Pressure Cooker of Projects Building

By Carly Fields


deugro has spotlighted the Middle East as a geographical epicenter of project cargo activities for at least the next 12-24 months, where countries such as the UAE, Saudi Arabia and Qatar are emerging as vibrant hubs of investment and innovation.

With a keen focus on bolstering domestic gas infrastructure and expanding petrochemical ventures, the region exudes dynamism.

Speaking to Breakbulk, Thomas Wylie, deugro’s global head of strategic projects and accounts, highlighted Oman’s ambitious endeavors in hydrogen development, underscoring the region’s pioneering spirit as it aspires to carve a niche as a global leader in sustainable energy solutions.

“The Middle East has always been a steady source of project work for deugro,” Wylie said.

“But it’s not just the Middle East that is busy with projects. In many areas, the pandemic caused large capital projects to slow down or stop, which created a bottleneck that is now being released and it is expected to have an impact as many projects come to execution phase all at the same time.”

Here, the U.S., Europe and Australia are singled out. “The U.S. market is busy with all kinds of project cargoes, traditional oil and gas, LNG plants, new energy projects, clean fuel projects and renewable projects, while in Europe and Australia, the entire electricity grids need to be revamped in the coming years to meet the domestic demand and influx of green electricity from the renewable energy projects,” Wylie said.

Then there are the outlier locales, including Mozambique where there is said to be great project potential.


Supply Chain Pressure

However, all this activity is putting immense pressure on the project supply chain, particularly with respect to offshore wind. “These projects introduce more volumetric cargoes, which although not very complicated to ship, require a huge amount of tonnage just because of the size of the components and the scale of the offshore wind farms,” Wylie noted.

Wind turbine nacelles can weigh up to 800 tons, requiring larger capacity vessels to lift such weights. Therefore, Wylie expects pressure on deck carriers and the larger heavy-lift vessels.

For carriers to invest in newbuild ships of larger capacity, there needs to be certainty on what’s in the pipeline, but the general market landscape is “marred with uncertainty.” This uncertainty is a result of inflationary and geopolitical issues, including the current crisis in the Red Sea. These have an impact on vessel availability and inflate freight rates, a situation that deugro is navigating for its clients.

“We’re supporting our clients in finding solutions to deal with the current crisis. A lot of our market is still driven by lumpsum, turnkey projects, so the market effects are very challenging to deal with. deugro’s job now is really to provide solutions to these kinds of problems,” Wylie said.

“Shipping costs that are fixed in long-term contracts make it challenging to deal with such crises. We see cargo is still moving smoothly when our clients have already factored freight rate changes into the contract, whether that’s through indexing or pricing mechanisms.”

He added that the situation does merit a potential revamp of the approach to freight pricing and as well as incorporating general market changes into contracts. During the pandemic, most clients switched to spot bidding for breakbulk shipping, which meant that their cargo still moved but with a lot of time spent on the bidding process for each shipment.

Long-term contracts work for both parties because the client has the certainty of a logistics partner on board for their project and it allows the freight forwarder to invest in the resources needed to execute the project well. “Incorporating flexibility into the long-term contract with certain clauses or mechanisms would mean that during the next market change, the client is not forced to return to spot bidding to execute their shipments,” he said.


Changing Client Requests

Post-pandemic, the overarching ask from clients has changed, Wylie added. The question today is ‘can you deliver’, rather than ‘at what cost’. “Cost is always important, but we see a trend that it is no longer about awarding contracts to the lowest bidder because clients have seen what happens when things do go wrong, especially in the last couple of years.

“This is one of the areas where deugro excels. We have a reputation for reliability and for resilience; we stand alongside our clients to support them no matter what. One way or another we will deliver.”

Wylie also noted the shift towards earlier sourcing of supply chain needs with cargo owners and EPC companies trying to secure their supply chain needs ahead. “That longer-term thinking is a direct result of capacity challenges in their supply chains. In the renewables market there are commitments to carriers one to two years in advance.”

Cashflow is another issue today, and this is where it pays to partner with a financially stable, independent company. “[deugro’s] primary focus is the project industry, and we aim to position ourselves to support this growing sector,” Wylie said.

“How are we doing that? We are investing heavily into our people and into certain products. In the past year, we’ve set up a renewable energy team. We’re also not afraid to invest in the equipment and the resources needed to deliver these projects. We’re constantly looking at potential opportunities to support this growing industry.

“We are taking the knowledge that we gained over the past 100 years on large-scale projects, and we are applying our expertise to make sure that they can these projects can be delivered.”


deugro is exhibiting at Breakbulk Europe 2024. Meet the team in the Main Hall, stand 2F20-G21.