Non-fuel Methods of IMO Compliance. Prepared for Platts Bunker and Residual Fuel Oil Conference 8th Annual, Houston 22 June 2011

Transcription

1 Non-fuel Methods of IMO Compliance Prepared for Platts Bunker and Residual Fuel Oil Conference 8th Annual, Houston 22 June 2011

2 Agenda Introduction Alternative Fuels and Approaches Primary Paths Scrubber Economics 2

3 Purvin & Gertz, Inc. Technical, strategic and commercial advisory services for the global energy industry Core Competencies Energy Market Analysis Refinery/Asset Valuations Technology Evaluations Crude Oil Marketing Project Finance Assistance Independent Engineer Conferences/Training Premier, client-driven, energy consulting firm 3

4 PGI has a long history of delivering insightful analysis of complex issues Completed for two scenarios Global Diesel/Residual Balances 13 World Regions Diesel/gasoil balances Stationary Fuel Oil 3 qualities Bunker Fuel 5 qualities Refining Capacity Refinery Supply 5 streams Economics, Prices & Margins Prices for three world regions Scrubber economics Refining LS bunker cost of production Refining margins Diesel pricing Fuel oil/bunker pricing Current and future grades Crude differentials 4

5 IMO sulfur regulations in-force and on the horizon % Sulfur, max Study in 2018 determines availability of LS fuel and start date for 0.5% S limit Global ECA North America ECA begins

6 One approach is to switch away from petroleum fuels to lower emission alternatives Liquefied natural gas Hydrogen Nuclear power Battery/electric power Biofuels 6

7 While non-petroleum fuels have certain advantages, widespread adoption on appears unlikely Long sailing distances (where most bunker is consumed) makes fuel density important Major change in infrastructure for non-liquid fuel alternatives Same fuels are desirous for on-road and power markets too Niche applications appear to be a first step Alternative fuels have greatest benefit in ports or near-shore where population density is highest 7

8 Other solutions also being put forward Wind power Air cushion Scheduling & Navigation Shore-based scrubbing Advanced green designs Cold ironing 8

9 Advances will aid in reducing emissions Friction reduction has direct benefits no matter the fuel Improved navigation and scheduling saves money Ports are pressed to improve air quality, so shore-based systems likely to progress but bunker impact is modest Ship design & efficiency improvements a continuum 9

10 Two basic compliance paths most likely IMO Regulations Fuels Compliance $ billion refineries 3-5 year lead-time Ship Scrubber Compliance $ billion 9-16k vessels 1-3 year lead-time 10

11 Technology providers are working on the problem These and perhaps other companies provide exhaust gas cleaning systems for marine applications not all focused on SO x reduction 11

12 One of the simplest systems is an open-loop seawater scrubber OPEN LOOP SYSTEM Exhaust Gas Scrubber Main Engine Scrubber Aux Engine Sludge Efficient Water Treatment Treated Water Discharge Open loop uses seawater directly followed by filtration Sulfur oxides reacts with seawater to capture emissions Discharge quality set by IMO in open sea Scrubber required for each engine/boiler, although new designs can couple with blower Discharge at port/near-shore is a possible issue Relative simple design Proven in land-based applications 12

13 Marine seawater scrubber systems could provide part of the solution Uses freshwater and caustic in a closed loop with small purge CLOSED LOOP SYSTEM More complicated and requires fresh water & caustic Key advantage is ability to hold discharge water while in port (smaller purge stream) Scrubber Fresh Water Tank Sulfur still ultimately discharged to sea NaOH Main Engine Process Tank Holding Tank Reduces CO2 generation from seawater reaction Cooling Sludge Hybrid systems are being designed that can provide certain benefits of both systems Treated Water Discharge 13

14 Current concerns with scrubbers Cost will investment payoff? Relates directly to bunker fuel pricing for grades Space can vessel accommodate equipment Sacrifice of cargo space greatly hinders economics Reliability will units be reliable Industry real-world experience needed chicken-&-egg At least initially, relates to scale-up of technology Training/manning what is required to operate and maintain units Alternative Will ECA marine distillate fuels be available in all ports? Environmental How will authorities treat discharge of scrubber wastewater? 14

15 Global bunker demand by cargo type Bunker Fuel Demand by Cargo Type, Million Tons Tankers Bulk Carriers Container/ Dry Goods Other Vessels Bunker demand has been growing at nearly 4%/yr on average since

16 Bunker consumption is concentrated in a few vessel classes MW Cruise, 100k+ gt Container, 8,000+ teu High Consumption Subset of Fleet ~6,600 vessels Consuming ~ 100 million tons bunker Container, 5-8k teu Size represents bunker consumption of class Cruise, k gt 40 Roro, 2k + lm Ferry, RoPax 25kn+ Bulk, 200k + dwt LNG, <200k cbm Crude, VLCC Vehicle, 4k + ceu Product Tanker, LR Container, 3-4k teu Crude, Suezmax Bulk, k dwt Chemical, 20k+ dwt General cargo, 10k+ dwt Current Operating Scrubber Units Number of Vessels 16

17 Installing scrubbers on the largest bunker consuming vessels would allow a large portion of bunker to remain high sulfur 100% 90% 80% 70% 60% Percent of Global RFO Demand 50% 40% Each data point represents a vessel class 30% 20% 10% 0% 0% 5% 10% 15% 20% 25% 30% Percent of Vessels (approx. 100,000 total) 17

18 The economics on scrubber installations looks attractive for a large portion of bunker consumption assuming 100% utilization 100% Percent of Bunker Consumption Payback Period, Yrs 10 80% Main Engine Residual Bunker Consumption 8 60% 6 40% 4 20% 0% 0% 10% 20% 30% 40% 50% Main Engine Scrubbing Payback Percent of Vessels Based on $200/t fuel cost savings and includes power load and maintenance cost estimates. Cost curve capital estimate. Assumes installation during maintenance downtime

19 Even if scrubbers are widely adopted, refining supply of higher quality fuels are still required FIGURE II-13 GLOBAL BUNKER SUPPLY: Scrubber Compliance Scenario (Million Tonnes) HS Residual Blend LS Residual Blend Low Quality LS Distillate/Intermediates MS Residual Blend High Quality Distillate Supply of HS residual blends nearly flat for next ten years as distillate and LS residual blends grow 19

20 Concluding thoughts IMO bunker regulations are driving research and innovation to find non-fuel quality-related solutions While ECAs are near-term, big prize is still on the horizon in 2020 or 2025 Large switch to alternative fuels not likely For meeting global IMO requirement, ship scrubbing appears to be a favored economic solution for certain vessels On-board scrubbers are not the silver-bullet and will not fit or be economic in all situations Some level of fuel quality improvement needed Other technologies could further impact bunker markets Special thanks to Don Gregory with Exhaust Gas Cleaning Systems Association (EGCSA), for input on ship scrubbing technology and status 20

21 About this presentation This analysis has been prepared for the sole benefit of the conference attendees. Any third party in possession of the analysis may not rely upon its conclusions without the written consent of Purvin & Gertz. Possession of the analysis does not carry with it the right of publication. Purvin & Gertz conducted this analysis utilizing reasonable care and skill in applying methods of analysis consistent with normal industry practice. All results are based on information available at the time of review. Changes in factors upon which the review is based could affect the results. Forecasts are inherently uncertain because of events or combinations of events that cannot reasonably be foreseen including the actions of government, individuals, third parties and competitors. NO IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE SHALL APPLY. Some of the information on which this analysis is based has been provided by others. Purvin & Gertz has utilized such information without verification unless specifically noted otherwise. Purvin & Gertz accepts no liability for errors or inaccuracies in information provided by others. 21

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