stable home market will encourage the maintenance and further development of a local industrial footprint due to economies of scale and logistical efficiencies. However, far from nearshoring, we’ve actually seen offshoring in recent years,” Zipf said.

Wind Europe attributes this seeming anomaly to: • Volatility of European markets, particularly Spain and Germany. • Development of non-European markets. • Pressure from public authorities to reduce the levelized cost of electricity. • Proliferation of EU defense measures on raw materials, which is incentivizing the import of downstream components.

“Progress on industrial subsidies at the global level is needed to ensure that European manufacturing facilities aren’t forced to pay more for their raw materials than facilities located elsewhere,” Zipf said.

EU wind targets are lofty. “Hitting the 55 percent emissions reduction target by 2030 will require a big ramp-up in capacity installations … [and] the right government policies on permitting and auction design.” This is expected to include long-term forward visibility, revenue stabilization mechanisms and technology specificity. “It will also require big public investments in the modernization and expansion of electricity grids, ports; research and innovation (circularity, digitalization, floating offshore wind), and in renewable hydrogen (notably electrolyzer scale-up) for the chemicals industry and hard-to-abate sectors,” Zipf said.

Interestingly, transport costs may be decreasing in importance. “Even bulky, heavy components like blades and towers can now be transported overseas with advances in bulk shipping. Overland transportation presents more of a challenge. But we’re seeing innovation here, such as the use of airships,” Zipf said.

THE SOUTH AFRICA SITUATION

In the case of South Africa, domestic or localized wind industry supply might look very different in a few years, according to Hansen. “Domestic production/localization will depend greatly on the market demand set up by the government as part of the Renewable Energy Independent Power Procurement Programme auction scheme.” South Africa’s Integrated Resource Plan calls for 14.4 GW of new wind capacity by 2030 – a powerful draw for foreign investment in local production.

“Localization depends on the stability … Assuming that a sufficiently large and predictable market demand would be in place, one could easily imagine that the local production of towers … would reappear (as there were previously several tower suppliers) in the short to medium term, as would local blade production by foreign suppliers. In the longer term, one could expect to see the local assembly and production of more complex components, such as forgings, bearings, gearboxes and nacelle hubs, undertaken by local subsidiaries of lead firms,” Hansen said.

Over the years, wind industry developments – especially the increasing size of components and escalating buy local policies – have created challenges for transportation Namir Khanbabi and logistics com panies. Namir SWIRE PROJECTS Khanbabi, general manager of Swire Projects, noted that this has happened in the past in the U.S. and to a limited extent in Australia. “So, we may see this [near-sourcing] increasing in those areas, but the overall cost of production and supply will still have to be considered.”

Khanbabi agreed the case in the EU is different: “In contrast, if we consider Europe, which has one of the highest investments in renewables, the opposite is happening.” Lately Khanbabi has seen a shift away from traditional European suppliers of onshore components toward Asian suppliers. “For offshore components and due to the weight and size of the units, many components (such as transition pieces) need to be sourced close to the field due to the cost of transportation. With a number of offshore projects starting in Asia, we expect that many components will be sourced in Asia for future projects.”

Like other transportation providers, Swire recognizes growing market potential, and has made some strategic corporate changes. It is well-established in the offshore space with its investment in Cadeler (formerly Swire Blue Ocean), an offshore installation company. Swire Oilfield Services has rebranded to Swire Energy Services due to its shift in focus towards renewables. “As Swire Projects, we are working closely with Swire Bulk on solutions utilizing backhaul capacity which provides uniquely economic and competitive solutions, as well as with multipurpose tonnage from the market, and Swire Shipping. We are looking to the future in the renewable space and will adapt our strategy according to where we see future opportunities arising,” Khanbabi said.

LOCAL CONTENT RULES SET STAGE

Local content regulations, or LCRs, will play a major role in stimulating the localization of supply of complex components. There is opportunity for the localization of service activities as well, including employment, of course, and “high value-added/knowledgeintensive activities, such as advanced business services (e.g. legal consulting), engineering, construction, project management, transport and logistics, and operation and maintenance,” Hansen said.

Local content rules could disrupt market forces. For example: “A significant reduction in the price of transporting components from China to South Africa could potentially contribute to undermine efforts aimed at promoting component production in South Africa. However, the introduction of a high level of LCRs in South Africa (say at 60 percent or above), which is enforced effectively, would likely be a counteracting force to this scenario,” he added.

Many countries in Asia already apply local content requirements to encourage the development of local supply chains, Zipf pointed out. “Local content requirements increase costs for both manufacturers and governments, since they can drive sub-optimal investments in manufacturing capacity and thereby push up the levelized costs of electricity. In easier words: They make wind energy more expensive,” he said.

Staying abreast of LCRs, which may vary by country, state, region or project, will keep the wind supply chain hopping and impact procurement strategies. However, Khanbabi cautioned: “Someone has to underwrite such a policy if it seeks to eliminate the competitive advantage of foreign suppliers. What we hope we see is that a balance is struck between opportunities for local economies and imports, as it is the latter that we need to see volume in the market. With projected growth figures in onshore and offshore wind there should be hopefully plenty to go around.”

The wind energy industry may be able to hasten the roll-out of new capacity with the help of the supply chain, but a lot of stars will have to align. Successful near-sourcing must factor in competitive suppliers, timelines, project location, government intervention through incentives and barriers to trade, and a multitude of other variables.

At the end of the day, it appears some projects and local economies will benefit from near-shoring supply. Some won’t. BB

GE and other OEMs are setting up local manufacturing facilities to serve local projects. CREDIT: GE Based in the U.S., Lori Musser is a veteran shipping industry writer.

REGIONAL REVIEW

BREAKING RECORDS IN THE BALTIC

Breathtaking Scale of Fehmarnbelt Project | BY FELICITY LANDON

More than 18 kilometers long and incorporating a four-lane motorway and twin-track electrified railway, the Fehmarnbelt Tunnel will be a record breaker as the world’s longest combined road and rail immersed tube tunnel.

Its construction will be something of a repeat performance for Denmark, as the Øresund Tunnel, part of the fixed link between Denmark and Sweden, was built as a similar immersed solution 20 years ago. The difference? The Fehmarnbelt Tunnel, across the Baltic Sea, will be more than five times the length.

The scale of the project is breathtaking. The planning is immense. Lars Greiner, bulk terminals specialist at Hamburg Port Consulting, put it into context: “I have worked on projects like this before, where on the face of it looks very big – but it is just like ‘how do you eat an elephant?’ The answer is you break it down into phases.”

In this case, it all starts with a port – a brand new one, being built at Rodbyhavn on the island of Lolland. This will be a largescale work harbor, providing 1,500 meters of dedicated quays with water depth of 10.3 meters. Alongside, an immense construction operation is being built from scratch, to include production halls and drydocks.

Eight production lines will create concrete tunnel segments in a continuous casting process. Nine segments will be joined together to create each complete tunnel element, 217 meters long, 42.2 meters wide and 8.9 meters high, and weighing 73,500 tonnes. The finished elements, fitted with watertight bulkheads, will be moved into the drydock, floated out into the harbor and then towed to a holding area out at sea, ready to be immersed in a pre-excavated trench. The tunnel will consist of 89 elements.

THREE MAJOR CONTRACTS

The Fehmarnbelt Link, connecting the Danish island of Lolland and the German island of Fehmarn, is a completely Danish project, albeit involving some obligations from Germany regarding provision of road and rail links on the German side. Femern A/S is the Danish state-owned company charged with delivering the tunnel, which will be paid for by customer tolls when it opens for traffic.

The project is divided into three big contracts – “tunnel north,” “tunnel south” and portal/ramps on both sides. All three contracts have been awarded to the one joint venture, Femern Link Contractors, or FLC.

“We started with only the land at Rødbyhavn; we will build the big factory to produce the tunnel elements and the harbor to bring in all the materials for production and to sail out the elements to the site,” said Tomas Skjold, construction manager, Femern A/S.

“We will have separate quays for different materials – i.e. one for reinforcement and gravel, and another for bringing in cement and all the materials for concrete. The supply of materials will be needed for continuous production of the tunnel elements.”

The big gain from this approach is the ability to have continuous progress, he said. “Normally when you are doing a tunnel, you are digging a big hole in the ground, bringing out the spoil, and then stopping while you take out two or three elements which are installed under the seabed, then restarting again.

“Also, we are building a tunnel for two lanes of traffic and two railway lines, so conventional tunneling would require a huge diameter. For a tunnel under the seabed, you would have to encroach more into the German and Danish territory at each end in order to get the tunnel low enough while also having the gradual gradient required for rail.”

The process will require a massive and continuous supply of raw materials, but no heavy-lifting at this stage.

Skjold said the logistics for larger items required later in the project – for example, electrical components, barriers, lighting, rails and so on – have yet

to be decided. “At present the focus is on the civil contractors, and phases for the railway and mechanical/electrical installation will go out to tender at a later stage.”

The production of 3 million cubic meters of concrete will require 7 million tonnes of material to be brought into the harbor. As well as excavating a trench in the seabed, the design involves building a gravel bed and also using gravel and other materials on the side and top of the tunnel elements: “This will also require a huge amount of materials, about 14 million tonnes mainly of gravel and sand.”

By December 2020, work on the Rødbyhavn quays was 80 percent complete and dredging had begun. While FLC’s responsibility covers building the factory, producing the elements, then towing them out and lowering them into the trench, another contract covering dredging and reclamation was awarded to a Dutch consortium, Fehmarn Belt Contractors or FBC, and came into force in November 2019.

“Between 2,000 and 3,000 people will work on construction of the tunnel elements,” Skjold said. “Once you add in the local area, the supply chain and service suppliers, including accommodation, hospitality and smaller jobs around the project, a lot of people will be involved at its peak. Right now, about 150 people are working on construction of the harbor.”

The consortium is also building a small harbor on the German side next to Puttgarden.

OPPORTUNITIES BEYOND THE LINK

Greiner said now that work on the tunnel work has started, the sector can “look forward to new opportunities” across the project logistics sector. “This connection between Denmark and Germany is already laying the foundations for investment and expansion across many industries, with the promise of associated project cargo requirements.”

He pointed out that the Fehmarnbelt link is one of the five cross-border projects within the European Union’s Trans-European Transport Network

Top: The crossing will link Denmark and Germany. CREDIT: FEMERN

Above: The tunnel will be the world’s longest combined road and rail immersed tube tunnel. CREDIT: FEMERN

(TEN-T) policy, whose ultimate objective is to close gaps, remove bottlenecks and technical barriers, and strengthen social, economic and territorial cohesion in the EU.

“The hope is that this development will move much of the logistics movement from the Great Belt route via Zealand in Denmark to a more direct route between Copenhagen and German, smoothing trade between them.”

Theis Gisselbaek, chief commercial officer at the Danish port of Grenaa, has also spoken of the possibility of gaining work linked to the Fehmarnbelt project – and he also thinks the knock-on opportunities could be considerable.

“Infrastructure-wise, a lot of projects will be materializing in the next five to seven years, as the [Danish] government tries to create work around Covid-19. We are a project port, so it could be good for us,” he said. “We are focusing on the tunnel construction itself but also on a lot of other projects which we expect to see close to the tunnel – general infrastructure, building work and so on.”

Grenaa could handle steel and other building materials required for the construction of the factory, as well as providing a hub role for bulk materials during the tunnel construction, he said.

“We have heard that some materials will be coming from China – steel for armored concrete, for example – and this would likely involve 30,000-40,000 tonnes in one vessel. The project is based around just-in-time delivery for everything, so this might require a hub function with reloading into small vessels to deliver to the site. We might also see shipments of steel rails for the railway later on.

“A lot of vessels and machinery will be required for the project, and these will need a maintenance and stacking facility if they have an ideal period. We believe the Port of Grenaa is well placed to provide facilities for vessels and storage for cargo.”

The knock-on benefits from the new tunnel link are also significant for the region of Lolland-Falster, he said. Motorists will be able to make the crossing in 10 minutes and train passengers in seven minutes, instead of an hour-long ferry ride or a 160-kilometer detour through the region of Jutland in Denmark.

The area had a major industrial production cluster in the 1950s, ’60s and ’70s, but many factories closed down in the 1980s. “The area has suffered since then, being in the middle of an area with no logistics or transport routes. We are already seeing a build-up of logistics hubs around the highway between Copenhagen and the island of Falster and the railway is being updated, so the effects have already begun.”

FUTURE PORT QUESTION

While Rødbyhavn will play a crucial role as possibly the world’s largest work harbor, its future is not certain. At present, Femern’s permit states that the factory will be demolished, and the harbor returned to its previous state once the project is finished. Any alternative decision would be a political one, Skjold said.

However, Gisselbaek added that the Rødbyhavn facility may eventually be maintained to meet the needs of other infrastructure developments. Among these is the much-discussed possibility of building a Kattegat crossing in the form of a tunnel, a bridge or both.

“Apart from that, with the huge progress in offshore wind expansion off Denmark and other major projects, we believe that the capacity of port infrastructure around Denmark and the region will be limited and we expect to be extremely busy,” Gisselbaek said. BB

Felicity Landon is an award-winning freelance journalist specializing in the ports, shipping, transport and logistics sectors.

Illustration of the work harbor in Rødbyhavn CREDIT: FEMERN

Europe’s Heavy Corridor Hopes

Will Bloc Deliver on Network Promises?

BY TON KLIJN, ESTA

Joined up thinking on European heavy load logistics is urgently needed. CREDIT: ESTA For many years, my organization, ESTA, has been campaigning for the creation of pan-European heavy transport and abnormal load corridors, as concerns have grown about weak and deteriorating infrastructure. Today, we are cautiously optimistic that our work is close to fruition. But please note the word “cautiously.”

The optimists among us point out that the European Union has finally agreed to spend €1.5 billion to help create a network of “dualuse” heavy transport corridors for both military and commercial purposes.

But there is a significant hitch. That €1.5 billion is part of the EU’s new seven-year budget which has to be passed by all member states.

And at the time of writing in mid-December, approval had been stalled by ongoing and bitter disagreement between Brussels, Hungary and Poland over the budget’s rules and regulations. So, no budget agreement, no heavy transport corridors. Yet, to us at least, the arguments in their favor seem obvious and undeniable. And in recent years, our proposals were given extra impetus by a series of events, some of them tragic.

Just over a decade ago, the global financial crash had a devasting impact on public finances. Local authorities across Europe cut staff and lost much of their in-house engineering expertise. This in turn meant that many were reluctant to give permits for heavy or abnormal loads because they no longer had the skills to ensure that the requested routes were safe.

Secondly, investment in infrastructure, already at a low ebb in many countries, was further reduced, adding to safety concerns.

Against this background, the creation of a network of heavy transport corridors seemed to us to make perfect sense. What investment was available could be focused on a limited network of routes whose strength and quality could be established to everyone’s satisfaction.

What is more, dealing with this issue on a pan-European basis meant that the routes would – hopefully – connect with each other, something that has not always been the case, even within nation states.

CONVOY ISSUES

Then in early 2018, a convoy of U.S. howitzer guns traveling from Poland to southern Germany for a major NATO exercise was held up when German Police stopped the Polish company transporting them, reportedly for violating local transport regulations and because of fears of the state of some roads and bridges on the route. As a result of this and other similar incidents, NATO asked the EU to develop a series of routes to help military equipment move around quickly and safely.

ESTA, with the backing of the International Road Transport Union, proposed that such a network of routes could also be used for heavy transport as well as for military purposes, a dual-use argument that was accepted by Brussels.

Today, we can only hope that common sense will prevail and that the funding for a network of heavy transport corridors will be forthcoming despite the political game playing.

Which brings me to a final point that is well outside my and ESTA’s remit. It is clearly ridiculous that a widely supported policy such as the creation of heavy transport corridors – a policy that will improve the safety and efficiency of Europe’s heavy transport industry and its customers – risks becoming lost in a wider political disagreement. Maybe it is time for the EU to rethink how such decisions are taken. BB

Ton Klijn is director of the European association of abnormal road transport and mobile cranes, or ESTA, www.estaeurope.eu.

ENERGY UPDATE

SOUTHERN OIL BOOM

Brazil, Guyana and Suriname Lead the Charge

BY SIMON WEST

Deep below the ocean, some 300 kilometers off Brazil’s southeast Rio de Janeiro coast, lies Tupi – the world’s largest producing deepwater oil field.

Boasting 117 wells and more than 2,200 kilometers of underwater pipelines, the field, discovered 14 years ago, yields a million barrels of crude oil per day, or about 11 barrels every second. Just 5 percent of Tupi’s resources have been produced, says state-controlled energy giant Petrobras, meaning the field is likely to remain Brazil’s most prolific for years to come.

Alongside other “mega” fields located in the Santos and Campos Basins, such as Buzios and Mero, development of pre-salt reserves – so called because they are buried beneath thick sheets of salt – has transformed Brazil into a major exporter of medium-grade sweet crudes, which are highly sought after by China and other Asian refiners. Average oil output at Brazil’s pre-salt deposits has rocketed from 41,100 barrels per day, or b/d, a decade ago to 2.2 million b/d in 2020.

Factor in the 92 million cubic meters per day of pre-salt natural gas, and total production stands at 2.8 million barrels of oil equivalent per day, or boe/d, about 72 percent of Brazil’s nationwide oil and gas output of 3.9 million boe/d.

Petrobras is the dominant force in the region. The company is midway through a plan to sell off billions of dollars’ worth of non-core assets such as refineries and pipelines to focus on pre-salt exploration and production.

Other international energy majors such as Shell, ExxonMobil and Chevron have been lured to the region by a raft of industry-friendly reforms, including a new rule three years ago scrapping Petrobras’s mandatory role as sole operator of pre-salt projects.

BRAZILIAN ATTRACTION

A stable political and regulatory context, good infrastructure, strong local expertise in deepwater development and robust domestic markets for oil products and natural gas are also enticing investors, said Sylvie D’Apote, managing partner at Brazilian energy consultancy Prysma E&T Consultores.

“I don’t see many other opportunities worldwide which offer the same attractiveness and risk-reward balance,” D’Apote told Breakbulk.

Elsewhere in South America, excitement continues to grow in Guyana following ExxonMobil’s 18th discovery at the 6.6 million-acre Stabroek Block, about 190 kilometers off the country’s Atlantic coastline.

The find at the Redtail-1 well means Stabroek’s estimated recoverable resources are approaching 9 billion boe, and comes just five years after ExxonMobil’s first commercial discovery at Liza-1. Production at that well began in December 2019 from the Liza Destiny floating production storage and offloading vessel, or FPSO, with its capacity to pump 120,000 b/d.

With the start-up of the Liza Phase 2 project slated for 2022, and the Payara development for 2024, ExxonMobil, alongside partners Hess and CNOOC, believes the acreage could call for at least five FPSOs to produce up to 750,000 b/d of oil by 2026 – almost a barrel a day for every citizen of the country.

Stirred by ExxonMobil’s success and the prospect of lower production costs as local technology and expertise develops, other exploration companies are entering the market, such as Repsol, Tullow Oil and Canada’s CGX Energy.

“Beyond the huge resource potential, it is attractive to a certain type of company that has expertise in these sorts of offshore operations that require relatively little onshore support,” said Jed Bailey, managing director at Energy Narrative.

“For a company like Exxon and other U.S. producers it is relatively close to the refining capacity they have on the US Gulf Coast. It can certainly help replace some of the barrels that they are not pulling out of Venezuela for example.”

SURINAME POISED FOR ENERGY BOOM

The former Dutch colony of Suriname, meanwhile, which shares oil and gas resources in the Guyana-Suriname Basin, could also be on the verge of its own offshore boom.

Several oil and gas explorers have arrived, including U.S.-based producer Apache, which has made three deepwater discoveries at Block 58, and Malaysia’s government-owned energy firm Petronas, which spudded this year its first well – Sloanea-1 – at Block 52, located north of Suriname’s capital, Paramaribo.

The United States Geological Survey, or USGC, said the GuyanaSuriname Basin could hold 13.6 billion barrels of oil and 32 trillion cubic feet of natural gas, ranking it the secondmost prospective unexplored basin in the world.

“There is so much potential there,” said Brent Patterson, regional director for the Americas at Blue Water Shipping, a Houston-based transport and logistics specialist with offices in Guyana and Suriname. “We are gearing up for that in the same way we did several years ago for Guyana.”

The rapid development of pre-salt and deepwater resources in Brazil, Guyana and Suriname could enable South America’s offshore production to outstrip volumes from North America by 2024, according to data and analytics company GlobalData.

Offshore output in the U.S., Mexico and Canada is expected to drop by 15 percent from 2022-2024, GlobalData said in a report, hurt by the fallout of the Covid-19 pandemic and, in the case of the U.S. and Canada, bottlenecks caused by insufficient pipeline capacity.

Development in South America is also more competitive – Brazil’s presalt projects have breakeven oil prices of US$35 per barrel, while prices for deepwater projects in the GuyanaSuriname Basin are as low as US$23 per barrel.

Beyond 2024, offshore output in the U.S. will likely face further challenges as President-elect Biden’s pledge to cut carbon emissions should see the reintroduction of tougher legislation governing upstream activity.

“Brazilian pre-salt and Guyana’s deepwater are significant resources with relatively low break-even prices,”

There is rising demand for logistics support for the construction and transport of FPSO vessels in Brazil. CREDIT: FOX BRASIL

said Svetlana Doh, oil and gas analyst for GlobalData.

“As a result, these countries contribute the most in terms of future planned and announced projects, and hence are the main drivers for production growth in the region. North America, on the other side, is quite well explored and production is somewhat expected to plateau towards 2024.”

PRE-SALT OPPORTUNITIES FOR BREAKBULK

In Brazil, pre-salt is providing plenty of work for project logistics, from transporting flowlines and masterminding full rig moves to dismantling decommissioned platforms and supporting the construction of new liquefied natural gas, or LNG, units.

Murilo Caldana, project director at Sao Paulo-based freight forwarder FOX Brasil, also pointed to rising demand for logistics support for the construction and transport of FPSO vessels.

Although FPSOs deployed at presalt fields are built in China, local content laws require at least some

components and equipment to come from Brazil. Logistics firms are tasked with shipping these parts to Chinese shipyards for assembly, and then transporting the completed Murilo Caldana vessels back to Brazil for pre-salt FOX BRASIL operations. Petrobras is planning to spend US$17 billion over the next five years for the construction of 13 new FPSOs for the Santos and Campos Basins, according to a recent investor presentation. “I am very positive right now to see everything that is happening in the country and for the project business,” Caldana said.

Similar opportunities on a smaller scale have opened up in Guyana and Suriname, but unlike Brazil, the pace of offshore development has exposed a deficit in the infrastructure and equipment required for moving breakbulk and heavy-lift.

“There is not a lot of project cargo in Guyana right now because there is limited infrastructure and handling ability,” Patterson said. “Most of the heavy equipment is handled in Trinidad.”

Some major infrastructure projects in the region are likely to boost options for breakbulk including CGX Energy’s plans to construct a deepwater port facility on Guyana’s Berbice River to support exploration activities in the Guyana-Suriname Basin.

Kevin Lagnah, business development lead at Ramps Logistics, a Trinidad-based freight forwarder that has worked on several offshore campaigns including Petronas’s Sloanea-1 campaign, said the Berbice project and other port developments would be welcomed by logistics services providers in Guyana.

“The ports are now getting more and more equipped because they have seen the type of cargo that is expected to come into the country,” Lagnah said.

PANDEMIC SETBACK TO PLANS

However, like everywhere, the economic downturn brought about by the pandemic has delayed projects throughout the region and forced companies to reassess capital expenditure plans.

Petrobras said in November it would cut its five-year spending plan by 27 percent to US$55 billion, although it would continue to focus on development of its pre-salt assets. The energy ministry has also reported this year production stoppages at offshore and onshore facilities, but according to D’Apote, Brazil has been one of the very few countries in the world that has boosted oil volumes during the pandemic.

“In the medium term, we may see delays in the contracting of new platforms and other related infrastructure, but so far we have not heard of drastic decisions relating to the cancelation of large exploration and production projects in the presalt,” the analyst said.

ExxonMobil, meanwhile, despite announcing spending cuts for next year, said in November it would prioritize capital investments on its assets with the highest potential future value, which included Guyana.

“For me it has probably been the most exciting time in oil and gas in a very long time, in terms of new services, discoveries we have seen, and what we have been reading in the news about what is to come,” said Rudy Rampersad, operations director at Ramps Logistics. “We are excited, very excited.” BB

Trinidad-based Ramps Logistics described the current market in Guyana as “most exciting.” CREDIT: RAMPS LOGISTICS, GUYANA Colombia-based Simon West is a freelance journalist specializing in energy and biofuels news and market movements in the Americas.

Digital Take-off

Using AI to Revolutionize Air Cargo

Innovation in air cargo has never followed a linear progression, and this very traditional industry now seems to be stuck in a rut, when the need to increase productivity is more important than ever.

Catching up on innovations that have proven to be successful and have become the standard in many other industries is a must for all air cargo players, including air carriers and freight forwarders. Getting data and making good use of this data with the help of artificial intelligence is one area that shows great promise and will, in my view, be the next breakthrough that will provide a very competitive advantage to the most advanced project cargo and breakbulk stakeholders.

With 80 million shipments per year and multiple touchpoints in the process from booking to tracking, air freight generates a lot of data points. For the last few decades, most of this data has been exchanged via Electronic Data Interchange, or EDI, in a standardized way – most often through Cargo-IMP or Cargo XML – set by airlines and freight forwarders through the International Air Transport Association. Today, most of this data exchange flows via those two international companies, which have split the market of air cargo messaging and are still transmitting them via the same few decades-old technologies.

TIME FOR CHANGE

But things are changing. Over the past couple of years some air cargo stakeholders have woken up and, firstly, realized that they could replace EDI with an Internet application programming interface, or API, and secondly, that something big could be done with such an amount of powerful data. This is exactly the point that Google reached 20-plus years ago. Excited by the cost savings and benefits, transformation for carriers and freight forwarders is now happening fast. Through APIs, data is starting to flow faster than before.

There are some persuasive arguments for the use of AI in a repetitive industry where forecasting is key for all the players. Yield/ revenue management started later in the air freight industry than in the passenger sector and is still sometimes a small department focused more on pricing or capacity management. Yet, increasing forecast accuracy on supply (airline capacity) and demand (booking requests) on a specific route and specific dates has a direct impact on the quality of the pricing and on an airline’s total revenue. As has been seen in other industries that need to forecast supply and demand, using machine learning algorithms on past data as well as available current sources of data improves the prediction and output of models, resulting in optimum pricing to the benefit of the carrier. Digital ebooking platforms like CargoAi enable and facilitate the distribution of dynamic pricing from the airlines to the freight forwarders.

For a freight forwarder, being able to forecast air cargo prices on specific routes can have a major impact on profitability and on increasing sales. Again, using AI to increase forecasting accuracy is something that has been done for quite some time in other industries, including banking and in the supply chain for inventory optimization, and there is no doubt that machine learning can do better than any humans on an Excel chart. With a pricing forecast, freight forwarders will be in a better place to negotiate long-term contracts with shippers as they will have better visibility on how much airfreight will cost through the whole period.

It is great to see that technology, innovation and AI are today touching down in the air freight cargo at a rapid pace. As the traditional players adapt to external factors including the Covid-19 crisis, competition from new digital forwarders and the further rise of e-commerce will support that growth. Now that digital growth has truly taken off, I foresee the air cargo sector quickly catching up with other industries and coming out of the changed market very strong indeed. BB

Matthieu Petot is CEO of CargoAi, an air cargo digitalization transformation specialist.

BY MATTHIEU PETOT

CREDIT: SHUTTERSTOCK

BREAKBULK AMERICAS’ DIGITAL SPECIAL

Behind the Forecasting 8-ball Industry Leaders Navigate the Latest Uncertainties

BY GARY BURROWS

For industrial project cargo and its key sectors, forecasting opportunities and challenges in 2021 is a dicey proposition.

Nonetheless, a panel representing carriers, forwarders and engineering, procurement and construction companies attempted to shed light on the current environment, kicking off Breakbulk Americas’ Digital Special.

Raj Desai

Fluor

Richard Seeg

Intermarine Americas

“Any predictions in terms of forecasting these days is basically on a caveat, and that’s getting through the pandemic,” said Raj Desai, senior vice president procurement and contracts and chief commercial strategist for Fluor.

“It’s hard to forecast for the future when your customer is having difficulties forecasting for the future. And a lot of times they’re having a hard time because the customer’s customers are having a hard time forecasting for the future,” said Richard Seeg, president of Intermarine Americas LLC.

OPPORTUNITIES

Assuming the world emerges from the pandemic early this year, Desai and Fluor see the dependence on green energy increasing, as laws and regulations that seek to lower carbon emissions and address climate change evolve.

Cleaner-burning liquefied natural gas is drawing interest and foreign investment into the U.S. Likewise, with low-priced gas a feedstock for specialty chemicals, the U.S. gas market is “one of the most attractive places for that,” Desai said.

Though the IT industry was burgeoning before the pandemic, the drive towards working remotely has required new and broader adoption of IT solutions. That, coupled with green energy, is raising the focus on mining for the copper, nickel, rare earth minerals and other metals necessary for IT and green energy products.

“We see [Fluor] being very busy in 2021-22 moving forward,” Desai said.

For service providers, such as ocean carriers, the latest plight is cratering what has already been a difficult operating environment for several years. Webinar moderator Mac Sullivan, head of technology and digital promotion, NNR Global Logistics, noted that massive layoffs and acquisitions among forwarders and shipping lines are not the only things impacting their business models.

Intermarine’s Seeg said the shipping industry is facing multiple challenges. “There’s a depressed world economy. Nobody’s buying anything.” Because of depressed business due to Covid-19, low oil and gas prices, trade tariffs and conflict, EPCs are “focusing less on new big project spend to keep existing projects going or starting smaller projects to keep up with lesser demand.” That’s all leading to smaller and fewer cargo shipments and a push to regionalize sourcing from an increased number of vendors.

Further, trade and political uncertainty is leading to shippers having smaller cargoes and simpler supply chains on a more regionalized basis, with “some out of Europe,” but a lot more inter-Americas and domestic U.S., Seeg said. The latter plays well with liner-service carriers such as Intermarine, and its regional Americas liner service.

“The perfect vessel for the market constantly changes, depending on trade lane, volume need or transit time. As carriers, we adjust our fleet to meet our customers’ needs,” he added.

‘HOLISTIC APPROACH’

On a more global basis, the shift in sourcing from China to Southeast Asia continues, said Susan St. Germain, director of projects at LV Shipping, a Houston-based international freight forwarder and logistics provider. Though China remains the leader in raw steel and has long been the main source for her customers, those same customers are finding alternative sources in regions where steel products are exempted from the tariffs, such as Vietnam.

St. Germain said that as customers seek new sources, she has seen quotes sourcing out of Croatia, Turkey and India.

Fluor’s Desai said he’s seeing the trend of weaning off China dependency as well. CEOs are no longer “depending on one source globally … the trend among clients is towards a broader global dependence rather than counting on one market only.”

But the shift isn’t happening in a hurry. “It’s not so easy to pick up a factory and move it,” St. Germain said. So contracts that were already in place prior to the tariffs don’t have a lot of flexibility in start-up date, and mean biting the bullet on pricier Chinese steel goods.

As a forwarder, LV Shipping tries a “holistic approach,” St. Germain said. “We don’t say, ‘how much freight have you got? Here’s a ship, let’s move it.’ It’s more managing the flow

2021

of the product … It is about (the customer) taking delivery of the product at the last possible moment so maintaining cash flow.”

While tariffs have been lifted on some items out of China, St. Germain said there has been a “mad dash to get it on board ships and across the pond and customs cleared before the end of the year.”

She did note that if she were to “throw a dart at the map, India might be the next big supplier of materials, at least for our company and the projects we’re working with.”

Seeg added that Intermarine is seeing increased flows from Vietnam and Indonesia.

DIGITALIZATION

Panelists largely agreed that the pandemic has greatly accelerated the industry’s push towards digitalization.

Stephen Garifalos, national director, out-of-gauge and specialized cargo sales, MSC Mediterranean Shipping Co., sees the focus among all carriers large and small. “It makes sense. It also insulates your business from events such as this (pandemic).”

Businesses scrambled at the pandemic’s onset to shut down offices and move all employees that could to work from home. “Some were prepared, well prepared,” he said.

“Any predictions in terms of forecasting these days is basically on a caveat, and that’s getting through the pandemic” – Raj Desai, Fluor. CREDIT: SHUTTERSTOCK

Though MSC had digitalization plans in place, they were “not for that week or month.”

However, the carrier’s IT department was quick to pivot operations and provide systems, software and hardware “to give us all the tools we need.”

WHO PAYS?

NNR’s Sullivan asked panelists that as these IT innovations bubble into being, who pays: client or service provider?

“I don’t think it’s with our customer base,” Garifalos responded. “The expectation is that you’re there to support customer service. The easier you make it for your customer to navigate your own company systems, the more trust they’ll give you, the more that they will come to you … If you make it difficult, they’ll go somewhere else in a hurry.”

Customers demand “more agile and flexible,” said Seeg of Intermarine. To “support our customers as their needs changed, that’s the critical and important part.”

The required push to home office, and to split staffs into individual domiciles, has developed a strangely paradoxical situation that has “actually brought us closer together,” St. Germain maintains.

Besides a deeper relationship with clients, it helps the bottom line, she added. “I feel that I can go to them and say, ‘I mentioned something the last time we talked, and I thought about it and what if we do this or that?’ Rather than being reactive, I feel like I’m part of their team.”

While Sullivan suggested that the current environment – and these deeper online relationships – makes it harder to acquire new business, St. Germain said in wooing new customers this year, that they’re looking for the same thing: “a decent relationship.”

Fluor’s Desai said the EPC saw opportunities to expand its range of services to help traditional and new clients navigate through the crises brought by the onset of the pandemic. That included breaking out of the typical EPC services box and creating offshoot supply chain services for non-traditional clients. This included customs issues, reshoring, and port issues.

Further, they are investing in artificial intelligence, predictive modeling, auditing and digitalization services. Its modeling is tied into IBM’s “Watson” platform. The payoff for customers would be dynamic pricing, he added. BB

BREAKBULK AMERICAS’ DIGITAL SPECIAL

Beaming in a Virtual Expert Remote Expert Becomes Reality During Pandemic

BY GARY BURROWS

Key breakbulk industry verticals, across all modes and roles within the massive supply chains, are employing industry-changing, remote expert technology within their operations, making the seemingly impossible possible. It was an eye-opening session during the Breakbulk Americas Digital Stephen Spoljaric Special, that focused on technology and Bechtel Corp innovation.

Remote expert technology, in a definition unearthed by moderator Stephen Spoljaric, corporate manager of global logistics, Bechtel Corp., is “the ability to connect with virtual specialists immediately, by sharing live video, audio or augmented content.”

Spoljaric, a key industry innovator from a leading engineering, procurement and construction firm, noted the concept’s first appearance was in 1973, when a NASA engineer coined the terms “telecommuting” or teleworking. By 1991, a transport engineer published the first major research paper on the concept. By 1994-95, companies such as AT&T, American Express and IBM changed policies and began to offer telecommuting, and as a result reduced their office space. In 2010, the U.S. government passed the Telework Enhancement Act, which required federal agencies to formally establish a policy on remote work.

Spoljaric maintained that research has shown that employees are more productive telecommuting – not less – as many companies have confirmed during the business corrections of the pandemic.

“That NASA engineer in 1973 suggested that within 10 years almost everyone would be working remotely. Now we are 40 years later and it took a pandemic to be a catalyst for this change,” he said.

ONE GIANT LEAP

Across the breakbulk industry, remote expert technology is being employed and enhanced among

intermediaries, ocean carriers, truckers, surveyors and insurance providers, as well as for the shipper’s perspective.

“We’re not beaming people from here to there, but we can actually put somebody on the ground at Luojing Terminal in Shanghai and moments later have them at the Port of Baltimore. They can virtually move from port to port quite easily,” Spoljaric said.

Initially, for the heavy-lift and project cargo sector, the remote expert has been employed “from a safety perspective,” he said. “It’s the ability to keep people in safe positions and to go look at things in dangerous situations.”

For the logistics and freight forwarding industry, leading companies such as DHL see this as a natural next step forward in innovation. “We’re very much focused on innovation and have an entire group working on innovation,” said Jake Swanson, global head, sector strategy at DHL Industrial Projects. Jake Swanson Swanson said DHL Industrial Projects that in 2020 DHL partnered with a technology platform, an ocean carrier and a shipper, using a video platform to observe operations at sea, observing loading and discharge, and sharing those live video streams to control tower setups, and customers, remotely.

Further, DHL is exploring whether the technology would allow approvals and sign-offs, which are vital for liabilities, customs and legal approvals – those who are dragged to the fore when something goes wrong.

Capt. Andrew Kinsey, senior marine risk consultant, Allianz Risk Consulting, acknowledges the value

More Breakbulk Americas’ Digital Special Coverage

Offshore Wind Brings Positive Spin

U.S. coastal state governments, investors and ports and terminals are gearing up for an expected boom in offshore wind energy topping 25 gigawatts by the end of the decade.

“It’s such a very exciting time to be in the marketplace,” said Dan Shreve, head of global wind energy research for Wood Mackenzie, and moderator of a panel on U.S. offshore wind prospects.

www.breakbulk.com/Articles/offshore-wind-brings-positive-spin

Space Logistics Takes Flight

In the developing niche of space logistics, industry practitioners apply often conventional – though highly sensitive and technical – strategies and operations towards out-of-this-world cargoes and ultimately, space travels.

“It still moves on the same modes of transportation,” said Jeff Bitner, senior transportation analyst, Northrop Grumman Corp. and a 28-year logistics veteran. “It is different in that many loads are heavier and larger, they’re one of a kind and very valuable. You’re not moving bags of potatoes.

www.breakbulk.com/Articles/space-logistics-takes-flight

Replays of Breakbulk Americas Webinars Available www.breakbulk.com/page/breakbulk365

of keeping people safe, particularly in the pandemic, while being able to ensure safety of the cargo in dangerous environment.

“Remote technology is not a replacement for the surveyor,” Kinsey said. “It helps fill gaps when we can’t have attendance.”

COACHING BEHAVIORS

ATS Trucking has already developed remote expert programs that impact the niche carrier’s business in multiple ways, including assuring securements on valuable loads, said Nathaniel Leis, director of safety.

“First and foremost, we use (remote expert) to evaluate the securement of our shipments, to make sure our securements are correct,” Leis said.

ATS also uses the technology from a safety perspective, evaluating driver behavior on highways from a dashboard camera, and “using remote expert to coach drivers to improve those driving behaviors,” Leis said.

The most vital application from a shipper perspective is the handling of critical loads that require very specific securement plans, particularly for high-value, uniquely vulnerable loads. ATS provided a video demonstration on the securement process during the webinar, a video feed of a load jet turbine, situated in a cradle on a flat-deck trailer.

Before departing an origin location with a securement verification requirement, the driver must take

BREAKBULK AMERICAS’ DIGITAL SPECIAL

images and send to remote experts via ATS’s internal driver application. The experts evaluate and ensure the load is properly secured, and respond with required corrections to the driver, or confirm the securements are correct and release the driver to depart, Leis said.

It’s impossible to place “an expert in any truck,” under the circumstance, so ATS’s homegrown system extended training outward to the open road.

As part of its in-house system, ATS does audits of 15 percent of drivers’ securement each day. Drivers are instructed to pull into a “safe haven,” and they are evaluated to ensure they’ve followed all securement criteria.

BEING THERE

For most industry verticals, the lack of face-to-face is insurmountable in some nuanced customer service. Interactive technology has become a valuable surrogate, particularly for global organizations like DHL, which needs to customer face, have visibility at ports, jobsites and loading origins.

“We rely on our network,” Swanson said,” whether it’s project teams or global forwarding teams located locally. We use the video capabilities we have in house” to fill in the gaps.

Allianz’s Kinsey noted that while the current industry environment has sparked accelerating interactive options such as remote experts, the fear is that there will be an ad hoc development of multiple platforms, rather than finding a shared platform that enables streamlined and mutually verifiable connection.

“We have to be robust in vetting and review, to ensure everyone is on the same page,” he said.

Rather than a head-long dash into adoption, there are risks of a company getting ahead of itself in technologies such as remote experts, panelists agreed.

For starters, there are the connectivity issues of wi-fi, or cellphone service in remote places. Proper training is another obstacle, and perhaps more so is the deep-end, sink-or-swim approach to new initiatives.

Connectivity also means ensuring that the customer embraces the process.

Spoljaric noted Bechtel utilizes a “stop card authority. If we bring out the stop card, everyone must stop. It’s a life-critical event.”

However, resistance is often seen in those events. In a face-to-face environment, usually such conflicts may be talked through. However, a disparate voice on a phone or app could force an escalation with a driver, shipper rep, or supplier.

Leis said ATS has developed internal protocols. If there is resistance at the source for proper securement by the driver, despite the remote expert protocol, the issue escalates to the fleet manager. If unresolved, then the response moves up the operations management structure.

The more unique issue is when the shipper refuses to make changes in dunnage or configuration, Leis said. Similarly, the dispute moves through the customer support team and the actual manager of the load

Across the breakbulk industry, remote expert technology is being employed and enhanced among intermediaries, ocean carriers, truckers, surveyors and insurance providers, as well as for the shipper’s perspective.

CREDIT: SPLIETHOFF GROUP

tender puts emphasis on the unsafe loading.

“Ultimately our final step is we’re not going to haul this load; we don’t think we can safely do it,” Leis concludes.

DHL’s Swanson also noted resistance to process, particularly within the port environment. Unionized ports have found resistance from labor in simply holding the camera. “So we had to hire a surveyor to hold the camera,” he noted, which defeats the whole remote proposition.

So, who pays for all of this technology and development? While the shipper directly benefits – and vendors receive a degree of shield for liability – there’s considerable development, hardware and software investment.

Swanson pointed out that the cost/benefit weighs toward the service provider that differentiates itself in the industry for its leading-edge approach.

Kinsey said the situation requires a longer view, and that such investment makes one a “best-in-class provider. You can pass on costs, but everyone has skin in the game.” BB

As the world rides the pandemic roller coaster with countries opening and closing to travel, we at Breakbulk Events & Media continue with the weekly BreakbulkONE newsletter to keep the industry connected and supply welcome good news. Here’s a selection of subscriber favorites from the last few months.

KNOWLEDGE HUB: VETERANS

RISK MANAGEMENT – THEN AND NOW – MEANS PLAN AHEAD OR PERISH

BY DICK KNOLL

When I started in this business, project owners knew they had to insure the project and the business from outrageous losses, whatever they were. Sometimes they worried about how the project would progress, but that issue was usually left to the insurance company to work out. That’s where I came in.

Trained as an engineer, I tend to take things apart and put them in a semblance of order as I see it for the job or project. Being an engineer got me hired by a major insurer syndicate handling all their claims. It was a good life – traveling the world (a bit too much), getting to see a lot of things and places, and it paid fabulously.

When I started handling project claims, I could not count on safety, project planning or the project administration itself for much of anything, except a big payday for me. Back in the early 1960s and 1970s there were as many physical issues (broken chains, roads and bridges that could not handle the cargo) as there were planning issues. Dick Knoll People would “plan” a refinery Drexel Logistics or power plant or whatever without regard to the physical limitations of the times.

Back then, the heaviest pieces were usually under 100 short tons primarily because of physical limitations of lifting, trailers and things of that nature. But people also forgot to plan ahead.

There were times I arrived on a site only to find the cargo hung up

Breakbulk Middle East Digital Special Feb. 9 – 10, 2021 – To Bring Our Community Together

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on a dirt road that was so bad the trailer and load could not handle the potholes. Surveyors did not exist. Port facilities were hired by steamship lines based on their pricing, and if a chain broke, so what, it was insured. You had to pick and choose the right contractor (with the possible exception of mainland Europe) because not everyone had the right equipment to do a job, but they bid it anyway. Projects were seen by most vendors as a way to expand their business, and these projects were normally insured, so why worry about losses?

To counter these and a myriad of other problems, I started sending the insurer a “lessons learned” report after each claim I worked on. After two or three years, the insurer actually started reading these things, but by then they had lost so much they went out of business. While they were in business, they started getting a bit pickier about stuff or overall project operations.

The short story was I kept that “lessons learned” process up through my tenure at Panalpina and I never lost anything at Panalpina because we planned ahead! BBONE

Richard Knoll, owner and principal of Drexel Logistics, has been a transportation industry veteran for more than 50 years. He has held positions in rail, motor carrier, intermodal, and freight forwarding, and senior management positions focusing on the handling and execution of project cargoes especially domestic and global oversize and overweight cargoes. He can be reached at richard.knoll@ drexel-logistics.com.

KNOWLEDGE HUB: ENERGY

CROWLEY RESPONDS: U.S. OFFSHORE WIND AND THE JONES ACT

Following up on Breakbulk’s U.S. Offshore Wind Projects webinar held in November as part of the Breakbulk Americas Digital Special, panelist Jonathan Zier, manager of business development for Crowley’s offshore services, answered additional viewer questions beyond the webinar session, covering the Jones Act and development of the offshore wind energy sector.

Q: How do EU transport/ installation and other companies get involved in U.S. offshore wind projects, considering Jones Act compliance?

Jonathan

Jonathan Zier Zier: There will be a lot of heavyCrowley lift cargo such as the monopiles and WTG (wind turbine generator) components delivered from Europe and Asia onboard non-U.S. flag heavy-lift vessels. The Jones Act comes into play when shuttling the components offshore to the installation vessels. I think there will be other opportunities for EU companies to partner with Jones Act owners/ operators on SOVs (service operation vessels) and CTVs (crew transfer vehicles).

Q: How difficult would it be for the U.S.-flag vessel industry to replicate a fleet of installation vessels like that already seen in Europe?

JZ: I don’t really think the fleet in Europe will be fully replicated in the U.S. I believe the fleet that will be developed in the U.S. will have to be tailored to the challenges we face

Crowley does not expect the U.S. wind installation fleet to replicate the European installation fleet. CREDIT: CROWLEY

over here – especially that shuttling concept. This is not as much of an issue in Europe as it is here in the U.S. I believe the early projects will start out by using the existing Jones Act fleet in the market, maybe with some slight modifications, and then once the market starts to take off in the U.S., there will be more purpose-built Jones Act assets produced. The key question is what shuttling concept will the industry accept? If newbuilds will be required, the clock is ticking, and construction contracts will have to be made relatively soon.

Q: What are the concerns within the industry for the Jones Act fleet to satisfy the projected vessel demand for U.S. offshore farm installation?

JZ: We will have to balance vessel availabilities in the market between oil and gas and wind, i.e., Gulf of Mexico and U.S. East Coast. The potential for spot market availabilities for wind projects on the East Coast, as there are in oil and gas in the Gulf, will not be a workable solution going forward.

Another challenge, of course, is capital. If we are talking vessel modifications for the installation phase, that’s low capital, relatively speaking, that we feel can be shared between owners and developers. Jones Act compliant SOVs on the other hand will be very capital-intensive, and we believe that it could be advantageous to partner with existing European owners who already have experience in this field to obtain lower design, construction and operational costs.

BBONE

Jonathan Zier is responsible for sales and chartering activities of Crowley’s unique Jones Act offshore fleet of dynamic positioning-capable offshore tugs and flat deck project barges.

Full Q&A available online at http:// breakbulk.com/Articles/us-offshorewind-and-the-jones-act. See coverage of the U.S. Wind Energy webinar a https://www.breakbulk.com/Articles/ offshore-wind-brings-positive-spin, or watch the webinar at americas. breakbulk.com/page/digital-specialoffshore-wind. See related Breakbulk story, “Southern Oil Boom,” page 34.

KNOWLEDGE HUB: TECHNOLOGY & INNOVATION

PROJECT LOGISTICS 2030: THE POWER TO PREDICT BREAKBULK BUSINESS

An Industry Round-Up Of 2021 Outlooks And Expectations

Sven Hermann, managing director of ProLog Innovation and professor for logistics and supply chain management at NBS Northern Business School, asked market experts about their outlook for 2021, what will it take to innovate and compete over the next 10 years, and the No. 1 disruptive technology for this decade.

TECHNOLOGY OUTLOOK

“We already see new perspectives, possibilities and chances in logistics planning and steering of the supply chain ‘end-to-end.’ Project logistics will be empowered, Digitization and data transparency will play an even bigger role in 2021. CREDIT: SHUTTERSTOCK processes will be enhanced and accelerated, and costs for paper and centralization in our so-integrated MARKET EXPECTATIONS double-checks, claim and risk breakbulk business. The question – 2021 management, security lacks and especially for logistics providers – is: “The outlook for 2021 is cautiously double-work will be reduced. This is ‘How is data transparency affecting positive due to increased service businot fantasy or spinning of confused the business model?’. This should be ness and more customer inquiries. theorists. No, it is the development an important strategy topic in the near Despite the effects of the Covid-19 of digitization in logistics and supply future.” – Andreas Sedlatschek, direc- pandemic – and precisely through the chain management in the next decade, tor global logistics, Voith Group. gradual reduction of infection achieved and this is not reversible. Logistics “Platform-based business models by the vaccination of the world’s service providers who neglect this will play a major role and will transform population – there is light at the end trend won’t survive. It´s time for them project logistics in the next years. They of tunnel and the chance for market to rethink strategies and put their will allow some players to improve their growth within the year.” – Joerg Breker. strength into digitization and AI to play and maybe to change the game as “The year ahead will open with the seize their opportunities in future.” – well. The shift to automated, efficient industry still in a state of uncertainty, Joerg Breker, senior executive expert and agile end-to-end chains based on but we will see a market recovering logistics, thyssenkrupp Industrial a selected partner network will chal- hopefully in the second half of 2021. Solutions. lenge the status quo in the industry For Voith, we are cautiously optimistic.”

“The world’s most valuable com- and the competitive position of every – Andreas Sedlatschek. panies are built on digital platforms. company.” – Jan-Dirk Schuisdziara, “While the coming year brings They are here to stay and will lead to managing director, Hansa Meyer with it a lot of uncertainty and efforts global standardization, harmonization, Global. to prepare for new projects, exciting opportunities are ahead of us if we folIntroducing Breakbulk Knowledge Hubs low up our end-to-end approach and develop continuously our consulting

Breakbulk and industrial project industry topics are supported through- business. The global economy and out the year by our media products as part of Breakbulk365, comprising daily operations may get back to pre-

Breakbulk magazine, Breakbulk Events, Breakbulk Studios, Breakbulk.com, pandemic levels within the second

BreakbulkONE newsletter and webinars. half of 2021.” – Jan-Dirk Schuisdziara.

Knowledge Hubs are great lead-ins to the live discussions at Breakbulk BBONE events and allow you to take a deep dive into these important industry topics The full feature is available at http:// and the people who shape them. www.breakbulk.com/Articles/project-

Explore the Knowledge Hubs at http://www.breakbulk.com/page/knowl- logistics-2030-part-6 edge-hubs This is the final of a six-part series on BreakbulkONE.

KNOWLEDGE HUB: PROJECT SHOWCASE

WW OCEAN KEY TO CHILEAN WIND FARM DELIVERY

South America is one of the world’s leading renewable energyproducing regions, accounting for nearly 10 percent of the world’s total installed renewable energy. But while renewable energy projects are scaling up in South America, equipment needed at project sites is not always readily produced or available locally. As a result, projects are dependent on sourcing from overseas, which requires safe and reliable ocean transportation to avoid costly delays.

This was the case for forwarder NMT Global Projects when it needed to ship a used crawler crane from Santander, Spain, to Chile for the installation of wind turbines for the Tchamma Wind Farm project. The forwarder turned to Wallenius Wilhelmsen Ocean.

“Our biggest challenge was ensuring the product arrived in early December to keep on track with project schedules,” said Tristan Boorsma, NMT Global Projects. “We needed a shipping partner that could offer short, fixed transit times at a competitive rate.”

With its excellent rail connections into the hinterland, Puerto Angamos has become a strategic entry point for regular cargo flows into South America.

A privately owned port, Puerto Angamos is located in the heart of the Chilean mining industry and able to handle rolling machines and breakbulk products. WW Ocean is the only roll-on, roll-off carrier to call at Puerto Angamos and offers a direct service once a month between the U.S. and Mexico. For shipments from Europe, Asia and Oceania, the port is accessible through transhipment in Manzanillo.

The crawler crane was dismantled into 56 components, totalling about 1,500 freight tons, and was loaded onto 17 40-foot roll trailers and one 62-foot roll trailer. The roll trailers ensured safe loading and quick vessel operations at the port of discharge.

“We have full confidence in WW

WW Ocean is the only roll-on, roll-off carrier to call at Puerto Angamos and offers a direct service once a month between the U.S. and Mexico. CREDIT: WWO

Ocean to handle our customer’s product with care and deliver on time,” Boorsma said.

TIGHT TIMEFRAMES

With regular sailings from Europe to Manzanillo, Panama and a monthly connecting service to several destinations on the west coast of South America, NMT Projects relied on WW Ocean’s ro-ro service to reduce its lead times and costs.

“Manzanillo is a reliable transshipment hub for products into South America and our regular liner service with more or less guaranteed departure and arrival dates offers a fast, dependable and cost-effective solution for our customers,” said Paul Van Heurck, breakbulk sales representative, WW Ocean.

Once the first leg of the journey from Santander to Manzanillo was completed, the product was loaded onboard WWO vessel Tosca for the final leg to Puerto Angamos. BBONE

The Future of Offshore Wind Projects

Breakbulk Events & Media was pleased to be a partner in the Energy Transport Summit held in December and organized by the Wind Logistics Group and Energy Cluster Denmark.

The five-panel summit focused on collaboration between offshore wind players, standardization of offshore wind components in Europe as well as in Asia-Pacific and North America, and how ports can future-proof infrastructure as turbines increase in size every year.

Useful resources were shared such as DHL’s new port assessment tool, Energy Cluster Denmark’s recently released standardization guidelines for offshore lifting operations, and Advantis’ open-source designs for tower segments. BBONE

To view the presentations and replays, visit https://energytransportsummit.com/home-1/e-ts-iv-downloads.html#Section2

MARKET SPOTLIGHT

BY THOMAS TIMLEN CASHING IN ON CHINA’S COMMITMENTS

Forward-looking Plans Bode Well for Project Work

As the only major economy that ended 2020 with a gross domestic product greater than it began the year with, the importance of China to the project cargo sector will not only be maintained, but it is also anticipated to increase.

Several drivers are at play that support the view that, even if demand for project cargo transportation does not increase, the current level of demand will at least be sustained.

In addition to GDP growth, another driver is China’s Central Committee, which has formulated a five-year plan to guide economic strategy through 2025, combined with a 15-year plan known as “Vision 2035.” Together, these plans form a blueprint for the country’s economic growth model with a focus on innovation, the environment and economic self-sufficiency.

Before the five-year plan and Vision 2035 came to light, the project cargo sector was already benefiting from China’s GDP advantage combined with the dual pursuits of renewable energy sources and infrastructure initiatives. Now there is added impetus to push renewable projects: analysis from Wood Mackenzie shows more than US$5 trillion of investments will be needed for China to reach its goal of carbon neutrality by 2060. To reach this, Wood Mackenzie estimates solar, wind and storage capacities will have to increase 11 times to 5,040 gigawatts, or GW, by 2050 compared with 2020 levels.

COMMITMENT TO PROJECTS

The significance of the five-year plan and Vision 2035 in boosting project cargo work is real, according to experts in the region. Chris Devonshire-Ellis, chairman of Dezan Shira & Associates, a specialist firm handling foreign investment into China’s Belt & Road Initiative, told Breakbulk: “China tends to follow through on its plans, although there can be unpredictable bumps along the way caused by unforeseen political, medical or economic issues cropping up.

“China has also invested US$4 trillion in the Belt and Road, at least half of which is in countries that have high climate change risk. So, it is aligning its own investments with a need to wean itself off coal and onto other clean energy resources.”

On this basis, Devonshire-Ellis feels that the five-year plan and Vision 2035 will definitely concentrate minds and investments on renewables, boosting demand for the related transport service needs.

Although investment in China’s infrastructure and renewable energy initiatives would have continued even without the five-year plan and 15-year strategy papers, DevonshireEllis saw these as force multipliers that bring with them additional stimulus. “The new plan will refine and define how China intends to deal with this, and that, in turn, will be followed by China’s state-owned enterprises and private companies. Other policies can also be expected to support it, such as investment incentives as well as disincentives in certain areas.”

The steps taken by China’s Central Committee and the sustained GDP are not the only factors expected to contribute towards continued opportunities for the project cargo transport sector. There are others, namely the Northern Sea Passage and the Regional Comprehensive Economic Partnership, or RCEP, agreement.

“The Northern Sea passage will be a game changer, and the new RCEP deal will also have an impact. Look out for potential upcoming

deals involving China and the Eurasian Economic Union, or EAEU, and the EAEU with India,” DevonshireEllis said. “The Northern Sea Passage will be viable by 2025 and is being built up now. This is introducing new classes of vessels and routes and usage will become increasingly common.”

In his Russia Briefing published in November 2020, Devonshire-Ellis pointed to China’s status as the European Union’s second-largest trade partner, with more than €1 billion in goods value changing hands each day. Use of the Northern Sea Passage – when it becomes more financially attractive and safer for shipping – will considerably reduce the time and cost of transporting goods from China to Europe.

STRENGTH IN NUMBERS

RCEP, meanwhile, can be seen as one of the rare positive outcomes to arise from the global Covid-19 crisis. Signed in November 2020, RCEP has been described as the world’s largest free-trade agreement. The partnership involves all 10 ASEAN members joined by China, Australia, Japan, Korea and New Zealand. In a joint statement, the group stated that in light of the adverse economic impact of the pandemic, the RCEP agreement demonstrates a strong commitment to supporting economic recovery, inclusive development, job creation and strengthening regional supply chains as well as support for an open, inclusive, rules-based trade and investment arrangement. RCEP is seen as critical for the region’s response to the pandemic, and is intended to play an important role in building the region’s resilience through inclusive and sustainable post-pandemic economic recovery process.

RCEP, involving 15 regional trade partners that together make up almost one-third of the world’s population and about one-third of its GDP, will not only contribute towards opportunities for project cargo transport in China, but throughout the region.

Project cargo specialists based in China agree that infrastructure investment will remain a key economic driver for the coming years, as a result of China’s policy for both domestic and regional development. The holistic nature of these plans is also of note, as they take account of all aspects of the Chinese economy, far beyond infrastructure and energy.

Protranser International Logistics Marketing Manager Leo Liu noted that this is not a government approach that is specific to China, as all countries have made or are making plans and implementing measures aimed at sustained development. “2020-2025 will be the 14th Leo Liu five-year plan,” he said. “China’s PROTRANSER infrastructure and renewable energy initiatives are part of the plan, which also includes other important activities and related goals, such as annual grain output, basic medical insurance, basic retirement insurance and so on.”

Liu viewed these plans as essential and expected investment funds to be directed towards those goals officially sanctioned by the government. He also foresees a positive impact on investor confidence: by setting out specific goals, China’s Central Committee has in effect bolstered confidence that investment in related activities will be worthwhile. Further, Liu has seen indications that foreign investment in China’s high-tech sector have been given a boost.

Left: Protranser transports 12 68-meter wind blades from Qinhuangdao, North China, to Europe. Lower left: Protranser transports three 8-megawatt, 42-tons hubs from Qingdao to Europe. CREDIT: PROTRANSER

With respect to China’s efforts to pursue renewable energy sources, Liu sees Chairmen Xi’s announcement that China will strive to address carbon dioxide emissions and achieve carbon neutrality by 2060 as another driver that will complement continued growth in the related sectors.

ENERGY REVOLUTION

More specifically, the long-term goals of Vision 2035 include a focus on extensive green development, a “modernization level of the industrial chain and supply chain,” coordination of “the advancement of infrastructure construction,” acceleration of “construction of a transportation power,” and advancement of “the energy revolution.” All of which points to further investment in infrastructure expansion and renewable energy solutions.

However, Liu said that it is not necessarily a given that this will lead to growth in demand for related heavy-lift and project cargo transportation services. “For renewable energy, wind energy has developed quite quickly. Around 10 years ago, the capacity of turbines was only 780 kilowatts to 1.5 megawatts, or MW. Now GE has developed 12MW offshore wind turbines with 107meter blades.” In his view, offshore wind farms will be the future, and there is uncertainty on where those turbines will be built, raising questions on project transportation needs to service that sector. Liu anticipates that turbine manufacturers will move production closer to installation locations, reducing transportation needs.

Despite that wrinkle, China has made it clear that it intends to continue to develop its programs to expand renewable energy sources from wind, tidal, solar and hydro facilities, while expanding its infrastructure. By specifying such goals, the government is sending an unmistakable signal that it supports large-scale investment in renewable energy to meet the country’s aim of becoming carbon neutral by 2060. The five-year plan and Vision 2035 combined cement that commitment, a commitment which will help to sustain or expand demand for related heavy-lift and project cargo transportation services.

There are reasonable grounds for optimism, a long-standing characteristic of the ox of Chinese zodiac fame, whose year now beckons as the Chinese year turns. BB

Thomas Timlen is a Singaporebased freelance researcher, writer and spokesperson with 28 years of experience addressing the regulatory and operational issues that impact all sectors of the maritime industry.

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The Publication for the Industrial Project Supply Chain Industry

PREPARE FOR LAUNCH Space-bound Project Cargoes Conquer Earthly Challenges

Issue 5 / 2020

ITER Project Takes Place | Testing Sustainability | Footing Renewables Bill

The Publication for the Industrial Project Supply Chain Industry

Air Freighters Step up to Pandemic Plate

Issue 4 / 2020 The Publication for the Industrial Project Supply Chain Industry

CASE STUDY

SCOTLAND’S BLADERUNNER

Turbine Move Defies Weather

BY MALCOLM RAMSAY

Weather conditions in the West of Scotland, UK, can be extreme at any time of the year, and while the region’s high average wind speeds are ideal for generating renewable power, they also deliver considerable challenges for the transportation of the very parts needed to capture that power.

Project cargo specialist Collett & Sons was met with this challenge when it was tasked with transporting a shipment of eight over-dimensional E82 wind turbines from King George V Dock, or KGV, in Glasgow, Scotland, on behalf of German manufacturer Enercon.

Based in Aurich, Lower Saxony, Enercon has manufactured wind turbines since the mid-1980s and has production facilities predominantly in Germany, but also worldwide in countries including Sweden, Canada and Portugal. Its E82 turbine has a rated power of 3 megawatts and each bottom tower section has a gross vehicle weight of 111 tonnes.

Kicking off the move, Enercon contracted Collett & Sons with the transport section of the project. “It was our responsibility to provide adequate trucks and trailers for vessel discharges at KGV into store, as well as the transport of all components from store to site following a day-byday delivery schedule,” Joe Collett, project manager at Collett & Sons, told Breakbulk.

Consisting of 10 abnormal load components in total, the consignments were shipped from Portugal and Germany to Glasgow. With each turbine featuring 39-meter-long blades and 67-meter-high towers, the project required specialized planning to ensure the safe transit of each section. Destined for the Inverclyde Windfarm in Greenock, some 20 miles away from the KGV Dock, the turbines will form one of the largest onshore wind projects in the area.

SEA LEG CONSIDERATIONS

Niall Herr, logistics coordinator at Enercon, explained that its global procurement department compared various transportation modes for delivery, which led to shipment via chartered sea vessel being selected as the optimum mode. “Considering the scale of the wind farm, direct transport of the components by truck via the ferry network is a more costly option, and therefore was not considered in this case.”

Having selected road transit from KGV dock, Enercon then had to find a solution to move 128 components

across a variety of motorways, dual carriageways and A-roads to the project site. Aware of the complex nature of the cargo, Enercon carried out a comprehensive procurement process involving numerous technical meetings prior to selecting Collett & Sons.

“Due to their excellent industry reputation, highly professional management structure and expansive fleet, Collett Transport were deemed to be the ideal haulier to provide on-carriage haulage services for the Inverclyde project,” Herr said. With three depots located across the UK – Halifax, Goole and Grangemouth – Collett & Sons operates a fleet of heavy-lift trucks, specialist trailers and self-propelled modular trailers, providing breakbulk logistics throughout the UK and Europe.

Given the varied terrain, road surfaces along the route and the need to navigate densely populated areas, the team from Collett & Sons started with a detailed review of handling processes for each step.

Enercon’s Herr explained that as its components are not standard general cargo, heavy gauge lifting gear is required to lift its turbine components at all handling locations. “Our comprehensive handling manual, which advises the correct procedure for handling of our wind turbine components, is a significant document which must be referenced by all our handling agents, hauliers and crane contractors before they undertake any activities,” he said.

Collett said that the heights, weights and widths of the components had to be taken into consideration when selecting the appropriate trailers. Alongside that, the trailer configurations had to be fit for purpose on site, with the site’s maximum axle weight of 12 tonnes per axle. “This became a crucial deciding factor towards selecting adequate trailers,” he said.

To ensure the efficiency of the move, all components were drawn on AutoCAD initially and allocated to a specific trailer. This allowed the team to accurately replicate each drawing to calculate its precise movement to site.

ON THE MOVE

Having created a detailed plan for the move, the team from Collett & Sons then prepared its modular trailers, fashioned in a 3-bed-4 formation, as well as its triple extendable blade trailers. “The cargo was loaded onto our trailers utilizing crane vehicles. KGV Clyde Port Ltd. discharged the vessel operating their crane vehicles, with third-party crane services offloading and loading the components in store,” Collett explained.

Once safely loaded at the dockside, the cargo began its slow journey towards Inverclyde, navigating under low overhanging cables on route. With each bottom tower section measuring 4.3 meters in diameter the team relied on the hydraulic trailer capabilities to lower the trailer suspension and allow a running height of 4.7 meters.

The size of the cargo also caused issues for the slow-moving convoy, as Collett & Sons had to coordinate with local authorities to ensure escorts and permitting requirements were met. As Herr explained: “Considering the difficulties/possible restrictions as a result of the Covid-19 pandemic, Collett were deemed and proved to be highly competent with respect to securing abnormal load

The turbines had to navigate low overhanging cables on route. CREDIT: COLLETT & SONS

permits and police escort availability.”

With the breakbulk packages underway and all necessary permits secured, the next challenge faced on the journey was a deterioration in the weather as autumnal squalls forced Collett & Sons to stop transit to ensure the safety of the crew and cargo. In all, three days were lost to adverse weather conditions over the project’s duration.

Finally, after 22 days in transit the turbine components were pre-delivered to the project site at Inverclyde Wind Farm. After unloading the cargo using third-party cranes, final installation of all eight turbines was able to proceed. Scheduled for completion in late 2020, Inverclyde Wind Farm is expected to produce 24 megawatts in total, generating enough electricity to power 18,000 homes, with each installed turbine extending 110 meters in height. BB

Based in the UK, Malcolm Ramsay has a background in business analysis and technology writing, with an emphasis on transportation and ports.

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ECONOMY, MIDDLE EAST AND NORTH AFRICA

Breakbulk magazine looks at economic forecasts for Gulf Cooperation Council countries as well as select MENA countries

GDP FORECAST

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

BAHRAIN KUWAIT

-23.8

OMAN QATAR SAUDI ARABIA

CURRENT ACCOUNT BALANCE (% OF GDP)

% 10

5

16.4

0

-5

-10

-15

-20

BAHRAIN KUWAIT OMAN QATAR SAUDI ARABIA UAE

ALGERIA EGYPT

UAE

ALGERIA EGYPT

FISCAL BALANCE (% OF GDP) % 5

0

-5

-10

-15 -27.7 -23 -20

BAHRAIN KUWAIT OMAN QATAR SAUDI ARABIA UAE ALGERIA EGYPT

GCC countries in bold type.

*Estimated **Forecast Sources: Trading Together: Reviving Middle East and North Africa Regional Integration in the Post-Covid Era, October 2020, World Bank Group, based on World Bank Macro and Poverty Outlook. 2019 2020* 2021** 2022**

MOROCCO IRAQ IRAN

MOROCCO IRAQ IRAN

MOROCCO IRAQ IRAN