BREAKBULK MAGAZINE
JULY-AUGUST COVERAGE
Palma in Mozambique is a small unassuming fishing village in the north of the country. Situated in dense jungle there are few roads, the locals live in scattered mud huts and hardly, if at all, speak English.
Those locals vary from friendly fishermen to gun-toting rebels. There are snakes – the poisonous kind – and hordes of mosquitoes, the malaria kind. The current port is nothing but a stretch of beach and the airport a dirt strip. Drinking water and electricity is as hard to find as the shops.
This unassuming place is where Anardarko Petroleum Corp. are planning to build a gas-export project, one of the biggest of its kind, to recover gas reserves in the region of 250 trillion cubic feet. It’s a project of enormous proportions, not least because of the lack of even basic infrastructure to support the development.
But ask any project manager in Africa what the minimum infrastructure requirements are for a project of this nature and you get the same answer every time: nothing. At most they will say some kind of access is necessary, but even that is desirable, rather than essential.
“Our organization has never walked away from a project due to the lack of infrastructure,” said Ferose Majam, commercial, international and tenders manager for Basil Read. “No infrastructure is the norm on most projects in Africa. Our approach is simply to find solutions and create that which is not there. We have developed a skill set that puts us in a position where we can tackle and find means to complete any project.”
Ernst Kunfermann, a projects specialist who has worked across Africa, agrees saying that he has yet to find a project that is not doable.
“The bigger question is more about whether there is budget to create the infrastructure for the infrastructure. It can be extremely costly and run into huge figures before you have even started construction of the actual project,” he said.
In Mozambique it is estimated that the exploration company’s costs are already around the billion-dollar mark and there is little to show for it all in terms of minimum infrastructure input thus far. In fact, Anardarko is still at the pre-project project planning stage and feasibility studies have not yet been completed.
The magnitude of what the company has to establish is difficult to comprehend. Before any gas plant goes up, the company is going to have to find a way of housing and feeding more than a thousand project workers. Anardarko has already had to truck in tons of soil to create a temporary campsite for the small handful of people presently on site.
Lars Greiner, managing director for materials management and logistics consultancy Greiner, Mendi & Associates, said the viability of projects is not measured in terms of what is already on the ground.
“Mozambique is a prime example of our willingness to take on just about anything regardless of what it costs or how difficult it is,” he said. “Innovative logistics that speak to the delivery of cost-effective projects is being required more and more. Logistics experts have to just perform the extraordinary, and one then begins to question if there should not be a minimum requirement of infrastructure in Africa.”
Francois du Toit, global discipline director: logistics for Hatch, said there is no standard in Africa, as it varies for every project and for every company operating on the continent.
“Some people will say roads, ports, railways must be in place before they undertake a big project, while others will say understanding of the customs regulations and compliance to it is just as important. After all if you don’t have the necessary understanding and ability to manage the import and export of your materials and equipment in and out of a country you might as well not even be in it, and you will not be constructing your project, let alone achieve schedule and cost,” he said.
In fact, it’s far more complex than that. “Electricity, water, sewage, accommodation for employees, food, security, storage – all of these would be considered minimum requirements in most countries before a project could kick off. In Africa none of these things have to be in place for a project. Remote logistics addresses it all.”
It all starts with pre-feasibility – in African terms that means establishing how much of those essentials need to be taken to the site for the project to begin.
Taking this into account, risk then plays a major role in the African project landscape. “The importance of knowing what you are going up against cannot be underestimated,” Majam said. “You have to plan, plan and then plan some more. In Africa there are no shortcuts and you have to as far as possible eliminate all elements of surprise.”
A near impossible task as there are virtually always surprises; expecting the unexpected is part and parcel of project planning in the continent.
“The trick,” said Majam, “is to plan for those unexpected elements and to understand the landscape you are operating in – an environment with very little or no infrastructure.” Once you know what you are dealing with, it is simply a matter of constructing an access point. “We start with the road. All we need is a starting point and from there one can just about do anything,” he said.
The St Helena island airport construction is a prime example. Situated 2,000 kilometers from the nearest point of land on the African continent, initial infrastructure was limited.
“There was no harbor, no construction plant and no material available for construction apart from rock and water,” Majam said. “In order to get our equipment and material to the island we sourced a ship which is a landing craft type vessel to which we had to make modifications to allow it to carry fuel and cargo. A crane was also installed to allow us to offload.”
A forwarding facility was created in a bonded yard in Walvis Bay in Namibia to consolidate all cargo before shipment to St Helena. On the island itself Basil Read constructed offices, storages and workshops. “We constructed an accommodation camp that could accommodate about 100 people. The vessel that we sourced – the NP Glory 4 – was the first vessel to voluntarily touch ground on the island. We built a temporary jetty to allow for this.” The company also built a haul road that climbed about 350 meters in the first few kilometers to get to the site.
To date, the company has shipped in excess of 22 million tons of fuels, 5,000 tons of explosives, 27,000 tons of cement, more than 200 pieces of heavy construction equipment, brick-making machinery, crushing equipment, batching plants for concrete, and tons of sand. The list goes on: “Then there is the hundreds and hundreds of kilograms of fresh meat and food produce that had to go,” Greiner said.
In Nacala, Mozambique, where a railway line was constructed a few years ago, people lived in tents on site for at least six months while the living accommodation was constructed. Camping in the middle of nowhere means trucking or flying in fresh food, fuel to generate power and water for drinking and washing.
“Once there is access anything and everything is brought to the site. Water and food being the most obvious. Electricity is created with generators and containers are turned into storage facilities,” Greiner said.
In Palma these necessities will have to be trucked in over hundreds of kilometers, as was the case for the Ascaf iron ore project in Mauritania. “Literally a desert site in the middle of nowhere, one of the biggest questions initially was how do we get the first containers off a truck. Once that was solved everything was delivered to the site,” Greiner said.
Kunfermann added that in the case of Mozambique the first priority – once the road to the site is completed – will be to create a settlement of sorts.
“These camps are quite primitive and provide only for the bare necessities. Even so it is expensive. Putting this minimum infrastructure in place plays a big role in why logistics in Africa is so expensive,” he said.
Paul Runge, an African projects expert and managing director of the Johannesburg headquartered Africa Project Access, noted that the high cost of logistics has not deterred project flow in Africa, which is riding the crest of a wave.
Monitoring projects across a broad range of sectors in Sub-Saharan Africa, excluding South Africa, Runge said he is not surprised to see the private sector paying close attention.
“The continent has an abundance of natural resources and minerals, oil and gas and it is politically more stable in many regions,” he said. However, he noted that funding is a problem and it is affecting projects as logistics costs are “sky rocketing.”
In its latest Africa infrastructure report, Capital Projects & Infrastructure in East Africa, Southern Africa and West Africa, PricewaterhouseCoopers (PwC) found that the top three challenges in delivering capital projects across Sub-Saharan Africa were:
- The availability of skills.
- A lack of internal capacity among state organizations to plan, procure, manage and implement capital infrastructure projects.
- The impact of political risk and government interference during project lifecycles.
But, failure is simply not an option, said Du Toit. “In Madagascar we built a mine with hardly any infrastructure available not even a port. At least 160,000 tons of cargo was moved on to the island via barge onto a temporarily established quayside. A port was constructed at the same time as the mine was going up. Accommodation, water, food, power, supplies … everything else was imported for the duration of the project and the permanent infrastructure requirements were constructed as we went along.”
According to Runge, developers also need to consider emergency preparedness. “Not only planning and creating of living facilities and getting food, water and electricity to people, but you also have to have a plan in place as to what you are going to do if someone becomes ill or if an accident happens. How are you going to evacuate them and how quickly you can do it?”
Community involvement is another minimal requirement – albeit not infrastructure related, Runge said. “Without the buy in of the local community you are not going to go very far. It is essential for a project to have the village chiefs and tribal leaders on board.” In the case of Anardarko in Mozambique some 3,000 locals from a handful of villages will have to be relocated.
However, successful projects are able to mitigate risks, Runge said. “The problem is that these large international companies just don’t understand the risks. Yes, there are those that have paid their dues and have come to appreciate what it means to do a project in Africa, but many have learnt the hard way.
“You might run a big multinational in a very developed country, be very good at projects and have a string of successful projects that attests to that, but a project in Africa is a different kettle of fish. Understanding the risk and then mitigating it is what makes the difference.”
In Tete, Mozambique mining companies faced very real problems in the relocation of local communities out of the coalfields. “That is but one of many examples,” Runge said. “Another minimum requirement for any African project is that there has to be an off taker for the product. Unless someone really wants that mineral the money being put in to make it happen is going to be wasted.”
Explained Greiner: “It’s not about what can be delivered but rather at what cost. It has to be cost effective for it to make sense in the long run.”
Du Toit agreed saying the development of a project has to be sustainable especially in remote areas. “It’s about implementing durable solutions over a long period of time which ensures sustainability and that remain cost effective. If the solution is just too expensive it’s not durable or sustainable.”
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