Governing energy logistics

The oil and gas industry demands the highest standards in logistics management. The complexity and scale of the projects, in some of the world’s most difficult terrains and most remote locations, require reliability and expertise. And air freight has a vital role to play in making it happen. Surya Kannoth…

Whether it’s fracking for shale gas in North America or China, drilling thousands of meters below the seabed off the coast of Brazil, or setting up a wind project in a rugged and remote area of Africa – energy logistics are demanding, to say the least. Many energy companies are operating at some of the hard-to-access, out-of-the-way locations like Alaska, West Africa or Papua New Guinea where the logistics infrastructure is generally poor or non-existent.
Even relatively routine tasks like the resupply of materials, inbound logistics, and maintenance, repair & operations (MRO) may require special measures, such as unconventional transport, when executed in difficult terrain, like oil sands in Canada or petroleum fields in Central Asia. Considering the fact that the energy sector spends more than €180 billion per year on logistics services globally, it is a part of the industry that cannot be ignored.
Houston remains one of the largest air freight destinations while Singapore and Malaysia are the rental equipment and overhaul hubs. And while West Africa is generally recognised as a strong point for oil and gas, oil companies have now moved to East Africa, where there is development in Sudan, Ethiopia, Kenya, Tanzania and Mozambique, with large fields found in 2012 in the last two in particular.
One of the pioneers and the leader in this segment of the global airfreight industry is the Russian carrier Volga-Dnepr, which 24 years ago began commercial operation of the unique An-124 ‘Ruslan’ heavy cargo transport aircraft with a freight capacity of more than 120 tonnes. The non-standard cargo hold of this enormous plane allows the transportation of very large cargoes, and the specially-constructed floor in the cargo hold enables special features for the transportation of very heavy goods. In 1985, the legendary ‘Ruslan’ set 21 world records in one flight, carrying 171 tonnes of cargo to an altitude of 10.7 km. Transportation of a wide range of oil and gas equipment is one of the key activities for Volga-Dnepr Group.
Last year, an-124-100 and IL-76TD-90VD freighters from Volga-Dnepr Airlines’ fleet were called into action to deliver more than 80 tonnes of oil and gas equipment to Cape Town in South Africa. The An-124 flight carried five 13-metre pipes from Singapore weighing 60 tonnes. The pipes were shipped to Singapore’s Changi Airport by truck and then placed carefully onto airport dollies and towed to the aircraft for loading. The aircraft’s onboard cranes were used to load the pipes. The delivery was operated on behalf of logistics company UTI South Africa and was contracted under the Ruslan International An-124 joint venture.
Earlier, the urgent transportation of oil equipment from Stavanger, Norway, was organised by Volga-Dnepr’s experts onboard an IL-76TD-90VD cargo aircraft. The shipment of two subsea risers measuring 13.5m and 7.5m in length was required to complete the fast repair of a broken semi-submersible drilling rig. This equipment was delivered on behalf of French broker ATS International.
“The fast delivery of the risers to Cape Town helped the oil and gas operation to resume production at the rig within a short timescale. We have a lot of expertise in meeting such urgent customer requests and in situations of extreme urgency when each day of interruption to production can result in substantial financial losses, we are always ready to provide customers with fast and effective solutions to support them in keeping their projects on track” said Clair Gunn, Commercial Executive, at Volga-Dnepr in a news release.
“At least ten of a great number 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. In 2014, we have operated a 1100th ‘oil and gas’ flight. That was the delivery of 45 tonnes of cargo which included part of the drilling machine with the hydraulic drive and the additional equipment from Rio de Janeiro in Brazil to Prestwick in the UK,” said Andrey Rassadkin, sales director of charter operations at Volga-Dnepr Airlines.
In September 2014, Ruslan International, which manages 17 giant AN-124 freighter aircraft for its partners Antonov Airlines and Volga Dnepr Group –moved 75 tonnes of urgent oil and gas industry coil-tubing equipment from London Stansted to Adelaide, to support a drilling programme in the Coober Pedy Basin of South Australia.
The equipment was needed urgently in order to commence drilling on schedule, and the timetable did not allow the time required for transportation by ocean. In addition, the largest item in the consignment – a reel weighing 38 tonnes and measuring 3.95 metre high – was too large to fit into any other aircraft type. This meant the only viable solution was to utilise an AN-124. The 17,000 km flight was completed in 58 hours, and involved stops in Baku, Karachi, Kuala Lumpur and Darwin.
Loading and unloading were relatively straightforward operations, using the aircraft’s unique portable ramp system, and external cranes. All operations at origin and destination were overseen by specialist staff of charterer Airland Logistics, which has offices in Europe and Australia, as well as South Africa and Canada.
For Lufthansa Cargo, on a global basis, business from oil and gas industry is still niche. However, if it is broken down to certain stations, it has become an absolute key business in the last years. Stations like Houston, Stavanger, Aberdeen depend on oil and gas business, but also other stations like Baku, Lagos and Johannesburg have a fair share of oil and gas business.
While there are only few dedicated flights only for the purpose of the oil and gas industry, Lufthansa Cargo mainly uses its standard network of more than 300 destinations and fly oil and gas equipment along with other commodities and industries on the same flights. There are, however, several flights serving oil and gas hotspots like Houston, Stavanger, Aberdeen and other places, which by majority transport cargo for the oil and gas industry.
Volatility of the industry, according to Alexander Kohnen, Director Sales & Handling Nordic and Baltic at Lufthansa Cargo, is the biggest challenge. “Volumes are hardly predictable and destinations change frequently. The business is very ad-hoc driven and almost every shipment looks different. You have outsized pieces, very heavy pieces, low degree of packaging standardisation and combinations of several commodities.”
Very often oil and gas equipment contains dangerous goods (from explosives via flammable liquids to radioactives) or goods need to be transported under climate control conditions (drilling samples). The industry is also very complex and it is a challenge to get a good overview about the players in the industry and it takes time to build relations accordingly, Kohnen explains.
Lufthansa Cargo constantly adjusts its network to the needs of its customers. In November 2014, for example, the airline introduced a weekly direct service with a Boeing 777 freighter for the oil and gas industry between the industry capitals of Houston and Stavanger. On the customer service side, the airline launched in August last year a 24/7 oil and gas emergency hotline which can be used by both forwarders and shippers in need for urgent uplift of oil and gas shipments, completing the local services of our offices around the world.
Given the volatility of the industry, the current drop in oil prices has put several exploration projects on hold and oil fields with high production costs are currently less utilised. Production focus currently shifts to lower cost areas, and therefore also, traffic streams change, which could have an impact on the airlines serving this segment.