Breakbulk Middle East delegates hear that the Gulf continues to develop ambitious projects requiring precise strategic logistics

Management of risk critical to seizing opportunities available

Abu Dhabi, UAE, 26th October, 2016:  The current economic conditions mean that now is a good time to invest in the oil and gas logistics sector in the Middle East according to experts speaking on day one of Breakbulk Middle East held at ADNEC, Abu Dhabi. 

Following the official opening by H.E. Dr. Abdullah Al Katheeri, Director General, Federal Transport Authority, global management consultants A.T. Kearney discussed the impact of low energy prices on the region’s oil and gas transportation sector. Eduard Gracia, Principal, A.T. Kearney explained that due to these low costs, high-cost oil and gas basins have lost economic appeal and therefore investment globally has both reduced and concentrated on the low-cost reservoirs in the Middle East. 

Gracia continued by highlighting that with Middle East NOCs investing heavily in refining and petrochemical capacity, the export of hydrocarbon resources as crude and refinery products as well as gas and petrochemicals is set to generate further demand for logistics and transportation.

To enable organisations to capitalise on this increased demand it is important for firms to assess and mitigate risk in cargo. Cyril Varghese, the Logistics Director from global EPC firm Fluor, moderated a panel discussion that analysed the issue. In the session it was mentioned that despite some significant opportunities, vessel owners, forwarders and project owners/EPCs must still grasp key liabilities related to shipping project cargo, and strategies for mitigating risk.

Varghese and the expert panel discussed the ways companies should manage risk, particularly in light of several high profile bankruptcies of global firms working in the sector. There was consensus that there would be further consolidation of firms to enable them to weather the depressed economic landscape. 

Shipping companies should spread risk, looking to work with more than one carrier, as well as fully understanding contractual details and to do due diligence before committing to do business. Meike Ziegler, a Associate at law firm Holman Fenwick Willan LLP, explained that firms do not pay enough attention to contract exclusions, and that research on financial data before entering into business contracts should be a standard activity for firms looking to better manage their risk – and if problems do arise, an amicable solution is often better than a legal course of action.

Logistics Challenges Examined

At the conference a number of industry experts delved into a case study highlighting the kind of challenges faced by regional logistics operators and how they have been addressed on a flagship development in the Gulf – the Upper Zakum UZ750 field, ZADCO’s major offshore drilling development 80 kilometres off Abu Dhabi’s coastline, one of the world’s most complex projects.

The panel discussion was moderated by Matteo Pollara, Logistics Director, Petrofac Emirates who provided an overview of the challenge set by ZADCO to reach a strategic target to increase input at the site to 750,000 barrels of oil per day for the next 25 years. 

There was a need for major facilities upgrades to enable this, with the challenge exacerbated by the fact that the development is located on four artificial islands offshore, making it a hybrid development – mixing elements of both offshore and onshore. The decision was taken to abandon the current wellhead at the field and concentrate on consolidating the processing facility and drilling platform leading to a more robust and flexible development for UZ750 field. 

Due to the scale and nature of the project, it was stated that logistics was as important as the engineering with the UZ750 project. Precision was needed in planning and delivery from a logistics point of view, and was every bit as critical as the engineering – something not typical in an offshore project.

The physical challenges amplified the need for strategic logistics planning too: a development of this size would normally require hundreds of acres of storage, but with just four artificial offshore islands making up the development, space was at a premium, making the logistics of the enhancements more difficult and ‘Just in Time’ logistics the only way forward. This was especially so when there was up to 189 modules being build and transported from 10 construction yards around the world, with cargo ranging from 100 tonnes to 4000 tonnes. 

The complexity and scale of the project underlined the significant developments happening in the Gulf where project logistic firms and breakbulk operators need to use all their expertise – and where they can capitalise on lucrative opportunities. 

Abdulkareem Al Masabi, Acting Executive Vice President - Ports Unit at Abu Dhabi Ports commented: “In major events such as the Breakbulk Middle East Exhibition and Conference 2016, Abu Dhabi Ports recognises the significant opportunity for project cargo and breakbulk growth within the region, as we too witness bustling activity take place in this dynamic market.”
 
“As an example of our firm, on-going commitment, during the past year we have invested more than AED 75 million in new equipment at Zayed Port and Khalifa Port which further enhances our operational capability, productivity and efficiencies that more than meets the surging demand from our customers and reduce vessel turnaround time.”

Mark Rimmer, Event Director - EMEA, Breakbulk, commented: “Today we’ve heard some insightful discussion about how global events and situations have provided companies in the Middle East with clear opportunities. We’ve also heard that producers in the Gulf are still delivering ambitious projects that require logistical skill to make happen. But there’s an obvious need for a clear move towards strong governance and risk management to be able to capitalize on these opportunities in a sustainable and profitable way. We’re looking forward to furthering these discussions on day two.”

Breakbulk Middle East 2016 will welcome 63 exhibitors, 46 speakers and 250 delegates to the exhibition, conference and seminars. Day two of the conference begins at 10.00am on the 26th October. Breakbulk Middle East is supported by sponsors Abu Dhabi Ports, DP World, Almajdouie, Bahri, Rickmers-Linie, Cheekay Shipping, Hoegh Autoliners, Rohling, Sarjak, APM, Geodis and Modulift.  The event is co-located with NATRANS Expo.