Economic upswing

IDZ development essential for economic upswing

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The development of South Africa’s industrial development zones (IDZs) and special economic zones (SEZs) are key drivers for economic growth, with South Africa (SA) playing catch-up to cash in on intensifying offshore traffic, while highlighting the need to minimise red tape.

The completion of upgrades at Richards Bay, Saldanha Bay and Coega IDZs would enable the oil and gas industry to compete on an international level, with every second counting as margins tighten, and the currency and fuel prices fluctuate.

The ports of SA are vital to the growth of gas distribution channels, giving business more confidence in steady supply chains. With possible new Southern Africa gas finds on the cards, solid export infrastructure is also not without mention. Our rail network needs to start running more optimally, taking some of the stress off our highways. Credit must be given to companies like Bidvest Panalpina Logistics who rival any international company on service, price and reliability – the cornerstone of any successful operation.

There is a need to streamline the complex port administrative processes, which will provide additional incentives for the international market. This must, of course, be done in conjunction with the duty-free benefits available in the IDZs. The job creation benefit cannot be understated, as vital skills are needed to maximise our effectiveness. The improved working relationship between the public and private sector can only bode well for the future.

Because of the strategic oversupply of oil worldwide and diminished demand from strategic oil buying countries, IDZ developments are critical, specifically because of the downturn in oil prices. However, the downturn is sure to follow an upswing in price, which SA needs to be ready to cash in on. One of the leaders in the development of Africa’s oil and gas potential is supply chain specialist at Bidvest Panalpina Logistics (BPL), Jen Byrne, who heads up their oil and gas division.

Why are IDZs and policy implementation key to oil and gas sector development in 2016?

ISZs, as part of SA’s broader Special Economic Zone policy, are key to the further growth and development of the oil and gas (O&G) sector in SA. It is also part of the strategic objectives relating to SA’s economic development as part of a broad-based industrialisation growth path. The benefits on offer will definitely promote investment opportunities resulting in much needed job creation. These projects, and the new developments, are intended to attract companies and investors that are looking to use Saldanha Bay, Coega and other IDZs to position themselves for Africa’s longer-term offshore growth prospects. Furthermore, it will help to facilitate the needed growth in the freight, supply chain, heavy lift, transport and manufacturing industries.

O&G has been identified as a major sector because of the inherent benefits of geographical location as well as SA’s skills in refurbishment. South Africa has some of the best engineers the worldwide O&G sector has to offer. International manufacturing and refurbishing companies servicing the O&G sector have workshops locally and conduct most of the refurbishing work for operations along the African coast. Globally, the most successful IDZ policies have been beneficial when they are focused on specific industry sectors and the O&G sector in particular has benefited from these strategies. Department of Trade and Industry (DTI) driven incentives enhance the benefits to local suppliers and international oil companies/rig owners in line with DTI policy. Saldanha, SA’s deepest natural port, and Coega deep water port are in close geographical proximity to a slew of new oil and gas finds on either side of the continent. This gives these ports an edge over other repair hubs in Europe, Singapore and Dubai in providing services to the O&G sector.

How has the infrastructure spend on SA’s ports helped the O&G sector be more efficient and internationally competitive?

Firstly, the upgrading and enhancing of the Coega and Saldanha Bay ports means that these ports now meet international deep-water and industrial requirements to service the O&G industry. They are now able to efficiently accommodate rigs and/or drill ships needing repair work, through meeting water depth requirements, quay sides being able to accommodate extremely heavy equipment and cargo, as well as manufacturing and/or refurbishing companies being able to set up shop within the ports’ perimeters, as well as enabling these companies to conduct operations within the ports. An estimated 120 oil rigs currently pass SA’s coastline annually. Most were unable to obtain services in Saldanha as the port was not equipped to meet the demands from the sector. The new developments in Saldanha will allow oil exploration firms to save millions by having their rigs repaired in SA, rather than towing them to pre-existing repair hubs such as Aberdeen, Singapore, etc. Towing the rigs to these hubs takes up considerable travel time as well as loss of rental income due to time out of operation and other costs related to towing, etc. As a result of these infrastructure developments, companies are now looking at using these two ports for future refurbishment. A proposed offshore supply base will also be built to serve as a one-stop shop to supply oil rigs with their basic needs, such as food and materials and waste collection. It can only be good for us.

What are some of the key risk management factors that go into transporting and storing flammable gases/liquids?

Storing and transporting high risk cargo successfully and safely requires a very good understanding and full compliance of the legislative frameworks and the relevant standards pertaining to such operations. At BPL we have a zero-tolerance approach to compliance. Risk management is seen as a strategic pillar driven from executive level and aligned to customer needs and operational processes.

The years of experience in supplying services to the O&G industry have always been based on a culture of compliance and our belief that there are no shortcuts for transporting, handling and storage of dangerous goods.

It is important to do risk assessments on every new product warehoused and transported and to appropriately implement risk controls to eliminate or reduce risks. Furthermore, it is imperative to do regular reviews on all products and processes in case of changes to risk or commodities. Ongoing internal and external related training is required to ensure employees involved with the handling and storing of dangerous goods are skilled and that all statutory qualifications are current.

Some of the key preventative factors are:

  • Correct labelling
  • Correct packaging
  • Appropriate handling
  • Appropriate transport solutions
  • Appropriate warehousing solutions
  • Regular dangerous goods training
  • Understanding your commodities/products transported and stored
  • Case study reviews relevant to operations.

It is important to understand the risk to people, property and the environment and of each hazardous class and product where appropriate. BPL’s stringent risk management processes ensure full compliance with legislative and regulatory requirements in terms of transporting, handling and storing of flammable gasses/liquids. Maintaining these level of compliance can be time consuming and BPL’s internal SHERQ audits ensure that all departments and operations remain compliant at all times.

What is the level of skill within the oil and gas logistics sector and what is BPL doing to help any skills shortages?

The challenge of adequate levels of skills experienced in SA in all sectors is also applicable to the O&G industry. We began addressing this challenge some years ago by establishing our own accredited Academy as well as focusing on individual development programmes for all employees. This has resulted in BPL having excellent logistics specialists servicing the O&G sector within SA. We also work closely with O&G specialists from our global partner Panalpina to ensure that they remain on the coal face of the industry and global trends. BPL is proud to have a learnership programme where we provide young professionals with the opportunity to work within BPL, while completing their studies, and which BPL helps to finance. The programme also provides continued opportunities for employees to further their studies through a list of accredited tertiary institutions.

The multiple upstream and downstream companies approaching local freight forwarding employees directly, as well as the number of South African expats working in Africa and the rest of the world, is true evidence of the level of skills in the O&G industry in SA. This does, however, contribute to the shortage of skills locally. The emphasis BPL places on skills development allows our O&G customers to focus on their core businesses and leave their logistics requirements to our skilled team of specialists. Compliance is a time consuming, resource intensive exercise and it is easy to drop the ball by not allocating the appropriate time, effort and resources to it. We believe that the cost of compliance is insignificant compared to the cost of non-compliance.

How has the fluctuation in fuel price and currency affected your business?

The downturn in the oil price, drop of commodities prices, erratic fluctuation of major currencies and the weakening of the rand have had a negative impact on the O&G business with lower growth and volume forecast. The industry is inherently linked to global economic conditions, but at BPL we remain positive and we see this as an opportunity to innovate to meet new challenges and opportunities. We remain positive considering the opportunities envisaged in terms of the IDZ developments, specifically with the focus on the O&G industry. We have been hard at work to plan and renew our O&G focus. We have managed to retain our current customer base and will continue to stay strong and focused for when the market turns around.

Keys to effective organisational, co-ordination, scheduling and planning skills?

BPL, together with its international partner Panalpina, prides itself on understanding the demands and requirements of the O&G industry.

Organisational co-ordination, scheduling and planning is the service we are selling. The O&G product is underpinned by a team of experts who understand the industry well both locally and internationally through the Panalpina international network. Compliance and understanding of these requirements are key pillars to the total door-to-door international supply chain management of the O&G industry. The need for partnering with someone who actually understands the industry increases as compliance and risk in the industry intensifies. Due to the high risk factor it is more important to partner with a company with the right specialist skills, knowledge and capabilities.

We always have a back-up strategy with clear common understanding of the main objectives and realistic goals. We anticipate possible problems and failures and have preventive actions and contingency plans, which is important in high risk situations. It is essential to define clear authority and responsibility by task, person and deliverable date. Follow the plan and process, be willing to adapt when the time comes and ensure that you collaborate accordingly. It’s called effective communication and teamwork. We are, after all, in the business of communication.

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