June 1st, 2016 | Written by


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A compressor failure at Russia’s sole natural gas liquefaction plant, Sakhalin-2, earlier this year called two large freighters—an Ilyushin 76 and a giant Antonov-124—into action, converging on the island of Sakhalin in Russia’s eastern periphery. The former brought in a 14-ton capacity, multi-wheel trailer from Moscow, while the AN-124 carried some 30 tons of special repair equipment from Kuala Lumpur.

 “We had to organize this transportation and logistics solution quickly to ensure that the repair equipment needed to restore production was available at the Sakhalin-2 to minimize the plant’s downtime,” says Alexander Guzenko, CEO of TGK Logistics, which organized the flights.

Sakhalin-2 has the capacity to produce around 10 million tons of liquefied natural gas per year. Clearly its operator was not going to waste any time bringing it back to speed, as the money lost in the downtime dwarfed the cost of chartering in two large freighters carrying loads from eastern Russia and Southeast Asia.

For most logistics players serving the oil and gas sector this type of move is fairly routine, but not very frequent. In terms of overall activity in this segment, transporting equipment by air makes up a tiny fraction. The bulk of this traffic goes by ocean carrier, notes Colin d’Abreo, CEO of project logistics forwarder KOG Transport. When airfreight does enter the picture, it often involves freighter aircraft. “You normally have bigger and larger cargoes that need to get to a destination in an urgent situation, for example a pipe. These are easily 15-, 20-foot long pieces. They cannot go on regular passenger aircraft,” says d’Abreo.

 The destinations for this traffic are usually far from major international airports and served neither by passenger aircraft nor scheduled freighters, which leaves chartering a freighter as the only option. “But as far as possible you try to stay away from that because of the cost,” d’Abreo advises. When the conversation turns to charters, the figure that pops up in people’s mind is a million dollars, he adds.

The drop in the oil price has heightened customers’ aversion to embrace charters. When the oil price was north of the $90-a-barrel mark, there was a considerably greater willingness to use charters, notes Ron Buschman, managing director of charter broker and cargo airline sales agent Aerodyne.

“For airfreight, oil needs to be at $70 to $80 for us all to do well. At $120 no one cares about the cost and everything goes by air. Now people look more to alternatives,” Buschman adds.

“We see less activity than before, but there is still a need for it,” reports Jessie Baiza, senior project manager of BNSF Logistics.

Part charters, where two or more parties share a dedicated freighter flight, are one option to avoid the cost of a full charter, but they do not come into play often because they are not readily available. “You cannot foresee a part charter. It depends on aircraft availability in the vicinity,” remarks d’Abreo.

 Baiza says that it is easier to organize part charters to some regions, such as northern Europe. Destinations like Indonesia, on the other hand, are challenging.

 Wherever possible forwarders prefer to avail themselves of scheduled freighter flights, which come at far more attractive rates.

“The best is to use scheduled freighters. Even if they don’t go to the same destination, we often find it cheaper to truck the cargo to and from the points where the scheduled freighter goes,” says d’Abreo.

Centers of the oil and gas industry—in North America, Houston above all, but also Calgary—have attracted some regular international freighter operations, which are eagerly embraced by project forwarders. Cathay Pacific Airlines added a stop in Calgary on a U.S.-Asia freighter route in 2014. “The Cathay freighter has been a heck of an advantage for us to get cargo to Hong Kong and Southeast Asia,” says one Calgary-based forwarder.

 Faced with downward pressure on yields as a result of slow demand and overcapacity in most sectors, scheduled freighter operators have shown greater flexibility to accommodate large shipments. This has ranged from holding an aircraft back for a few hours to give the forwarder time to bring a shipment to adding stops to a route to pick up or deliver a sizable load.

 “You can always do diversions. Carriers can divert freighters for a cost,” Buschman comments. “You can always find ways around.”

Baiza urges shippers to take advantage of the willingness of airlines and charter brokers to find creative solutions to their needs. “Don’t tie yourself to the established answer! There is availability in the market. There are different ways to skin a cat. Look outside the box for different solutions,” he says.

The depressed air cargo market has forced airlines to cut back and retire older freighters, including many Boeing 747s. This is a concern, as newer freighters cannot load cargo through the nose, which limits their ability to take long pieces. However, there are still enough 747 freighters around, Buschman says, adding that one possible alternative could be to charter an Antonov-124.

 Arguably a bigger concern is the fact that some airports are not equipped to handle a 747 freighter. “Our biggest limit on the 747 is that not every airport has the capacity to unload the aircraft. Then you have to go to a larger airport and truck from there,” says Baiza.

An answer to both the availability of large aircraft that can load long pieces and airport handling capacity could be airships. Advocates of the technology have often stressed the benefits that they would bring to industries like oil and gas or mining in terms of reaching remote locations without needing airport infrastructure.

Baiza calls the model very interesting, noting progress in the development of possible concepts in recent years. “The technology has come a long way. If they are able to perform in the way they say, they could get to remote areas at a very reasonable cost. We’re keeping tabs on this,” he says.

For his part, d’Abreo also sees promise in airships, but he is not holding his breath. “Airships have been in the works for a very long time,” he says. “People were talking about airships 15 years ago, but they haven’t taken off yet.” n