Feb 19 | 2021
Alternative Energy Projects Still a Ways Off
By Carly Fields
While a transition away from oil and gas is underway in the Middle East, the pace of change will be more gradual than in Europe and the U.S., as regional state-owned oil companies continue to pursue mandates to maximize profit from natural resources.
Therefore, agreed regional experts taking part in the Breakbulk Middle East Digital Special, project cargo movers serving the region can expect to see O&G related work dominating until at least the end of the decade.
This contrasts with the aims of international oil companies that are already diversifying and transforming their businesses. In December 2020, energy companies BP, Eni, Equinor, Galp, Occidental, Repsol, Royal Dutch Shell and Total announced they had agreed on six joint principles to drive their participation in the energy transition. “They are now optimizing their operations, process and procedures to become green,” pointed out session moderator, Rafael Vicens, head of global projects and industry solutions MEA at DB Schenker.
Speaking as part of an exclusive roundtable hosted by Breakbulk, Moataz Hussein, regional manager – project and energy services (MENA) at Expeditors, saw a big role for renewables in the Middle East region in the future. However, he caveated that with his expectation that O&G projects will still be important through to 2030. He did add that project cargo movers operating in the region are starting to see different types of projects, such as entertainment and country-program driven projects, and that there were fundamental shifts taking place in sourcing. “Our region was always looked at as an inbound region, but that may change with local content and the local cargo production,” he said. “People are not looking at this, but the market is changing.”
Yasser Al Yassin, logistics director at Petrofac, saw a strong global drive to shift from O&G in the region, but agreed that it was difficult for the Middle East to adopt the same energy transition policies as other regions. “We are very much dependent on O&G still in this part of the world,” he said. “While I do not think O&G will continue to be as profitable as it used to be 5-10 years ago, it will continue to be the main economic drive until governments and other stakeholders decide to adopt an alternative energy business model.”
Alternative Options
That said, investment is being committed to alternative sectors, such as wind, solar and water recycling. Solar is particularly suitable to the Middle East region, and is where the panel expects the most interest in the coming years.
Javier López, senior logistics manager at Abengoa, confirmed that his company is not only involved in renewal energies with 2.3 gigawatts built, but is also leader in construction of thermal solar plants with 34 percent of worldwide output in this “key” area. Expeditors’ Hussein described solar projects as a “fit for our region.”
Vicens, meanwhile, reported seeing a rising number of desalination plants in the project pipeline, while López added that Abengoa is constructing in the region the world’s largest reverse osmosis desalination plant and the biggest desalination plant in Saudi Arabia using the same technology. He saw water as a “a key element regarding renewable sources and how we manage water in the region.”
However, because of the immaturity of the renewables sector in the Middle East it is difficult for project cargo handlers to build up experience and to be successful in tenders, the panel noted.
Whether O&G, renewables or desalination, Omar Yacoubi, GCC procurement manager for Tecnicas Reunidas, said that logistics companies in the region will “still have a job.”
Vicens raised the question of whether project specialization is in danger of being lost with a shift away from the more complicated O&G sector into other sectors where components can move by conventional means. “From the project forwarding side before we were moving a huge number of breakbulk and heavy-lift cargos for refineries and chemical plants. Now with renewable projects especially solar and desalination plants, most of the cargo is containerized,” he said. “I am concerned that in 30 years there may be less O&G to build and there will be more desalination, solar and carbon capture, and the pure project forwarders as is will disappear. This could go against our specialisation.”
However, Hussein saw this as an opportunity for project freight forwarders: “Project cargo freight forwarders need to look differently at the market and consider the types of project cargo moves associated with renewables, energy storage and entertainment projects, which could present opportunities and future potential.”
López explained how some Abengoa Projects are managed with “just in time” supply chain processes and share similarities with car assembly factories. He said that the industry could learn a great deal from those lean processes to improve fulfilment and cash flow.
But, at the end of the day, Al Yassin said that as engineering-driven companies, they should be able to take any diversification in their stride. “Companies serving the highly complex O&G sector are very much equipped to transition into alternative projects.”
While a transition away from oil and gas is underway in the Middle East, the pace of change will be more gradual than in Europe and the U.S., as regional state-owned oil companies continue to pursue mandates to maximize profit from natural resources.
Therefore, agreed regional experts taking part in the Breakbulk Middle East Digital Special, project cargo movers serving the region can expect to see O&G related work dominating until at least the end of the decade.
This contrasts with the aims of international oil companies that are already diversifying and transforming their businesses. In December 2020, energy companies BP, Eni, Equinor, Galp, Occidental, Repsol, Royal Dutch Shell and Total announced they had agreed on six joint principles to drive their participation in the energy transition. “They are now optimizing their operations, process and procedures to become green,” pointed out session moderator, Rafael Vicens, head of global projects and industry solutions MEA at DB Schenker.
Speaking as part of an exclusive roundtable hosted by Breakbulk, Moataz Hussein, regional manager – project and energy services (MENA) at Expeditors, saw a big role for renewables in the Middle East region in the future. However, he caveated that with his expectation that O&G projects will still be important through to 2030. He did add that project cargo movers operating in the region are starting to see different types of projects, such as entertainment and country-program driven projects, and that there were fundamental shifts taking place in sourcing. “Our region was always looked at as an inbound region, but that may change with local content and the local cargo production,” he said. “People are not looking at this, but the market is changing.”
Yasser Al Yassin, logistics director at Petrofac, saw a strong global drive to shift from O&G in the region, but agreed that it was difficult for the Middle East to adopt the same energy transition policies as other regions. “We are very much dependent on O&G still in this part of the world,” he said. “While I do not think O&G will continue to be as profitable as it used to be 5-10 years ago, it will continue to be the main economic drive until governments and other stakeholders decide to adopt an alternative energy business model.”
Alternative Options
That said, investment is being committed to alternative sectors, such as wind, solar and water recycling. Solar is particularly suitable to the Middle East region, and is where the panel expects the most interest in the coming years.
Javier López, senior logistics manager at Abengoa, confirmed that his company is not only involved in renewal energies with 2.3 gigawatts built, but is also leader in construction of thermal solar plants with 34 percent of worldwide output in this “key” area. Expeditors’ Hussein described solar projects as a “fit for our region.”
Vicens, meanwhile, reported seeing a rising number of desalination plants in the project pipeline, while López added that Abengoa is constructing in the region the world’s largest reverse osmosis desalination plant and the biggest desalination plant in Saudi Arabia using the same technology. He saw water as a “a key element regarding renewable sources and how we manage water in the region.”
However, because of the immaturity of the renewables sector in the Middle East it is difficult for project cargo handlers to build up experience and to be successful in tenders, the panel noted.
Whether O&G, renewables or desalination, Omar Yacoubi, GCC procurement manager for Tecnicas Reunidas, said that logistics companies in the region will “still have a job.”
Vicens raised the question of whether project specialization is in danger of being lost with a shift away from the more complicated O&G sector into other sectors where components can move by conventional means. “From the project forwarding side before we were moving a huge number of breakbulk and heavy-lift cargos for refineries and chemical plants. Now with renewable projects especially solar and desalination plants, most of the cargo is containerized,” he said. “I am concerned that in 30 years there may be less O&G to build and there will be more desalination, solar and carbon capture, and the pure project forwarders as is will disappear. This could go against our specialisation.”
However, Hussein saw this as an opportunity for project freight forwarders: “Project cargo freight forwarders need to look differently at the market and consider the types of project cargo moves associated with renewables, energy storage and entertainment projects, which could present opportunities and future potential.”
López explained how some Abengoa Projects are managed with “just in time” supply chain processes and share similarities with car assembly factories. He said that the industry could learn a great deal from those lean processes to improve fulfilment and cash flow.
But, at the end of the day, Al Yassin said that as engineering-driven companies, they should be able to take any diversification in their stride. “Companies serving the highly complex O&G sector are very much equipped to transition into alternative projects.”
