G2 Ocean banks on wind to double project cargo revenues

G2 Ocean banks on wind to double project cargo revenues

Wind cargo transported from China to Barber’s Point, Hawaii, aboard the Star Louisiana. Photo credit: G2 Ocean.

Onshore wind projects, especially in the United States and Europe, are the cornerstone of G2 Ocean's ambitions in the project market. This specialized cargo contributed about 10 percent of G2 Ocean’s total revenues of $1.3 billion last year, or approximately $130 million.

“We aim to increase this to 20 percent over the next four years. Outsize cargo is a small but important part of our revenues,” Leif Arne Strømmen, G2 Ocean’s vice president for innovation and project cargo, told JOC.com.

That comes amid a resurgence in the project cargo sector after a prolonged market slump due to overcapacity, weak freight rates, and a slow recovery from the 2014-2015 oil price decline.  

“Project cargo is slowly coming back after oil and gas-related project demand dropped in 2014. The sector is not taking off, but it is slowly growing,” Strømmen said. “We see a lot of liquefied natural gas projects coming to market.” 

G2 Ocean, formed in 2017 as a joint venture between bulk/breakbulk carrier Gearbulk and forest products specialist Grieg Star, has developed a niche in the onshore wind turbine transportation sector, especially through its focus on scheduled liner-style project cargo services. 

“We run similar kind of services to those that used to be operated by Rickmers-Linie, although we have larger and different types of ships,” Strømmen said.

The carrier operates some 27 services, from Asia to Europe and from Asia-Europe to the east and west coasts of the US and Canada, along with high-frequency services from Asia to South America and Australia. “We see onshore wind as a strong market. Right now, for us, we're seeing a lot of volume this year and next," Strømmen said. 

Wind cargo is a good fit for long-haul shipping services because components, including blades and towers, are built in Asia and shipped to Europe and the US, he said.

Strømmen’s views reflected estimates by energy consultancy Wood Mackenzie Power & Renewables, which recently forecast that a record 14 gigawatts (GW) of onshore wind energy capacity would be added in the US in 2020. That comes even as production tax credits supporting the wind sector in the US are likely to end in late 2020.  

“While the current tax regime will expire at the end of 2020, wind power developers are taking advantage of those credits as much as they can,” Strømmen said.

Cost of wind projects falling

While there could be disruption in the wind power market in the US after the tax subsidies end, Strømmen believes wind development will continue, as the cost of wind projects has tumbled around the world.

In Britain, offshore wind costs have crashed by about 33 percent to approximately £40 ($50) per megawatt hour, less than the price of electricity in the wholesale energy market. 

G2 Ocean is currently midway through a strategic fleet review which should be completed in December, Strømmen said. While it would be premature to comment ahead of that, he said, there are no plans to order new buildings for the project cargo business.

“The review is more about how we can operate the existing fleet better,” he said. G2 Ocean operates about 130 ships, including the world’s largest fleet of open hatch gantry crane and jib crane vessels, mainly transporting traditional bulk and neobulk cargoes of forest products, aluminum, steels, and minerals. 

Asian shipyards have a lot of capacity to build multipurpose vessels (MPVs) and new ship designs save on fuel costs, but banks are reticent about ship financing, Strømmen said. There is also uncertainty over what kind of fuel to plan for, given the IMO’s plan to cut greenhouse gas emissions by 50 percent by 2050. Ships typically have a 20- to 25-year life span. “There are a lot of things to take into consideration — from that perspective, it’s tough,” he said.

As part of the expansion of its project cargo business, G2 Ocean is hiring senior project managers for offices in Houston, Singapore, and Hamburg, and seeking business partners such as freight forwarders, and heavy transport and haulage firms. This reflects Strømmen’s own background with Kuehne + Nagel, where he was global head for project, oil & gas, and marine logistics before joining G2 Ocean in August 2018.

“Freight forwarders are really hands-on and have a lot of opportunities which are normally closed to ship owners, but operators can do more things with ships, including rescheduling for complex projects. With our experience, we think we can bridge that divide,” he said.

Contact Keith Wallis at keithwallis@hotmail.com.