Mammoet CEO Paul van Gelder, COO Jan Kleijn, and Group Commercial Officer (GCO) Darren Adams discuss the company’s focus on projects for the renewables sector and the work being done to refocus Mammoet to support its customers through the coming period of recovery and growth.
What was the thought process behind Mammoet’s current focus on renewable projects?
PvG: In 2018 we formulated the strategy “Reshape to Win”. At that point in time, it was already a strategic imperative for us to diversify our portfolio into other sectors next to petrochemical, which will always be a substantial part of the work we do. We saw the developing renewable energy market as an interesting sector, and a market where we could do more. Over the last five years we have gained more experience working in the sector – learning some key lessons along the way. During 2020 we saw a significant acceleration in renewables projects in Western Europe, and also in the US with the change of government. If you take a step back and look at what is happening in the world, you can’t deny that there is a clear push to come out of the coronavirus crisis with a stronger focus on sustainability and renewable energy.
JK: From an operational perspective, if you look to offshore wind, the turbines are getting bigger and bigger, so more and more clients will need the expertise of a company like Mammoet to deal with the increasing size of heavy components involved.
DA: There’s also a clear overlap with offshore wind. These projects share many key features of the work we are used to doing in the oil and gas fabrication yards from an operational perspective and are taking place in similar locations – making us well placed to serve them.
What challenges is the renewable energy market facing over the next few years?
PvG: The foremost challenge is of capacity. After the acceleration in demand for renewables projects experienced during 2020, there is a huge need for capacity in the market. So, the large OEMs will have to deliver to the market the required number of turbines – but the supporting industries should also be ready. This is an area where the market needs some further maturity. We’ve seen in the onshore wind market that the setup of contracts was not allowing efficient operations, and for the respective contractors and sub-contractors involved to concentrate on their key areas of expertise. So, to a certain extent the structure of the contracts, their risk balance, needs to standardise and mature; most likely to follow the model laid down for a number of decades in other sectors.
JK: In onshore wind, I think what we will see is a renewed definition of the roles of the players. Due to the relative youth of the market, manufacturers have also been playing the role of installer, where this is not their core area of expertise. However, they have been forced by a lack of capacity in the market to take this role. In offshore wind up to now, farms have been either monopile or jacket-based; so shallow water. As floating offshore wind develops, we will see floating foundations of tens of thousands of tonnes, creating an entirely new ball game once again.
DA: The size and weights of components could cause a bottleneck in the market, particularly for offshore wind. The traditional way of doing things – where tower sections are assembled one by one then go offshore – is unlikely to ultimately be the preferred assembly method. We’re looking to innovate in the offshore wind market with regard to the handling onshore, and as the industry leader we want to be a partner in this process. We’re looking into innovations that will deliver huge efficiencies and therefore substantial changes in the way the market works.
PvG: A requirement will develop for heavy lift and transport companies to move into larger weights, because these floating structures can become massive, massive beasts – demanding a lot of lifting capacity. There will be a lot of work in the shipyards but also on land.
Moving back to onshore wind, to manage projects most efficiently the market needs to develop and mature, and to recognise that it doesn’t make sense to give certain tasks to certain subcontractors. A heavy lift and transport company is specialised in these functions – transport and lifting – so it is not efficient to also put installation and commissioning under the responsibility of the same sub-contractor. That is a different area of expertise and mixing those will result in all kinds of discussions and potential conflicts, which is, in the end, not good for the development of larger renewable energy projects.
With offshore floating foundations so massive in size, will this mean changes to the way Mammoet approaches operations?
JK: I don’t see that at the moment, though there may be a renewed requirement for mobilisation of large cranes to ports. Also, through our Conbit operation, we are researching how to perform maintenance offshore in a smart way. This will help our customers to avoid bringing the floater back to the port and then needing to have a large crane in place just for maintenance activity, and also help them to avoid having to disconnect anchor cables and re-connect the turbines to the electrical grid again.
PvG: Because we are still in the infancy phase of this industry – especially with the floating wind turbines – we will see new developments in how to perform much of its scope. The industry has a long way to go and as the market leader in heavy lifting and transport we are looking to play an important role in leading this.
What changes are we making to the Mammoet organisation to refocus on renewables customers?
PvG: We have decided to set up a global onshore wind group; a group of specialists that will develop our wind portfolio. This will not change the present setup of the regional structure in Mammoet – we will continue to undertake projects through our regions – but this group will oversee all the wind projects in the regions, capture lessons learned, optimise wind-specific assets and also liaise with the Innovations department to find the right innovations to serve this key market.
This wind group is led by Pieter Jacobs, who will be the key account manager for all of the wind OEMs worldwide, and we’re looking to set up several framework contracts with them in order to provide them with the best service possible.
DA: Offshore wind projects will still be operating from our regions, with our Global Segment Lead Francisco Rodrigues – who has significant experience in offshore wind projects from his time at DEME and elsewhere in the sector – available to support all projects.
Will this affect the way wind projects are sold in any other way?
PvG: I’m not ashamed to say that we have certainly learned our lessons in the past. It should not be a secret to the industry that there are challenges coming with lump sum projects – both for the developers but also the sub-contractors in heavy lifting and transport. The lesson that we have experienced is that combining transport, craneage and installation (TCI) is not the ideal approach. In onshore wind, work takes place in an area that can by definition cause delays, thanks to windy conditions, geographic remoteness or other factors. This makes lines of responsibility blurry if the entire TCI scope is undertaken by one sub-contractor. We are promoting a model where the scope is divided with transport and craneage in one hand and installation on the other hand, whereby it’s clear for the developers who holds the responsibility and it’s clear in which direction they need to turn if things are not running as they should be.
We feel comfortable and have undoubted capability in transport and craneage, but installation and commissioning are not part of our core services, so it is better that these scopes are undertaken by specialists in these disciplines. The key here is to have focus and clarity of roles. If you have that, this ultimately gives the developer a platform to have clear contracts in place, and also a better way to assess performance.
If you take out this blurring, you also remove much of the risk of a project. It’s like building a house: whenever you have a delay with the carpenters, the carpenters will start to complain and point at the bricklayers, and the bricklayers will potentially blame the team that laid the foundations. Making sure there is clarity in the roles will help developers or EPCs to manage projects better. Installation, commissioning, controlling the full logistics supply chain – these are activities that require completely different expertise.
JK: There’s a comparison to be made with oil and gas here, too. There, you have an owner who hires an EPC contractor for the total package, who then has knowledge of the total scope of work and can request heavy lifting and transport through a freight forwarding company, or from a company like Mammoet. In the past, in wind, the market has operated under a different model, where due to our position as a very knowledgeable provider of heavy lifting and transport we took responsibility for the full scope. However, we are the specialists in heavy lifting and heavy transportation; we want to play that role. We should be honest to ourselves and to the industry: we do not want to undertake commissioning and installation scopes, because they are not what we are best at; they are not our cup of tea.
Why has Mammoet chosen to review its geographical footprint at this time?
PvG: When we were progressing with the integration of ALE, at the same time we were hit by the coronavirus crisis, just like every other company in our industry. It was a challenging year – maybe that’s an understatement – but we wanted to come up with the right approach. We wanted to come out of the coronavirus crisis as a stronger company.
So, we engaged with a consultant to review our geographic locations, our performance, the economic outlook. We ran scenarios about how regions would develop, following the pandemic. Based on that process, we are making changes across our business; in Australia, in South America, in Europe – and it’s all around optimising our portfolio of locations, clusters and countries, to continue to serve the customer in the best way possible during the upcoming period of recovery and growth.
What is the strategy behind this change?
PvG: It’s all about achieving clarity and focus. For example, we have always had a strong portfolio in nuclear. This was always a capability, a strength within Mammoet, and we want to build upon that on a global scale. We already touched upon the renewables sector. Eastern Europe is strategically a very interesting part of the world for us that we can further grow. We are developing a plan of how to grow rapidly in Germany and use that as a springboard to serve Eastern Europe. In Australia we’re building up an organisation that could be used to expand further into Southeast Asia.
DA: We are refocusing, reshaping and ramping up where we see opportunities. The coming years will be a period of growth for Mammoet.
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