BUSINESS CASE: Green bunkering of cruise vessels with sustainable fuel options

Size: px
Start display at page:

Download "BUSINESS CASE: Green bunkering of cruise vessels with sustainable fuel options"


1 BUSINESS CASE: Green bunkering of cruise vessels with sustainable fuel options Poul Sørensen, COWI at the Green Cruise Port Workshop Cruise Port Newcomer Infrastructure Solutions - Green bunkering of cruise vessels with sustainable fuel options Esbjerg, /Denmark, June 6 th -7 th 2018

2 Agenda Introduction Aims and objectives of the business plan Different LNG Supply chains Market demand and potential Result of the business case 2

3 Group overview This is COWI today 2017 net turnover: DKKm 6,151 Approx. 6,600 employees World-class competencies within engineering, economics and environmental science At any given time, 12,000 ongoing projects More than 85 years of history 3

4 Vision We create coherence Our vision is to create coherence in tomorrow's sustainable societies. 4


6 Delivering 360 solutions Planning and economics Economic analyses and tools Financial analyses Evaluations and impact assessments Organisational development and social studies Transport planning and modelling Public transport and ITS Spatial planning and urban development Poul Sørensen: M. Sc. University of Aalborg Chief project manager in COWI since 2005 Specialized in: Business development, transport and infrastructure 6

7 Background for the business plan Growing pressure on the maritime sector to introduce green fuel options especially from the new SECA regulations Especially in the cruise market there is a high focus on green fuel options: The cruise ships come very close to city centers and fragile locations The consumers in the cruise market have high expectations for green solutions and sustainability LNG is one of more solutions to meet the new requirements for greener maritime traffic Cruise is considered to be a relevant market 7

8 Aims and objectives of the business plan A change to LNG as a fuel option is associated with investment in new bunker facilities The purpose of the business plan is to assess if there is a sound business in investment in new LNG bunkering facilities in Esbjerg and other ports in the Baltic Sea Region The approach of the business plan is to analyze LNG supply at a general level Port of Esbjerg is used as an illustrative case but the results can be used in other Baltic ports 8

9 Main focus in the business plan Different supply solutions and related costs The demand side: Potential customers Development in competing technologies 9

10 Preliminary experience in Denmark: The Samsø ferry is the first domestic Danish ferry propelled by LNG In Hirtshals, Norwegian Fjordline has bunkered LNG since

11 1: Different LNG Supply chains - Supply from existing LNG export terminals Supply chain alternative 1: LNG Truck distribution: Flexible, easy and low cost startup Supply chain alternative 2: LNG ISO container distribution: High volume depending on container shipping routes Supply chain alternative 3: LNG ship/carrier distribution: High volume, but depending on satellite terminal 11

12 2: Supply from Import & Export terminals Supply via LNG import and export terminals, originally developed for importing LNG into the transmission and distribution net Many of these terminals now offer LNG to ships using various technical solutions It is a basic characteristic that the essential infrastructure is already established LNG Import terminal: 9 in service, 3 under construction, 9 planned LNG Export terminal/ Liquefaction plant: 6 in service, 4 planned BSRarea 12

13 3: Local production of LNG Local production will include supply chain by either ship or truck The primary benefits: quick reaction and delivery, scalability, introducing Biogass (LBG), synergies to other energy technologies: using windpower, delivering excess heat etc. The obvious disadvantages: Significantly high investment, depending on a large market, safety regulations etc. 13

14 Market demand and potentials 14

15 Drivers behind the LNG market Both literature and interviews point at these main drivers: Increasing regulatory focus on emissions from the marine sector: The extent of appointed areas is increased Growing public awareness towards emission issues In some countries: A large supply of natural gas. Some signs of correlation between supply of gas and number of LNG powered ships 15

16 LNG for the cruise market a snapshot The cruise ship market is developing in Northern Europe, especially the Baltic Area Baltic Sea Area offers cruises with high security level, waters suitable for shorter trips (7 10 days) and a good infrastructure (port and airports etc.) Nordic countries are experiencing increasing interest from tourists in general LNG is very suitable for the cruise market: High demand for greener solutions and a high willingness to pay The ships call ports on a regular basis makes fuel supply easy to arrange Shorter cruises are suitable for bunkering during passenger turn-around 16

17 Characteristics of the LNG market for cruise ships A significant proportion of cruise ships will be LNG powered in few years Different expectations: 25 % of all cruise ships in order are LNG Mainly ships operating in limited waters, like the Baltic Sea and the Mediterranean Sea For ships operating on a global basis, the supply is still uncertain The trend of converting to LNG is part of general trend of a greener "foot print": Also focus on reducing food waste etc. Actual trend: The shipping companies make arrangments with bunkering companies about fuel, probably by truck Other supply chains will be considered in few years 17

18 Other market areas: Offshore Supply Vessels Offshore Supply Vessels (anchor handling vessels, crew boats etc.) A sector with high political focus, i.e. a growing focus on low emission fuel especially when operating within the renewable energy sector A number of LNG powered supply vessels are operated in Norway, to some extend because of a 'Anti-NOx subsidy scheme' In other countries it is estimated that goals can be met to a satisfactory level with low sulphur fuel, catalyst or supplement with batteries in specific situations For smaller vessels (crew boats etc.) the weight of on board installations is a barrier 18

19 Ferries: Ferries and RoRo ships are obvious market areas, since they operate in regular service at certain ports Some LNG powered ferries are in operation For smaller ferries (i.e. in domestic waters) the battery technology has developed rapidly a relevant solution in very short time On some ferry crossings, there is a strong price competition which makes the shipping companies hesitate to invest LNG might get a higher market share in some segments 19

20 Line vessels: Line vessels cover several types of ships and a large total number of ships A few shipping companies have announced that they have ordered new ships, operating on LNG, e.g. container ships and chemical tankers Statements from shipping companies: Insufficient infrastructure (ships are often moved to new routes and crossings) Prices are too high (tough price competition) They see LNG is a transitional technology Nonetheless: LNG will be a solution in some niches 20

21 Conclusion: The market assessment is a snapshot The cruise market for LNG looks promising For other market areas, LNG is considered as a niche product For The Port of Esbjerg, the market potential looks very small the coming years The demand for LNG is driven by many factors - which is not stable: Development in LNG infrastructure Oil prices Competing technologies Regulations and subsidies 21

22 Result of the business case 22

23 Main assumptions in the business case Calculation of cost per unit of energy for different supply chains and bunkering solutions Calculation of bunkering costs for each solution, influenced by the demanded quantity of LNG Port of Esbjerg as a case with 3 supply solutions: 1. Trucking the LNG from a liquefaction point (using the terminal in Rotterdam as the supplying terminal) 2. Shipping the LNG in a container from liquefaction point (or redistribution terminal - in this case from the port of Rotterdam) 3. Using a barge to move LNG from the liquefaction point (again Rotterdam is the point of supply) 23

24 Supply chain cost to Port of Esbjerg 24

25 12 different bunkering methods No. Bunkering models No. No. 1 Truck 5 Pump unit 9 Stationary tank with multiple trailers 2 Y-piece 6 Dual truck to ship 10 Multi fuel station 3 Bunker manifold 7 Multiple truck to ship (MTTS) 11 Small terminal 4 Movable MTTS 8 Stationary tank 12 Pontoon 25

26 Economically feasible LNG solutions The calculations are using the following assumptions Annual CAPEX are found assuming a or financing period of 20 years with an annual interest rate of 2% The quantity supplied per vessel is assuming that each vessel is bunkered with the quantity also outlined for each of the models The revenue is calculated assuming that the LNG can be sold at the same price as MGO*. I.e. assuming that there are no additional investment cost required for the vessels using LNG An average MGO price of 580 USD/MT, and a average LNG price. Transport of LNG from Rotterdam to Esbjerg is made by truck (for all alternatives). As noted in Chapter 5, when volumes are high, a barge may be used to supply LNG to satellite terminals at a lower costs. * This assumption is obviously unrealistic. The purpose is to illustrate the magnitudes of LNG demand required to cover costs 26

27 Economically feasible LNG solutions Model Total CAPEX Annual CAPEX Quantity supplied per vessel OPEX Logistic costs (excl. Local handling costs) Amount of LNG required to cover CAPEX if LNG sold at MGO price Corresponding no. bunkering vessels 27 EUR EUR mwh EUR/mWh EUR/mWh mwh , , , , , , , , , , , ,

28 Main results A significant amount of demand is required to make permanent installations profitable A liquefaction plant is considered to be competitive with a demand for at least mwh per year. 28

29 Thank you 29