JGC’s Koichi Kaizu: The Master of Modularization

By Damon Evans

(6-minute read)

At JGC Corporation in Japan, freight forwarders and other logistics partners are held in particularly high regard, given their ability to make or break a project’s success.

“Since JGC is engaged in megaprojects, any delays in the shipment of components, heavy equipment and structures can lead to additional project costs amounting to millions of dollars per day,” said Koichi Kaizu, a logistics subject matter expert for module transportation at JGC, in an exclusive interview for Breakbulk.

“Therefore, robustness and certainty in our logistics execution become critical for overall supply chain management, and the performance of the logistics service provider significantly impacts our logistics execution performance.

“As a result, we prioritize trust and accountability in our long-term partnerships with logistics companies. This helps us manage unexpected events, such as the COVID pandemic,” the logistics expert added.

Kaizu is charged with shipping heavy cargoes and equipment to energy projects across the globe, including modules heavier than the steel structure of the Eiffel Tower.

Established in 1928 and headquartered in Yokohama, JGC is a global engineering company that specializes in the design, procurement and construction of large-scale industrial plants and facilities, particularly in the energy transition sector.

It operates in various business fields such as oil and gas, chemicals, renewable energy, life science and infrastructure development and says its biggest market is energy construction projects, including liquefied natural gas (LNG) plants.

Global Operations

The company is working on multiple LNG projects around the world, among them the Shell-led LNG Canada project, one of Canada’s largest-ever energy projects. JGC uses a modular construction approach, where much of the project is built offsite overseas, before being transported and installed at the final location.

The LNG Canada modules, for instance, were fabricated at various yards across the world, including China, Italy and Indonesia – the largest weighing in at more than 9,500 tons.

LNG Canada, a joint venture (JV) company encompassing Shell, Petronas, PetroChina, KOGAS and Mitsubishi, is building an LNG export terminal in Kitimat, British Columbia. A JV between JGC and Fluor is in charge of delivering multiple aspects of the Canadian mega-project, including engineering, procurement, fabrication and delivery of modules, as well as construction of the project’s infrastructure and utilities, marine structures and LNG storage tanks.

Elsewhere, JGC is currently executing multiple floating LNG (FLNG) plant projects simultaneously. An FLNG plant is a specialized vessel used for the production, liquefaction, storage and transfer of LNG at sea, with technology that’s often used to tap small-scale offshore gas fields.

JGC is responsible for the engineering, procurement and commissioning work for the FLNG topside, the associated onshore facilities and the management of the overall project.

A Modular Approach

JGC uses a modular construction approach for projects built in remote areas, where there are inevitably labor availability and cost concerns. Indeed, Kaizu believes the greatest challenge for JGC when executing projects is the location of the energy plant site, since the construction site management cost is a significant element.

A logistics partner’s role in a modularized project is especially pronounced, emphasizes Kaizu. “A one-day delay in an individual piece of equipment remains the impact of a delay in one unit of work pack (a group of related tasks) in a conventional project – but in a modularized project, it becomes the impact of a delay in one module.

“If we consider a module in terms of work pack volume, it is equivalent to several thousand units of work pack volume and, therefore, a delay in a module means a delay in several thousand units of work pack at construction site. As a result, the impact on the site and the entire project is enormous.”

It’s no surprise, then, that Kaizu values reliability and speed as key traits among JGC’s logistics partners. “Mitigation measures are also important – if there is a delay in delivering a shipment to the construction site, for whatever reason, such as a manufacturing delay, then we might be able to choose air freight to recover the schedule.

“However, for modules, we don’t have that transport option, as due to the size and weight, they can only be shipped by sea.”

JGC’s first experience using the modular approach was for the Gorgon LNG development in Australia. “Since then, we have gained more experience, and we are continually improving the modularization design process,” noted Kaizu. “As a result of the design progress, the module size and weight got larger and heavier than ever before. To transport these giant modules, we need to use very large semi-submersible vessels.”

The company’s modules tend to be fabricated in countries such as China, Indonesia, and Thailand, Kaizu said. “We then transport them to the energy plant construction area. We have completed these types of energy construction projects in Australia, as well as the Arctic area of Russia.”

Seeking Long-Term Partnerships

While JGC does not often seek opportunities to deviate from its well-established logistics partners, business opportunities do exist for new players, said Kaizu.

JGC is said to be “very happy” with its legacy partners deugro, Bolloré and a few other forwarders, though it continues to explore potential collaborations with other suppliers. “We are looking for trusted partners to be added to our future projects, but we also want to be a trusted partner for them too,” said Kaizu.

“In addition to the basics, such as cost, speed, quality, and capability, we are seeking trust and accountability. This is of utmost importance. As we experienced the market volatility and disruption during the pandemic, we need a certain amount of accountability and trust which goes beyond common practice,” stressed Kaizu.

“We feel a strong obligation to retain our reliability, credibility and accountability to our partners,” he added. “We select partners for long-term relationships.”

For its modular energy projects, JGC engages two different types of logistics partners – international freight forwarding companies and module transportation ocean carriers. “In terms of the freight forwarding company, we expect them to have the capability and ability to manage materials shipments to various destinations as we execute projects across multiple locations,” said Kaizu.

“Typically, we use four or five fabrication yards for one project. Therefore, our freight forwarding company needs to manage equipment shipments from our global suppliers to four or five different final destinations, which includes managing import duty exemptions,” he added.

Minimizing Carbon Emissions

JGC is actively involved in various energy projects across the world that are focused on reducing greenhouse gas emissions and advancing sustainable energy solutions. Now, the major energy companies are also looking to their contractors and suppliers, such as JGC, to manage their environmental footprints.

“Reducing emissions is our big homework, as our clients increasingly ask us to demonstrate how we will minimize carbon emissions during the EPC project execution. To respond, we need to develop our program and we need cooperation from our partners, such as shipping companies,” noted Kaizu.

Looking ahead, Kaizu, who has worked in logistics and shipping at JGC for 20 years, considers the African and North American markets to be the most active for energy projects over the next decade. “In Africa, we expect LNG projects, while in North America, we are exploring ammonia and nuclear power projects, as well as LNG.”

Kaizu said long-term energy market trends are difficult to predict, but in the near-term he states “there is a general market understanding that coal plants will disappear very soon. Next to disappear will be oil refinery and oil-fired power plants.” However, he regards natural gas and LNG to be “sustainable for the next 10 to 20 years, playing a role in the energy transition.”

JGC, Shell, Mitsubishi and Fluor are members of the Breakbulk Global Shipper Network .