The Middle East’s primary generator of project logistics activity, the oil and gas sector, still commands the lion’s share of attention. Nevertheless, profits derived from fossil fuels are being funnelled into various markets, including transport infrastructure, civil construction and renewable energy. The pace of diversification may be gradual, but there is a tangible sense that the region is laying the groundwork for a more resilient future. Chris Lewis reports.
According to Simona Peter, who is responsible for business development at Fleet Line Shipping Services, the project logistics market across the Middle East has grown steadily over the past couple of years, a trend that is expected to continue.
“For instance,” she said, “there has been a significant influx of people around the world relocating into the region, attracted by the rapid development and the resulting job opportunities. This has also brought about substantial investments in various sectors, such as infrastructure and transport, which has subsequently increased the demand for logistics services in the region.”
Moreover, she highlighted significant investments made in Africa, most notably by DP World, which has resulted in a surge of cargo movement between the Middle East and Africa.
With a huge influx of investment, there has been a boom in residential and commercial development projects. “In addition to numerous residential developments, major projects such as Etihad Rail and various solar plants are under way across the UAE. Many companies are also manufacturing and fabricating materials and machinery here in the UAE, boosting our exports. Additionally, cargo movement continues in the UAE for Saudi Arabia’s large-scale megaprojects, including Neom,” she explained.
Marc Willim, global head of chartering at AAL Shipping, pointed out that while there has been a heightened emphasis on alternative energy investments in the region, that market is still a long way from surpassing the region’s primary industry – oil and gas. AAL serves the market with a mix of liner services and charters by its fleet of multipurpose vessels. Liner services out of Europe and the Mediterranean to the Gulf are performing particularly well on the back of demand from a number of major capital projects from industries including oil and gas, infrastructure and renewables.
Oil and gas projects
GlobalData Energy figures show that 621 oil and gas projects are expected to commence in the Middle East from 2023-2027, with petrochemicals making up the majority and newbuild projects accounting for around 78 percent of the total. In 2024 alone, over USD40 billion was awarded for projects, with Saudi Arabia, the UAE and Qatar seeing increased investment.
However, Willim said: “While alternative sources will not yet match levels seen in the oil and gas sector, we are seeing increased investment in the clean energy sector.” He calculates that renewables will account for around 15 percent of overall energy investment in the Middle East, which is expected to reach around USD175 billion in 2024, according to the International Energy Agency (IEA). “We anticipate that this segment will only grow in the coming years with several nations hoping to reach net-zero emission targets.”
Meanwhile, he pointed out, the largest development in the region is not in oil or gas but Saudi Arabia’s giant Neom urban project, which is slated to use up to 20 percent of the world’s steel in its construction.
Infrastructure schemes of all shapes and sizes can be expected to increasingly drive the region’s project freight market in years and decades to come. Nevertheless, the pace at which this diversification can take place is very dependent on fossil fuel revenues.
Currently, there is no shortage of projects – of all kinds – for heavy lift transport and shipping companies, according to Johann van Zyl, Roll Group head of commercial in the Middle East. Qatar and Saudi Arabia, in particular, are strong performers, while the UAE has been somewhat quiet, although the market is expected to strengthen in 2025.
Infrastructure schemes of all shapes and sizes can be expected to increasingly drive the region’s project freight market in years and decades to come. Nevertheless, the pace at which this diversification can take place is very dependent on fossil fuel revenues.
In Qatar, Roll Group has been heavily involved in the North Field gas expansion project, playing a significant role in moving heavy pieces from laydown areas to the project site, and installation using gantry systems. It has also been involved in the Ras Laffan petrochemical project, Qatar Fertiliser Company’s QAFCO 7 blue ammonia development, and other projects with modules and out-of-gauge cargoes.
The attraction of the Middle East for shipping operators is not just the amount of cargo, but its breadth and variety too, confirmed JSI Alliance’s Dennis Geertz (general manager semi-liner projects and chartering for Europe and the Middle East) and Laurens Govers (global commercial director). It is a rare month when one of JSI’s fleet of multipurpose, heavy lift and semi-submersible ships does not call in the region, whether it is to carry jackets, boilers, heat exchangers or all the other assorted pieces needed. There are also more specialised, one-off cargoes like shiploaders weighing hundreds of tonnes.
“The Middle East offers opportunities for our entire fleet,” said Geertz. “It can be anything from pipes or heat exchangers on the Intermarine vessels to super-large loads on our semi-submersible vessels.”
Historically, the problem for the Middle East was that it drew in a lot of cargo but exported almost nothing, other than oil and gas in tankers or by pipeline. However, that has started to change, according to Geertz. While the flow is still predominantly inbound, “six or seven years ago we started to see an increase in exports. There are local industries making, for example, wind turbine foundations, which in turn is leading to 800-tonne transition pieces, which are of much interest for our semi-submersible vessels. Local industries are also fabricating shiploaders,” he explained.
There is also some higher-tech equipment such as that used on floating production storage and offloading vessels and pressurised vessels, destined not only for the region but further afield to Africa or Europe. “It’s good news for our customers, because backloads allow us to offer more competitive rates,” Govers noted.
Indeed, competitive shipping rates may well have encouraged manufacturers to set up in the Middle East, though another consideration may be to diversify supply away from total reliance on China.
Geopolitical volatility
Logisticians are still suffering from the knock on effects of regional conflict. There is hope about the market that the tentative ceasefire between Hamas and Israel will hold although the jury remains out as to when there would be a large-scale return of commercial shipping to the Red Sea region.
But while some opportunities are closed off by geopolitics, others can be opened. In March 2024, JSI Alliance finished a major shipping programme to Basra in Iraq that kept two vessels employed and delivered 500,000 freight tons. “We made a lot of effort to ensure the safety of our people, and it all worked like a charm,” Govers recalled. “Everything ran really smoothly and efficiently – and that was in a place that is officially a war zone.”
But Iran, meanwhile, has gone totally off limits, after a brief heady period in 2016 when the market was opened following the treaty that was then cancelled by the previous Trump government. Govers said: “During the short window when it was open, you could see the tangible excitement at the opportunities, especially in the gas industry.” Iran’s loss has been Qatar’s gain; the two countries exploit essentially the same gasfield from different sides.
Regional volatility certainly brings challenges to the project logistics market in the Middle East and there is concern that growth will be subdued as investors remain wary. That said, the project pipeline, and indeed the supporting multipurpose, heavy lift supply chain, is resilient.
“It is worth noting that a significant portion of these large capital projects are state backed and often of national significance, offering a degree of cushioning against uncertainty,” said Willim.
“Yet we have already seen many governments in the region balance the delivery of ambitious schemes with the reality of their financial capabilities,” he added. “For instance, news emerged earlier this year that there has been a sharp decline in the value of contracts awarded for the gigaprojects in Saudi Arabia.”
