Air freight keeps energy sector well-oiled
Even though the world is moving towards tapping energy from alternate sources; the oil and natural gas industry remains a major source of energy even today. And the air freight industry continues to play a significant role in the supply chain management of the energy sector.
There is an apparent reduction in oil production from traditional wells and according to some estimates it is about five percent a year. But the fact of the matter is that there is still plenty of oil left in the world and many of the new sources of oil and natural gas are found in China, East Africa and the US. However, it is now even harder and more challenging for exploration companies to produce oil. They are today working in some of the most challenging environments but the oil sources still have huge reserves and therefore the potential returns are enormous for companies in this business. Logistics support for such businesses is very crucial and air freight has a significant role to play in the energy sector. One of the biggest variables among air freight customers is the timing of deliveries. Customer requirements vary depending on the product being moved, its urgency and final use. Air freight services are generally preferred by industries with time-sensitive manufacturing processes, short product lifecycles or high-value products. However, many industries look to air freight to provide delivery options as this mode of transport is highly reliable and convenient. And for several reasons, the energy sector is increasingly dependent on the air freight industry for timely delivery of parts and equipment to keep the production running without a shutdown. Flexibility in timing, routing and delivery mode are key requirements of the energy sector. To operate in such challenging environments as efficiently as possible, many energy companies already outsource supply chain services such as shipping, warehousing, and procurement coordination. And as projects get more complex, 3PL companies are moving up the value chain, running maintenance, repair and operation (MRO) and even helping to plan projects. Employed properly, 3PL companies can not only reduce operating costs but also help design projects and ensure compliance with relevant environmental and safety regulations. The energy business already spends almost a quarter of a trillion dollars a year on logistics. Oil and gas equipment is one of the growing commodities within the airfreight business. With oil fields and plants moving to more remote locations, the demand to deliver material gets more complex and requires specialized services. These equipment cannot travel in belly hold as it is huge in size and requires special handling. And most of these need to reach destinations not normally served by wide-body passenger aircrafts. Around the world there are specialised carriers and there are airports that offer services that are of specific in nature to meet the demands of the oil and gas industry. Liege Airport in Belgium is particularly equipped and experienced in handling cargo and cargo carriers meant for the oil, mining, and gas industry. According to Liege Airport, freighter operators who fly horizontal, US – Europe – Middle East – Asia, connect with freighter operators who fly vertical, Europe – Africa, Europe – CIS. This airport serves Africa with scheduled widebody freighters (MD11, B777F, B747F) on a daily basis and receives specialized freighters (AN-124, IL-76, AN-12) for charter operations on at least weekly basis. To understand the growing demand for logistics services in the energy sector consider the complexity of extracting natural gas from shale. This involves hydraulic fracturing, which requires expensive equipment, a variety of chemicals and considerable volumes of water. Projects in remote locations are not easy to supply, those closer to populated areas involve extra environmental concern and few companies have experience running such projects or navigating the relevant regulations. Safely disposing of water used in the hydraulic fracturing process presents its own challenge. So does coordinating, supervising and ensuring the regulatory compliance of all the contractors involved. Logistics for these projects involves more than delivering the right equipment at the right time. They involve keeping assets visible, often with a control tower that offers a bird’s eye view of an entire supply chain, and making sure that all contractors can update it when needed. “It’s about getting there safely and being able to run a supply chain that can support every eventuality in a remote place,” said Steve Harley, president, DHL Energy Sector, in a recent report. Reflecting on the significance of the share of airfreight business from the oil and gas industry Michael Goodisman, business development manager for Ruslan International, the heavy air cargo charter specialist, said the oil and gas industry has been a very significant part of AN-124 flying during the 25 years the AN-124s have been operating commercially. “The level of our oil and gas flights from 2006 until present does approximately reflect that of the general cargo market dropping from a peak of 60 flights in 2008 to 30 flights in 2009 and then gradually increasing in the following years. In 2013 the oil and gas flights performance made up 20 percent of our total revenue and greatly exceeding the2008 level. So far this year, we have performed 34 oil and gas flights,” he added. Volga-Dnepr Group has been in the intensive charter operations since 1990 and has become a truly recognised expert on the international market of air transportation of heavy and outsize cargo. The group’s vast experience based on operation of the largest fleet of unique ramp airplanes such as giant An-124 and smaller IL-76TD-90VD, makes Volga-Dnepr the first choice when it comes to logistics for world’s oil and gas industry. “Transportation of wide range oil and gas equipment is one of the key activities for Volga-Dnepr Group. Over the past 24 years we have been participating in many exciting projects of the big- name companies of the Industry. Our airplanes could be seen in various remote locations of the world such as Latin America, Africa and even Papua New Guinea delivering project cargoes. We have served all sectors of oil and gas industry: upstream (drilling equipment, pumps, power houses, blowout preventers), downstream (compressors, heat exchangers, separators, stabilizers, control units), midstream (tube bundles, pipeline valves, vents, pipe layers), oil spill recovery equipment and specialised vehicles,” said Andrey Rassadkin, sales director, charter operations, Volga-Dnepr Airlines. Recently, Volga-Dnepr Airlines completed its 1,100th flight for customers in the oil and gas industry with its latest delivery of 45 tonnes of equipment from Rio de Janeiro to Prestwick, Scotland. The cargo consisted of specialist equipment for a water-driven excavation system and auxiliary equipment and will be used for drilling operations and seabed engineering. The IL-76TD-90VD freighter flight was ordered by Chapman Freeborn Airchartering Fretamento e Logística do Brasil. Today Volga-Dnepr Airlines is an acknowledged expert in this field, cooperating with such leading international companies like Exxon Mobile, Total, Shclumberger, Cameron, National Oilwell Varco, Halliburton, BP, Shell, Fluor, CB&I and others. “We have the capability to fulfill various client needs from urgent deliveries of oversize equipment to hardly accessible hotspots on a charter only basis to a complete package of door-to-door transportation. At least ten of our monthly flights are being operated for oil and gas industry. And since 1990 we have carried more than 90,000 tonnes of oil and gas equipment by our flagship An-124-100 and IL-76TD-90VD,” explained Rassadkin. Geographically, most exports of oil and gas equipment are from USA and western Europe and the main destinations range from central/south Asia (Kazakhstan, Uzbekistan, Turkmenistan, India) to middle-east (UAE, Saudi Arabia, Yemen, Iraq) to Africa (Nigeria, Libya) to Far-East (Australia, Singapore, Papua New Guinea, Korea) to south America (Brazil, Venezuela). “The majority of Volga-Dnepr transportations for oil and gas industry are from Europe, India, Far East and Pacific and North America. More than 60 percent of deliveries are for such industrial regions as Russia, African countries and South East Asia,” said Rassadkin. For the air cargo industry that is offering unique products and services to the energy sector the challenges are many. “The most common factor is the need to deliver an item in the shortest possible time (to keep an oil and gas project on schedule). So the challenge is to quickly address parallel issues such as cargo preparation, route selection and permit requests,” said Goodisman. Today the discoveries of oil and gas are far in far remote places and far away from shores in the depths of oceans. Oil and gas discoveries can be made in remote locations. “The challenge of getting as close as possible to these destinations can include operating the AN-124 close to its limits into relatively short runways with acceptably high payloads. In a few projects, O&G companies have chosen to extend runways or even build new runways. Our teams have advised on airport design requirements for the AN124, and followed this up with flight simulator analysis by our pilots to properly evaluate such airport designs with their surrounding terrain,” he added. Volga-Dnepr’s fleet is able to land on unprepared runways loading and unloading with no need to use a special airport handling equipment. “This is of particular value for the delivery of oil and gas equipment to remote regions where gas and oil fields are being explored. Also we design and manufacture bespoke loading systems and handling frames for specific projects,” said Rassadkin about creating innovative products and services for the oil and gas industry. Goodisman admitted that it is difficult to put a growth rate on oil and gas as single large projects can appear sometimes to give a boost to a particular year. “But on average, we can say that compared to the low point in 2009 we are operating about twice the number of flights now,” he says with confidence.