When developing complex Oil and Gas or Mining projects, ports are often taken for granted. They either exist (i.e., brownfield) or need to be built (i.e., greenfield). While some perceive ports to be selected upfront and expect the supply chain to wrap itself around them, savvy project developers know that ports need to be seen holistically – part of the full supply chain and transportation from the mine or the well to the end user.
Because of this, ports are the lifeline for complex projects. During construction they are the conduit for equipment, modules, and supplies to the construction site, and during operation they facilitate the import of required consumables to the project site and the export of (un)finished product to the end client. What’s more, the capital and operating costs of a port can often contribute a large percentage to the shipping cost of a product to the end client. In other words, poor port selection can be catastrophic to the economic feasibility of a project.
Over the past two decades, I have seen five key things go wrong in Mining and Oil and Gas project development, when ports are involved. These challenges can be avoided by asking yourself the following questions:
1. Is your project development properly thought through and free of potential bottlenecks?
A common error is to step into a project with a preconceived idea that the product processing must happen at the source. This could be crushing rock at the mine or separating water, condensate, and oil at the well. The second preconceived idea is that because you can strike a deal with a familiar terminal operator to store the mineral product or liquid bulk at an existing brownfield port, you have automatically selected the port.
I’ve seen many clients locking in these aspects contractually and only then calling on their favorite engineering consultant to design the transportation system from the processing facility at their site to their selected port. That could be a pipeline, a railway, a road, or a long-distance conveying system.
Is that the best approach? Not really.
Requesting a port siting study during the concept phase enables developers to make decisions with eyes wide open and gives them the ability to consider many options not only for the port, but also for the transport to and from the port, very often multimodal transport systems.
Here’s a series of questions that could be asked for a project, to help provide the foundation for smart decisions:
- Should the project use a brownfield port with the risk to limit expansion, and be constrained by uncontrollable changes of a port owner or operator, or consider a greenfield port?
- Is it better to transport the run of mine from 4,000m altitude by a 40km long distance conveyor to the valley at 2,000m altitude, and process it there where your workforce can work safely in the processing plant and close to their accommodation?
- Can we then load the processed mineral in dedicated trucks on a dedicated road for another 250km, to reach an existing railway for the last 800km of the journey to the port?
- Can we build another 20km of private rail at the end of the railway to reach a location of a port with natural deep water, which has shelter, remains ice free all year and doesn’t need maintenance dredging every year, or a port in natural deep water that doesn’t require a massive amount of habitat compensation to be created to offset the destruction of existing habitat?
At concept stage, many options will be studied, and through proper use of multi-criteria analysis (including cost, environment, social impact, permitting, constructability, safety, schedule, and risk), the best option with an acceptable cost and risk can be selected. When things get really complicated, tools such as discrete event simulation are used to help identify exactly where the bottlenecks exist.
Once you have this information, you can confidently move forward with the next few phases of the engineering.
2. Have you accounted for all the risks that can affect your throughput?
It doesn’t make sense to design your port for a certain throughput capacity if there’s a series of bottlenecks in your transportation chain that cause disruptions in getting the product to the port. Disruptions can be geohazards on rail or pipeline alignment (like fires or landslides due to climate change) or they can be changing storm patterns en route for the vessels calling on the port.
These risks can be anticipated and quantified, by asking questions such as:
- What should the capacity of the tanks for different liquid bulk products in a midstream distribution terminal be in order to deal with variations
- What impact does this have on your throughput? Is it seasonal?
- Can your supply contract deal with these troughs and peaks?
These risks can be evaluated, and the throughput can be simulated holistically, looking at the entire supply chain to debottleneck the transportation chain. In addition to spotting bottlenecks, the outcomes from this evaluation can impact how you size your processing facility.
3. Did you get your design criteria right?
When designing something to suit, the engineer needs hard numbers which are found in the design criteria. Design criteria are there to delineate what you really need and to prevent costly changes when the work is already ongoing. Design changes add to your project cost and can cause delays and rework for all consultants involved.
Consider these design criteria questions:
- Have you thought about the project’s future?
- Does the project have phases or expansions?
- Did the design criteria capture the future by designing the port so that expansions are possible?
When developing design criteria, it is important to focus on the parameters that have the biggest impact. These factors are not just throughput, production, or shipping capacity numbers. They also require understanding the wave climate, the difference between design life and return period, as well as earthquake damage and the impact that it may have on your business when “The Big One” comes.
Port structures and foundations can be designed to avoid earthquake damage if continuity of the supply chain is an absolute requirement, but this can get expensive. A specialist geotechnical engineer can provide input, so that foundations are designed to be repairable within a defined period. You could also consider making the stockyard a bit bigger so that you can keep producing the end product for your client and ship it later.
4. Is your project bankable?
When it comes to risk management, a project’s investors and insurers will ask many questions for which you should be prepared. For example:
- What’s the geotechnical risk?
- Can the construction cost for the port escalate because you don’t know the subsoil conditions?
- Is there any historic contamination at the terminal?
- What is the wave climate like?
- How much berth availability do you have?
- Do you need specialist assistance on geotechnical, geophysical, environmental and metocean data collection?
- Have you consulted properly with the Indigenous interest holders on whose land your supply chain passes?
- Has proper financial phasing for the project been considered?
If your lender is a bank, they will ask whether your port meets International Finance Corporation (IFC), World Bank (WB), European Bank for Reconstruction and Development (EBRD) and Equator Principles (EPs) requirements. Your project will need to be audited to ensure it meets the criteria.
5. Are you thinking outside the box?
Going in with preconceived ideas such as “it hasn’t been done before” is not always the right approach when considering what’s possible for your project. An excellent example of this is when Brazilian mining company Vale, decided that bigger is better.
Currently recognized as the world’s biggest bulk carriers, Vale built their Valemax (400,000 DWT) class of vessels to save on transport costs. During design, naysayers considered these vessels too big to be built, and there were no ports in the world that could accept vessels with 65m beam, 362m long and 23.0m draft. As of 2020, there are 68 of these vessels plying the world’s seas and calling on multiple ports with 35%-41% less greenhouse gas (GHG) emissions per tonne compared to the standard Capesize vessels.
Sometimes you need to think big like Vale and innovate! When predicting the future, you will need support to add your grand ideas to your port masterplan:
- Maybe you want your port to be able to accommodate a Valemax vessel in the future. You may need to plan the layout of the breakwater in the early phases in such a way that deepening of the access channel and turning basin for a Valemax vessel in a later phase does not require modifications to the actual breakwater and does not affect wave calming in the port.
- Or perhaps you want to erect wind turbines to offset greenhouse gas emissions. You may want to consider building a breakwater that allows for the turbines to be constructed on top.
If you don’t plan well, you may be faced with an impact on your commodity supply chain when implementing your outside-the-box ideas.
Don’t find out too late in the project development that these five key questions were not addressed. Your throughput, project upgradability and return on investment may all be at stake - and often it all culminates in that one single node, the port.
About the Author
Jan Matthé, ir. P.Eng., is a Senior Port Engineer at WSP*. He has over 25 years of experience in marine construction, coastal and ports engineering. He has led multidisciplinary design teams from pre-feasibility and site selection, through detailed design and construction. Project experience includes marine structural engineering, asset management, coastal engineering, dredging, bulk handing and heavy haul rail.
* This work was performed by Golder professionals who joined WSP in an acquisition completed in 2021.
