Project carriers seek to build bigger, stronger ships for the largest cargoes.
By Chris Dupin
The project cargo business has been one of the more stable sectors of the shipping industry in recent years and continues to have a fairly bright outlook.
Project cargo can range from the movement of an entire factory to a large piece of equipment for an offshore oil field. It usually involves the movement of cargo not easily placed in conventional containers either because of their size or weight.
A wide variety of ships compete for movement of project cargo, including conventional handy-size bulk carriers and so-called “tweendeckers,” containerships equipped with flat racks or open-top containers, and roll-on/roll-off vessels with hoistable, high-strength decks and ramps.
But carriers are also building and operating specialized ships devoted to handling project cargo, or what Frank Guenzerodt, president and chief executive officer of freight forwarding company Dachser USA, calls “BUF — big, ugly freight.”
Susan Oatway, a senior consultant at Drewry Ship Consultants in London, estimates that at the end of May there were about 3,119 multipurpose ships in the world fleet of which about 956 are heavy-lift capable, or able to take on board cargoes weighing 120 tons or more.
The order book for these multipurpose ships is fairly well balanced, with about 318 ships comprising 4 million deadweight tons (dwt) on order for a fleet that has a current capacity of 29 million dwt. Oatway said about half of those ships have heavy-lift capability.
Generally speaking, Oatway said there is a trend among ships for the project trade becoming more capable, for example, being able to lift heavier cargoes or work in shallower ports.
“The designs of the ships are becoming more niche and I think this is in reaction to the competition within the sector,” she said. “Project carriers, in particular, are becoming more specialized so that they have that unique reason why they should be carrying your cargo.
“Carriers in this sector have recognized that is what their ships are about. They have to add value, because all of these ships are expensive. They have to offer a reason why you should be hiring their ship rather than a very simple multipurpose ship or putting cargo on a flat rack,” she said.
Carriers, Oatway explained, “are definitely seeking to add value to any supply chain arrangement so that they can do more of the transportation — better, quicker, for longer. When you talk to the carriers, that is what they are doing — they are upgrading themselves in all ways.”
In addition to adding cranes with higher lift capability, project carriers are making their ships more fuel efficient and finding ways to get a better stow of cargo.
For example, Dutch firm Jumbo Shipping announced this year plans to build the second (with an option for a third) in a series of new vessels capable of making dual hoists, or using their onboard cranes in tandem, to lift upwards of 3,000 tons. These so-called K-class ships are Finnish-Swedish ice-class 1A — ideal for projects in Arctic regions — and have a single large hatch. The ships can even be operated, if necessary, without hatch covers so that oversize pieces can extend from the bottom of the hold to above the deck.
The K-class ships also have dynamic positioning systems so they can provide installation support in the offshore sector, enabling large and heavy structures to be loaded, transported and installed by a single vessel. The first of those ships will see active service in the fall of 2013 and the second six months later.
Japanese carrier “K” Line has also targeted the heavy-lift business as an area for expansion through its SAL subsidiary, which is based in Germany.
SAL has a fleet of 16 heavy lifters with dual-crane lifting capacity of 600 to 2,000 tons, and two are fitted with dynamic positioning systems.
SAL says infrastructure development projects such as construction of oil refining and petrochemical plants and development of railroads are advancing in step with the recovery of the global economy, and the transport of wind turbine equipment is forecast to continue.
The global wind energy sector grew 20 percent in 2011 to 238 gigawatts, and is expected to reach 493 gigawatts by 2016, according to the Brussels-based Global Wind Energy Council.
That has created a boom for some shipping companies and ports, although it remains a market which can seesaw dramatically.
The U.S. port of Vancouver, Wash., for example saw a 321 percent increase in wind turbine cargo, or 106,182 metric tons, in 2011, and the port’s executive director Larry Paulson said he expects 2012 to also be a big year for these imports.
However, he added, “like the wind, this cargo will gust and taper off. We expect to see a decline in wind imports in 2013 and 2014 due in part to the loss of federal tax incentives for renewable energy.”
Some project cargo moves are destined to ports with well-developed infrastructure and equipment, while others can be much more challenging. Guenzerodt, for example, said his company arranged transport of equipment for a number of wind farm projects in Brazil, including to remote areas in the Amazon.
Exploration and production (E&P) activity by the oil and gas industry is one of the biggest providers of work for specialized heavy-lift vessels, and the business is projected to climb by 10 percent to reach $598 billion, according to Barclay Capital.
Robb Erickson, president of Dockwise USA, a company that operates float-on/float-off heavy-lift ships said there is a “worldwide push to put energy facilities in more and more remote locations — farther north, farther south, difficult regions where new energy resources are being discovered whether it’s the Arctic, Australia, West or East Africa.”
At the same time he said the concept of building facilities in modular form and transporting them long distances, sometimes half-way around the world for installation in a remote location, keeps growing. More companies are building “modules in China, Korea, Indonesia, Malaysia and putting them on ships and shipping them to wherever they go. They roll them off and put them together,” he said.
The trend toward building in remote locations sometimes conflicts with local content laws, but Erickson said communities benefit by using local labor for assembly.
As an example, he pointed to the giant gates being built for the new set of locks in the Panama Canal. His company is bidding on the job to transport the lock doors, which will be fabricated in Italy and then transported to Panama with a float-on/float-off ship.
Some oil and gas projects are massive and will keep the ships of several companies busy, sometimes for years at a time. Chevron’s Gorgon LNG project, 80 miles northwest of Australia’s west coast, is chartering four ships from Dockwise and Fairstar, a company Dockwise is in the process of acquiring, and those of Germany’s Combi-Lift for multiple voyages.
The kind of float-on/float-off ships that companies like Dockwise operates are able to carry far heavier cargo than those that do lift-on/lift-off moves — for example, Dockwise is building a new ship called Vanguard that will carry pieces weighing 110,000 tons. (The company is in discussions with the U.S. Navy about possibly having the Vanguard transport the aircraft carrier USS Enterprise from Norfolk to Seattle when it’s decommissioned after its final voyage this year and turned into a museum.)
Erickson said lift-on/lift-off and float-on/float-off ships infrequently compete for the same projects, though as more oil and gas facilities are built far offshore, some companies will choose to lift components into place and assemble them there, while others will build them in remote locations and then float them into position.
Combi-Lift operates a fleet of more than a dozen heavy-lift ships, capable of combined crane lifts of up to 900 tons, but they are cleverly designed so they can act as roll-on/roll-off, or float-on/float-off vessels. If need be, the ships can use a mixture of those loading techniques on the same voyage.
While many oil and gas projects are directed from the United States and Europe, Erickson noted most cargo for those projects are being built in the Far East.
Because of requirements that projects financed by the U.S. Export-Import Bank or other federal agencies be carried by U.S.-flag ships, the size of heavy-lift vessels being registered in the United States has grown in the past two years. (See article, “Exports boost U.S. flag fleet,” in the March issue.)
Will Terrill, vice president of Intermarine, said in the wake of the capital market collapse, more companies building projects are looking to export credit agencies like the Ex-Im Bank and similar agencies in other countries for financing. And in some cases, projects are so expensive that only governments can fund them.
Intermarine, which maintains offices in both New Orleans and Houston, operates a combination international and U.S.-flag fleet.
This summer it added the biggest heavy-lift ship ever to its U.S.-flag fleet, the 18,000 dwt Ocean Giant. The vessel sports two 400-ton cranes, capable together of lifting 800-ton pieces. The ship is ice-classed and slightly larger than the Ocean Freedom, which Intermarine brought into the U.S. fleet at the end of 2011.
“As projects get larger and more complicated we want to have the vessels to meet the need of the project. Also the projects tend to be father away and the larger ships are also better suited for longer transits,” Terrill said.
But he said it’s important to have a balanced fleet.
“While our recent trend is to go to larger ships with more lifting capacity, we still maintain a number of 8,000 dwt vessels with two-by-2,000-ton lifting capacity. It allows us to provide the best solution for the customer,” he said.
Intermarine historically has been a major project carrier to South America and last month announced it will add a call to Paita, Peru, as part of its regular service to the west coast of South America from Houston, which also calls Esmeraldas and Guayaquil in Ecuador; Callao, Peru; and Puerto Angamos in Chile.
Terrill said the company is working to expand its service to Africa which is complementary to South America since ships can operate in a triangular routing between the United States, Africa, and South America.
“Africa is also a place where we have many of the same customers that are working on projects in South America,” he said.