Shifting gear

Logistics in the oil and gas industry can be much more complex than in any other sector. Sheer weight, complexity, or quantity of items being moved makes the whole process a challenging one.

Besides the issues surrounding the size and shape of the cargo, there are also major challenges in their final destination. Often these are integral parts of oil and gas equipment and need delivering to remote locations in short time frames, and under huge pressure.

Despite this, there is no shortage of companies taking up the challenge. One such company is GAC, which has been involved in the oil and gas sector in the Middle East region since the 1950s. “We pride ourselves on having helped build the region’s oil and gas infrastructure ‘from the seabed up’,” explains GAC group energy logistics manager Ismayil Manzil.

“We are unique in the energy sector in being able to provide service packages that integrate a range of services across shipping, logistics, and marine services that can be tailored to specific client demands wherever the project is. GAC Energy was created in 2008 to provide a single point of contact and bring the range of our services under a single umbrella,” he adds.

Another company involved in the sector is TNT, which operates a global import and export system of road vehicles and aircraft for transport and a support network for managing the customs and paperwork flows. In the UAE the firm also operates warehousing facilities in JAFZA for storage and redistribution.

The firm’s major challenges derive from the tight deadlines and short time frames being operated within upstream logistics.

“It would be easy to focus on the size of oil and gas pieces and the weight causing handling concerns, however, that is a day to day process,” says Bryan Moulds, country general manager, TNT Express UAE.

“The most challenging part of servicing the oil and gas sector is the time sensitivity of some of the movements, matched to the distances and borders that some of the shipments have to cross. Added to the paperwork for temporary exports and managing the expiry dates of pieces on loan some days can be more exciting than others,” he adds. Manzil agrees that the majority of GAC’s challenges revolve around time and, more specifically, the occasional lack of it. “We always talk about the value of time at every opportunity. In a time-sensitive market, the value a logistics provider adds may be measured in days, hours or even minutes. Only experience and planning can help us meet the expectation of the industry.

“Like in any other business GAC is involved, we don’t treat our customers as an outsider but we are part of them to ensure we add value constantly. We work and plan with the clients, and follow-up on every stage of the process to ensure success,” he states.

Manzil adds that this can mean great difficulty in making sub contractors and authorities appreciate the importance of the time factor for the company’s clients. “It is not uncommon that delays could cost US$50 000 or more per day, and in some cases that figure can pass the million dollar mark, so time is of the essence,”

Time is the crucial factor in all of the operations involving oil and gas equipment, Eliska Hill, general manager, Dubai, Chapman Freeborn, reveals: “Time is a huge factor, especially if there are spills or breakdowns. That is massive, because you have to get the aircraft in the air very quickly and you can be dependent on the piece being manufactured or made available.”

Abnormal Load Engineering (ALE) is a worldwide logistical engineering company which is heavily involved in the oil and gas sector. “We are an engineering company which specialises in transportation and installation of heavy loads, we are not a transport company, and that is a big difference from some of our competitors,” James Roberts, regional commercial manager, ALE, says.

While GAC and TNT are in the air, Roberts is using the roads and the seas to transport heavy equipment, with the roads in particular presenting challenges. “I think because it’s a rapidly developing region, the road networks are constantly changing which results in unforeseen challenges.”

While it may be a day to day process, the awkward shape and size of the cargo being handled is undoubtedly a big challenge. Stuart Smith, cargo sales director – Middle East, Air Charter Service explains: “Large heavy outsized awkward pieces of equipment are a big challenge. You have often got really awkward long pipes, the biggest piece we had was a 13m piece of pipe and trying to maneuver it into the aircraft can be difficult.”

Air Charter Service primarily uses Russian planes to transport oil and gas equipment, as it claims they offer the best option when trying to fit huge pieces of equipment into an aircraft. However, there are further issues caused by these as regulations can restrict the use of certain aircraft. Russian airplanes can be old airplanes; not all of them are old but aviation is constantly evolving, and from time to time sometimes aircraft will be restricted in certain areas, mostly due to noise restrictions,” explains Smith.

Restrictions

Further restrictions exist on which aircraft can land in particular airports. “You are tied into airports when you are flying by air, some of the larger aircrafts can’t land in regular airports. It’s a difficult one,” reveals Hill.

Onshore locations of oil and gas facilities can sometimes be extremely remote. This is an opportunity for logistics companies to again show versatility. Some sites in onshore drilling locations do not even have access roads. “So our job starts with working with the clients on building access roads to ensure easy access for the supplies to the site,” stresses Manzil.

“Having been in the region for over half a century, perhaps we can safely say that nothing can really catch GAC by surprise! This is a highly demanding environment where precision in planning and execution are critical. At the same time, backed by our extensive experience and expertise in this field, we have the flexibility to respond to last minute client demands or changes in circumstances.”

Due to the complexity of some of the processes in logistics in the Middle East, the services offered by firms here have actually expanded. “We recognise this is the Middle East, and Middle East shippers in particular appreciate all inclusive solutions,” comments Smith.

“We get involved in that by having airport agents at many of our hub points, we can appoint nominated agents in airports of arrival. We can send representatives and managers, we can tailor the service according to the position of the company. If it is a big oil and gas company they tend to want an all inclusive service.”

Claudio Lietaert, passenger charter analyst, Air Charter Service, reveals: “We are a very global company, we have around ten offices worldwide, which I think is an advantage we have over local competitors. There is nowhere we don’t cover, otherwise what is the point in chartering?”

“We often arrange the pickup if it is coming out of a freezone. We can do the trucking pick up, with specialist vehicles and take care of everything from the shipper at the end,” says Hill.

“You have to have local knowledge of the area and the problems; if you are moving things in and out of the UAE, it can be a challenge especially with dangerous equipment. We have operational staff who deal with all of that, the papers and the documentation,” she adds.

Upstream expansion

While some of the firms in this industry such as Abnormal Load Engineering and GAC treat oil and gas as their primary focus, others are also involved in other areas, although oil and gas is usually an area these companies want to be more involved in.

“We have a wide range of vertical markets but oil and gas is an important part, accounting for around 10% of volumes. This year’s challenges with the economy have meant that oil and gas become more interesting due to the stability of the sector,” explains Moulds.

“It’s not a huge part of us, because it’s a very ad-hoc business. Perhaps 10-15% of our cargo, so we are working on getting more and developing that in the Middle East. We are definitely targeting it and that is an area where we want to do more work,” affirms Hill.

Cross border logistics operations can present major tests to a firm’s capabilities, particularly with the clock ticking. Problems can arise in this regard, on both land and in the air. “The problem in this part of the world is that airspace is very much a point of national pride, where each country tries to protect its airspace,” reveals Lietaert. “They don’t like to see aircraft from certain countries overfly other countries let alone land somewhere. When you have an aircraft on route and you get a call from operations saying you cannot fly across a country, you have a problem.”

Smith suggests a solution to this problem may be an open skies policy in the Middle East, to increase trade between countries in the region.

There are many challenges being faced by these companies on a daily basis.

However, it seems it is these situations that get logistics industry members out of bed in the morning.

Roberts describes the most exciting part of his job as “trying to find solutions to complex logistic situations”. In essence the job is a problem solving one, however, with a fast ticking clock and an awkward cargo, the oil and gas sector is permanently keeping the logistics industry on its toes.

“No single day is comparable to any other day. You are seeing different challenges and different opportunities every single day. What more does one need to be excited?” concludes
Manzil.

Case study: Shifting LNG facilities for Kuwait’s Mina Al-Ahmadi

GAC helped Kuwait meet its high summer demand for electricity by handling all the parts and equipment shipments for a new natural gas import terminal.

The Challenge

Kuwait’s own gas supplies are not enough to generate the power needed in summer when air conditioning units are at full blast. To cover the shortfall, Kuwait signed a US$150 million contract with Excelerate Energy to build import facilities for liquefied natural gas (LNG) at Mina Al-Ahmadi about 40 kilometres from Kuwait City. The Excelerate Energy supplies are based in several countries in North America, Europe and Asia.

The Solution

Parts and equipment for the project shipped from various origins including the USA, UK, Italy, Holland, Belgium, Canada and Korea.

Project Execution

GAC was entrusted with door-to-door handling of all shipments whereby the logistics team took care of the logistics from all the origins including customs clearance all the way through to final delivery to Mina Al-Ahmadi GasPort (MAAGP) project site in Kuwait. In all, GAC has flown in 900,000kg of cargo and shipped in 125 TEUs for the project.

The Outcome

All the client needed to do is issue purchase orders and leave a copy with GAC. The Kuwait office was following up every purchase orders with the origin office to ensure that the parts were in the site at just in time without increasing the transport cost or timeframe.