Breakbulk Magazine Issue 3 2021 by Breakbulk Events & Media

This Breakbulk Issue is Sponsored by AAL Shipping

Issue 3 / 2021

The Publication for the Industrial Project Supply Chain Industry

ENERGY TRANSITION WARS Breakbulk Movers Support Carbon-free Switch

Future Fuel Conundrum

Hydrogen Sweetspot

Post-Brexit Learning Curve

IN THIS ISSUE

Cover Story

10 ENERGY TRANSITION WARS

Breakbulk Movers Support Carbon-free Switch

18 SHIPPING TRENDS

36 LOGISTICS PERSPECTIVE

No Clear Winner Leaves MPVs Stumped

Breakbulk Operators Uncover EU Quirks

FUTURE FUEL CONUNDRUM

24 EMERGING MARKETS

42 PROFILE

Project Cargo Serves Carbon-free Fuel Frenzy

Hapag-Lloyd’s Sarah Schlüter Takes an Expansive View

HYDROGEN SWEET SPOT

28 ENERGY UPDATE Also in this issue 04 EDITORIAL 06 C ONVERSATION 23 THOUGHT LEADER

– LEIN MANN HANSEN

31 THOUGHT LEADER

– CHRISTIAN ARNDT

58 B REAKBULKONE 62 CASE STUDY 66 BACK PAGE

POST-BREXIT PROJECT LEARNING CURVE

POSITIONING FOR DECOMMISSIONING WORK Breakbulk Movers to Define Circular Wind Role

32 CASE STUDY

CAPTURING CHINA’S WIND AMBITIONS Asia Powerhouse to Fill Renewables Need

THE INDUSTRY FROM EVERY ANGLE

46 REGIONAL REVIEW

CHAOS OR STABILITY?

Debate over U.S. Steel Duties Intensifies

50 REGIONAL REVIEW

BUCKING THE RENEWABLES TREND

Mexico’s State-led Energy Push Undermines Sector

54 EQUIPMENT

REVOLUTIONIZING DECKMARKING

Efficiency Gains and Innovation Through AR www.breakbulk.com BREAKBULK MAGAZINE 3

EDITORIAL

PLUGGING INTO ENERGY’S FUTURE 2021 may well prove to be a transformational year, in many ways converse to the global pandemic and cultural upheavals that consumed 2020. The global response to vaccinations has raised optimism – though some countries are still spiking, led by India – that we’re hopefully, finally turning the corner on the pandemic, with many markets having pushed restart. Yet among the most lasting potential changes of this year are developing in sustainability and a seismic shift in energy sources. In the wake of the recent Gary Burrows virtual energy summit, world leaders voiced agreement on a “clean energy future” even more ambitious than the roadmap created in the Paris Agreement on climate change, while U.S. President Joe Biden vowed to cut greenhouse gases in half by 2030, with a multitrillion-dollar investment in renewable energies. Breakbulk Events & Media has long provided industry-leading news and analysis on conventional and alternative energy industry and projects, and this issue kicks off an omni-channel approach to market intelligence for these sectors, culminating with Breakbulk Europe Connect21, May 17-21.

ANNUAL ENERGY ISSUE

In this, our annual energy issue, Breakbulk explores global markets and the near-term future for conventional and alternative energies. In our cover story analysis, provided by Amy McLellan (“Energy Transition Wars,” page 10), we take a global look at the uncertainty of the oil and gas markets, while renewable energy expenditures are narrowing the gap with conventional energy. In “Future Fuel Conundrum,” (page 18), News Editor Carly Fields explores the shipping industry’s dilemma of meeting its target of a 50 percent absolute reduction 4 BREAKBULK MAGAZINE www.breakbulk.com

in emissions by 2050, and the urgent need for alternative fuels to replace the current carbon-belching fuels still used today. Hydrogen’s “transformative potential” to replace fossil fuels is being realized in a series of projects, Michael King reports in “Hydrogen Sweet Spot” (page 24). Malcolm Ramsay reports in “Positioning for Decommissioning Work” (page 28) that with the success of wind farm development in the early 2000s, many of those farms are nearing the end of their lives, creating a growing projects niche through dismantling and removing turbines. Energy-related topics have also been covered in thought pieces by Christian Arndt, vice president logistics at P&O Maritime Logistics, on future-proofing the development of energy projects (“Oil & Gas Recovery Rules, page 31); and by Lein Mann Hansen, senior analyst at Rystad Energy on the potential for carbon capture and storage projects (“CCS Drives Cost Reductions,” page 23).

BREAKBULK EUROPE CONNECT21

Energy will be the focus of two industry insight sessions for Breakbulk Europe Connect21 scheduled for May 20, starting with “Servicing Europe’s Growing Offshore Wind Industry: Keys to Success,” in which panelists will discuss new and innovative ways to service the growing industry. Later in the day, “Greening of the World’s Oil & Gas Supply Chain,” looks at European oil and gas majors taking the lead in a low-carbon future by committing to deep transition related investments. May 19 sessions start with “World Project Expo: Global Project Outlook” focusing on five different regions: Europe, Asia, Africa, Russia and the Americas; and will be followed by “Carrier Checkin: Business, Environment and the Changing Cargo Base,” moderated by Carly Fields. Breakbulk Europe Connect21 will also provide four days of networking business meetings, May 17-21. For more information and to register, go to https:// europe.breakbulk.com/page/connect21.

EDITORIAL DIRECTOR Gary G. Burrows / +1 904 535 5460 gary.burrows@hyve.group NEWS EDITOR Carly Fields carly.fields@hyve.group DESIGNER Mark Clubb REPORTERS Paul Scott Abbott Amy McLellan Felicity Landon Michael King Malcolm Ramsay Thomas Timlen Simon West BREAKBULK EDITORIAL ADVISORY BOARD John Amos Amos Logistics

Noelle Burke

Eos Energy Storage

Dennis Devlin Maersk

Dharmendra Gangrade

L&T Hydrocarbon Engineering

John Hark

Bertling Project Logistics

Samuel Holmes Dennis Mottola

Global Logistics Consultant

Roger Strevens

Wallenius Wilhelmsen

Jake Swanson

DHL Industrial Projects

Ulrich Ulrichs

BBC Chartering

Margaret Vaughan Consultant

Johan-Paul Verschuure Rebel Group

Frans Waals

Dynamar D.V.

Grant Wattman

Jade Management Group

PORTFOLIO DIRECTOR Nick Davison nick.davison@hyve.group MARKETING & MEDIA DIRECTOR Leslie Meredith leslie.meredith@hyve.group To advertise in Breakbulk Media products, visit: http://breakbulk.com/page/advertise SUBSCRIPTIONS To subscribe, go to http://breakbulk.com/page/ subscribe-breakbulk-magazine, or email: gary.burrows@breakbulk.com A publication of Hyve Group plc. The Studios, 2 Kingdom Street Paddington, London W2 6JG, UK

ISSUE 3 / 2021

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CONVERSATION Join the conversation – share your thoughts, opinions and feedback with Breakbulk! Send them to gary.burrows@breakbulk.com. Items we use will be edited for appropriateness, length and clarity.

CAPACITY SHIFT PRESENTS RISKS FOR MPV SECTOR The strong recovery of multipurpose charter rates in the first quarter of 2021 may be threatened by improving capacity and shifting dynamics in global shipping supply chains as economic recovery continues, predicts Susan Oatway of research consultancy Drewry. Speaking at a market outlook webinar on the multipurpose and heavy-lift shipping sector, Oatway noted that Drewry’s latest forecast predicts a rise to above U$8,000 in April. “We are preSusan Oatway dicting a further Drewry rise of almost 7 percent in April. It’s no surprise that markets are awash with predictions of rate rises. What’s happening is the start of the recovery from one of the longest recessions in this cyclical sector,” Oatway said. Drewry’s Multipurpose Time Charter Index saw a 15 percent rate increase from February to March, to US$7,795. This equated to a robust 24 percent rise year-on-year, reflecting the sharp fall in rates initiated by the onset of global lockdowns at the end of the first quarter 2020. For April, the firm predicts that rates will rise a further 6.5 percent to US$8,300 per day. Drewry’s Index tracks charter rates over a one-year period and compares a basket of vessel types and sizes to forecast the market movement over the coming month. The outlook for strengthening charter rates was reinforced by consultancy Toepfer Transport, which publishes its own index for the MPV sector. It anticipated rates would reach US$8,092 in April, up from US$7,520 in March and a 17.9 percent increase year-on-year. “The demand for cargo space is booming and so are the cargo enquiries for the next months. Large

6 BREAKBULK MAGAZINE www.breakbulk.com

“What’s happening is the start of the recovery from one of the longest recessions in this cyclical sector,” Drewry’s Susan Oatway said. CREDIT: deugro

operators try to keep the tonnage they have and to add up more, causing only very few vessels to appear on the spot market. Small operators who did not secure tonnage in the recent weaker times have to pay high premiums to secure the ships they need to fulfil their obligations,” said Yorck Niclas Prehm, head of research at Toepfer. Toepfer’s index is based on a 12,500-dwt multipurpose /heavy-lift F-Type vessel for a six to 12-month charter period.

EFFECTIVE DEMAND GROWTH TO SLOW

While growth in MPV charter rates has been supported by wider economic recovery, Drewry notes that a lack of capacity across the global shipping sector has been the most significant factor in propelling demand higher, creating greater effective demand even as overall volumes have fallen in some areas. “Clearly over the first quarter of 2021 due to port congestion and supply chain issues, effective demand for MPVs has strengthened, but we do expect this to slow as issues are sorted. Even in our downside scenario however growth is still positive,” Oatway added.

Strong competition from container vessel operators is expected to eat into growth rates going forward, as box carriers seek to reclaim some breakbulk cargoes that have returned to the MPV sector in recent months. “There will be a drift back because container carriers are keen to carry that project cargo, but there is a ceiling because of the size and weight of some of these pieces,” Oatway noted. While most forecasts for the global economy suggest robust growth for 2021, Drewry notes that MPV sector recovery remains more fragile. The speed at which congestion and supply chain issues in the container and dry bulk sectors are resolved will have a huge impact as will the rate of replenishment of the MPV fleet. “One of the main reasons recovery is fragile for this sector is the level of overage tonnage in the fleet. Over 50 percent of the total fleet is over 15 years old. Although the fleet contracted in 2020, due to increased demolition with no corresponding newbuilding deliveries, our concern is that increased optimism will lead to new investment decisions, without corresponding cargo commitments,” Oatway said. ISSUE 3 / 2021

WIND SUPPLIER MARGIN RECOVERY MUTED Margins for European wind turbine manufacturers are expected to recover this year with revenues up 8 percent to 10 percent, according to research from Moody’s Investors Service. But the improvement will not be enough to push margins back to prepandemic levels. This, combined with a fragmented market, will keep the pressure on the

wind supplier sector to keep costs under control, including logistics costs. The sector also requires research and development investments to remain innovative and competitive, Moody’s said. Moody’s calculates that just four suppliers controlled 60 percent of the capacity installed in 2019: Vestas, Siemens Gamesa, Xinjiang Goldwind

Science & Technology Co Ltd., and GE Renewable Energy. The analyst expects the share of renewable energy to increase to 55 percent by 2040 from 35 percent in 2018. Advances in photovoltaic technology will keep wind turbine manufacturers under price pressure to maintain and expand the market share of wind in the energy mix.

DON’T RUSH PROJECT RESTARTS Engineering, procurement and construction companies are being advised to not rush project restarts and to not bend to increasing pressure to deliver projects simply to strengthen market position and competitiveness. Instead, Independent Project Analysis, or IPA, advises that project sponsors balance the risks associated with the remaining execution against forecast revenues, or other business justification for the project. EPCs also need to select the best restart strategy for each project. “Business and project teams too often overestimate their ability to mobilize and coordinate resources when restarting projects, for example,

by not hiring enough safety mangers to keep pace with aggressive field mobilizations during fast construction restarts,” said Ronell Auld, IPA advanced associate project analyst. According to IPA surveys, companies slowed, stopped and canceled project work across their portfolios, reducing capital spend by 34 percent, on average, during 2020. Now, in 2021, companies are in search of successful strategies for restarting projects as the world enters the vaccination and post lockdown stage of the pandemic. “Owner companies should be aware of the different risk profiles when restarting their capital projects. IPA research shows that outcomes

NO RETURN TO OIL ‘NORMAL’ The International Energy Agency has warned that there may be no “return to normal” for the oil market in the post-Covid era. In its Oil 2021 report, it acknowledged that the accelerated shift to clean energy couple with forced rapid changes in behavior have reduced the outlook for oil demand, raising the prospect of peak demand sooner than previously expected. “The Covid-induced demand shock and a shifting momentum towards investment in clean energy are set to slow the expansion of the world’s oil production capacity over our six-year forecast period,” the IEA said.

In 2020, operators spent onethird less than planned at the start of the year (and 30 percent less than in 2019). In 2021, total upstream investment is expected to rise only marginally. “Those sharp spending cuts and project delays are already constraining supply growth across the globe, with world oil production capacity now set to increase by 5 million barrels per day by 2026.” The U.S. is expected to see only modest supply growth over the forecast period through to 2026, as although costs of shale production have fallen, a lack of cheap capital

differ considerably depending on the project lifecycle phase in which the stoppage occurs,” Auld said. Projects stopped and restarted during the definition phase of the work process, before detailed engineering and construction, had similar outcomes to projects that never stopped and restarted, IPA found. In contrast, projects stopped and restarted after the definition phase averaged about 5 percent more cost growth than uninterrupted projects. Moreover, IPA research found that projects stopped and restarted during the construction phase average significantly more cost growth than projects stopped and restarted during detailed engineering.

is stunting growth. “The industry is consolidating and is taking a more conservative approach to investment than was the case when smaller independent companies were the dominant players. They are also becoming wary of environmental, social and governance criteria and the potential for increased regulations under the new Biden administration,” the IEA said. This U.S. slowdown allows OPEC+ to fill any supply gap with its spare capacity and could encourage Saudi Arabia and other key Middle East producers to boost investments and accelerate expansion plans. www.breakbulk.com BREAKBULK MAGAZINE 7

CONVERSATION

Dresses and Delays Butterfly Effect of Logistics Snafus

BY MARGARET VAUGHAN

COVID-19’S REACH

The emergence of the Covid-19 virus and its subsequent impact on global trade could be considered an example of the butterfly effect. A pathogen believed to be from a breed of horseshoe bat in China crossed the species barrier infecting humans with a hitherto unknown but extremely virulent and deadly virus. The world economy was suddenly severely hampered by the ensuing 8 BREAKBULK MAGAZINE

WWW.BREAKBULK.COM

pandemic, which forced quarantining of people and the shutdown of factories and transportation worldwide. At ports, vessel dockings were curtailed, vessels that were docked sat unloaded for lack of personnel and transport out of the ports, and store shelves sat empty for lack of supply. But people stuck at home needed something to do, so they discovered the joys of shopping online. As demand for goods increased, so did factory openings, in China at least. But the delays of unloading and transport from the ports remained, causing huge bottlenecks of vessels. A container shortage further impacted exports of U.S. goods as containers arriving at U.S. West Coast ports are being unloaded and shipped back to Asia empty to save time. This container deadheading has increased the cost of container shipments as ship owners seek to recoup monies lost on shipping the empty containers. Booking times have also increased. We are witnessing the butterfly effect of chaos theory in action. And my niece may need to wear my mother’s wedding gown after all – which would have pleased my mother very much. BB Margaret J. Vaughan has more than 30 years’ experience in all facets of supply chain management.

ISSUE 3 / 2021

CREDIT: SHUTTERSTOCK

y niece is getting married this August. As keeper of the family heirlooms, I asked her if she would like to wear her grandmother’s wedding gown (a magnificent satin and lace confection bespoke in the late 1940s). She declined saying she has ordered her dress “from overseas and it will be here in a couple of months.” My heart sank. Not because she declined to wear my mother’s dress, but because she is blissfully unaware of the current delays in shipments from overseas. Delays that may affect delivery of her dress. In 1961 mathematician and meteorologist Edward Lorenz posed a question: “Does the flap of a butterfly’s wings in Brazil set off a tornado in Texas?” The concept became known as the butterfly effect. The purpose of Lorenz’s question was to illustrate the idea that some complex dynamical systems exhibit unpredictable behaviors such that small variances in the initial conditions could have profound and widely divergent effects on the system’s outcomes. Because of the sensitivity of these systems, outcomes are unpredictable. This idea became the basis for a branch of mathematics known as chaos theory, which has been applied in countless scenarios since its introduction. We live in a world with an extremely complex and integrated global supply chain. Anyone who has been involved with just-intime procurement understands all too well the adverse impact that even the tiniest delay can have on the completion of a project.

Preparing for Black Swans Industry Needs to be Ready for Next Challenge

ome of my colleagues and friends have heard me talk about “Black Swans” before. I first heard the term in 2008 when the financial crisis hit the global economy and consequently the shipping sector. I am old enough to have experienced shipping in those fantastic pre-2008 years for carriers. Search for “Black Swan” or “highly improbable” online and you will find an abundance of interesting links and discussions about the topic. The fact is that Black Swan events not only exist, but they will also continue to occur. From my personal point of view, the Covid-19 crisis is such an event. So, how can we prepare for the unexpected? Despite the “unexpectedness” of these events – which prevents us from foreseeing them – we can still prepare by making ourselves and our businesses as robust as possible. We can find ways of coping with the impact(s) of highly improbable situations through improved flexibility and faster decision making. These improvements bring the added benefit of improving our ability to emerge stronger from the event. The multipurpose shipping segment has been in crisis mode for more than a decade and some carriers have dealt with this better than others. Before Covid-19 hit, the IMO2020 sulfur limit in marine fuels regulation was the big news in early 2020. Then the pandemic struck the world and its economy, and it was encouraging to see how quickly the shipping industry and shipping “people,” including carriers, vendors, shippers and vessel owners, adapted to this new and unprecedented situation, especially in the battle-hardened multipurpose and breakbulk segment. The breakbulk industry took up the challenge and dealt with the crisis partly because it had no choice, but also because most people involved in the industry have the right mentality, the experience and the guts to do so. This is what makes our industry tick – and at the same time why it is so much fun to be part of it, even in times of crises. That said, we must not forget the crew on board the vessels, who have probably

suffered the most from the pandemic’s disruptions. They are still suffering today, although initiatives like the Neptune Declaration or the #ISupplyTheWorld campaign are helping to overcome the issues of crew change and fatigue. Just over a year later and the shipping industry is booming again. We are still affected by Covid-19 with regards to restrictions and productivity issues, but who could have foreseen that 12 months on from the start of the pandemic we would find that space on ships would be scarce once more in many segments of the industry? I make no apologies for closing with a word of caution: the next Black Swan event will come, it is just a matter of time. But if you keep expecting the unexpected and learn how to deal with it, you will be fine. And look forward to the silver lining at the end! BB

BY ULRICH ULRICHS

Ulrich Ulrichs is CEO of Germany-headquartered, multipurpose ship operator BBC Chartering.

www.breakbulk.com BREAKBULK MAGAZINE 9

COVER STORY

ENERGY TRANSITION WARS Breakbulk Movers Support Carbon-free Switch

BY AMY MCLELLAN

he early months of 2020 saw analysts crunching through models that would quickly become obsolete as the Covid-19 pandemic changed our world. What followed was unprecedented in modern times: overwhelmed healthcare systems, national lockdowns, grounded flights and strict border controls. Twelve months on, and the cycle appears to be repeating itself. While vaccines seem to offer a route back to normality, at the time of writing a third or even a fourth wave, depending on the region, of infection and fears about the spread of new Covid19 variants was leading to further lockdowns and travel bans in Europe, Asia and elsewhere. Prior to the latest resurgence of infection, many analysts were bullish about the oil markets, with sentiment buoyed by the amazing progress of the multiple vaccines developed in record time over the past 12 months. Now, however, there’s increased uncertainty and oil analysts find themselves in the unenviable position of having to not only model the usual geopolitical and economic variables, but also a whole host of factors outside their expertise, from epidemiology to vaccine distribution. Chris Midgley, global head of analytics at S&P Global Platts, pointed out that the vaccines have created a wave of optimism that isn’t necessarily underpinned by any change in 10 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 3 / 2021

the fundamentals. “While in the long term we are more optimistic about a rebound of oil demand, causing us to upwardly revise our 2021 demand outlook, in the short term, we expect things Chris Midgley to worsen,” MidgS&P Global Platts ley said. Increasingly, it seems, the world is split between those economies still reeling from the pandemic, and those countries that took a so-called Zero Covid approach, imposing strict border controls along with effective test, trace and supported isolation policies, which are now reaping the economic dividends. China, for example, looks set to post economic growth in excess of 6 percent this year, with some analysts even tipping growth of 8 percent. Vietnam’s economy expanded by 2.9 percent in 2020, one of the highest growth rates in a pandemic-hit world, and is expected to nudge 6.5 percent this year. Taiwan saw record growth in 2020, even outperforming China, and analysts are projecting growth north of 5 percent for 2021.

DEMAND AND PRICING

Resurgent growth in Asian economies is good news for oil demand, which has rebounded from the lows of 2020. Energy intelligence consultancy Wood Mackenzie, for example, expects world oil demand to increase 6.6 million barrels per day, or bpd, year-on-year in 2021, reversing about two-thirds of the nearly 10 million bpd collapse in 2020. This resurgent oil demand is already feeding into higher oil prices, with benchmark Brent trading at US$65 a barrel in late March. Analysts have been sufficiently encouraged to increase their oil price forecasts for 2021, with the U.S. Energy Information Administration forecasting Brent spot prices averaging

By the Numbers

6.6 million barrels per day Forecast for oil demand in 2021

US$57.24 per barrel

Forecast average WTI crude oil prices in 2021

US$300 billion

Anticipated investment levels in upstream sector in 2021

Number of O&G big projects to be sanctioned in 2021

US$480 billion

Value of offshore greenfield upstream project commitments expected between 2021-2025

54,000

Number of wells expected to be drilled worldwide in 2021

US$243 billion

Expected capex for renewable energy projects in 2021 US$60.67 per barrel and West Texas Intermediate, or WTI, spot prices averaging US$57.24 per barrel this year. Fitch Ratings has increased its price assumptions to US$58 a barrel and US$55 a barrel for WTI, reflecting the stronger-than-expected oil demand and OPEC+’s supply management. “We consider such supply management policies as being prudent,” said Dmitry Marinchenko, senior director, corporates, at Fitch. “Furthermore, oil prices will Dmitry continue to Marinchenko benefit in the short term from Fitch

positive sentiment due to successful vaccination rollouts and the upcoming US$1.9 trillion stimulus package in the U.S.” Last year may have been one of the toughest in the oil industry’s history – and these are companies used to boom-and-bust cycles – but it has forged a more resilient industry. Savage cost-cutting saw international oil companies reduce their corporate cash flow breakeven from an average of US$54 a barrel to US$38 a barrel, which means today’s higher prices could see plenty of cash returning to corporate coffers. “At an average price of US$55/ barrel, our US$140 billion estimate of 2021 free cash flow before shareholder distributions exceeds any previous year since 2006,” said Tom Ellacott, senior vice president for corporate analysis at Wood Mackenzie. www.breakbulk.com BREAKBULK MAGAZINE 11

COVER STORY

McKinsey expects oil demand to peak in 2029.

CREDIT: SHUTTERSTOCK

OIL COMPANIES REMAIN CAUTIOUS

While oil and gas contractors, still hurting from last year’s cost-cutting, may be salivating at the thought of a major spending splurge, analysts expect oil companies to favor a cautious approach, reducing gearing and buying shares to restore investor confidence. “The sector is in ultra-capitaldisciplined mode to win over investors,” Ellacott said. “We think the industry will stick to its tight management of investment for some time.” Indeed, contractors hoping for a rapid rebound in activity levels after a lean year may be disappointed. Fraser McKay, WoodMac’s head of upstream analysis, for Tom Ellacott example, expects investment levels Wood Mackenzie 12 BREAKBULK MAGAZINE www.breakbulk.com

in the upstream sector to stay flat at about US$300 billion in 2021, as oil companies remain hesitant to take advantage of a nadir in service sector costs. “We expect 20 or so big projects to be sanctioned in 2021, up from just over 10 in 2020, but just half the prevailing pre-pandemic trend,” he said. When it comes to upstream, offshore greenfield project commitments in 2021-25 are expected to be worth more than US$480 billion. Drilling activity will rebound from 2020’s low, with Oslo-based energy consultancy Rystad Energy expecting about 54,000 wells (2,500 of them offshore) to be drilled worldwide in 2021, up 12 percent on last year, and 64,500 wells in 2022, still short of 2019’s tally of 73,000. South America will attract spending on deepwater projects offshore Brazil, Guyana and Mexico. The Middle East is another strong market, dominated by Qatar’s move to sanction the US$30 billion North Field Expansion project. According to Rystad Energy, some US$98 billion

of projects in the Middle East will be sanctioned between now and 2023, including ADNOC’s project pipeline of about US$40 billion in the UAE, Saudi Arabia’s US$12 billion giant Zuluf oil development, and projects in Oman, Iraq and Iran. In Australia, Woodside’s 4.5 million tpa Pluto LNG Train 2 project is expected to take final investment decision this year, which would be developed with the Scarborough upstream asset. Santos’ Barossa gas field US$3.7 billion development could also reach FID this year.

WINDS OF CHANGE

Increasingly, of course, these multibillion-dollar long-life investments need to be weighed against a backdrop of rising concern about climate change. Analysts said that projects will increasingly be weighed for their sustainability in a low-carbon world. “The class of 2020 will not all be low-carbon, low-cost trailblazers,” said WoodMac’s Ellacott. “But the direction of travel is one-way in terms of industry stakeholder aspirations.” ISSUE 3 / 2021

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COVER STORY

There is certainly growing pressure from investors for action on emissions. A group of 30 fund managers with US$9 trillion under management, for example, have committed to work towards net-zero emissions across their portfolios by 2050, with an intermediate goal for 2030 that would be consistent with limiting global warming to 1.5 degrees Celsius. Big Oil is, finally, taking note, with a number of companies setting net-zero targets and taking bigger bets on renewable and clean energy technologies. BP, for example, recently spent US$1.1 billion buying a 50-percent stake in two major lease areas off the U.S. East Coast to develop up to 4.4 gigawatts, or GW. The Empire Wind and Beacon Wind projects are part of the London-headquartered oil giant’s ambition to grow its net renewable generating capacity from 2.5 GW in 2019 to 20 GW by 2025 and to about 50 GW by 2030. It also aims to increase annual low-carbon investment 10-fold by 2030 to about US$5 billion a year. This is no longer greenwash; it’s increasingly a legal and commercial imperative. Analysts at McKinsey & Co expect renewables to become cheaper than existing fossil fuels plants within the next decade, triggering five-

fold growth in the installed capacity of solar PV and onshore and offshore wind by 2035. The pandemic, of course, has made a dent in global emissions, but perhaps not as much as last year’s shuttered factories and silent skies might have suggested. Analysis by Bloomberg New Energy Finance, or BNEF, suggests Covid-19 will subtract some 2.5 years’ worth of aggregate emissions over the next 30 years. More significant are longer term trends, such as mass working from home and adoption of electric vehicles along with a massive ramp-up in solar and wind, which are expected to meet 56 percent of world electricity demand in 2050, and some serious investment in batteries, green hydrogen and smart grid infrastructure. BNEF forecasts suggest an eye-watering US$14 trillion in grid investment will be needed between now and 2050 to enable the power system of the future.

GOOD NEWS FOR LIFTERS AND MOVERS

This transition is good news for the heavy-lift and project cargo industries. Not only will they be hired to install the new giant wind turbines, generators and grid infrastructure to deliver a greener future but they will also

have to remove the remnants of the old world. According to Danny Cain, director of safety and risk management at Edwards Moving and Rigging in the U.S., these two trends ensured that, despite the pandemic, 2020 proved to be one of the company’s busiest years. “A lot of this work was across the energy sector onshore U.S., where there has been a lot of major new construction underway and conversion of old coal plants to gas-fired facilities,” Kentucky-based Cain said. “Our infrastructure in the U.S. has deteriorated greatly over the years, so as well as new construction and expansion projects, we’re also involved in taking out the old equipment, particularly in coal and nuclear.” Indeed, the challenge for Edwards is finding enough staff with the right skills and experience. “There’s a real skills shortage,” he said. “You can’t just quickly train people up to do these specialist jobs, there’s a lot of experience needed to maneuver turns with these long configurations.” For many heavy-lift and project cargo contractors, the energy industry remains a significant part of their order books, but it’s green energy where the opportunities lie.

Global Demand for Turbine and Foundation Installation Vessels Vessel years* 45 40 35 30 25

Wind Turbine Installation Vessels**

Turbine size: 13+ MW

9-13 MW 6-9 MW

3-6 MW 0-3 MW

>40 meter water depth

Only foundation installation vessels

<=40 meter water depth

Both foundation & turbine installation vessels

15 10

5 0

Foundation Installation Vessels

2010

2015

2020

2025

2010

2015

2020

2025

* Excluding demand from China and intertidal wind farms ** Wind turbine installation vessel demand includes vessel years needed for heavy maintenance and repair Source: Rystad Energy Offshore Wind Cube, research and analysis

14 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 3 / 2021

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COVER STORY

Rystad anticipates a shortage of wind turbine installation vessels by 2025. CREDIT: SHUTTERSTOCK

“The energy transition is definitely starting,” said Yannick Sel, global sales director at heavy-lift specialist Mammoet. “Some projects will take time to develop and we are likely to see them in Yannick Sel execution from 2023 onwards.” Mammoet Ole Schmidt, vice president at global transport and logistics provider DSV Projects, DSV Air & Sea, sees a similar trend. “The majority of project cargo volumes are within the energy segment and our main focus is on renewable energy,” he said. “While Covid-19 had some interference and still does, with constraints due to slower operations, we expect considerable growth in the coming years, especially in renewables with a number of projects on hand for execution in 2021-2022.”

RENEWABLE SPENDING

According to Rystad Energy, capital expenditure for renewable energy projects is expected to reach a record US$243 billion, narrowing the gap 16 BREAKBULK MAGAZINE www.breakbulk.com

with oil and gas spending. Most of the renewable energy spending will go towards onshore wind projects, rising to US$100 billion from $94 billion in 2020. Offshore wind will see capital expenditure grow to US$46 billion from US$43 billion. Most of the expenditure stems from Asia, which had 156 GW of capacity under construction as of January 2021, followed by Europe with 32 GW. Big spend projects include China’s 800-MW Rudong offshore wind farm and 2 GW Zhuozi County Project, as well as Ørsted’s 1.4 GW Hornsea 2 project off the UK. The U.S. is another hugely promising market, with the new administration in the White House triggering a splurge of renewables activity. “Since Biden won, it has been like a tidal wave in terms of requests for proposals,” said Jeff Andreini of Florida-based Crowley, which has formed a New Energy division to Jeff Andreini capture these new opportunities. Crowley

“There’s a paradigm shift underway and everything is moving at breakneck speed.” Crowley has formed a partnership with Danish shipping company ESVAGT to address shortages of Jones Act compliant vessel capacity for this emerging industry and more partnerships are expected to be announced in the next six to nine months to “solidify us on the logistics side for offshore wind,” said Andreini, who is vice president of the new division. “We’re providing a full turnkey service. We have the marine assets, marine engineering, logistics, ship management, terminaling and decommissioning. There’s no one else as a Jones Act player in the U.S. who can do all of this in one package.” It is not just the U.S. offshore wind market that is expected to boom. Companies in other markets are also reporting busy order books. Felix Peinemann, commercial manager, shipping at Netherlands-based heavy-lift specialist Jumbo, expects 2023-2027 to be “really booming years for offshore wind.” He expects key markets to be the U.S., Japan, Vietnam and the UK, with emerging opportunities in Norway and the Baltic. “We see there will be high demand for vessels at the higher end of the ISSUE 3 / 2021

COVER STORY

Crowley has partnered with Danish shipping company ESVAGT to address shortages of Jones Act compliant vessel capacity for servicing the offshore wind industry.

CREDIT: CROWLEY

segment,” said Bremen-based Peinemann, noting the ever-increasing size of next-generation wind turbines. In 2005, the average offshore turbine had a capacity of 3 MW; projects on the books for 2022 have an average turbine size of 6.1 MW while next-generation turbines will be double that.

FLEET CONSIDERATIONS

This will strain the capacity of the existing fleet capable of transporting and lifting this specialist hardware. “We see that unlike oil and gas, where the lead time might be two to three years, some of these offshore wind projects have lead times of five to six years,” said Peinemann, whose company is in the process of forming a joint venture with SAL, the German-based breakbulk and project cargo specialist. “Order books can fill up rapidly so is there going to be enough capacity to supply the demand? If oil and gas activity comes back over the same time frame, then it’s going to be tight.” Crowley’s Andreini agreed. “If oil and gas come back, then the two industries will be competing for the same assets, which means there will be a premium on available assets,” he said. Even so, companies are being cautious before committing to any newbuild activity, not least because of advances in turbine technology. “They’re getting bigger and this will affect what’s needed,” Peinemann said. “If you develop something today it might not be right in three to four years’ time.”

Analysts at Rystad Energy have run their own calculations and reckon the fleet will be outstripped by demand after 2025. There are 32 active turbine installation vessels (five more have been ordered) and 14 dedicated foundation installation vessels (another five have been ordered), but with only four vessels currently capable of handling the next generation of turbines, such as GE’s Haliade-X 12-MW, the existing fleet will soon be insufficient. It’s not just that there will be more orders – Rystad Energy’s offshore wind specialist Alexander Fløtre points out that each project can be hugely intensive, requiring the transit and accurate positioning of installation vessels at least 100 to 300 times in quick succession. “We identify the heavy-lift vessel segment as the key bottleneck for offshore wind development from the middle of this decade, and the need for next-generation vessels may slow the cost reductions expected in offshore wind,” said Fløtre.

FINDING SOLUTIONS

Creating the solutions to unplug bottlenecks and optimize operations to ensure the green energy solutions of the future are competitive will require innovation and collaboration across the supply chain. “We need to get engaged early to be able to find solutions that can optimize the transport and/or construction process, thus saving time and costs,” Mammoet’s Sel said. “Clients are also

looking for integrated solutions, where we expand our scope, not limiting to equipment rental.” In renewables this might mean modularized construction techniques, where plants or installations are fabricated in modules away from the build site and brought together for integration, enabling construction to take place in parallel, shortening completion times, widening the talent pool and increasing cost-efficiency, Sel said. One thing is clear: while the energy transition has been much discussed, it finally seems to be underway and gathering traction. Oil will continue to play a role, but analysts are inching the date of peak oil ever closer. Analysis by McKinsey suggests oil demand peaks in 2029 and gas in 2037, with coal, having peaked in 2018, continuing its decline. The future will be greener, which means the contracting industry needs to be adjusting its capacity and its fleet now to be able to serve the demands of this greener world. Whether it is moving ever larger turbines into place or removing the aging infrastructure of the fossil fuel age, this is the time to be making connections, forging partnerships and horizon-scanning for new opportunities. BB Freelance journalist Amy McLellan has been reporting on the highs and lows of the upstream oil and gas and maritime industries for more than 20 years. www.breakbulk.com BREAKBULK MAGAZINE 17

SHIPPING TRENDS

FUTURE FUEL CONUNDRUM

he decarbonization clock is ticking. Shipping has nine years to switch at least 5 percent of its heavy fuel oil usage over to zero-emission fuel. That is if it is serious about meeting its target of a 50 percent absolute reduction in emissions by 2050. That 5 percent goal amounts to close to 16 million tons of heavy fuel oil equivalent by 2030, according to a report for the Global Maritime Forum – a long way from the paltry level of zero-emission fuels in use today. Report authors Peder Osterkamp, shipping lead at COP26 Climate Champions; Tristan Smith, reader in Energy and Shipping at University College London’s Energy Institute; and Kasper Søgaard, head of research at the Global Maritime Forum, state that even if the target is a 50 percent absolute reduction by 2050, this still requires rapid growth of zero-carbon fuel use in the 2030s, which requires a similarly small initial use by 2030. They consider achieving this is feasible on all counts – with regards to fuel supply, vessel technology, port infrastructure, safety, demand, government commitment and finance. But there is one major problem. Today, there is no clear leader in the race to find the shipping fuel of the future, and without clear direction on which might come first, or even which

18 BREAKBULK MAGAZINE www.breakbulk.com

fuels are in the breakaway pack, multipurpose vessel and heavy-lift operators are understandably reluctant to invest in new tonnage. Shipping’s inability to determine a fuel forerunner is not for want of trying. The number of zero-emission pilots and demonstration projects for the maritime industry now totals 106, up 38 percent over six months, according to mapping produced by the Getting to Zero Coalition. “Overall, the mapping demonstrates that significant work is underway on several different fuels, with no clear preference shown for a single fuel across the mapping,” say the map’s authors. Projects are developing at pace with about 10 percent of the projects from the report’s first edition moving into new phases of development, increasing in size or ambition, or moving from concept study stage to demonstration stage. “This shows that within the projects we have gathered there appears to be a tangible move towards raising ambition and scaling up existing projects.”

‘CHALLENGE OF OUR GENERATION’

Roger Strevens, vice president of global sustainability at Wallenius Wilhelmsen, views decarbonization of shipping as “the challenge of our

No Clear Winner Leaves MPV Operators Stumped BY CARLY FIELDS

generation. The science is very clear, we need to reduce emissions.” But what is very unclear, he said, is which is the right path to achieve decarbonization. Speaking to Breakbulk, he explained that the frame of reference for shipping is shifting around three key factors: • Regulation: “This has been the main historical driver of change in the industry and is set to continue to play a prominent role.” • Innovation: “There’s no law of physics that what’s greener will always cost more. The transition cost may be high, but the steady state cost may be very attractive.” • Demand: “Expectations of investors and lenders is helping shift us towards the clean paradigm of the future. “In short, the shifting frame of reference will mean that what is uncompetitive today won’t necessarily remain uncompetitive as time goes on.” Strevens calculates that one of Wallenius Wilhelmsen’s roll-on, rolloff ships uses as much energy in one day sailing as a normal house will use in 110 years. “When you think about what this means for energy storage you can then see the challenge both technically and operationally that we face.” ISSUE 3 / 2021

There is also the dilemma of timing to consider. Do breakbulk ship operators want to be the early bird that gets the worm or the second mouse who gets the cheese, Strevens asks. “We need to be cautious in shipping as the consequences of getting it wrong are dire, but we can’t afford to be conservative. We must think long in shipping as the lifetime of a vessel is the same as a generation: 30 years.”

Fuel Flexibility Options for Ship Operators Fossil-based without CCS Bio-based Electro-based Fossil-based with CCS

Retrofit Drop-in

bio-LNG

e-LNG

FUEL MODELING

In its Maritime Forecast to 2050: Energy Transition Outlook 2020, DNV calculated the share of shipping energy usage in 2050 for each modeled fuel type under 30 scenarios. Its modeling found that e-ammonia, blue ammonia and bio-methanol are the most promising carbon-neutral fuels in the long run in a decarbonization trajectory, with uptake in some scenarios reaching as high as 61 percent, 81 percent, and 87 percent, respectively, in 2050. However, in other scenarios it found a far lower uptake of these fuels and therefore “a single winner cannot be determined.” Add to this the fact that most of its scenarios see significant uptake of at least three or four different fuels in 2050. Tore Longva, principal consultant of DNV, explained that in each edition of its Energy Transition Outlook, or ETO, the class society has been going deeper into details of fuels and fuel technologies, looking at barriers and how the industry can bridge the gap from today’s available solutions to a carbon-neutral ship in the future. This must weigh up conflicting demands such as safety, sustainability, cost, space on board and availability, all the while keeping safety front and center and considering sustainability issues. “We also believe that we need more time in order to find the best solution, and in the meantime ship owners need solutions they can work with today that do not become a stranded asset in the future,” Longva said. “The conclusion of the ETO, that over the coming decades shipping must develop a new generation of carbon-neutral ships and that seizing the opportunities of decarbonization remains critical to optimize

Ammonia

LNG

DF LNG ICE

Hydrogen

Methanol

MGO

bio-MGO Fossil Fuels MGO, marine gas oil LNG, liquefied natural gas

e-MGO

Carbon-neutral Fuels CCS, carbon capture and storage DF LNG ICE, dual fuel LNG internal combustion engine

Bio-LNG and bio-MGO denote bio-based liquefied methane and bio-based diesel respectively e-MGO, e-LNG denote (respectively) electro-based diesel and electro-based liquefied methane CREDIT: Maritime Forecast to 2050: Energy Transition Outlook 2020, DNV

ships’ earning potential – are still just as relevant today.”

CHOOSING SIDES

Drawing the battlelines for the shipping fuel of tomorrow, UCL’s Smith is a firm supporter of hydrogen and hydrogen-derived fuels such as ammonia for shipping’s future. “In terms of scalability, the hydrogen-derived fuels have the biggest long-term potential for rapid scaling

in the following decades and should be a significant part of the 2030 fuel mix,” he said, adding that any fuels that require synthesis of hydrocarbons or alcohol, such as green methanol, are less cost competitive. Shell agrees with Smith’s assessment of hydrogen. Speaking at the UK Chamber of Shipping conference in February, Grahaeme Henderson OBE, head of global shipping and maritime at Shell, dubbed hydrogen as “the fuel www.breakbulk.com BREAKBULK MAGAZINE 19

SHIPPING TRENDS

Overall Fuel Focus Number of projects 0 5 10 15 20 25 30 35 40 45 50

One of Wallenius Wilhelmsen’s roll-on, roll-off ships uses as much energy in one day sailing as a normal house uses in 110 years. CREDIT: WALLENIUS WILHELMSEN

Hydrogen Ammonia Methanol/Ethanol Battery power Wind propulsion Biofuels Liquefied biogas Other CREDIT: Mapping of Zero Emission Pilots and Demonstration Projects, Getting to Zero Coalition

of the future.” He noted that with other industrial sectors moving to hydrogen supply, it will be an available fuel around the world. “So, shipping will not have to pay all those infrastructure costs.” However, Henderson said that there are still tremendous challenges with the different fuels and that the final solution will need industry to work together to meet zero-carbon goals. Smith sees liquefied natural gas and bio-LNG as “dead ends,” the former because it is a fossil fuel and the options that exist to replace it are also dead ends; the latter because there is no scalable supply available. “That doesn’t mean there aren’t niche opportunities to use it, but there is no evidence that it is both scalable and sustainable, and without meeting those two requirements then a fuel has got no serious long-run market share and investment is hard to justify.” But LNG and bio-LNG proponents continue to bang their drum. SEALNG, the coalition for accelerating liquefied natural gas as a marine fuel, said that waiting for options is not an option. Peter Keller, chairman of SEA-LNG, noted that as greenhouse gas emissions are cumulative, the decarbonization challenge only gets tougher the later the industry takes steps to address it. “The industry must act now using LNG and bio-LNG that 20 BREAKBULK MAGAZINE www.breakbulk.com

we know provide benefits today and into the future. With the introduction of bio and synthetic variants, LNG not only provides a pathway to decarbonization in its own right, but also provides the physical infrastructure and asset base that can be used by other alternative fuels, when and if they become commercially viable.”

RISK MITIGATION

Container line and project cargo mover Maersk is spreading its fuel risk by championing ammonia and methanol fueling projects. It has entered a partnership to conduct a feasibility study on establishing a supply chain for the provision of green ammonia ship-to-ship bunkering at the Port of Singapore. “Alongside methanol, at A.P. Moller - Maersk we see green ammonia as an important future fuel for the decarbonization of our fleet. A dual fuel ammonia engine is currently under development, but for green ammonia to fuel our vessels in the future we also have supply, infrastructure and safety related challenges to solve, not least when it comes to bunkering operations,” said Morten Bo Christiansen, vice president and head of decarbonization at A.P. Moller - Maersk. Maersk put firm feelers out for methanol earlier this year. In its announcement that it will operate

the world’s first carbon-neutral liner vessel by 2023, it revealed that methanol will feed a 2,000 TEU vessel deployed in one of its intra-regional networks. While the vessel will be able to operate on standard very lowsulfur fuel oil, the plan is to operate the vessel on carbon-neutral e-methanol or sustainable bio-methanol from day one. Chris Chatterton, chief operations officer of The Methanol Institute, which advocates for the adoption of methanol as a fuel in marine and other transport modes, told Breakbulk that methanol is widely available at several ports globally and could be readily and economically bunkered; this means MPVs do not need to be tethered to a specific bunkering hub which requires substantial investment in infrastructure to make an alternative fuel available. “The ships already using methanol as fuel have shown that the fuel is clean in operation and energy efficient,” he said. “Methanol is already being produced in carbonneutral environments. Renewable and bio-methanol have multiple pathways and although the market is nascent, it is growing rapidly and is expected to more than triple capacity of conventional methanol by 2050, according to the International Renewable Energy Association.” ISSUE 3 / 2021

SHIPPING TRENDS

Alfa Laval is working with MAN Energy Solutions to develop a methanol fuel system that can adapt to today’s marine diesel engines. CREDIT: ALFA LAVAL

PROJECTS AND INITIATIVES

While Chatterton sees a future for hydrogen, its current carbon lifecycle, production cost, infrastructure/storage and regulatory hurdles are barriers to its use as a marine fuel today. Bio-LNG, he added, is a concept rather than an available fuel, and for the foreseeable future LNG fuel will be fossil-sourced and have operational emissions challenges. “LNG fueled engines experience methane slip and investors in gas as power find themselves at odds with the EU and some national energy policies which are withdrawing support and championing renewables, a position that methanol is increasingly coming to occupy.” Engine manufacturers are also picking up the methanol mantle. The Alfa Laval Test & Training Center in Denmark is gearing up to begin large-scale methanol testing, working closely with MAN Energy Solutions and other partners. In the third phase of a research project, Alfa Laval will investigate

the possibility of running the center’s fourstroke, 2 MW diesel engine on methanol – without modifications or another pilot fuel. Through joint research, the consortium seeks to develop a Lars Skytte methanol fuel sysJørgensen tem that can adapt Alfa Laval to today’s marine diesel engines. “At present, combusting methanol requires a pilot ignition with fuel oil,” explained Lars Skytte Jørgensen, vice president technology development, Alfa Laval Marine Division. “This necessitates two fuel lines and different types of fuel tanks on board. If methanol from renewable sources could be burned directly in standard compression

engines, it would offer a shortcut to carbon-neutral shipping.” This is just one of the many projects and initiatives forging ahead to find the fuel of the future for shipping, and the excitement around solving the challenge is palpable. However, that enthusiasm is not shared by MPV operators who have been left scratching their heads over which fuel they should choose for their next newbuild. While the MPV industry was in the trough of cripplingly low freight rates, ordering new ships was not top of the agenda. With the turnaround in freight fortunes, ordering is being seriously considered and defining the fuel needed to power them safely and greenly through their lifetime has suddenly become a very pressing topic. Carly Fields has reported on the shipping industry for the past 21 years, covering bunkers and broking and much in between. www.breakbulk.com BREAKBULK MAGAZINE 21

SHIPPING TRENDS

PUTTING THE WIND BEHIND MPVS With the zero-emission discussion centering around fuel choices, multipurpose vessel operators might be missing an important, wind-capturing trick. International Windship Association Secretary General Gavin Allwright advises that wind propulsion systems can be installed on virtually any vessel, including MPVs, and there are more than 40 technology designers and suppliers with multiple systems in seven main categories: softsail, rotors, hardsail, kites, suction wings, turbines and hull form. While a large amount of deck equipment will mean that modifications are needed to a wind-assisted system, there are several solutions that can be used, including retractable, hinged and moveable systems, some of which are already in operation on bulk carriers and roll-on, roll-off vessels. Many systems are available as retrofits and there is R&D going into containerized systems that can be used on individual voyages. Determining the return on investment for wind propulsion systems is very difficult, Allwright said, as it depends on the fuel being used, the size of the system, type of ship and more. “However, the potential sweet spot for ROIs to be within a three- to four-year range would be a fuel price around US$550-US$650, so MGO is approaching that now.” Two selling points for wind assist Movable Anemoi Rotor sails on Blue Planet Shipping’s 64,000 dwt Afros. CREDIT: INTERNATIONAL WINDSHIP ASSOCIATION

systems are that costs come down considerably for whole fleet solutions over one-ship fits, and as wind propulsion systems are generally deck equipment, a business model of leasing the systems is much easier to arrange. “Quite a number of my members are looking at this model, transferring costs to operational expenditure and away from capital expenditure/ROIs,” Allwright said. French company AYRO is manufacturing four of its Oceanwings to be fitted on Canopée, a roll-on, rolloff vessel under construction, which has been designed to transport rocket parts for the Ariane 6 space vehicle among other cargoes. The Oceanwings wind propulsion system is a 363-square-meter, two-element wingsail several of which can be installed on board cargo vessels. Ludovic Gerard, AYRO CEO and partner, explained to Breakbulk that Oceanwings are designed to be fitted or retrofitted as a standardized product on different ship types, and that they are suitable for MPV vessels and heavy-lift vessels, especially if they have cranes on one side only.

DEFINING FACTORS

DNV Principal Engineer Uwe Hollenbach noted that there are many factors to consider when evaluating a wind-assisted propulsion system. These include: • Route – is there enough wind. • Speed – the higher the speed, the lower the savings in percent.

• Cargo – high deck cargo makes the positioning of the wind system challenging. • Gear – cranes or similar equipment can disturb the inflow to the wind-assisted propulsion systems, at least from one side. “Looking at these factors in terms of MPVs and heavy-lift vessels, the presence of project cargo on deck, alongside large cranes and other ondeck gear mean that obtaining the maximum benefit from a wind-assisted propulsion system may be a challenge,” Hollenbach said. “Additionally, heavy-lift vessels often operate at higher speeds.” He advised checking on a case-by-case basis to see if and how wind-assisted propulsion might fit with the individual vessel, route and operational profile. Wallenius Wilhelmsen certainly sees benefits in wind-assisted propulsion. At 220 meters long and carrying 7,000 cars, its Orcelle Wind concept vessel would be the largest sail powered ship in the world. Given the above, the International Windship Association is keen that wind propulsion is not left out of the future “fuel” debate. It has called for the establishment of a multistakeholder international working group to evaluate and quantify wind propulsion’s potential in respect of shipping’s decarbonization efforts. It wants a level playing field for all power systems that looks beyond the current “narrow fuel-centric approach,” Allwright said. BB Currently under construction, Oceanwings are being fitted to the ro-ro Canopée.

CREDIT: NEPTUNE MARINE

22 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 3 / 2021

THOUGHT LEADER

CCS Drives Cost Reductions Potential Seen for Carbon Capture and Storage Projects

ational governments and leading industrial companies alike are pumping billions of dollars into the development and deployment of carbon capture and storage, or CCS, technologies. The interest in CCS has never been higher and the knowledge spillovers from different applications, technology improvements and network effects of shared infrastructure have contributed towards the declining costs of CCS, making this a viable option for many more players than before. The network effects from shared infrastructure will be particularly interesting to track in Europe and North America – where some of the most exciting CCS projects are being developed, as these are expected to result in significant reductions in cost-per-tonne metrics. The increasing preference for shared infrastructure as high-capacity pipelines, hubs or industrial clusters are reducing project costs and risks. The traditional format of having one source, one pipeline and one storage site has been turned on its head, as networks of several capture sites sharing transport and storage have emerged, allowing companies to focus on their core competencies and get economies of scale. In Europe, most CCS projects are part of a hub or industrial cluster, such as Humber and Teesside in the UK, Northern Lights in Norway and Port of Rotterdam and Port of Amsterdam in the Netherlands. The NOK 25 billion (US$2.9 billion) project Longship includes the capture of CO2 from cement production and a waste-to-energy plant with a combined capture capacity of 800,000 tonnes per annum, or tpa, of CO2 , making it a highly expensive solution at present. Still, what is unique about this project is that it is not only the first large scale “open source” infrastructure project for receiving and storing CO2 from multiple sources that can provide significant cost reductions, but it is also a project that is set to incorporate transportation of CO2 by a ship which provides more flexibility. In the transportation and storage stages, dubbed the Northern Lights, the liquid CO2 from these sites will be transported to an onshore terminal on the Norwegian west coast and from there, the liquefied CO2 will be transported by pipeline to a subsea storage location in the North Sea for permanent storage. The use of a ship provides flexibility to receive additional volumes of CO2 from third-party

European customers against handling fees for receiving CO2 and storing it. The project is planned to have available capacity of 700,000 tpa per year of CO2 when the first phase is completed mid-2024, with the possibility to expand capacity by an additional 3.5 million tonnes by way of incremental investments to increase capacity to 5 million tonnes. Utilizing the full capacity of the storage facilities could bring the net present cost per tonne down by 27 percent to about NOK 940 or US$110. Another interesting example of shared infrastructure is the Alberta Carbon Trunk Line that commenced operation in 2020 and transports CO2 to storage in Central Alberta using a CAN$900 million pipeline, to be ultimately used for enhanced oil recovery. The 240-kilometer pipeline is designed to transport a total of 14.6 million tonnes of CO2 in the long term, making it the CO2 transport infrastructure with the highest capacity so far. Currently, Sturgeon oil refinery and the Nutrien Fertiliser plant CCS facilities supply 1.6 Mt of CO2 per year, leaving plentiful capacity to tie in many more CO2 emissions sources from additional industrial plants. BB

BY LEIN MANN HANSEN

Lein Mann Hansen is a senior analyst at Rystad Energy.

Global spending on CCS projects in the pipeline and new projects US$m 10,000

New projects

9,000

Latin America

8,000 7,000 6,000 5,000

Africa

Australia Asia

Middle East

CAGR 38%

Europe

North America

4,000 3,000 2,000 1,000 0

2020

2021

2022

2023

2024

2025

Source: Rystad Energy research and analysis

www.breakbulk.com BREAKBULK MAGAZINE 23

EMERGING MARKETS

HYDROGEN SWEET SPOT BY MIKE KING

Project Cargo Serves Carbon-free Fuel Frenzy

he transformative potential of hydrogen as a fuel capable of drastically reducing fossil fuel emissions has long been recognized. The colorless gas does not produce carbon dioxide when burned, making the benefits of harnessing its power obvious. William Robert Grove, a judge, inventor and physicist from Wales, mixed hydrogen and oxygen in the presence of an electrolyte to produce electricity and water all the way back in 1839, while the first hydrogen car was built by General Motors in the 1960s. There have been many other attempts since to commercialize hydrogen, but

the technical complexities and cost have proven prohibitive over the decades. Enthusiasm for overcoming those challenges has tended to rise with oil price inflation and rapidly ebb when crude becomes more affordable. However, everything changed with the 2015 Paris Agreement, which committed 191 member states to finding ways of limiting global warming by committing to fossil fuel emissions cuts. The UK subsequently passed legislation committing it to net zero emissions by 2050 and the EU and others have promised to follow suit. Most agree that hydrogen, and specifically lowcarbon hydrogen, will play a key role in

helping industry meet Paris Agreement emission-reduction targets. Indeed, such has been the postParis Agreement momentum behind hydrogen projects that analysts at Morgan Stanley refer to hydrogen as the “abundant molecule” which “will increasingly replace carbon as the dominant energy carrier” on the planet. “Hydrogen will transition from a dirty feedstock used in industrial processes to a clean fuel source adopted by power, industry and mobility in particular,” said the investment bank’s latest hydrogen report. “The similarities with wind and solar in the early 2000s are hard to ignore.”

ENGIE and Equinor are to work together to investigate the development of low-carbon hydrogen value chains in Belgium, the Netherlands and France. CREDIT: EQUINOR

24 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 3 / 2021

GLOBAL PROJECT ROLLOUTS

Governments around the world have been rolling out hydrogen blueprints as they bid to drastically reduce emissions. A new report from lobby group the Hydrogen Council in collaboration with McKinsey & Co. details more than 30 countries that have published hydrogen roadmaps to expand hydrogen output as part of government commitments to decarbonize. “No less than 228 largescale projects have been announced along the value chain, with 85 percent located in Europe, Asia and Australia,” noted the report. Most national plans are supported by generous subsidies to lower the production costs of hydrogen. China, for example, aims to get 1 million fuelcell vehicles on its roads by 2029 and by 2023 will have invested more than US$17 billion in hydrogen projects alongside private developers. Government strategies focus on incentivizing developers to produce low-carbon hydrogen, which is produced either without fossil fuels (green hydrogen) or by capturing and storing emissions generated (blue hydrogen). However, the infrastructure required to produce low-carbon hydrogen is both expensive and requires huge logistics support to complete. For those in the business of project and heavy-lift logistics the potential is clear. Frank Appel, CEO of Deutsche Post DHL Group, told Breakbulk hydrogen was a fuel with the ability to transform logistics as well as create a new project logistics market of vast potential. He expects both hydrogen infrastructure projects and hydrogen fuel usage to accelerate in the short and medium term. “It’s good to see that there is so much commitment out there,” he said. “Governments need to put a price tag to carbon emissions worldwide. And in the long run, we also need to promote [hydrogen] investments. We need to invest in new scientific ideas. If all that is done, then I’m confident that we will make a lot of headway.” The new hydrogen projects identified by the Hydrogen Council include large-scale industrial usage, transport applications, integrated hydrogen

Green electricity

Eemshaven

Green hydrogen

Hamburg

Delfzijl

Hydrogen storage in underground salt caverns

Amsterdam Refurbished gas pipelines

Rotterdam

Zeeland Ruhr area

Antwerp Limburg

Köln The scope of the NortH2 project. CREDIT: NortH2

economy, infrastructure, and giga-scale production projects. “If all announced projects come to fruition, total investments will reach more than US$300 billion in spending through 2030,” said its latest report into the industry. “Of this investment US$80 billion can currently be considered ‘mature’ – meaning that these projects are in the planning stage, have passed a final investment decision, or are under construction, already commissioned, or operational.”

EQUINOR STEPS UP

One such new project is NortH2, which is being heralded as Europe’s

Frank Appel

Pål Eitrheim

Deutsche Post DHL Group

Equinor

biggest green hydrogen project. It aims to produce green hydrogen using renewable electricity from offshore wind off the coast of Netherlands at a rate of around 4 gigawatts, or GW, by 2030 rising to more than 10 GW by 2040. Launched in February last year, the project is led by Shell, Groningen Seaports, Norwegian energy giant Equinor and Germany’s RWE. DSV Panalpina confirmed to Breakbulk it is involved in the logistics of the project with development due to start later this year. Pål Eitrheim, executive vice president New Energy Solutions in Equinor, said the development of viable largescale clean hydrogen value chains via projects such as NortH2 would help Europe meet Paris Agreement targets. “Hydrogen will add to the competitiveness of renewables in the years to come, by adding value and an alternative route to market for renewables,” he said. Equinor is also a partner in H21, a radical plan to make 3.7 million homes and 40,000 businesses in the north of England emissions free by 2034. This will be achieved by switching their energy usage from natural gas to www.breakbulk.com BREAKBULK MAGAZINE 25

EMERGING MARKETS

Avedøre Power Station where Danish demonstration project H2RES will be located. The project is expected to produce its first hydrogen in late 2021 and will be Ørsted’s first renewable hydrogen project in operation. CREDIT: ØRSTED

hydrogen by converting the existing gas network so it can receive hydrogen blends. Clean hydrogen will be produced from the natural gas using a self-powered production facility with carbon capture technology. The resulting carbon dioxide, or CO 2 , captured as a by-product of the process will be stored safely in saline aquifers far below the seabed off the northeast coast of England. A similar project is also underway in the northeast of the UK where the Zero Carbon Humber partnership aims to decarbonize the Humber industrial cluster, the UK’s largest cluster by emissions. Partners in the project include Equinor, Mitsubishi Power, National Grid and Associated British Ports. The plan is to enable shared trans-regional pipelines to distribute low-carbon hydrogen and captured carbon emissions, thereby

SHADES OF HYDROGEN

creating the world’s first net zero industrial cluster by 2040. Central to the blueprint is the Equinor-led Hydrogen to Humber (H2H) Saltend project which will be the starting point for a CO 2 and hydrogen pipeline network developed by National Grid Ventures. The H2H Saltend project will produce blue hydrogen by reforming natural gas, initially for use in existing power plants and industry, while capturing its carbon emissions. It will eventually connect energy-intensive industrial sites throughout the region, offering businesses the option of directly capturing their emissions or making a fuel switch to hydrogen. Equinor was unable to confirm a timeline or the logistics requirements of either its NortH2, H21 or Zero Carbon Humber projects when contacted by Breakbulk.

The environmental benefits of using hydrogen to reduce emissions is determined by the process used to turn it into a fuel. Essentially, hydrogen is only as ‘clean’ as the energy used to create it. For example, brown hydrogen is created through coal gasification, while the process for producing grey hydrogen from natural gas creates carbon waste. At the cleaner end of the hydrogen spectrum, where most of the new range of global projects are focused, are blue and green hydrogen. Blue hydrogen is created when natural gas is split into hydrogen and CO2 either by steam methane reforming or auto thermal reforming with the CO2 captured and then stored to mitigate environmental damage. Green hydrogen is created by using renewable energy rather than fossil fuels. The renewable energy is used to electrolyze water, separating the hydrogen atom within it from its molecular twin oxygen. It is the ideal fuel in terms of reducing carbon emissions, but it is also very expensive to produce.

26 BREAKBULK MAGAZINE www.breakbulk.com

ØRSTED PROMINENCE

Another key company in the hydrogen revolution is Danish power company Ørsted, which specializes in the development, construction and operation of offshore and onshore wind farms, solar farms, energy storage facilities and bioenergy plants. Ørsted is now proceeding with Danish demonstration project H2RES, which will use offshore wind energy to produce green hydrogen. The project is expected to produce its first hydrogen in late 2021. The H2RES project will investigate how to best combine an electrolyzer with the fluctuating power supply from offshore wind, using Ørsted’s two 3.6 MW offshore wind turbines at Avedøre Holme. H2RES will have a capacity of 2 MW and produce up to about 1,000 kilograms of renewable hydrogen daily, which will be used to fuel road transport operations in the Copenhagen and Zealand areas. Ørsted has over the past 18 months partnered with different consortia in seven renewable hydrogen projects in Denmark, Germany, the Netherlands and the UK, but H2RES will be the first out the block in terms of producing hydrogen. Ørsted was unable to confirm the logistics requirements of the project, but Martin Neubert, executive vice president and CEO of Ørsted Offshore, said: “With the right framework in place that incentivizes the shift away from fossil fuels, renewable hydrogen can decarbonize transport and heavy industry, which is paramount to creating a world that runs entirely on green energy.” ISSUE 3 / 2021

EMERGING MARKETS

As previously reported by Breakbulk, Ørsted is also working with BP towards launching green hydrogen production at the latter’s Lingen Refinery in Germany. The project aims to utilize a 50-MW electrolyzer powered by offshore wind initially, with plans to eventually expand capacity 10-fold. Elsewhere in Europe, Iberdrola has launched what it claims will be the largest plant producing green hydrogen for industrial use on the continent in Spain. The €150 million Puertollano plant complex is scheduled to be commissioned later this year. It will comprise a 100 MW solar photovoltaic plant, a lithium-ion battery system with a storage capacity of 20 MWh and one of the largest systems for producing hydrogen by electrolysis (20 MW). Iberdrola sees the Puertollano plant as the first element in a comprehensive plan hatched in alliance with Fertiberia with a goal of developing 800 MW capacity of green hydrogen in Spain via an investment of €1.8 billion by 2027. If realized, this would see the development of three additional green hydrogen projects between 2023 and 2027 at Ciudad Real and Huelva.

US MODULAR ADOPTION

The U.S. is also proceeding with new green hydrogen projects with SGH2’s technology, which it claims is “the missing link to hydrogen” due to its ability to enable affordable, massproduced hydrogen. It is central to plans to build the world’s largest green renewable hydrogen facility in partnership with the City of Lancaster, California, which seeks to become a global hub for alternative energy capital. The Lancaster facility, which will be constructed in partnership with Fluor Group, will have the capacity to produce 11,000 kilograms of green hydrogen per day and 3.8 million kg per year, according to SGH2. “That’s nearly three times larger than any other green hydrogen facility built, under construction or in development within the decade,” said the company. “All other green hydrogen plants produce a much more expensive hydrogen through electrolysis of water using large amounts of intermittent renewable energy.” The plant will feature SGH2’s pioneering technology, which uses

Global Hydrogen Projects

Projects by region: Europe 126 Asia 46 Oceania 24

North America 19 Middle East and Africa 8 Latin America 5

228 Announced Projects

Giga-scale production: renewable H2 projects >1GW and low-carbon H2 projects >200 kt p.a.

Large-scale industrial usage: refinery, ammonia, power, methanol, steel and industrial feedstock

Transport: trains, ships, trucks, cars and other hydrogen mobility applications

recycled mixed paper waste to produce “greener than green” hydrogen which, the company claims, “reduces carbon emissions by two to three times more than green hydrogen produced using electrolysis and renewable energy and is five to seven times cheaper.” Construction is expected to begin later this year and the plant with full scale production scheduled to begin in early 2023. Neither SGH2 nor Fluor Group would comment about the logistics requirements of building the new plant when contacted by Breakbulk. However, SGH2 did report that it is in negotiations to launch projects of similar modular size to Lancaster in France, Saudi Arabia, Ukraine, Greece, Japan, South Korea, Poland, Turkey, Russia, China, Brazil and Australia. “SGH2’s stacked modular design is built for rapid scale and linear distributed expansion, at lower capital costs and does not require large land space – as solar and wind-based

Integrated H2: cross-industry, and projects with different types of end uses

Infrastructure projects: H2 distribution, transportation, conversion, and storage

CREDIT: HYDROGEN COUNCIL Hydrogen Insights, A perspective on hydrogen investment, market development and cost competitiveness.

projects do – or unique weather conditions,” it said. According to Deutsche Post DHL Group’s Appel, while hydrogen will not be a cure-all solution in global efforts to decarbonize, as companies such as his try to reduce emissions, this will increase demand for hydrogen and reduce the costs of new hydrogen plant projects while also creating a new project logistics market. “We are only at the beginning of this [hydrogen adoption] development,” he said. “I think in the second half of this decade, things will pick up speed and I am very confident we will see much larger investments then. That of course will have a bearing on us and our customers. I think this is the right time and the right place for us to take action.” BB Michael King is a multi-award-winning journalist as well as a shipping and logistics consultant. www.breakbulk.com BREAKBULK MAGAZINE 27

ENERGY UPDATE

POSITIONING FOR DECOMMISSIONING WORK Breakbulk Movers to Define Circular Wind Role

ollowing the first major surge of commercial wind farm development in the early 2000s, wind power has proven itself to be a vital element in the energy transition, and an immensely scalable resource. But as the size and scale of the latest wind power projects increases, the first generation of wind farms pose numerous challenges for operators that must either decommission or upgrade. With many of these early wind farms now nearing end of life, a vast number of wind turbines will be dismantled and removed over the coming decade and this presents opportunities for breakbulk providers. “If you take a list of just those wind farms already installed you can see this market is going to be a huge industry,” Brian Sørensen, commercial director for wind at Blue Water Shipping, told Breakbulk. “There is a far greater certainty with decommissioning old wind farms compared with commissioning new farms in that we know exactly how many turbines are there. For a new wind farm the proposal can change radically due to political or economic reasons making it hard to forecast the exact logistical requirements, but with an existing wind farm we can be reasonably certain exactly how many turbines need to be moved.” While estimates vary on the exact amount of capacity that will require decommissioning versus upgrade, the rapid rate of development over the last three decades suggests that there are many gigawatts of potential projects

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BY MALCOLM RAMSAY

with the first of these beginning to emerge over the next five years. Industry association WindEurope assumes that about 38 GW of wind energy capacity will reach the age of 20 or more operational years by 2025. “This is when in most countries most of these turbines will stop receiving guaranteed feed-in-tariffs,” said Christoph Zipf, communications manager for WindEurope. Those markets that were first to erect commercial wind farms will be among the first to face the challenge of decommissioning, with Europe at the forefront of a new industry approach dubbed Circular Wind. “In 2020, some 203 wind turbines with a total capacity of 222 MW were decommissioned across Germany. This number is likely to rise sharply in the coming years as more than 1.5 GW of onshore wind farms were erected in 2000 and more than 2 GW were added per year between 2001 and 2003 – and the feedin tariff support ends after 20 years,” said Heike Winkler, managing direcHeike Winkler tor of German WAB wind industry association WAB. Research by the University of Kent suggests that the UK will have to decommission about 300 and 1,600 early-model offshore wind turbines by 2025 and 2030, respectively.

“The market for wind turbine dismantling and recycling is going to increase sharply. Most decommissioning activity will take place in Germany, the Netherlands and Denmark – some of the oldest markets for wind energy,” Zipf added.

BLADE SHIPMENT OPTIONS

For many of the offshore wind farms erected in the early 2000s, the cargoes were moved in position, from factory to marshaling port, by small 3,000 to 8,000-tonne coaster vessels. These same vessels are expected do the reverse trips from marshaling port to the decommissioning port. If these components are then taken straight to port for recycling, this poses a question over what role breakbulk carriers may play in the decommissioning process. Blue Water Shipping’s Sørensen predicts that demand for breakbulk and heavy-lift services will primarily center around the carriage and re-use of blades. “I think a lot of the pieces will be recycled directly at the port, but we will see demand for breakbulk shipping, particularly when we consider re-use of components. The blades stand out as the primary driver with potential for breakbulk shipping to other countries for re-use. It is very much an emerging sector, and I think we will only see the real need for these services start to develop in five years or so.” WindEurope likewise estimates that 80 percent to 90 percent of modern wind turbines can be easily recycled through existing recycling circles for steel and concrete, but also ISSUE 3 / 2021

The breakbulk supply chain for wind farm decommissioning needs to be defined. CREDIT: WINDEUROPE

noted that the most challenging part are the blades. However, the supply chain for recycling and disposal of wind farm components remains nascent and the infrastructure required to process these components does not yet exist in many locations, posing challenges and raising the prospect of ancillary breakbulk demand. When turbines reach the end of their guaranteed feed-in tariffs, Zipf predicts operators will face three main options: • Repowering, where the existing infrastructure remains and the old turbines are replaced with new, more efficient turbines. • Life-time extension, where turbines continue to operate and sell their electricity on the market or via power purchase agreements. • Full decommissioning.

“Operators will have to answer the question of what to do with these turbines? Repowering, life-time extension or full decommissioning? We assume that around 7 GW will be fully decommissioned until 2025,” Zipf said. While the process of decommissioning and recycling components from oil and gas platforms or onshore industrial facilities is relatively well established, the potential for reuse of wind farm components is still very much developing. Steve Ross, data and digital business lead at UK industry body Offshore Renewable Energy, or ORE Catapult, said that it is a lot easier onshore, and that topside offshore is seen as relatively straightforward, with some form of reverse engineering as opposed to construction. However, subsea is “another matter,” he said.

“Cables, piling and infrastructure need to be removed/cut and impacts on their removal or long-term impact on the ecosystem are being explored by organizations such as ORE Catapult. O&G decommissioning is not directly comparable – however some of the skills and technology can be adapted for the offshore wind market.”

DEFINING INDUSTRY STANDARDS

One key element in this new supply chain will undoubtedly be the need for regulation and standards to ensure the safe and environmental decommissioning of projects. Given the range of early designs and the huge difference between onshore and offshore wind farms, this process is likely to evolve in parallel with the growth in decommissioning projects. www.breakbulk.com BREAKBULK MAGAZINE 29

ENERGY UPDATE

year, the City University of Applied Sciences in Bremen and partners of the research project SeeOff are expected to publish a handbook to support the companies involved in the decommissioning process to identify project-specific efficient decommissioning strategies. In the UK, industry initiatives are also starting to gather pace with ORE launching the Circular Economy for the Wind Sector Joint Industry Program last year, bringing together industry bodies to create a framework to support decommissioning.

DECOMMISSIONING HUBS Dismantling onshore does not compare to offshore decommissioning. CREDIT: ABOWIND

Wind farm storage facilities may face consolidation to meet decommissioning demands. CREDIT: BLUE WATER

“First, there must be a standard after which deconstruction and recycling can take place. This standard does not yet exist. For onshore there is a DIN SPEC norm in Germany, which when adapted might also be useful for offshore wind. The handling of the components then depends on the requirements and the fact that there must be sustainable and at the same time very cost-efficient solutions,” WAB’s Winkler explained. To meet these needs, WAB cooperation partner and German industry association RDRWind has developed 30 BREAKBULK MAGAZINE www.breakbulk.com

DIN SPEC 4866, a new industry standard for dismantling, disassembly, recycling and recovery of onshore wind turbines. “We are exchanging information for the further development of the standard, for the adaptation to offshore wind in a possible similar standard, as well as to planning to work together in joint wind industry research projects,” Winkler said. Plans also include a cooperative industrial cluster development for recycling management and the development of a quality seal. Later this

With most offshore wind components recycled locally at ports, landside congestion is a concern for hubs as the number of components needing to be handled will increase exponentially. Winkler said that it will likely be too expensive to use jack-up vessels to transport parts ashore for dismantling, and that ports will need sufficient equipment and space to handle and recycle a growing number of offshore wind farm components. With the size and scale of new turbines growing, ports already face pressure due to limited storage space, but as shipment of decommissioned components also start to arrive in number over the next decade this may drive consolidation and prompt the emergence of decommissioning hubs. “This will undoubtedly add pressure on port infrastructure, as in most cases it will be the same ports handling outgoing cargoes for new wind farms and incoming cargoes from decommissioned farms,” Sørensen said. “In Europe we are probably only going to see five to eight key wind hubs that will encompass everything from turbine factories to decommissioning facilities. This consolidation of resources may ultimately drive additional project cargo demand with bulkier components required to be moved to hub ports by breakbulk vessels to prevent congestion. BB Based in the UK, Malcolm Ramsay has a background in business analysis and technology writing, with an emphasis on transportation and ports. ISSUE 3 / 2021

THOUGHT LEADER

P&O’s Топаз Урал carries a heavy cargo. CREDIT: P&O MARITIME LOGISTICS

Oil & Gas Recovery Rules Future-proofing Energy Projects Development

s the world recovers from the Covid-19 pandemic, the course is being charted for the relaunch of oil and gas offshore projects around the world. Though the market has seen an oil price recovery to US$65-US$70 per barrel – which increases the reliability of return on investment – there will be delays, loss of efficiencies, and cost impacts because of this pandemic. Even if project planning, design and management do not stop altogether, work will likely be costlier and take more time. Integrated planning with logistics service providers is common practice within the engineering, procurement and construction, or EPC, world, however adding the offshore “last-mile delivery” has remained relatively untouched ground due to a fixed-day rate rather than a preferable “pay as you go” contracting model. We are working towards an offshore logistics model in which combined shore bases, quaysides and vessel operations for major capital projects are supported by tailormade IT systems for each of our clients. With the different links in the project cargo cycle connected for the first time, customers benefit from speed, transparency and cost savings, all the while enabling planning security for the critical last-mile delivery. This is part of P&O Maritime Logistics’ phased rollout approach to using big data with the goal of becoming an end-to-end logistics provider. By integrating offshore logistics at the earliest stage of pre-FEED studies, EPC companies gain the technical expertise needed to preempt challenges and find quicker, cheaper shipping routes. We do this by using business

intelligence data that we collect from managing yards and quaysides, operating large equipment, and running offshore supply vessels, enabling planning as an end-to-end service. With P&O Maritime Logistics as a customer’s single point of contact for their project planning and execution, this operating model reduces the interface management for the end client. Crucially, it also provides a transactional cost model rather than a fixedrate structure for all facility and asset use, both lifting and vessel, regardless of an idle stage. A great example of this in practice is our “Supply on Demand” tool being rolled out across Qatar by Doha Marine Services where customers get to be in control of their cargo and improve their planning schedules. The tool harnesses the power of big data to create optimized delivery schedules in accordance with the project execution plans. It is a future-focused solution for an energy industry that is changing rapidly. By looking at major capital offshore project execution in general, energy businesses can advance project efficiency and schedule delivery, even in frontier markets with limited existing infrastructure. In a future where the oil price looks to remain uncertain, end-to-end energy logistics is the answer to cost-sensitive yet sophisticated transport needs in a technically challenging environment. BB

BY CHRISTIAN ARNDT

Christian Arndt is vice president logistics at P&O Maritime Logistics.

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CASE STUDY

CAPTURING CHINA’S WIND AMBITIONS BY THOMAS TIMLEN

Asia Powerhouse to Fill Renewables Need

obert Louis Stevenson could not have consciously foreshadowed China’s role in modern Asian geopolitics as he wrote the novella The Strange Case of Dr. Jekyll and Mr. Hyde in 1886, yet the diametrical behaviors currently displayed by China fit the split personality of his fictional tormented character very well. On one hand we see a nation strengthening its military and staking claims in the South China Sea,

while on the other hand we see the same nation joining the world’s largest free-trade agreement with 14 other Asia-Pacific countries who together established the Regional Comprehensive Economic Partnership, while continuing to invest in the region’s infrastructure through the Belt and Road Initiative, or BRI, and providing its neighbors with the means to boost production of renewable energy. Intimidating and benevolent behaviors, often with the former getting all the headlines.

China’s benevolent engagement with its neighbors is driving the development of wind farms throughout the region, providing opportunities for freight forwarders such as Trans Global Projects, or TGP, a company that has been actively engaged in the transport of turbines manufactured in China to Thailand and Vietnam. TGP’s CEO Colin Charnock is enthusiastic regarding the prospects in the region and globally: “At TGP, it is very important for

Top: Loading turbine blades at ZPMC’s terminal inTianjin, China. CREDIT: TRANS GLOBAL PROJECTS

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ISSUE 3 / 2021

our customers that our teams understand the intricacies of delivering wind turbines. With our accumulated expertise, we are excited to be playing an increasingly growing role in Colin Charnock meeting the need for safe and susTGP tainable energy generation across the globe.”

IN DISPUTED WATERS

However, the road that led to these new opportunities was not an easy one. China continues its efforts to elbow its neighbors away from potential exploration of energy resources below the waters of the South China Sea by taking a wide variety of steps to enforce a disputed boundary as defined by an ancient nine-dash-line. This keeps members of the Association of Southeast Asian Nations, or ASEAN, busy. Among other things, the development of a code of conduct aimed at reducing the risk of confrontation on these waters has been in the works for years, while there are no signs that tensions relating to territorial disputes are easing. The most recent example involved more than 200 Chinese fishing vessels that positioned themselves within the Philippines’ exclusive economic zone. In March the Philippines foreign ministry issued a diplomatic protest claiming that the vessels were infringing on the country’s sovereignty and generating instability, while the Philippines defense secretary described their presence as a provocative action that is militarizing the area. Many see the vessels as part of China’s maritime militia, whereas China counters such accusations by claiming that the fishing vessels are merely seeking shelter from rough seas. The Philippines is joined by other countries that have territorial disputes with China, including Indonesia, Brunei, Japan, Malaysia and Vietnam. The Chinese Coast Guard has subsequently continued to patrol the contested waters.

Last year, while TGP was still negotiating its latest contract to bring Chinese-manufactured turbines to Vietnam, a British contractor cancelled an offshore project arranged with Vietnam amid rumors that it came under pressure from Beijing to back out of the deal. Yet China is supporting Vietnam’s efforts to expand its capacity to develop renewable energy sources with China well underway with a project to develop offshore wind turbine farms off Vietnam’s coast. Although the project was pursued throughout last year and operations commenced in September, it was first announced in February 2021. The TGP contract secured with an engineering, procurement and construction contractor in China involves the transport of about 320,000 freight tons of wind turbine components to be used for two offshore wind farm projects in Vietnam. Chinese turbine manufacturer Goldwind is also providing units for Vietnam’s Binh Dai offshore wind

project, joined by another Chinese firm, Orient Cable, who is providing and installing 185 kilometers of 35 kV subsea cable system, its first foray into the Vietnamese energy market.

INFRASTRUCTURE DEMANDS

China’s investments and direct involvement in infrastructure projects are well known, both domestically and regionally, as part of the BRI. Such investments have helped to allay many logistics challenges for the movement of large turbine components from China to Vietnam, a country known for its infrastructure inadequacies and where many logistics challenges remain. To TGP’s advantage, valuable experience was gained from a similar project involving the transport of turbines from China to Thailand last year. Six 2.5-megawatt turbines produced in Tianjin and Taicang were contracted for delivery at Laem Chabang. Among the challenges involved were the bulky and fragile nature of the turbine parts.

A nacelle unit prior to loading. CREDIT: TRANS GLOBAL PROJECTS

www.breakbulk.com BREAKBULK MAGAZINE 33

CASE STUDY

Any components arriving damaged or scratched would have to be returned to the Chinese workshop for repairs. There were also administrative burdens. Two types of customs clearance were required in China; one for the permanent export of the turbines and one for the temporary export of reusable transport saddles. With the transportation of multiple large-scale turbines typically involving many repetitions of singleset activities, TGP synchronized activities to provide the solution. It arranged to simultaneously load two sea charters: one with the turbines’ nacelles and hubs and one with the load towers and blades. While time was of the essence, the cargo’s safety was just as important, and precise plans were devised for its stowage on board while documentation was carefully coordinated for the dual customs clearance in China. This led the six turbines to be delivered at Laem Chabang safely and on time.

Turbine load towers loaded for shipment to Laem Chabang. CREDIT: TRANS GLOBAL PROJECTS

Under the latest contract, between September 2020 and September 2021, TGP is scheduled to deliver 10 batches of wind turbine equipment from China to Vietnam via ocean vessel. The ongoing contract sees TGP loading, shipping, providing customs clearance and discharging 57 sets of 3-megawatt offshore wind turbines. Each set

includes towers and blades as well as the hubs, nacelles and generators. The blades measure more than 76 meters, requiring careful loading, stowage and offloading. Since September, TGP has delivered 12 sets of wind turbine equipment from three different locations across China to the port of Ho Chi Minh in Vietnam.

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Asia

Australia

Europe

Mediterranean

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Middle East

South America

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CASE STUDY

“Shipment of a wind turbine’s oversized components, the blades, towers and nacelles, requires heavy lifting expertise and meticulous transport planning,” Charnock said. “Led by our team in China, this project highlights the trust we have built with key players in the renewables sector. We look forward to continuing to utilize our knowledge in the end-to-end handling of breakbulk cargo to meet the needs of a sector that’s expected to expand significantly in the coming years.”

ASIA-PACIFIC WIND POTENTIAL

Fanned on by the environmental, economic and political necessity of renewable yet reliable power sources, demand for wind turbines in the AsiaPacific is growing rapidly. TGP projects that by 2030 the region will become the world’s largest offshore wind power market. In previous years, TGP has supported a number of wind energy projects across Asia, and moving into

the future, the company plans to further hone its expertise in this area. Chinese turbine producers like Goldwind that have met domestic demand are increasingly looking to exports to Thailand and Vietnam, as well as other markets along the BRI network. Key manufacturers such as Goldwind have exported to buyers in Kazakhstan, Pakistan, Greece and Turkey, orders that drive continued demand for project cargo transportation. As a global trend continues in which offshore wind farm development takes precedence over onshore wind farms, the additional complexities of offshore farms will create continued opportunities for the companies that can provide the required services and expertise. While Asian territorial disputes continue to get a lot of attention, trade in the region continues unabated. Chinese-produced wind turbines and equipment are being installed for the energy grids of Indonesia, Japan, the

COMPLEX CARGO MADE EASY

Philippines and Vietnam despite the border issues. China’s industrial shipments continue to run parallel to large volumes of Chinese consumer goods traded regionally and globally, while the region’s continued trade volumes are positioned to benefit from the new Regional Comprehensive Economic Partnership. TGP’s activities in Thailand and Vietnam reflect a broader trend in which Chinese equipment is well positioned to support transitions to renewable energy sources, which can be expected to be a continued driver for project and heavy-lift transport demand, even if China’s Jekyll and Hyde behaviors stubbornly persist. BB Thomas Timlen is a Singapore-based analyst, researcher, writer and spokesperson with 31 years of experience addressing the regulatory and operational issues that impact all sectors of the maritime industry.

Breakbulk cargo isn't typical cargo. Good thing the Port of San Diego isn't your typical port.

• OPEN SPACE • FLEXIBILITY • EXPERTISE Take advantage of our special advantage. portofsandiego.org/cargo

www.breakbulk.com BREAKBULK MAGAZINE 35

CREDIT: PORT OF ANTWERP

LOGISTICS PERSPECTIVE

POST-BREXIT PROJECT LEARNING CURVE BY FELICITY LANDON

Breakbulk Operators Uncover EU Quirks

he end of the Brexit transition period on Dec. 31, 2020 meant that the UK was – after nearly five years of political upheaval – no longer part of the European Union. From the pre-Christmas truck queues on the way to the south coast’s Port of Dover – caused by the rush to stockpile, combined with France’s Covid-19-related border closure – and dramatic shifts of volumes on Irish Sea services since Jan. 1, 2021 to plummeting UK to EU export volumes, stories about truckloads of rotting pork and a ban on shipments of trees, the stories have kept on coming. But the focus is almost always on the regular flows of standard roll-on, roll-off trailers and containers. For project cargoes, plans are made in advance and therefore any additional paperwork should have been accounted 36 BREAKBULK MAGAZINE www.breakbulk.com

for and any new non-tariff barriers, or NTBs, will have been anticipated. Nevertheless, some Brexit fallout is inevitable for this sector. In its recent report on risks and resilience post-Brexit, the Economist Intelligence Unit highlighted the UK aerospace industry as one that is highly integrated with the EU. “Among the biggest UK producers is Airbus, which employs around 15,000 UK workers and operates across the EU. Just-intime supply chains could be disrupted by increased NTBs and local content requirements,” said the report. Axel Mattern, CEO of Hamburg Port Marketing, said the port was actually seeing a positive trend in trade with the UK in terms of container shipping, with shippers routing export or import goods to and from the UK via Hamburg to avoid congestion in the English Channel ferry ports. However, he said,

there has been no impact on the breakbulk segment. Ann De Smet, Port of Antwerp business development manager, said that as Brexit impact mainly affected regular ferry services, which are not handled at Antwerp, it was difficult for her to comment on the issue. However, a related development was Fast Line Belgium’s launch last year of a new liner service between Antwerp and Drogheda. The service runs between the Wijngaardnatie terminal, which handles all kinds of breakbulk cargoes and specializes in steel products, and Fast Terminals in Drogheda. At its launch, tagged “Prepare for Brexit,” Fast Line said it envisaged picking up cargoes that were being trucked via the UK land-bridge to Ireland. “All kinds of breakbulk and general cargoes such as steel products, bagged material, palletized goods, project cargoes, etc., are welcome,” it noted. ISSUE 3 / 2021

HITTING THE ROAD

Brexit seems to have delivered road-related breakbulk transportation issues rather than sea-based ones, for now. The northwest UK-based shipping and logistics group Armitt, which specializes in steel and handles a range of other cargoes, said that so far it had not experienced many issues with specific project cargoes. However, Lauren Caldwell, shipping and logistics manager, said issues around transit documentation had led to an increase in haulage companies requesting direct movements – for example, UK to Netherlands, as opposed to via Calais. “We have seen a change in voyage requests mainly due to the transit document (T1) being required,” she explained. “If you transit another country and are not declaring the goods into a Customs control, then you need to have a transit document that accompanies the goods at all times, so that when you pass through each border point, the document can be checked, and the goods allowed to proceed until they reach final destination.” Agents able to raise T1s are scarce, and those that can often may not provide the service, because they are not controlling the transport of the goods and therefore have no control to ensure the transit procedure is closed correctly, Caldwell said. “When raising a T1, the agent uses their guarantee to secure any duties due on the goods should they not be declared into a customs control at destination and the T1 closed. “Due to what may be a lack of knowledge and understanding within the industry of the required process, T1s have not been closed correctly or at all. This results in penalties and the guarantee being taken from the agent raising the T1, which has deterred some agents from offering this service.” At the end of January, a vast number of agents were offering this service with marketing emails, she said, “but over the past month we have seen this service/facility decrease due to the risks involved.”

“T1 agents now tend to want to complete the transport element, export and T1 together as one package, so their margin on transport plus the T1 cost and export declaration is making it an expensive operation to those who did not envisage the transit requirements.”

three years, no matter how many journeys the lorry undertakes within that category. However, post-Brexit, France made its system unavailable to UK operators – even though it remains available to EU and Swiss operators, despite Switzerland not being in the EU. “The whole idea of the system is that you can roam in the EU – for example, delivering from the UK you could drive through France and into Italy without having to change permits, crossing borders seamlessly,” said Marcus Gough, Marcus Gough chairman of the HTA. HTA

FRANCE PERMIT ANOMALY

An unexpected Brexit-related issue that has arisen on the roadside is France-specific. The Heavy Transport Association, or HTA, is lobbying hard over what has been called “the French roaming permit system crisis.” Before Brexit, UK abnormal load vehicle operators could apply for the EU roaming permit that allowed them to drive the relevant vehicle anywhere in the EU. These permits, in three price bands covering three categories based on size and weight, are issued by the country of origin and valid for

UK project cargoes have faced more road than sea challenges in relation to Brexit. CREDIT: PORT OF ANTWERP

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LOGISTICS PERSPECTIVE

CREDIT: PORT OF ANTWERP

“In January we started getting news that the French were withdrawing roaming permits for UK operators crossing France. That has hit the UK operator hard because most of the journeys between the UK and Europe are through France. Some go via Spain or Benelux, but the majority go across the Channel because it is the shortest crossing and offers good links.” The HTA was informed on Feb. 8 that any permits issued up to that date – which should have lasted three years and were paid for on that basis – would expire according to the French decision. “That is when we as an association raised our concerns with the (UK) Department for Transport,” Gough said. “So far, there has been no change – UK abnormal load operators are having to apply for a new permit for each and every movement.” This adds significant costs and bureaucracy to obtaining a permit for each trip through France. The EU permit still lasts for three years 38 BREAKBULK MAGAZINE www.breakbulk.com

everywhere else, so two types of permit are now required. But the damage goes further, Gough said. The application process can take a couple of weeks, depending on how France is dealing with the system – and now, of course, France is inundated with permit applications. That puts operators at a disadvantage compared to EU-based rivals who can confirm straight away their availability for a job. Gough relays the tale of an HTA member who drove a load through France on their existing EU permit was stopped and given an on-thespot fine of €750. France justifies its move by saying it involves internal domestic law, Gough said. “But under the EU-UK Trade and Cooperation Agreement, or TCA, they can’t do this because we are still meant to have seamless transport between all countries, and the agreement says there should be a level playing field for transport rights and safety. France has effectively shut its borders to the EU roaming permit for UK drivers.”

REPRESENTING DRIVERS

ESTA, the European association of abnormal road transport and mobile cranes, has more members who are outside the EU than within it, according to Director Ton Klijn. “We had a discussion about Brexit at our recent board meeting. We have said that although we regret the fact that UK has left the EU, we think Ton Klijn that in the future UK members will ESTA need ESTA even more than ever,” he said. “At ESTA we are not politicians – we want to work together.” Klijn noted that UK drivers will not be affected by the regulations of the upcoming Mobility Package 1, part of the EU’s efforts to coordinate regulations across Europe and tighten up “bending” of the rules. He describes ISSUE 3 / 2021

the regulations as “definitely a move in the right direction.” There will be new rules around driving and rest times and cabotage, and also requiring the use of smart tachographs, to enable a system which adds up penalty points picked up in any EU country, leading to possible suspension for multiple offenses. Within the EU-UK TCA, an annex covering road transport states that both parties can carry out international transport to and from each other’s territory with transport companies, vehicles and drivers that are duly registered, qualified and certified according to their own national law, Klijn said. “In addition to this, a limited number of cabotage loads are permitted, provided they immediately succeed the international trip. Drivers are obliged to follow driving and rest time rules, which are stipulated in detail in the agreement; this would imply that any changes to these TCA rules (as foreseen in the Mobility Package 1) would need to be bilaterally agreed.” As the Mobility Package 1 will culminate in a number of EU directives, its effects will have force in the EU alone, he explained. “As such, I do not expect too much effect on UK drivers in the EU or EU drivers in the UK. This, of course, is not the case with member states’ national regulations related to abnormal transport – they can be changed at any time or can be related to use for transport companies from EU member states only, as we have seen in the abolishing of long-term permits in France that hit UK companies as a surprise.” Klijn had not heard of any other Brexit problems related to project cargo between the EU and the UK. “However, normal transport volumes were very low in January and February, and I wouldn’t be at all surprised if the same has been the case for project cargo.”

MAKING EARLY PREPARATIONS

Speaking to Breakbulk, Des Nott, project and breakbulk specialist at Kestrel, said that before the agreement he did not know what Brexit was going to be like, but Kestrel knew they had to align their thoughts and

CALM BEFORE THE STORM? Overall, ports and operators handling project and breakbulk cargoes are not reporting enormous problems from Brexit – although there is still time, of course. Hamburg has seen volumes in this sector decline over recent years as more and more cargoes are containerized, said Axel Mattern, CEO of Hamburg Axel Mattern Port Marketing, although there are Hamburg Port still three termiMarketing nals specializing in breakbulk at the port and regular cargoes include drilling equipment, huge pipes, industrial tanks and railway machinery. There are new possibilities; some manufacturers are considering relocating some production from Asia to countries such as Poland, Romania and Hungary, in response to escalating shipping costs. “They would need to build the factories and bring in components for these.” At the Port of Antwerp, which has 15 terminals specializing in project and breakbulk cargoes, some major expansions and refurbishments in Antwerp’s huge petrochemical cluster are expected to generate new cargoes, said Annick Dekeyser, the port’s marketing adviser. “We can see these factories bringing in large modules – there was one for Borealis last year. We had some special cargoes as well – for example, an autoclave brought through Antwerp to Russia. It weighed about 1,000 tonnes and was 50 meters long and over 8 meters wide.” Mammoet is Gordon Dehne expecting more project activity Mammoet

in 2021 compared with last year, said Gordon Dehne, global manager shipping and logistics. “In the medium to long term, the effects of the pandemic will be limited, and the outlook will be governed more by investments in infrastructure and renewables throughout Europe,” he said. “The effects on the container-shipping market have been largely the same as on breakbulk and projects in the short run. Bunker prices have seen a steady climb over the last few months. “Onshore and offshore wind are important markets. We see a steady demand from the power industry, in part due to required changes to the electrical grid in Europe, adapting to renewable energy. The announcement last year of BP that 2020 may have seen peak oil is an indication that industry itself is changing.” At Kestrel, project and breakbulk specialist Des Nott said work has not stopped since mid-2020. Major jobs have included delivering large components for a factory extension in Italy for coffee company Lavazza, which involved shipping items up to 25 by 5 meters into Genoa and moving north by road. A regular client for Kestrel is EDM, which produces highly sophisticated cabin crew simulators in Manchester. Despite the impact Covid-19 has had on commercial aviation, EDM’s products are still in demand, he said. “Even in the midst of the current situation, airlines are still investing in training – making sure their facilities are top notch, ordering training devices. Meanwhile, our renewables division is working shifts every weekend, such is the demand for wind turbine equipment coming into the UK and the Republic. Industrial projects are moving. Heavy-lift vessels are full – the space on all modes of ship has been at a premium and prices have been rising. Unheard-of shipping costs will have to be passed on. It may settle back a little by the end of the year, but I think we will still be paying a lot more for our shipping as a norm, for some time to come.”

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LOGISTICS PERSPECTIVE

Above: Antwerp’s newest breakbulk liner service operated by Fast Line Belgium was tagged “Prepare for Brexit.” Left: Brexit has presented a challenge to maintaining supply chain quality. CREDIT: PORT OF ANTWERP

have processes in place right from the get-go. “We already had an office in Dover, and we expanded that to have full customs compliance capability, to manage our whole UK service. When we switched, we were ready to go.” Among current contracts, Kestrel is in the midst of a major project move to Dublin – delivering vacuum tanks and other components of an industrial air separation plant, with loads coming from various destinations, including the UK. “With so much stuff coming from the continent and out of England and getting it into Ireland, we have done a lot of work with Customs entries and making sure everything is done before moving, including T1 bonds,” he said. 40 BREAKBULK MAGAZINE www.breakbulk.com

“At Christmas time we had a project running into the Czech Republic and it seemed that virtually everyone was trying to get things out of England before Brexit. For us, it is all working OK in the project sector.” Gordon Dehne, global manager shipping and logistics at Mammoet, sees Brexit as a significant challenge to maintaining the level and quality of output within its supply chains. “In order to manage Brexit, Mammoet’s logistics team adjusted its process for transports to and from the UK, developed data management systems and partnered with customs brokers in the UK months ahead of the withdrawal date. In doing so, Mammoet managed to supply all equipment in time and

without any disruptions for the projects in the UK.” But unclear and complex customs clearance and tax legislation (specifically import value-added tax, or VAT) within Europe has been challenging, Dehne said. “As long as goods are moved within the EU, the process is extremely unbureaucratic and easy. The moment the goods come from outside the EU, individual country rules apply regarding duties (customs) and import VAT (tax). This adds time to our budgeting phase and creates uncertainty.” Mammoet has come up with one fix to avoid the uncertainty caused by differing EU import rules: it routes international cargo through Dutch territorial waters to make sure import clearances take place in the Netherlands before going to another European country. Workarounds seem to be the name of the game for breakbulk and project cargo movers operating in the new 27-member European Union. BB Felicity Landon is an award-winning freelance journalist specializing in the ports, shipping, transport and logistics sectors. ISSUE 3 / 2021

PROFILE

THE INDUSTRY FROM EVERY ANGLE

BY FELICITY LANDON

Hapag-Lloyd’s Sarah Schlüter Takes an Expansive View

ow often do we hear that young people are simply not aware of the career opportunities in shipping? How fortunate, then, that Sarah Schlüter grew up near Hamburg. “Whenever you wanted to go south you saw the container terminals in Hamburg, which always somewhat fascinated me,” said Schlüter, Hapag-Lloyd’s senior director of niche products, in an exclusive interview with Breakbulk. “Since Hamburg is also closely connected to shipping, it was a more obvious choice to go into this industry than is probably the case in many other parts of the world. The international scope of the business always excited me – learning about other cultures, understanding the drivers of global commerce and, of course, also having the chance to go abroad appealed to me.” She joined Maersk as a shipping apprentice 20 years ago and stayed 12 years, taking on a range of roles mainly in trade management teams, from customer service to capacity management. “It was a case of being thrown in at the deep end and go and figure things out,” she recalled. “I was working at HQ and in regional centers.” She decided to broaden her horizons and joined UASC, moving back to Hamburg to build up the Asia-Europe trade: “They had massive growth ambitions and I was busy setting up structures and processes, reviewing customer portfolios. Then after two 42 BREAKBULK MAGAZINE www.breakbulk.com

years I went to Kuehne+Nagel, to the forwarding side. I felt it was important to have a more complete picture of our industry in total.” Working on the buying/ forwarding side enabled her to get to know all the shipping lines she was working with. “I learned that everybody knows what they are doing – they all just do it a little bit differently. That was very good exposure and knowledge. I learned appreciation for other carriers and what was or was not working for them, Schlüter said. “After a year very much on the sea freight part, I moved on within Kuehne+Nagel to work on a transformation project, which took me into the whole IT/digitalization scope within the business. I wanted to do that because in the future shipping knowledge isn’t going to be enough to succeed in the long run – you also need to have IT knowledge and know how to optimize things. I did that for three years.” The next move was to software company CargoSphere, but only for a short time. “During that year, I realized that my heart and my passion is in shipping. It sounds a bit cheesy, but it is the case. I started reaching out.”

HEADY COMBINATION

Schlüter joined Hapag-Lloyd in March 2020 as senior director, niche products, with global responsibility

for reefer cargo, dangerous goods and special cargoes – including project, heavy and out-of-gauge cargoes. She said a more natural role for her would have been in trade management, but she would not have had the opportunity to learn new things. Instead, the scope of her role is broad, combining the strategic side with operational, being customer facing and back end, building systems that improve the way Hapag-Lloyd operates and quotes to customers. “So you can really combine everything. I have a great team and hopefully I am a good leader to them.” Schlüter insists she is not a technical expert in any of the segments within her remit, “but I have my team for that. I think overall it is more important to understand the organization, processes, how to optimize things and how to be a good leader in motivating your people.” Describing herself as a “generalist,” she added: “The old hierarchical approach is from the past – you don’t win over a lot of young people today with that style.” What has changed in 20 years? Not everything, it seems. The ISSUE 3 / 2021

up to me to help make that change, leading by example. It is really important to have diversity – a mix of male and female, and a range of nationalities – because the more diverse the team, the more perspectives and viewpoints you get.” While diversity is improving, Schlüter sets a clear goal of at least three women in each team or, even better, an equal male/female gender balance. Without that, there will always be more focus on “doing things the male-dominated way.” Younger people also need greater encouragement to join the industry. “If you want to work in an international industry with an ever-changing environment, I would definitely recommend working in shipping, regardless of if you are a man or woman. Shipping is not a traditional industry for

“It is really important to have diversity – a mix of male and female, and a range of nationalities – because the more diverse the team, the more perspectives and viewpoints you get.”

women, but many industries are not and the chances to succeed become better and better, as slowly but steadily we see more females in senior management positions.” Work and career paths in shipping have also morphed over the 20 years. Today’s generation are less likely to stick to one industry, or one career path for that matter, Schlüter said. “Also, ‘having a career’ might not be as important to them anymore, but rather being content with what they are doing. This might also lead them to switch around more and look more for work-life balance and a company that offers them what they are looking for.” As for skillsets, having in-depth knowledge about shipping will be important, but so will more in-depth knowledge of IT and marketing, as job scopes become broader and broader

CREDIT: HAPAG-LLOYD

shipping industry is still conservative in comparison with other industries, she said, but that’s not all negative. “I truly believe that shipping is a people business – while you still have to make it as efficient as possible for everyone involved. It is still about being liked and trusted and your word counts, but the customers are not as forgiving as they were in the past – everything goes so much faster today. You need to run substantially faster than you did in the past, you need to be better with people and you need to be more professional.” Twenty years on and the gender balance for leading positions in the industry is still lacking, she believes. “The shipping industry is still male dominated – it has absolutely not changed enough in the past 20 years. I can only hope that will change; it is

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PROFILE

and standardized jobs become automated, she believes. “Hence, only knowing shipping and having a closed mind to all other aspects of business and how it impacts people will not be sufficient.”

DIGITALIZATION LESS OF A DIFFERENTIATOR

Schlüter has support from the Hapag-Lloyd board to develop special cargo. CREDIT: HAPAG-LLOYD

From a strategic perspective, project cargo and breakbulk is run as a separate department at Hapag-Lloyd, with Schlüter’s department responsible for setting targets, budgets and pricing, as well as for processes, operational requirements and IT. Although it’s described as “niche,” growing the segment over the next few years is part of Hapag-Lloyd’s Strategy 2023. As part of that, the team is working on a web application to enable customers to go online and ask for rates for breakbulk and special cargo, offering more of a self-service option for customers. Processes should be more driven

towards digitalization in order to make them as efficient as possible for both parties, Schlüter said. For example, artificial intelligence can help by predicting where equipment is going to be needed and what buffers are required according to vessel schedules, as well as supporting pricing and other factors. However, she believes that very soon digitalization will not even be a differentiator, and that brings us full circle. “Digitalization will become so common that people will be the differentiator. You need to have a rapport with a customer and then you need to have the channel. I still think if the relationship between two people is not a positive one, it doesn’t matter what channel you offer or what digital solution. In the end, it is the people that make the difference – and the quality that you deliver. You must deliver what the customer has booked and agreed on, giving them confidence that this will happen.”

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44 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 3 / 2021

PROFILE

In the year ahead, Schlüter expects big projects to be slower because of the pandemic. Until Covid-19 is fully overcome, she thinks there will be continued impact on big investment projects, particularly in oil and gas. In line with its plans for growth in the sector, Hapag-Lloyd has significantly expanded the team handling sales for special cargo, and is investing in new equipment, making internal changes and optimizing processes to accommodate special cargo better. Needless to say, in the current container rush, vessel space is tight, especially for items that do not fit nicely into a standard rectangle shape. “Within the organization we all have to compete for the space – it is not just the customers!” Schlüter said. “Everyone has their own interest and we do have some tough internal discussions. But we do have support from the board for developing special cargo.” Outside work, Schlüter’s hobby is Olympic weightlifting – fortunately

SB_0078 Anzeige/ 4260-001581-011.indd 1

The carrier is investing in its special cargo team, processes and equipment. CREDIT: HAPAG-LLOYD

she has been able to continue training throughout lockdown conditions. “I also love to travel, meet friends all around the world and explore new places – which will hopefully soon be possible again,” she said. And while she has no plans to leave the industry within the next 10 years, she has her

pipedream of opening her own café serving cake and coffee to fall back on. BB Felicity Landon is an award-winning freelance journalist specializing in the ports, shipping, transport and logistics sectors.

20.04.21 13:41

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REGIONAL REVIEW

CHAOS OR STABILITY?

Debate over U.S. Steel Duties Intensifies

espite rising pressure from a broad spectrum of U.S. manufacturers, the Biden administration appears to be in no hurry to lift hefty tariffs on steel and aluminum imported into the U.S. Those who oppose the duties contend keeping the tariffs in place will cause continuing harm, including further fracturing of global trade relationships and weakening of U.S. exports, while proponents see the tariffs as a stabilizing force for the U.S. domestic steel industry. Early indications since President Joe Biden assumed the highest American office from Donald Trump on Jan. 20 suggest retention of the contentious tariffs, even as bipartisan legislation seeks removal of the duties, which were introduced by the Trump administration in 2018 under the guise of protection of national security. The tariffs, imposed by Trump

under Section 232 of the Trade Expansion Act of 1962, place a 25 percent duty on steel and a 10 percent duty on aluminum imported into the U.S. from the vast majority of countries, with Argentina, Brazil and South Korea agreeing to quotas instead of tariffs. Tariffs on imports from Canada and Mexico were dropped mid 2019.

TARIFFS ‘EFFECTIVE’

On just her second day since taking office, U.S. Commerce Secretary Gina Raimondo said March 4 that data shows the tariffs “have been effective,” adding that the Biden administration intends to hold China – which accounts for more than half of the world’s crude steel production – accountable for anticompetitive behavior and “horrific” human rights violations. And, in one of his first traderelated actions since his January inauguration, Biden indicated his

BY PAUL SCOTT ABBOTT

support for tariffs imposed by his predecessor as, on Feb. 2, he reinstated duties on aluminum imports from the United Arab Emirates that President Donald Trump had actually removed on his penultimate day in office. Biden said the move was “necessary and appropriate in light of our national security interests.” From a legal standpoint, in one of the latest of a series of challenges, a Feb. 4 ruling by the U.S. Court of International Trade on a suit brought by Universal Steel Products and other U.S. importers of foreign steel determined the tariffs to be legally enacted under national security grounds. On March 15, U.S. Sen. Rob Portman, R-Ohio, led a bipartisan group of seven senators in introducing the Trade Security Act, aiming to reform Section 232 to require the U.S. Department of Defense to justify the national security basis for tariffs and step up congressional oversight of the process.

Top: Steel coils move at northwest Louisiana’s Port of Caddo-Bossier, where a new warehouse is being built to handle large steel volumes. CREDIT: PORT OF CADDO-BOSSIER

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“We must hold countries that violate our trade laws accountable, but we must do so in a way that protects American jobs and strengthens the U.S. economy,” said Portman, who served as U.S. trade representative from 2005 to 2006 under President George W. Bush. “As a former U.S. trade representative, I know that misusing our trade tools not only hurts our exports and our manufacturers, but also our consumers, so I urge my colleagues to support this bipartisan legislation.”

SCHISM IS BROAD

Thoughts shared with Breakbulk by those on both sides of the issue unmistakably demonstrate just how broad the schism is between tariff opponents and proponents. At the forefront are two lobbying groups. On one hand, the American Metals Supply Chain Institute, or AMSCI, representing steel-consuming companies, sees the tariffs as hurting American businesses, consumers and ports. On the other hand, the American Iron and Steel Institute, or AISI, representing the American steel industry, staunchly supports keeping the tariffs in place. “The tariffs on steel and aluminum cost many times more American jobs than they save,” said Richard Chriss, president and international trade counsel of AMSCI. “Government can Richard Chriss always help a politically conAMSCI nected few at the expense of the many, and that’s what has happened here. A few winners did very well, but the tariffs created a huge set of losers, adversely affecting the entire steel supply chain and the broader American economy.” Chriss termed the tariffs “simply an exercise in unnecessary corporate welfare,” arguing U.S. steel producers were largely profitable before the tariffs went into effect. He said the

American steel-producing industry added about 1,000 jobs at a cost of about US$1 million per job, while, according to the Federal Reserve Board of Governors, increased input costs due to tariffs are linked to a loss of 75,000 U.S. manufacturing jobs. Higher input costs also mean higher consumer prices for a wide range of goods. “Some of our manufacturers lost overseas customers permanently as a consequence of the steel and aluminum tariffs,” Chriss said. “Our ports saw declines in shipping volumes. Dockworkers took pay cuts as hours were reduced.”

been in force for more than two decades, well before the Section 232 tariffs began in 2018. Chatterjee called for revocation of the tariffs and other trade measures, saying such actions should lead to greater demand for ocean freight movement.

US$7.8 BILLION LOSS

Meanwhile, the wide-ranging impacts of the steel and aluminum tariffs extend to American farmers as well, Chriss said, noting that farmers have been targeted for trade retaliation, losing lucrative export markets. Federal subsidies to farmers as a compensatory effort have resulted in US$28 billion in U.S. debt, with American taxpayers on the hook, he said. “When a policy is not working, and doing more harm than good, it’s time to reassess,” Chriss said. “That’s why we feel it is important to terminate these unnecessary tariffs.” Removal of the tariffs, Chriss said, should bring about gradual return of lost manufacturing, agricultural and maritime jobs while reinstating reliance upon traditional trade policy protections of antidumping and countervailing duty laws. “If the tariffs remain in place, one continuing harm I would expect to see that will affect the entire supply chain is a weakening of U.S. exports,” he said, citing a 2019 study by economists at the U.S. Federal Reserve System, the University of Michigan and the U.S. Census Bureau showing 84 percent of total U.S. exports were by firms facing at least one import tariff increase. “That’s not surprising, since, according to the 2019 study, 57 percent of the items on the administration’s tariff lists, by value, are intermediate goods,” Chriss said. “These are goods that American companies use as inputs to make products which are then sold

The tariffs also are a drag on overall U.S. economic growth, according to Chriss, who cited a National Bureau of Economic Research study pegging the nation’s net economic loss associated with the duties at US$7.8 billion. “Moreover,” Chriss said, “the tariffs have had zero effect on reducing Chinese overcapacity in steel, the single greatest trade-distorting factor in global steel markets, and a de minimis effect on Chinese imports to the United States, which were already subject to 28 dumping duties.” In fact, Chinese crude steel production rose in 2019, the last full year for which the World Steel Association has published data. China’s 2019 production of more than 996.3 million tonnes was up 7.3 percent from its 2018 output, and represented more than 53 percent of the total world production of 1.875 billion tonnes. The 2019 data shows No. 2 India’s production at nearly 111.4 million tonnes, up 4.6 percent from the preceding year; No. 3 Japan at 99.2 million tonnes, down 4.8 percent; and fourth-ranked U.S. at 87.8 million tonnes, up 1.2 percent. Bhaskar Chatterjee, secretary general of the New Delhi-based Indian Steel Association, told Breakbulk that his nation has “enormous export potential” to the U.S., but has been severely limited due to dozens of U.S. trade measures, some of which have

Bhaskar Chatterjee Indian Steel Association

FARMERS TARGETED

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REGIONAL REVIEW

“While the Biden administration can only play a limited role in resolving many of these issues, it can terminate the tariffs immediately with one stroke of the pen. Terminating the tariffs would significantly help alleviate supply problems by creating more competition in the steel supply market.” – Paul Nathanson, CAMMU

overseas. Fewer exports mean reduced jobs and economic activity throughout the steel and manufacturing supply chains. These aren’t just numbers, there is a real human cost attached to this. Paul Nathanson Just ask the men CAMMU and women who load and offload ships at our major ports.”

MARKET ‘IN CHAOS’

The anti-tariff stance is also taken by the Coalition of American Metal Manufacturers and Users, or CAMMU, of which the AMSCI is among several members, ranging from Associated Builders and Contractors to the National Tooling & Manufacturing Association and the North American Association of Food Equipment Manufacturers, representing a total of more than 30,000 U.S. companies. CAMMU Executive Director Paul Nathanson said U.S. manufacturers are experiencing severe supply shortages, growing lead times and prices that are spiking to record levels. Tariffs, he said, lead a list of challenges that also include shipping container shortages for imported steel, Covid-19-related shutdowns, the exit from complete lines of product by some U.S. mills, and adjustments to furnace uptime and downtime by U.S. mills. “Let’s be very clear: The steel and aluminum market is currently in chaos,” Nathanson told Breakbulk. “While the Biden administration can only play a limited role in resolving many of these issues, it can terminate the tariffs immediately with one stroke of the pen. Terminating the tariffs would significantly help alleviate supply problems by creating more competition in the steel supply market.” In that sense, according to Nathanson, by allowing U.S. manufacturers to obtain the steel and aluminum they need in a timely manner and at more competitive prices, termination of the tariffs is in line with the Biden administration’s “Build Back Better” initiative to boost U.S. manufacturing, which must rely 48 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 3 / 2021

REGIONAL REVIEW

Kevin Dempsey, president and CEO of the American Iron and Steel Institute, testifies before U.S. Congress in favor of retention of Section 232 tariffs. CREDIT: AMERICAN IRON AND STEEL INSTITUTE

upon imports to augment still-limited domestic steelmaking capacity. “If the tariffs are not terminated, steel and aluminum supply problems will grow and U.S. manufacturers will lose business to their overseas competitors,” Nathanson said. “This will lead U.S. steel- and aluminum-using manufacturers to shut down production lines and lay off workers and could result in some manufacturers potentially even closing their doors.” Nathanson decried the tariffs as “a self-defeating policy,” as the hurt for U.S. manufacturers translates to their needing less steel, including from domestic producers. “The root cause of global oversupply in steel and aluminum is excess capacity in China,” Nathanson said. “The Biden administration has stated that it wants to coordinate with allies to confront China about their policies that cause oversupply. This won’t be possible if the tariffs remain in place. The European Union and other trading partners have made it clear that they will not join in such a coalition as long as their steel and aluminum exports to the U.S. are subject to these tariffs.”

TARIFFS ‘STABILIZE’

On the pro-tariff side of the debate, the AISI takes the position that the American steel industry, which supports nearly 2 million U.S. jobs, is vital to national and economic security, with its viability having been threatened by repeated surges in unfairly traded imports. “The steel tariffs and quotas have worked to stabilize the domestic steel industry,” said Kevin Dempsey, AISI’s president and CEO. “As a result of these measures, imports were reduced, domestic capacity utilization improved, many previously idled mills were able to restart and rehire laidoff workers and the industry began investing billions of dollars in new and upgraded mills.” Dempsey said the Covid-19 pandemic led to a significant drop in worldwide demand for steel in the first half of 2020, resulting in further global overcapacity – to an estimated 700 million tonnes or eight times the total output of the U.S. industry – and threatening a new import surge from China and other countries if tariffs are lifted.

Steel coil continues to be in demand for use in numerous industrial applications, from building panels to ships and power stations. CREDIT: WORLD STEEL ASSOCIATION/JAVIER BERNAL REVERT

“The steel tariffs should not be removed or weakened until major steel-producing countries eliminate their overcapacity and end the subsidies and other trade-distorting policies that create this excess capacity,” Dempsey said. “Removing the tariffs now in the face of growing global overcapacity would only invite a new surge in imports with devastating effects to domestic steel producers, their workers and, ultimately, their customers and the nation as a whole.” BB A professional journalist for more than 50 years, U.S.-based Paul Scott Abbott has focused on transportation topics since the late 1980s. www.breakbulk.com BREAKBULK MAGAZINE 49

REGIONAL REVIEW

BUCKING THE RENEWABLES TREND BY SIMON WEST

Mexico’s State-led Energy Push Undermines Sector

exican President Andrés Manuel López Obrador’s push for more state control of the energy sector is jeopardizing the expansion of renewables – a key source of cargo-carrying contracts for breakbulk and project cargo. Since taking office in December 2018, the populist López Obrador, known by his initials AMLO, has sought to undermine the free-market energy reforms of 2014 championed by 50 BREAKBULK MAGAZINE www.breakbulk.com

his predecessor Enrique Peña Nieto, and strengthen the hand of state oil and gas producer Pemex and power company the Federal Electricity Commission, or the CFE. Unperturbed by detractors claiming the strategy makes little economic or environmental sense, AMLO has doubled down on his state-led policies, and in early March, following Senate approval, the 67-year-old signed off a contentious new bill amending key parts of Mexico’s electricity industry law.

The bill’s provisions include changes to the existing order of electricity dispatch, prioritizing generation from the CFE’s own hydro and fossil fuel-powered plants. Cleaner and cheaper generation from wind and solar plants – almost all of which is independently owned – and other private combined-cycle power plants would be sourced last. “Currently there is a clear merit order established for the dispatch of power capacity to the grid. These ISSUE 3 / 2021

PEMEX refinery in Tula de Allende, state of Hidalgo. The Mexican president is supporting oil industry growth over renewables. CREDIT: PRESIDENCIA DE LA REPÚBLICA MEXICANA, CC BY 2.0

Another provision alarming investors could lead to a government review of all existing capacity underpinned by contracts with the CFE. According to Fowler, that would mean most of Mexico’s privately operated electric generation capacity could come under contractual scrutiny. “While it is unlikely that the government will seek to review each individual contract, it would give them the leverage to be able to pursue changes to contracts they deem as unfavorable.” The ICIS analyst warned that taken as a whole, the bill obfuscates the rules of the market, and would likely deter future private investment in new power infrastructure.

DROP IN WIND POWER

new rules propose manipulating this merit order in favor of the CFE,” said James Fowler, Americas energy markets development manager at downstream intelligence provider ICIS. “In effect, private projects would be at the bottom of the pecking order in terms of dispatch, meaning that investors would have no guarantee as to when their plants or projects would be used, and therefore how they would get their money back.”

Julio Valle, joint director at the Mexican Wind Energy Association, or AMDEE, told Breakbulk the bill could close the door on an estimated US$11 billion of investment in new renewable power projects and forestall the creation of 50,000 new jobs. Some US$28 billion has already been invested in privately owned wind and solar projects in Mexico, with generation capacity reaching 17 gigawatts, or GW, Valle said. So why is AMLO persisting with this policy? The left-wing, former Mexico City mayor won a landslide election three years ago promising to stamp out the rampant corruption and political sleaze that has dogged previous administrations. While in office, AMLO has vowed to rescue the heavily indebted Pemex and the CFE from years of mismanagement and poor results, and transform the state giants into engines for economic growth, a goal that has required modifying aspects of the 2014 reforms that opened up Mexico’s oil industry to private and foreign competition for the first time in 75 years. The president sees this strategy as the surest way to achieve energy selfsufficiency, and has handed Pemex tax breaks and cash in a bid to shore up finances and boost exploration and production. At the same time, he has slated private energy companies

including oil and gas operators for failing to adequately invest in the country’s resources, and has refused to restart the upstream auctions that flourished under Peña Nieto. The fall guy for this latest legislation is renewables, an industry for which the president has shown little warmth. “How dare they give permission to install these turbines,” he said in a video posted on Twitter and recorded during a visit to the privately owned La Rumorosa wind farm in Baja California in March last year. “They generate power, but very little, and also these are private businesses, so why do we have to subsidize these companies? No more permits that damage the environment … we must respect nature.”

CHANGE OF POSITION

Mexico-based breakbulk and project cargo movers are closely watching the shifting landscape. “The renewables sector is of great importance to all project cargo logistics providers in Mexico,” said Alan Alamilla, managing director of Mexico City-based ITM Projects. “In the past three years our country has developed more than 1.75 GW of generation capacity only from wind power, plus several solar parks installed in the last two years. There was such a big demand for specialized transportation. Now with the new changes in the government rules, this success story seems to have come to an end, or at least there will be a long pause.” AMLO has insisted the country will still hit its target of 35 percent clean energy by 2024 through an overhaul of the CFE’s aging hydro network. Furthermore, an US$11 billion investment package for 29 infrastructure projects unveiled in November included calls to boost CFE’s installed generation capacity. According to a presentation on the president’s official website, financing from the public and private sectors would be used to build six combined cycle power plants, a gas pipeline and a compression station, with construction work on the eight projects slated to begin by August this year. www.breakbulk.com BREAKBULK MAGAZINE 51

REGIONAL REVIEW

Spending on new CFE power plants though is unlikely to offset the slowdown in private sector spending, according to Fowler. “The Mexican state does not have the financial capacity to fill the void left by private investment in the sector,” he said. “While we have seen capacity refurbishments take place on existing projects, we have yet to see work start on any new power project proposed by the state since the start of this administration nearly two and half years ago.” Over at Pemex however, some major oil projects are picking up the slack for project cargo. Just days into his tenure, the president announced plans for a new 340,000 barrels a day crude oil refinery at the port of Dos Bocas in southern Tabasco state. The US$9 billion project is the centerpiece of a national refining strategy that has also called for an overhaul of the state oil company’s six existing refineries. Slated to come online in 2023, the refinery is designed to help Mexico wean itself off costly fuel imports, which account for 77 percent of domestic demand, according to Pemex. Despite warnings from investors and ratings agencies that Pemex’s scant resources would be better spent on upstream development, or activities that improved fuel supply such as logistics and storage, construction of the refinery began last June, and was 24 percent complete by October. Alamilla said these government projects to boost fuel output at Pemex and generation capacity at the CFE were creating openings for logistics operators. “There are big investments in those sectors, which is creating a high volume of project cargo shipments coming to Mexico from several countries.”

OTHER OPPORTUNITIES

Away from energy, the ITM Projects’ executive pointed to other industrial sectors that were providing opportunities for breakbulk, such as steel and auto manufacturing. “We are also handling exports of power transformers going from Mexico to several countries, especially to the U.S. There is quite an interesting market for transformers in the U.S., and hundreds of them are manufactured in Mexico.” 52 BREAKBULK MAGAZINE www.breakbulk.com

ITM is handling exports of power transformers going from Mexico to several countries. CREDIT: ITM

November’s infrastructure package was the second unveiled late last year, with a US$14 billion plan targeting 39 highway, railroad, port and energy projects announced a month earlier. The two packages totaling 68 projects are part of the government’s post-pandemic economic recovery plan to lift Mexico out of deep recession. The International Monetary Fund, or IMF, is predicting the economy to grow 4.3 percent this year and 2.5 percent in 2022. Other major projects requiring significant project support include the US$6.8 billion Maya Train, a 1,500-kilometer railroad linking five southern Mexican states to the Yucatan Peninsula on the Caribbean coast, and the US$3.5 billion Felipe Ángeles International Airport being built on the Santa Lucia military base close to Mexico City. The renewables industry, meanwhile, is pinning hopes on a federal court ruling that placed a temporary freeze on the new electricity bill just a day after it came into effect. A judge claimed the bill was unconstitutional as it violated the principle of free competition, Reuters reported. AMLO hit back during his daily briefing with journalists, questioning

the judge’s loyalties and threatening to submit a constitutional reform bill to Congress if the decision were upheld. Luis Miguel Labardini, a partner at Mexico City-based energy consultancy Marcos y Asociados, warned that the longer the dispute drags on, the more likely the president will prevail. “If the voting (on the legality of the bill) is delayed until 2022, AMLO will have an additional nominee in the court, and that could change the outcome of any ruling.” But Thanya Ramirez, Latin America projects manager at Logistics Plus, an international forwarder working on the Dos Bocas refinery and the Felipe Ángeles Airport projects, said despite the legal wrangling, work for the renewables industry had not ground to a halt. “We sincerely expect an agreement will be reached between the different parties shortly. So even though the rhythm has noticeably dropped, we continue bidding for new projects.” BB Colombia-based Simon West is a freelance journalist specializing in energy and biofuels news and market movements in the Americas. ISSUE 3 / 2021

EQUIPMENT Jumbo’s Sita Verburg puts the HoloLens to work on deck. CREDIT: JUMBO.

REVOLUTIONIZING DECKMARKING Efficiency Gains and Innovation Through AR

umbo’s journey with Microsoft’s HoloLens – mixed reality smartglasses – began with a team whose end goal was an improved deckmarking solution. This led them down an innovative and creative path that posed several challenges along the way, yet now they have succeeded in developing a pioneering solution that is already innovating the maritime industry. Prior to loading complex heavy-lift items on board, the footprint of the cargo needs to be marked on deck. This is usually carried out by hand, often by two people armed with blueprints and a measuring tape, making it an arduous and time-consuming task. Jumbo needed a speedy deckmarking solution and ultimately found it in Microsoft’s HoloLens. Using augmented reality, or AR, glasses, the AR software is programmed to precisely locate the cargo positions by projecting digital technical drawings onto the ships deck, allowing one person to mark the deck easily and efficiently. The main challenge in the development of the HoloLens application was to reach a projection accuracy of no more than a 1 centimeter or 2 centimeter deviation from the design. As the HoloLens was originally developed for indoor usage and for smaller objects, it was a trial for the developers to 54 BREAKBULK MAGAZINE www.breakbulk.com

BY OTTO SAVENIJE

maintain the accuracy when projecting larger images in sunlight. Sunlight filters were added to the application, solving this issue for the team. Another test was to ensure the projection could accurately follow the roll and pitch movements of a ship. The projection needs to remain flat on the surface of the ship’s deck, but with a floating vessel naturally the roll angle can vary. Extra menu options to (manually) correct the projection when required were developed to overcome this challenge. Further, the processor had difficulty in calculating and projecting a whole image of 17 meters by 13 meters at once, so a method was developed to project only a part of the image. A conversion method was also established to transform the standard drawings, already used within Jumbo, to a layout that could be processed by the HoloLens software with minimal disruption to the engineers. With every element thought through, there were even various designs tried and tested to make a good rigid connection to a safety helmet, which is of course mandatory onboard. With this innovative application, Jumbo is improving its way of working and has used the AR glasses effectively on a recent project. The HoloLens allows for a significant reduction in the

duration of a complex loading process, which minimizes time in port and the associated costs. As the projection can be combined directly with the layout of the deck/frames/structure it gives an immediate verification of correct placement/scaling of the projection, which also speeds up the process. Overall, we have found that the HoloLens increases the reliability of deckmarking because the risk of human error is reduced and, now with easy cloud-upload, updates and corrections can be shared from a distance at the click of a button. No more printing and improved efficiency for clients. Jumbo is now taking the next steps in implementing the existing application throughout its fleet. We also look forward to newer hardware that can give a wider “view window” and better processor speed to project larger parts of the whole image with more stability. As well as this, Jumbo is also thinking of other scenarios in which we can implement this or similar applications in a pioneering way. BB Otto Savenije is senior project engineer and senior port captain at Jumbo. See the HoloLens Deckmarking Solution in action at www.youtube.com/ watch?v=pnXLPZubGHk. ISSUE 3 / 2021

IT’S BACK LIVE & IN-PERSON

Sept. 28-30, 2021 Discover New Project Business George R. Brown Convention Center Houston, Texas, USA americas.breakbulk.com

ADVERTORIAL

PACIFIC PARCELLING AAL Ships Giant Barge from China to Tahiti, on its Monthly Asia – Americas Trade Lane

ultipurpose and project heavy-lift carrier, AAL Shipping (AAL), demonstrated the lifting and cargo intake capability of its megasize A-Class fleet and parcelling capabilities of its “Asia – Americas Trade Lane” chartering team with the transport of a heavy-lift barge from Taicang, China, to Papeete, Tahiti. The barge weighed-in on hook at 410 tonnes and measured more than 53 meters in length and 3,657 cubic meters, and was stowed on the 31,000 dwt AAL Dalian, joining another 29,000 cbm of cargo comprised of large and small parcels loaded in China, South Korea, and Japan to be discharged along the U.S. West Coast and Gulf. Yahaya Sanusi, deputy head of transport engineering at AAL, explained: “The barge was designed by Alwena Shipping in France who arranged for it to be built at the Yangzhou Hairun Shipyard, in China. Our own planning for this heavy cargo operation 56 BREAKBULK MAGAZINE www.breakbulk.com

started in September 2020. This gave us time to analyse technical details of the lift and make prepreparation recommendations to the customer, like welding special padeyes onto the deck of the barge to facilitate safer lifting by the AAL Dalian’s port-side cranes, without the need for lifting beams.” Floris Schorsch, managing director of Martin Bencher France SAS, added: “It was important for us to deliver a high-quality solution for our customer, with a focus on cost control, risk management and schedule integrity. AAL not only had the cargo expertise we needed, but was also active on the transpacific trade with suitable tonnage options. The safe transport of this cargo required a lot of planning and coordination between us, the customer and AAL. Ultimately, the loading onto the AAL Dalian was well-executed and all parties fully satisfied. The barge will eventually be deployed by owner, Travaux Maritimes de Polynesie, in French Polynesia for civil works.”

Felix Schoeller, general manager, AAL Shipping. CREDIT: AAL SHIPPING

Felix Schoeller, general manager of AAL, added: “The Asia-toAmericas trade is one that we have employed significant resources into developing and have served with a sailing practically every month. With our recent experience of having carried a much broader portfolio of ISSUE 3 / 2021

“The Asia-to-Americas trade is one that we have employed significant resources into developing and have served with a sailing practically every month.” – Felix Schoeller, AAL Shipping

cargoes into Central America, and the U.S. Gulf and East coasts, and having gained the trust of a growing customer base within the U.S., Southeast Asia and China, AAL is standing by its commitment and employing multiple tonnage options from our young specialist MPV fleet. “With 26 years’ expertise running liner services on busy trades, we can put together voyages for large and small parcels of practically any cargo type. This is perfectly evidenced on this sailing, which accommodated steel pipes, containers, large tanks, cooler units and turbines, electrical equipment, a heavy-lift dismantled crane and of course Martin Bencher’s barge – and all at the same time. This type of parcelling means cargoes can be transported faster and with significant economies of scale for every shipper, big or small.” He added: “Despite a great deal of experience trading across the Pacific, building the market to justify these regular monthly MPP sailings has taken time and hard work. Only a few years ago, volumes could not be relied upon and we saw longstanding players pull out. We do not take our recent success for granted and are pleased with how well the market has taken to our service. Our local market knowledge and presence – both in the U.S. and Asia – coupled with a fleet well-suited for

cargo demands allows for continued commitment and optimism.” AAL foresees that the Biden administration will continue its strict line on trade with China but anticipates constructive dialogue that will lead to increased volumes going forward. Already in place between the two superpowers is a deal penned in January 2020 for expanded trading of agricultural, manufactured and energy products. The carrier also forecasts increased cargo volumes to South America. AAL’s fleet comprises various sizes of heavy-lift MPV vessels that

offer cargo intake volumes of up to 40,000 cbm and heavy-lift of 700 tonnes max. With two-thirds of its vessels in the ‘mega size’ MPV segment (30,000+ dwt), AAL’s ability to parcel-up big and small cargoes of any type on frequent monthly sailings, as with the Asia – Americas Trade Lane, offers significant economies of scale to customers. The carrier also operates additional regular trade lanes between Asia and Europe and across the Atlantic. It further runs three scheduled liner services – Asia – Australia East Coast, Asia – Australia West Coast and – Europe – Middle-East / India – Asia. n

AAL’s local market knowledge and presence in both in the U.S. and Asia has supported the carrier’s regular sailings. CREDIT: AAL SHIPPING

www.breakbulk.com BREAKBULK MAGAZINE 57

Breakbulk Events & Media’s biweekly BreakbulkONE newsletter keeps the industry connected between issues of Breakbulk. Here’s a selection of subscriber favorites from the past few months. KNOWLEDGE HUB: BUSINESS OUTLOOK

US PORTS SEE DECLINE IN STEEL ACTIVITY

Volumes Tied to Reduced Energy Sector Production BY PAUL SCOTT ABBOTT

While U.S. ports traditionally handling the greatest volumes of breakbulk steel are seeing a drop in such activity, the trend may not be entirely due to Section 232 import tariffs, and it may not encompass all ports. Officials of the Port of New Orleans see the tariffs as the primary factor in declining volumes, whereas the head of Port Houston, the nation’s longtime No. 1 steel port, cites a slowdown of the U.S. energy sector. “We have said, historically, when tariffs have been imposed, we have seen a decrease in steel volumes,” Roger Guenther, Port Houston’s executive director, told Breakbulk. “However, we believe the decline in steel volumes that we have seen these last months cannot be attributed to the tariffs, but is due to the decline in production in the energy sector.” Guenther said he is “not weighing in” on the Biden administration’s position on the tariffs imposed in 2018 by then-President Donald Trump, but he did say Port Houston’s import steel volumes are closely tied to the energy sector, as the majority of the steel moving across Houston docks is imported oil country tubular goods, or OCTG, the name applied to steel pipe used for oil and gas drilling operations. “The steel supply chain and ocean transport of raw materials are driven by supply and demand, tied not only to the cost of recovery and materials like steel pipe, but for us steel volumes are linked to the energy sector and the price of a barrel of oil,” Guenther said. 58 BREAKBULK MAGAZINE www.breakbulk.com

Steel pipe is among goods handled at the City Docks of Port Houston, which leads U.S. ports in throughput volume of breakbulk steel. CREDIT: PORT HOUSTON

VOLUME PLUMMETS

At the Port of New Orleans, marketed as Port NOLA, steel volume has plummeted since the latest tariffs have been in place, according to Jessica Ragusa, communications manager at the Mississippi River port. During calendar year 2020, 1 million tons of iron and steel moved through Port NOLA, compared with between 2 million and 3 million tons in a typical year prior to the Section 232 tariffs, she said. Overall, Port NOLA handled moves of 1.6 million breakbulk and bulk tons in 2020, down 35 percent from 2019, and, Ragusa said, “We will continue to see a weakened breakbulk market. “The Port of New Orleans, like other commercial enterprises, needs and depends upon a strong U.S. econ-

omy; a vibrant, healthy and competitive U.S. steel industry is essential to that goal,” she said. “However, the wide imposition and enforcement of tariffs on imported steel has the opposite effect, creating a negative impact on ports, the larger maritime community, manufacturers throughout the U.S. and other steel-consuming industries.” Ragusa cited record-level price increases for steel, as well as long delivery delays, causing hardships for construction firms also experiencing challenges in completing projects with crews limited by illness or new work site procedures resulting from the Covid-19 pandemic. Port NOLA is seeing ripple effects as well. “For example, 80 percent of the steel moving through the Port of New ISSUE 3 / 2021

By 2050, the EU aims to have 300GW of offshore wind energy capacity.

CREDIT: SHUTTERSTOCK

Orleans moves up the Mississippi River by barge, she said. Those same barges are then used by U.S. farmers to deliver agricultural products to the grain elevators located on the Lower Mississippi River. Without those barges moving upriver, the cost to transport U.S. grain increases, making U.S. agricultural products less competitive with those in other producing countries like Brazil and Russia.”

DUTY LIFTING URGED

Repeal of the tariffs should facilitate increased productivity and cost-efficiency in the supply chain by allowing U.S. manufacturers greater access to the global steel market, Ragusa said. “Imported steel volumes would increase as currently many steel exporting countries reach their quotas early on in the year,” she said. “We hope that the lifting of these tariffs would allow for a rebound from some of the downturns we have

seen and contribute to an increase in construction and manufacturing projects that have been put on hold due to significantly increased costs of construction due to the tariffs.” For Port NOLA, that could well mean greater utilization of breakbulk facilities in which the port has invested US$50 million over the past several years. Most recently, the port entered last fall into a partnership with terminal operator Gulf Stream Marine, which is handling steel and other general and bulk cargoes at the Alabo Street Wharf. Port NOLA isn’t the only U.S. port investing in infrastructure for handling steel. At the Port of Caddo-Bossier, on the Red River Waterway in northwest Louisiana, where steelmaker Ternium recently completed a US$14.7 million expansion of its on-port facility, a 100,000-square-foot warehouse is being built specifically to handle large volumes of steel, including coil

imports from South Korea and coils from domestic mills, including Big River Steel facilities in Arkansas and Nucor Steel operations in Alabama. In Alabama, ground has been broken for a US$775 million expansion to add an electric arc furnace at the ArcelorMittal/Nippon Steel mill just north of Mobile. Most of the slab steel converted into industrial products at that mill is shipped into the Alabama State Port Authority’s Port of Mobile. And the Port of Brownsville, near the U.S.-Mexico border in South Texas, is looking forward to partnering in development of a new steel terminal in anticipation of a doubling of steel volumes, projected to reach 6 million tons by 2025, as the port’s biggest steel customer, Ternium, is adding high-end hot-rolling capabilities to its mill facilities in the Monterrey suburb of Pesquería. Import tariffs on Mexican steel were removed in mid-2019. See related story, “Chaos or Stability?” page 46. BBONE

KNOWLEDGE HUB: BUSINESS OUTLOOK

FUTURE-PROOFING NO. 1 PRIORITY DNV’s advice for multipurpose and heavy-lift ship operators looking to order new ships is to future-proof designs as much as possible. By that, the class society means that owners should consider designs that comply with future requirements either as-is, or through future retrofits. Those designs will vary between ship types depending on IMO requirements, expectations from customers and financing. “We are moving into a much more complicated fuel environment,” DNV principal consultant Tore Longva said. “Owners planning a newbuild should be looking at all the options and seeing if there are route or vessel-specific factors that might make a particular option relevant for them. And at the same time, taking advantage of fuel efficiency options, and operational optimizations should be at the top of the list.”

DNV is a supporter of liquefied natural gas as a fuel that is a robust choice today which enables future flexibility tomorrow. “A dual fuel engine running on LNG will give immediate greenhouse gas benefits (up to 20 percent over conventional for a modern two-stroke engine) with the option to potentially use lower or zero carbon options in the future,” Longva said. Chris Chatterton, chief operating officer at The Methanol Institute, acknowledged that the fuel supply picture is changing and recommended that ship operators seek advice. “Talk to your class society; many are offering techno-economic evaluations for retrofits and newbuildings and are increasingly able to advise on the feasibility for specific trades and vessel types. Include engine makers in that conversation too,” he said.

He advocates starting with methanol today and moving to renewable methanol, ammonia or hydrogen when they become viable. That said, MPV operators might increasingly find that their options are limited and that they lack a voice in the overall fuel debate as container ship operators start to dominate conversations. A Global Maritime Forum report found that container ships could account for a large percentage of the zero emission fuels in use by 2030 and as Tristan Smith, reader in Energy and Shipping at University College London’s Energy Institute, pointed out, “whoever sets the agenda now is going to drive the fuel that becomes dominant.” BBONE

See related story, “Future Fuel Conundrum,” page 18. www.breakbulk.com BREAKBULK MAGAZINE 59

KNOWLEDGE HUB: BUSINESS OUTLOOK

EUROPEAN O&G MAJORS LEAD LOW-CARBON EFFORTS

Bloomberg Scores Carbon, Climate Transitions

European oil companies, including Total, Galp, Equinor, BP and Royal Dutch Shell, are leading the industry’s efforts to prepare for a low-carbon world, according to research by Bloomberg Intelligence. The five European leaders are among 39 publicly trade oil and gas companies graded by Bloomberg’s Climate Transition Scores, which “illustrate the challenges oil and gas companies face in positioning themselves for a net-zero world,” the research firm said in a statement. The five European O&Gs ranked highly by setting ambitious climate targets and committing to deep transition related investments to turn the tide of widespread carbon action. As an example, the five majors own about 11 gigawatts, or 78 percent of the renewable energy assets held by the 39 companies scored. “The transition to a low-carbon economy in the oil and gas sector is a complex undertaking, requiring considerable change and a shift away from fossil fuels-based business models,” said Patricia Torres, global head of sustainable finance solutions at Bloomberg. “The Bloomberg Climate Transition scores, combined with Bloomberg’s research, provide insight into how prepared companies are for a net-zero world and are a supplement to Bloomberg’s broader environmental and social scores.”

MAKING THEIR MARKS

The Climate Transition Scores are proprietary of Bloomberg’s two research teams: • Carbon Transition Scores, from Bloomberg Intelligence, or BI, weigh where a company is today, and where it’s planning to be with respect to carbon performance. The score includes assessing current and future emissions, which show each company’s carbon intensity, 60 BREAKBULK MAGAZINE www.breakbulk.com

recent reduction, future carbon intensity, future reduction, and comparison to the International Energy Agency’s 2º Celsius benchmark. Equinor, Total, Galp, BP and Eni ranked first through fifth in carbon score, BI said. • Business Model Transition Scores from BloombergNEF, or BNEF, look at a company’s current business model and actions it has taken to adapt to a low-carbon environment. The business model score considers factors such as deployment of new technologies, fossil fuel expansion, current business model, climate disclosure and progressive governance, with the BNEF score based on business model risk exposure and business model adaptation as the main pillars. Under the BNEF business model scores, Shell topped the list, due to aggressive transition activities and a resilient fossil fuel business, while most companies are still investing most of their capital expenditures into fossil fuels, BNEF said. Total, Galp, Repsol and BP were second through fifth. “When it comes to deploying low-carbon technologies, these companies do a lot of marketing, but their disclosure is limited and patchy, making comparison impossible,” noted Jonas Rooze, head of sustainability research at BNEF. “What makes these scores unique is that the bottom-up BNEF datasets shine a light on what these companies are actually doing – or not doing – to develop new lowcarbon business models.” Meanwhile, BI’s Carbon Transition Scores show that nearly one-third of the companies scored have established net-zero targets for operational emissions, and five include Scope 3 emissions – which includes all other indirect emissions that occur in a company’s value chain – in their net-zero

goals. Of the dozen companies with net-zero targets, seven companies, including Eni, Total, Equinor and Occidental, have targets that that will align them with the International Energy Agency’s Sustainable Development Scenario by 2030. Those seven companies would surpass the 44 percent reduction in operational emissions intensity by 2030, which the IEA suggests. Despite pressure from investors, regulatory action and shifts in demand to push O&Gs to reduce gashouse emissions, the 39 graded companies fall into “two distinct camps,” said Eric Kane, head of ESG research, Americas at BI. One-third have set targets to cut Scope 1 (fuel combustion, company vehicles and fugitive emissions) and 2 emissions (purchased electricity, head and steam) emissions. “More than half don’t even report their Scope 3 greenhouse gas emissions – 85 percent of the total footprint for the average company.” For the second camp, “transition strategies are increasingly ambitious, with leaders aiming for net zero,” Kane said. BI’s Carbon Transition Scores “make carbon reduction strategies comparable, translating them into carbon forecasts, and then allowing users to assess further carbon intensity against a temperature-aligned benchmark,” he added. BI and BNEF plan to continue to publish respective transition scores for other high transition-risk sectors, such as metal and mining and automakers. BI has already published carbon transition scores for more than 50 major utilities, with BNEF soon to follow. BBONE Tune into Breakbulk Europe Connect21 for the panel “Greening of the World’s Oil & Gas Supply Chain,” 10:05 – 11:00 BST. Register at: https:// europe.breakbulk.com/page/connect21-registration. ISSUE 3 / 2021

KNOWLEDGE HUB: BUSINESS OUTLOOK

DELIVERY EVOLUTION FOR SAUDI PROJECTS MARKET MEED Webinar Explored Project Risk, Dispute Avoidance

years in Europe or the U.S. might have a target to complete in 18 months in Saudi Arabia, which is just unrealistic.” While change of scope is often seen as a client issue, the panelists noted that this can frequently also be caused by the contractor where suitable pre-planning and the full implications of delivery are not factored in.

BY MALCOLM RAMSAY

A shift in Saudi Arabia’s strategic development is driving transformation in delivery of projects, as an unprecedented scale of construction creates new challenges for breakbulk transport. With some of the world’s largest construction projects underway or planned, via the Saudi Vision 2030 strategic development plan, the country has seen a change in requirements for stakeholders across the project delivery supply chain in recent years. “The market has changed from a relatively simple model to a very complex construction supply chain in recent years. Now companies need to be fit, agile and resilient to compete and must be able to adapt to the market,” said Nasser Al Shawaf, director at Saudi construction company Al Bawani. Speaking as part of the recent MEED Delivering the Vision panel discussion, Al Shawaf outlined a shift in project delivery from a centralized governmentrun approach to a more market-driven sector where projects depend on a greater variety of stakeholders and require wider collaboration. Megaprojects and gigaprojects, such as the US$500 billion Neom future city, the Red Sea Project, the Amala leisure project and the Qiddiya entertainment city project, are pushing the boundaries of modern construction, and have brought with them more sophisticated requirements for breakbulk handling. One aspect of this has been a shift for construction companies, engineering, procurement and construction companies, and transport firms as they become more sophisticated with a greater level of commercial expertise inhouse. “Risk management has very much taken center stage in our organization. We have had to step up to become more sophisticated … Every single tender is

publicly available online and you can see tender information and payment information. The level of transparency and accountability has increased significantly,” Al Shawaf noted.

PROJECT DELAYS

While the shift in project delivery has driven growth across the sector, it has also led to some issues when tackling the largest of projects – most notably delays. “We found that for 78 projects studied, the average extension of time, or EOT, claimed was 86.3 percent, so projects are taking almost double the time to deliver as originally planned,” said Haroon Niazi, partner, head of Middle East at dispute avoidance & resolution firm HKA. Niazi noted that the latest findings from HKA’s Crux research program showed the main reasons for project delays included change of scope, with many of the largest projects requiring major adjustments at a late stage. “Late issuance of design information is another key issue, as is access to site. These are followed by late approvals for work and contract interpretation issues as the main causes for project overruns,” Niazi said. Countering the EOT figures, Al Shawaf noted: “Despite these delays, we still complete many projects a lot faster than they are completed elsewhere in the world. In many cases the clients have very, very ambitious targets, so a project that might take three to four

COLLABORATIVE APPROACH

With many projects moving towards a multi-stakeholder approach, the need for breakbulk operators or other actors in the supply chain to liaise effectively was highlighted as a crucial issue. “Early planning and due diligence throughout the project life is essential. Having stakeholder involvement from the very start is really important, [and] having seen some of the disputes on big projects the most important element is robust project protocols throughout,” said Catherine Joshi, chartered civil engineer, technical director at HKA. The introduction of dispute boards is a key step that many companies in the Saudi market are taking, with robust protocols developed through consensus. “A dispute board is an important factor in avoiding delays so that stakeholders can discuss issues before they lead to delays or problems. Two or three projects have introduced [dispute boards] so far in Saudi … For the Rio Olympics, out of 41 main contracts only three of them had disputes by the end thanks to the use of dispute boards,” Joshi added. Technology is also forecast to make collaboration easier across the supply chain, with the introduction of digital twins ensuring that everyone is working from the same requirements. Advancements in drone technology are also set to improve collaboration, providing stakeholders with an eagle eye view of development across the project. BBONE www.breakbulk.com BREAKBULK MAGAZINE 61

CASE STUDY

BALANCING WEIGHT, WIDTH AND WEATHER Engineering Challenges of Pile Installation Frame Move

s offshore windfarms have grown in size in recent years, the scale of foundation pieces and complexity of installation have steadily increased, resulting in many new challenges in the transport of components and ever-greater engineering skill from breakbulk operators. Multipurpose shipping line dship Carriers demonstrated its prowess in this field with the transport of a 750tonne pile installation frame, or PIF, on behalf of specialist offshore services company Seaway 7. The giant PIF unit measured 33.5

meters in diameter and 29 meters in length and was shipped alongside other offshore and subsea equipment from Rotterdam in the Netherlands to Anping, Taiwan. “Constant communication with all parties involved was the key,” Lars Feller, global vice president, dship Carriers, told Breakbulk. “We demonstrated our ability to handle projects like this during all stages of transport, while delivering safety and defining logistics by offering solutions to fully comply with the very high offshore standards and requirements given by our clients.”

BY MALCOM RAMSAY

Headquartered in Hamburg, dship Carriers is an independent business unit within the familyowned deugro group. The firm operates a fleet of multipurpose vessels providing specialized Lars Feller breakbulk, heavylift, dry bulk and dship Carriers project cargo services for the oil and gas, wind energy

The cargo was unusual in that it was heavy with a small footprint. CREDIT: DSHIP CARRIERS

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ISSUE 3 / 2021

and floating cargo industries. The group also operates offices in Houston, Tokyo, Mumbai, Shanghai and Singapore. Having secured the project, the first challenge was selecting a suitable vessel for loading and unloading of the cargo, stowage and transport to Taiwan. Given the size and weight of the PIF unit, dship utilized its newly acquired F-500 multipurpose heavylift vessel Bruce for the project due to its extensive lifting capacity and storage. “Bruce is one of three eco F-500 class vessels in dship’s current fleet. In addition to their huge versatility, low consumption and crane capacity of 500 tonnes, they also feature a designated heavy-lift area on deck with reinforced hatch cover pontoons,” Feller said. Featuring a 75-meter-long main cargo hold, adjustable ’tween decks and various stowage options, the vessel proved perfectly suited for the cargo. However the size of the PIF

still necessitated intensive engineering work prior to loading.

SMALL FOOTPRINT, HEAVY LOAD

In total, the offshore renewables installation units had a volume of 36,964 cubic meters and an overall weight of 3,328 tonnes, making it difficult to load and store in one operation. To complicate matters further, the PIF had a small footprint and heavy weight, which required collaboration with a specialist engineering partner to plan the move. “The development of the overall stowing and sea-fastening concept took several months and was conducted with the support of LOC Germany. We express our special thanks at this point,” said Hauke Bindemann, supercargo port captain for dship Carriers. Based in Hamburg, LOC Germany is part of London-headquartered AqualisBraemar LOC Group, which provides engineering consultancy and

derisking advisory for the renewable, maritime, oil and gas and power sectors. The first step in this process was to design a special load-spreading concept with heavy load platforms for the hatch covers, and a team from LOC began detailed analysis of the units and stowage position to ensure success. “The stowing and sea-fastening needed to be analyzed carefully beforehand in this challenging project,” said Jonas Schwebe, chartering manager for dship Carriers. “Due to the enormous size of the PIF on the one hand and its limited footprint on the other hand, the stowage position had to be precisely chosen. We needed to eliminate any potential clash with vessel cranes as well as ensure the integrity of the vessel structure under motion-induced loads.” To meet the challenges of stowing a heavy cargo with a small footprint, the partners additionally focused on preparing the ship’s decks to stow the cargo safely and to ensure a safe voyage of the cargo.

The overhang of the PIF meant that the voyage had to be weather-restricted. CREDIT: DSHIP CARRIERS

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CASE STUDY

ADAPT AND REUSE

To be able to counteract the small footprint of the PIF’s legs, a grillage concept was developed to better distribute the load onto the main members of the hatch covers. To save costs, the plan was to utilize heavy-load platforms already available for load spreading. However, the existing platforms had to be reinforced locally to make them fit for purpose. “The heavy-load platforms will continue to be used after the completion of this project, making for more sustainable operations in the long run,” said Emek Ersin Takmaz, general manager and naval architect at LOC. “The slotted shapes of the hatch covers were another restriction that had to be taken into consideration. For this reason, the heavy-load platforms also needed to be supported underneath by pre-shaped hardwood packs,” Takmaz added. With a robust plan in place to support the weight of the cargo and prevent any damage to either the PIF or the ancillary cargo, the partners next studied the proposed route to ensure there were no additional risks. Detailed meteorological and oceanographic analysis was carried out to forecast the environment the cargo was likely to encounter. “A detailed metocean study was conducted for the intended route and the season, and a motion response analysis was carried out to determine the motion-induced accelerations acting on the cargo. The calculated accelerations were then used for the structural calculations and sea fastening design,” Takmaz said. This study provided extensive data on the forces likely to act on the cargo and resulted in additional preparatory work to protect the structure. “Hook-over brackets (steel plates, designed as clip stoppers) were utilized as sea fastening devices. As a result of the structural integrity checks carried out by the aid of finite element analysis software, local reinforcements were required for the hatch covers and the vessel hatch coaming,” Takmaz said.

WEATHER-RESTRICTED TRANSIT

With a journey of more than 5,000 nautical miles from the Netherlands to Taiwan, the teams from dship and LOC next studied methods to avoid damage during the long voyage. 64 BREAKBULK MAGAZINE www.breakbulk.com

On-deck adaptations were needed to secure the cargo for the voyage. CREDIT: DSHIP CARRIERS

“Due to the size of the PIF, stowage with an overhang on port and starboard side was unavoidable. Therefore, in order to eliminate the wave-slamming forces acting on the skirts, the voyage had to be weather-restricted, which was achieved by a carefully conducted motion response analysis using hydrodynamic software,” Takmaz said. As the plan was to use the PIF more than once during construction of the project, the team had to consider the effect of marine transportation on fatigue. “Fatigue scatter tables were generated in order to conduct the related checks. To monitor the actual accelerations during the voyage, additional measurement devices (motion response units) were installed on the vessel so that the calculated values could be verified,” Takmaz said. The final challenge for the move was to ensure safety of all crew and participants in light of Covid-19. As part of dship’s global Covid-19 strategy, measures were put in place well ahead of the move to ensure that risks for all employees were minimized. “dship’s main challenge in connection with Covid-19 was to ensure attendance of all port operations with

highly skilled personnel. dship managed this task with the help of our global network of own offices as well as our long-term partnerships,” Feller said. Alongside the pre-planning engineering activities for the project, the team from dship also arranged approval from the classification society and on-board supervision of the whole reinforcement works to ensure a seamless preparation process prior to start of the loadout. Following successful delivery of the cargo to Anping, in the south of Taiwan, at the end of last year, the final installation of the pin piles was executed by Seaway 7’s vessel Seaway Yudin. The Seaway Yudin is engaged on several offshore renewable projects in Taiwan, including the upcoming Formosa 2 wind farm, which will be one of the largest wind farms in the Straits of Taiwan, generating 376 megawatts and involving pre-piling and installation of 47 jacket foundations. BB Based in the UK, Malcolm Ramsay has a background in business analysis and technology writing, with an emphasis on transportation and ports. ISSUE 3 / 2021

CONNECT21 17-21 MAY 2021

A GLOBAL ONLINE NETWORKING EVENT FOR THE PROJECT CARGO COMMUNITY Networking Business Meetings 17 May - 21 May Industry Insight Sessions 19-20 May 4 Steps to New Business Opportunities 1. Register at europe.breakbulk.com/page/ connect21-registration—it’s free 2. From 5 May, start networking and scheduling meetings with colleagues on the CONNECT21 platform 3. Hold your meetings from Monday, 17 May to Friday, 21 May 4. Enjoy a series of business sessions on Wednesday and Thursday, including: World Project Expo, Carrier Check-in, European Offshore Wind, Greening of Oil & Gas Sector, Participation in International Research Project for Women in Breakbulk