Energy sector tightrope for brokers

Antonov AN-124. Photo: Oleh Yatskiv/ Shutterstock - 2445304947

Outsize and general air cargo capacity alike is in short supply for energy charters against a backdrop of heated political debate on the energy transition.

“Fragile” is how one executive described the state of their energy supply chain. And, from the logistics operators’ perspective, the picture is not much better. Much of this uncertainty seems to stem from the state of limbo the sector finds itself in.

With Covid and then war in Ukraine it is often easy to forget that the world has found itself at another inflection point concerning the supply of global energy.

This uncertainty is a far cry from where the world appeared to be nearly a decade ago, when the Paris Agreement was adopted at the UN Climate Change Conference (COP21) in December 2015.

In the intervening nine years, what was undeniably a political debate has turned into more of a slug, with the rhetoric ranging from, at best, anxiety surrounding transitional energy supplies – a fact exemplified by Scotland’s new first minister suggesting there is still scope for new offshore oil and gas exploration licenses – to such division at its sourest that it has thrown the course of greening the globe off kilter.

All of which has left energy giants in a bit of a conundrum and eaten into the logistics sector’s business.

Vice president of global cargo at Air Partner, Pierre Van Der Stichele tells Air Cargo News (ACN), when it comes to the energy sector it “is not performing as robustly as anticipated”.

Amidst the present campaigning (this year marks the biggest year for elections in history with several billion having been or on their way to the polls), it seems the lack of activity is in part a consequence of the political rhetoric; The Daily Telegraph reporting one exploratory field in UK waters had been shuttered over comments coming from the looming Labour government.     

Steady growth      

But the noise surrounding the sector is not all gloom and doom. Dan Morgan-Evans, Air Charter Service’s (ACS) global director of cargo, tells ACN that looking back over the past four years, he has seen “steady growth”, at least for ACS.

“It [energy sector work] is one of our main industries of focus and has always been a big part of the air charter industry,” he continues. “The size of the market is always difficult to quantify in the charter sector, but I believe our focus on customer experience and our global footprint has contributed towards this growth.

“For larger movements obviously the war in Ukraine has influenced prices and availability but we just have to work that much harder to come up with innovative solutions to provide first-class service to our clients.”

Pierre Van Der Stichele, vice president global cargo division, Air Partner

Pierre Van Der Stichele, vice president global cargo division, Air Partner. Photo: Air Partner

On that last point, this is a position Van Der Stichele shares as he too notes the deleterious impact of the war in Ukraine when it comes to servicing the needs of customers in the energy sector.

“The primary challenge currently is capacity, particularly with outsized cargo aircraft, which are in limited supply,” Van Der Stichele says. “There are only six AN-124 aircraft available on the market, all of which are operating at full capacity. Consequently, lead times for securing an outsized cargo aircraft has significantly increased. While additional AN-124 aircraft exist, they are Russian-registered and inaccessible due to trade sanctions.”

AN-124 is practical choice

As if that was not enough, the war quite literally destroyed the only operational Antonov AN-225, after it was hit during a Russian assault on Antonov-owned Hostomel Airport in 2022.

Van Der Stichele says the loss of the plane was mourned for its “notable advantages in terms of length and payload capacity”, particularly among aviation enthusiasts who saw it through something of a “symbolic” lens.

He adds: “Its useable floor space was approximately 10 metres longer than that of the existing AN-124 and while it was only a nose-loading aircraft, it could carry up to 250 tons which is quite remarkable.

“These advantages made it useful for transporting pieces that were too large and heavy for the AN-124, since most can only carry up to 120 tons.”

Sources told ACN that given its unique history, it was unlikely the AN-225 would ever take to the skies again. That being said, Ukraine has promised to complete the construction of what would be only the second AN-225 ever to fly.

Asked if this was essential to meet the needs of the energy sector (or any sector for that matter) Van Der Stichele appears keener to note some of the aircraft’s drawbacks, not least its high cost and the lengthy project management and engineering support required for complex loads, which he added rendered it “not the regular aircraft of choice”.

Concurring, on the impact on the loss of this plane, Morgan-Evans notes: “The AN-225 was so niche the impact is very limited. It took a lot of things to align for it to be the right aircraft of choice, so for the most part the AN-124 (or two of them) can cope with most things.

“Early procurement will always help. It helps with costs and planning. But breaking down shipments will of course open up more options in the solutions that can be provided.”

Dan Morgan-Evans. Source: Air Charter Service

In the immediate future, the situation may be flat, but there is work to be had. A Goldman Sachs report noting that at 70 the number of oil and gas projects either underway or set to start marks a 25% increase in the number prior to the pandemic.

Can air meet the demand that these projects generate? This is a question that brings Van Der Stichele back to a shortfall in available capacity.

“The current fleet of AN-124’s requires significant attention as there are too few of them and they are likely in need of modernisation,” he continues.

“The AN-124’s presently operating are going through some modernisation, but the airframes are not getting any younger which may become a significant problem in the medium term.”

Problem beyond outsize

That shortage of available outsized capacity, however, is not the key impediment to airfreight operators serving the energy sector, at least as far as Van Der Stichele is concerned.

Rather, he says that when discussing energy logistics, our tendency to stray towards the issue of outsize capacity masks the more pressing shortfall in the market for AN-12 and IL-76 aircraft.

“The AN-12, a turboprop with a rear loading ramp, is known for its heavy-duty capability to carry awkward pieces up to 18 tons and the IL-76 can transport up to 40 tons,” he continues.

“Although a few of these aircraft remain in service globally, including in Europe and North America, the AN-12s have an average age of 55 years, making them inefficient, less reliable and with no replacement in sight. Some newer IL-76 models are ICAO Chapter 4 noise compliant, but these are very few.”

In India, one proposal at least has surrounded replacing the IL-76 with an Airbus A400M Atlas but whether this would be a viable replacement for the IL-76 in a commercial setting remains something of an unknown.

But Van Der Stichele stresses that for air to service the energy sector it is essential that a means of elongating the life span of these aircraft or, better still given increasing difficulties in sourcing them, a replacement is found.

“These aircraft are pivotal to transport mid-outsized cargo to certain destinations where an AN-124 would not be able to operate to due to runway length,” he adds. “The AN-12 and IL-76 are incredibly versatile, often referred to as the 4×4 of the skies, yet both are ageing and dwindling in numbers. Despite several initiatives to develop replacement aircraft or improved variants, none have materialised to date.”

Source: Volga-Dnepr

And all of this sits within a broader debate on the role of aviation in the green future. Yes, air is working hard to mitigate its environmental impact, not least through the increasing uptake of sustainable aviation fuel (SAF).

But acquiring SAF is in itself problematic, with production levels nowhere near what is needed to meet demand and claims that some of the larger carriers are buying up and hoarding volumes of the fuel at the expense of smaller operators. Added to which, the early signs for the role of air in the clean energy projects has been muted.

That uncertainty is exemplified by Morgan-Evans’ claim that “green energy is definitely less dependent on airfreight”.

Nor is he the only broker to express some concern or trepidation about the role of air in future green energy projects, but Van Der Stichele is certainly less definitive on the need for airfreight in the green energy sector, noting (pardon the pun) some early green shoots.

“We have not seen a significant increase in demand,” he says. “However, the types of cargo being transported has slightly shifted. We are now seeing more components for wind farms, motors and spare parts, as well as equipment supporting the manufacturing of EV vehicles.”

One thing air undeniably has in its lockers over the other transport modes is speed and, if for any reason, there is an urgent demand to get projects moving and to get them moving quickly, the green energy sector may find itself turning to carriers and charter brokers alike to get their parts to production sites ASAP.

All change for energy airfreight

 

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