NEWSLETTER 3. The introduction of liquefied natural gas (LNG) as ship s fuel. Welcome to the 3rd issue of the MAGALOG newsletters

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1 Welcome to the 3rd issue of the MAGALOG newsletters Marine Fuel Gas Logistics Baltic Energy Forum e.v. Capt. Jörg D. Sträussler Seelandstraße 3 D Lübeck Germany Tel: Fax: js@baltef.de The introduction of liquefied natural gas (LNG) as ship s fuel Combined bunker and city gas terminal. Standard LNG bunker terminal design. Five Ports for LNG fuel supply. LNG fuel supply chain study. The final MAGALOG public conference, 4th December 2008

2 MAGALOG changed the landscape of shipping fuels For the first time ever MAGALOG brought LNG liquefied natural gas - as a shipping fuel to the minds of managers and officials of shipping, shipbuilding, ports and port cities on the European continent. Not only that the environmental footprint of LNG is lower by dimensions then that of any other fuel used in shipping but it also provides fuel security in a world of extremely volatile fuel prices. LNG proves to be a realistic alternative to traditional fuels such as heavy fuel and marine diesel. Moreover LNG has the potential of opening a door towards environmentally even friendlier fuels such as plain natural gas or biogas during stay in port. Moreover LNG will pave the way for hydrogen because this requires similar shipboard distribution, storage systems and safety requirements. Showed stakeholders like ship owners, ports and shipyards extremely low interest in LNG up to severe objections at the beginning of the project this changed dramatically over time and with heavily increasing bunker prices and the decision of IMO s Maritime Environmental Protection Committee to reduce SOx and NOx especially in Emission Control Areas of the Baltic and Northsea interest took up momentum. Now, several ship owners and shipyards are planning ahead to meet more stringent international environmental standards and to prepare for the gas age in bunkers. These frontrunners are also taking into consideration that gaseous fuels will be allowed from 2009 or 2010 on. Appropriate guidelines are already under preparation by an IMO working group initiated and lead by Norway the pacesetter in developing LNG as a fuel in shipping. Interest was even more fired by the decision of the Norwegian ship owner Sea-Cargo AS to order two 132 m long LNG powered RoRo vessels with options for four more in September Upon the decision of Sea Cargo several ship owners entered into sincere considerations to power future ships either with LNG or with gas. The world s largest and renowned shipping gazette Lloyd s List reported that the Stena Group established a working group for developing medium range LNG powered product tankers. It has also been heard that Stena is considering gas in port for its ferry operations. Moreover is has been reported that Meyer shipyard, one of the world s leader in the construction of cruise liners has initiated a scientific cluster project to develop LNG powered passenger ships, RoRo vessels and mega yachts. 2

3 Final MAGALOG conference an overwhelming success More then 70 participants from all over the Baltic Sea region followed the invitation of the consortium to attend the final MAGALOG conference on 6th December 2008 in the historic town hall of the medieval city of Lübeck, which headed the Hanseatic League for more than 600 years. Most of the participants came from Germany the hosting country for this event; a large delegation came from Norway, the second largest from Göteborg in Sweden. Other participants came from Finland and Poland. Primarily the conference interested environmental and port planning authorities of port cities such as Bergen, Göteborg, Swinoujscie, Lübeck, Hamburg and Bremen, but also ship owners and companies from the ship building, ship engineering, suppliers of maritime equipment and motor manufacturers. Marvellous publicity on the first page of Lübeck s newspaper Lübeck to become the first Baltic Sea port for gas-powered ships Non-oil powered ships: starting shot for new Eco project From 2012 freighters are to be powered by liquid gas. By Thorsten Teichmann Lübeck The project is unique in the world. In the near future ships are to be powered by gas propulsion in the Baltic Sea. And Lübeck s port is the pioneer. The starter s pistol for more environmentallyfriendly shipping was fired yesterday in the town hall of the Hanseatic city at a conference with 70 representatives from the Baltic Sea Region and Norway. The ports of Lübeck, Bergen, Göteborg, Stockholm and Swinemünde intend to set up terminals with a gas filling station for liquid natural gas for freighters and ferries. The first gas-operated ships could be plying the Baltic Sea as soon as Lübeck will be the first port to have a gas filling station. The profitability of the project is being costed in the Hanseatic city at present and the statutory requirements are being subjected to a review. But the course was plotted long ago. A feasibility study proves that Lübeck s port is suitable for a natural gas terminal, which could be sited at the Scandinavian quay, the port facilities in Siems and the Northland quay. The bunkers for the liquid natural gas from Norway will not take up much room. The gas filling stations need no more than 2,000 square metres of space. Another problem is of much greater significance. The ferries already in operation cannot be converted to run on gas. New ships will have to be developed. Norwegian shipyards have received their first orders for the construction of gas-operated ferries. At the Baltic Sea Conference staged by the Baltic Energy Forum, Lübeck s senator for the environment, Thorsten Geissler (CDU), pointed out that Lübeck, has once again shown that it is a central turntable and pivot for forward-looking concepts for maritime infrastructure. Lübeck was already the pioneer in one respect by being the first port to arrange for ships to be connected up to land lines providing power, which was a trend-setting innovation having an impact far beyond the region. The Deputy Major of the Norwegian City of Bergen, Trude Drevland, can already see the dawning of a new era. According to Drevland, the partnership between the cities of Lübeck and Bergen, which has already existed for several hundreds of years, will be given an important boost with the innovative gas project. 3

4 Jörg Sträussler, the Baltic Energy Forum assistant co-ordinator of this MAGALOG project (Maritime Gas Logistics) part-funded by the EU reckons that there will be a great technology transfer between Germany and Norway. And Ralf Gierke, project manager at the Lübeck public utility company is convinced that the Baltic Sea co-operation will be a success, in view of the continual increase in environmental standards in the shipping sector natural gas is able to play an important role in cutting emissions still further and to fulfil the EU regulations. Now it is important that more alliances are forged in the Baltic Region and to expand networks. The Baltic is amongst the seas with the highest volume of shipping in the world. Ships driven with gas emit 26 percent less carbon dioxide and 80 to 90 percent less nitrogen oxide than ships running on diesel oil. The EU co-ordinator Jörg Sträussler doesn t only believe that gas operated ships have crucial environmental benefits, Shipping companies running their ships on gas are no longer dependent upon oil and the global gas reserves are larger than those for oil. MAGOLOG paves the way to renew Hanseatic co-operation between Bergen and Lübeck; more publicity on the first page of the local part of Lübeck News Gas for ships: Lübeck is a pioneer The spirit of the Hanseatic League blew through the Bürgerschaftsaal (convention hall of the city council) yesterday. Gas-powered ships for the Baltic Sea. Five ports have collaborated to hammer out this major target and are showing the way for the future. BY THORSTEN TEICHMANN One day they had a tangible vision As if with one voice, yesterday the Senator of the Environment Thorsten Geissler (CDU), and the Deputy Lady Mayor of the Norwegian City of Bergen, Trude Drevland, fired the starter s pistol for the future yesterday, a future in which the economic and environmental objectives are virtually identical. 4 The ports of Lübeck, Bergen, Göteborg, Stockholm and Swinemünde will be setting up gas terminals for ships powered by natural gas. And Lübeck will be the first port (remark: in the European Union) in which this type of ship will be able to fill up with liquid natural gas. The objective is for the first gas-driven freighters to be cruising across the Baltic Sea within just four years. The MAGALOG (Maritime Gas Fuel Logistics) project entered the first specific phase at the Lübeck Conference of the Baltic Energy Forum with the establishment of a lasting partnership. 1.2 million Euros (600,000 Euros coming from the EU) have been spent since 2007 to ascertain whether it makes sense to power ships with gas. The result was Yes it does. In two brilliant speeches at the conference staged in English Geissler and Drevland swore in the partners to collaborate in a future placing the Baltic Sea at the centre of worldwide attention. The aim is for the gas ships to become a success story both in environmental and in commercial terms. The Norwegian energy group Gasnor, the Baltic Energy Forum, the Trondheim Marintek AS, the Hordaland oil and gas group from Bergen, the Polish town of Swinemünde and the Lübeck public utility company are the project partners. In her welcome speech for the 70 conference participants from the Baltic region and Norway (civic and port representatives, shipping companies, business owners, and energy suppliers) the chairperson of the Lübeck town council, Gabriele Schopenhauer (SPD) paid tribute to Lübeck s role in the era of the Hanseatic League. Geissler and Drevland see the revival of these glory days. We have to develop a joint strategy for the Baltic Sea and stick together, said the Senator for the Environment. The development of clean shipping is an investment in the future We can solve the problems together in the Baltic Region, proclaimed Geissler. Drevland said in forceful tones, Bergen and Lübeck have worked together for more than 400 years and now we are working together again. Senator for the environment Thorsten Geissler, We have to stick together. Bergen s deputy mayor Trude Drevland, We need smog-free ships.

5 5 MAGALOG achieved all its goals The core objectives of the EU-(Intelligent Energy Europe) funded project MAGALOG or Maritime Gas Fuel Logistics were to investigate the technical and economical viability of a supply chain for LNG, to analyse 5 ports regarding their potential for LNG supply to ships and 1 port for its potential for city gas supply and to elaborate a standard medium size LNG terminal for the supply of ships. Finally LNG and its environmental benefits should be made public to all relevant stakeholders such as ports, port cities, shipping companies, shipbuilders and associated industries. Drivers for LNG bunkers: environmental legislation and fuel security The MARPOL Annex VI regulations are under revision by the International Maritime Organization. They will set global limits on sulphur content in ships engine fuel. Before 2012 the limit is 4.50%. It will be reduced to 3.50% from 2012 and progressively down to 0.50% from The Baltic Sea and the North Sea have been designated as Sulphur Emission Control Areas (SECA) under MARPOL (Figure 2), to be renamed as Emission Control Areas (ECA) as restrictions are expanded to cover other pollutants than sulphur. Within the ECA, more restrictive limitations on sulphur in ships fuels will apply: Currently 1.50%, 1.00% from 1 July 2010 and 0.10% from 1 January It is expected that the reduced sulphur content in fuels will also lead to large reductions in particulate matter emissions. For nitrogen oxides (NOx), emissions do not only depend on the fuel quality but also largely on engine design and operating conditions. IMO stipulates limits on NOx emissions in g/kwh which decline with increasing engine speed in revolutions per minute. A limitation of 17 g/kwh at lowest speed was stipulated in the Annex VI before the 2008 revision. For ships constructed after 1 January 2011, this will be reduced to 14.4 g/kwh. For ships constructed after 1 January 2016 and operating within an ECA, the limitation will be 3.4 g/kwh at lowest speed, approaching 2 g/kwh at high engine speed. By comparison, a NOx limitation of 2.0 g/kwh applies to heavy vehicles in Europe under the EURO V standards. This change in environmental legislation will result in lower availability of low sulphur fuels, because refineries are not prepared to the desulphurization of the large amounts needed. Moreover they would have to invest large amounts into new process equipment. All of this would of course result in an increase of bunker prices. Moreover MARPOL requirements on the reduction of NOx emissions will lead to costly shipboard investments in Selective Catalytic Reaction (SCR) equipment. The technology is not proven yet on a large scale and moreover it will put a greater workload on shipboard personnel. Here then LNG comes into play. It has a considerable smaller footprint then any other fuel and it may save considerably in shipboard installations such as SCR but also pre-heaters, separators, particle filters and the more. Engine manufacturers are on the verge to tackle the challenge. Some have already developed large scale Dual Fuel Engines; others are selling small scale single gas fuel engines. There are also plans to develop the middle class gas fuelled engines. Ship owners in Norway have already made the move towards LNG powered ships. Motivated by MAGALOG others are following suit and last but not least shipyards are preparing for the gas age since the beginning of MAGALOG.

6 Pan-Baltic-Sea LNG fuel supply chain study A logistics study regarding potential locations for LNG bunker terminals to supply shipping with LNG fuel from the starting point Kollsnes, Norway, came to the result that an LNG supply chain is technically feasible and can economically be operated. Such a supply chain is firstly dependent on LNG transport by relatively small LNG tankers. A very small LNG tanker of m³ operated by Gasnor has served small scale industrial LNG terminals in Norway. The next generation of small scale LNG tankers represented by Gaynor s m³ vessel Coral Methane will be put in operation early Other vessel operator are following suit. Logistic routes have been investigated from Kollsnes near Bergen, Norway, and from the large scale LNG import terminal to be built at Swinoujscie, Poland towards Gothenburg, Stockholm, Lübeck and Rostock. Assessment of the potential market for LNG powered ships In principle every ship could run on LNG; even large tankers. Examples of this is provided by large ( m³) LNG tankers, the most recent of which can run on heavy fuel but also on boil off gas from the LNG load likewise. Since this market is regarded a specific niche investigations were made which other ships could be built to run on LNG. It is not thought that it would be wise to convert existing ships because such conversion would require heavy changes to the existing propulsion and fuel storage system, hence such investments would be too costly. The MAGALOG study concentrated on such areas where environmental legislation constraints would be highest, i.e. in the ECA areas of the Baltic Sea and Northsea and where small and medium scale logistics could be developed. Established for LNG use in Norway. 1. Inland ferries for vehicles + passengers; 2. Offshore supply vessels for North Sea petroleum activities; 3. Coast Guard vessels. Potential candidates for LNG use. 4. Cargo ships in liner service; 5. Ferries (Ro/Pax) in international liner service; 6. Barges and other cargo vessels for inland waterways; 7. Passenger liners 8. Tug boats, e breakers, vessels operated by administrations such as coast guard 9. Fishing boats. MAGALOG s work focused on segments 4 and 5 above, i.e. cargo ships and ferries in scheduled service between ports mainly within the Baltic and Northsea. Helsinki, Stockholm, Lübeck, Rostock, Zeebrugge and Gothenburg are identified as the busiest ports for Ro-Ro and Ro-Pax shipping, and therefore as particularly relevant locations for developing LNG bunkering logistics. Inland navigation is highlighted as another potentially relevant segment for LNG fuelled ships, if successful efforts are made to revitalise this segment as a growing contributor to European transport requirements. Five Ports for LNG fuel supply 1. Solutions for LNG bunkering for ships are identified and prepared in all targeted ports. 2. In Gothenburg, Stockholm and Lübeck, initial users and bunkering locations are identified. 3. Swinoujscie offer future supply of LNG potential from the planned large scale LNG import terminal. 4. In Bergen LNG bunkering is in operation, and has room to expand. 6

7 Standard LNG bunker terminal design A standard LNG bunker terminal has been designed as a starting point for all future considerations and planning in ports designated to provide LNG bunkers to the shipping community. In Lübeck: combined bunker and city gas terminal In Lübeck there is the unique opportunity to combine a maritime LNG bunker terminal with the supply of the city with gas from LNG. This LNG terminal will provide reserve gas for unexpected high demand or in cases of extraordinary high gas prices at the gas exchange. A m³ terminal is under sincere consideration and Sustainability of MAGALOG The finalization of the project does neither mark the end of the work nor the end of the co-operation. On 18th November 2008 The MAGALOG partners Gasnor and Stadtwerke Lübeck agreed to cooperate further in order to bring forward the construction of a LNG terminal in Lübeck. On 6th January they further depicted their future co-operation and the future of the LNG terminal as a back-up for city gas operations. Under the impression of the most recent gas crisis forced by Russia and the Ukraine a medium size LNG terminal could set the pace for independence from pipelined gas and from the large players in the gas sector. Sunday, 11th January 2009 Page 1 Lübeck, gate for the Gas of the Future Germany s first LNG terminal could be realized in the port Experts: reduce dependency from Russia planning. On 17th November 2008 the MAGA- LOG partners Gasnor AS and Stadtwerke Lübeck GmbH agreed to pursue the issue of a combined shipping and city gas terminal further. On 6th January 2009 they started the concrete technical and financial engineering phase. The picture above highlights the unique opportunity arising from the annual consumption of gas curve. In periods of high consumption, in winter, acquisition costs of gas are also highest. In unexpected cases, i.e. very cold and/or windy winter days, the local gas supplier would have to buy at highest prices at the gas exchange. In such cases it would be good to have reserves bought at reasonable prices during the summer. Once a LNG terminal will built for city gas demand then shipping companies are expected to follow quickly to buy LNG for bunkering purposes. This at least has been expressed by the shipping scene. By GERHARD KRÜGER LÜBECK Will just Lübeck have a future strategic role in the supply with energy of Germany and possibly Europe? In the shadow of the gas battle between Russia and Ukraine experts call upon a German terminal for liquefied gas (LNG) in order to diminish the dependency from the large gas suppliers like Gazprom. Since E.On Ruhrgas has pulled out from its LNG terminal project in Wilhelmshaven (Germany) Lübeck will have the first and only liquefied natural gas terminal in Germany by 2012 in addition to supplying shipping the terminal here could also supply private households and industry. The benefit of such a terminal: dependency from pipelined natural gas would decrease; there would be more competition in a marked dominated by few suppliers. The energy expert of Deutsches Institut für Wirtschaftsforschung (DIW) [German Institute for Economic Research], Ms Claudia Kemfert is enthusiastic about the project. LNG could become the Gallic Village against 7

8 outstanding Roman Power. Until now German energy enterprises prioritized pipeline gas. Should there be supply shortcomings one could quickly provide a substitute by ship transported LNG. In a few years, by far the largest part of natural gas will come from Russia, states the DIW energy expert. With this the danger increases that a monopoly could dictate prices. Also the Director of the Foreign Trade Association for Mineral Oil and Energy strongly calls for a landing point for liquefied natural gas in Germany. Russia supplies one third of the natural gas for Germany. This is much too much. One would require new supply sources for liquid natural gas. Stadtwerke Lübeck (Lübeck s part public utility company) is working under high pressure to develop the LNG project which will cost some five million Euros. We are inviting investors says project manager Ralf Giercke. It is anticipated that the liquefied natural gas terminal will be located at the Scandinavia Quay. Especially ships, when powered by natural gas could drastically reduce their environmental footprint. Moreover natural gas could be fed into Lübeck s city gas grid, says Lars Hertrampf, press speaker of Stadtwerke. By this we could avoid pipeline gas purchases at times of high gas prices. In the future, the Lübeck terminal maybe expanded. Should demand rise Stadtwerke could also supply other gas suppliers. The Norwegian energy trust Gasnor has great interest in the Lübeck project because more liquefied natural gas is produced in Norway then is used for own energy supply. Meanwhile negotiations regarding the delivery of Russian gas are on the move. Yesterday representatives of Russia and the EU have signed an agreement regarding the control of gas supplies via Ukraine. Russian gas is set to flow as soon as the control mechanism has started functioning. Sunday, 11th January 2009 Page 8 By GERHARD KRÜGER Early December the idea was born at a Baltic Sea Region conference in Lübeck [The final MAGALOG conference on 4th December 2008 is meant. The idea was already part of the 8 MAGALOG application in 2006 but the results of the pre-feasibility study were made public on 4th December]. In the future, ships in the Baltic Sea will not any more be operated by heavy fuel but by environmentally friendly natural gas. Therefore the port cities of Lübeck, Bergen, Göteborg, Stockholm and Swinoujscie endeavour to install terminals with liquefied natural gas bunker stations. In Lübeck the local utility company is working on this unique worldwide project for shipping which is estimated to cost some three to five million Euros. By 2012 the first ships will be able to bunker LNG at Scandinavia Quay provided they have been built by then. In a first gor six tanks for liquid gas will be built at Scandinavia Quay says Ralf Giercke, project manager with Stadtwerke Lübeck. For these tanks from m² up to m² would be needed. Bunkering of up to m³ natural gas, sufficient for the distance Lübeck-Helsinki and return would need about three to four hours. Giercke has registered great interest in gas operation by shipping companies. Environmental restrictions will intensify says Giercke. LNG for Lübeck will be delivered by the Norwegian energy trust Gasnor. In the Northsea gas is a by-product of the oil and gas production which, until now, has been flared with no utilization. Flaring has come to a stop. For climate change reason the flares on Norwegian drilling platforms have been extinguished. Now the associated gas is cooled down to minus 161 C and thus made fluid. Small tankers take the load on board and pump it into special tanks at the LNG terminals. The fluid energy is sent through a pipeline grid, thawed and regasified again. The Clou of LNG: by cooling down natural gas it is extremely compressed. Stadtwerke s traditional gas storage contains 80,000 m³ natural gas. This corresponds to just 121 litres of liquefied gas. For further information contact Capt. Jörg D. Sträussler Baltic Energy Forum js@baltef.de Tel: Author Jörg Sträussler, Jan 2009

9 GASNOR AS, Bergen, Norway GASNOR is the coordinator or lead partner in this project. This partner is setting paces in the field of Small Scale LNG. Gasnor has its own LNG-Resources on the island near the Norwegian town Haugesund in western Norway. The core business of Gasnor is sales and distribution of natural gas to local consumers like industrial enterprises and hotels and hospitals. Moreover Gasnor delivers natural gas in the form of CNG to cars and buses and in the form of LNG to shipping. Gasnor renders to its clients technical support, counselling, guidance and training. Baltic Energy Forum e.v., Lübeck, Germany Baltic Energy Forum is one of the initiators of MAGA- LOG and its assistant coordinator. Baltic Energy Forum e.v. is energy management agency within the European programme Intelligent Energy Europe in the legal form of a non-governmental and charity organization since Together with it s national and international partners, i.e. regional and local authorities, universities, enterprises and NGOs Baltic Energy Forum executes projects for reducing greenhouse gases and other emissions. A particular focus of Baltic Energy Forum lies on shipping, ports, maritime regions, offshore, fisheries and protection of the maritime environment. Baltic Energy Forum is one of the leading European organizations in the field of energy management and alternative energy solutions for shipping and harbours. Together with Stadtwerke Lübeck GmbH Baltic Energy Forum e.v. is signatory to the Memorandum of Understanding on sustainable on Sustainable Port and Maritime Policy for the Baltic Sea Region. MARINTEK MARINTEK AS, Trondheim, Norway MARINTEK is one of the largest maritime scientific organizations in Europe. MARINTEK has special experience in the development of LNG system for maritime vessels. In MAGALOG MARINTEK provides the scientific view on maritime logistics in general and maritime small scale LNG propulsion systems in particular. MARINTEK is part of the SINTEF group, the largest independent scientific organization in Scandinavia. SINTEF supports about Norwegian and foreign enterprises in research and development. Hordaland Oil & Gas, Bergen, Norway Hordaland Oil & Gas (HOG) is the leading representation of oil and gas interests in the County of Hordaland, the westernmost Region of Norway. Members of the organization are the County of Hordaland, communities and enterprises of the oil and gas sector. The members are committed to the development of oil and gas resources and to protection of the environment likewise. The Municipality of Świnoujście, Poland The Municipality of Świnoujście, Poland, is partner in the project and candidate for one of the shipping related pilot LNG terminals. It is of particular advantage of Świnoujście that this town will be seat of a large scale LNG terminal in the future. Świnoujście is well known seaside resort and the largest Polish ferry harbour likewise. Ship borne air emissions are threatening the touristic industry. Therefore it is a particular asset for Świnoujście to be pacemaker in combating air pollution. Stadtwerke Lübeck GmbH, Lübeck, Germany Stadtwerke Lübeck GmbH (SWL) is the public utilities company of the Hanseatic City of Lübeck. It provides electricity, gas, district heat, water, telecommunication and public transport services to the city of Lübeck and its population. As transport provider Stadtwerke Lübeck operates river ferries in the part city of Travemünde, Germany s largest harbour at the Baltic Sea. Moreover Stadtwerke Lübeck represents the City of Lübeck in the Environmental Commission of the Union of the Baltic Cities, a pan-baltic organization which represents more than 100 cities in the Baltic Sea Region. This partner has great interest in providing LNG supply to shipping, in utilizing LNG as a back-up for its natural gas grid and operating its own ferries and buses with LNG or CLNG as an environmentally friendly fuel. Stadtwerke Lübeck GmbH is one of the most important drivers in sustainable development. It had been lead partner in the predecessor project New Hansa of sustainable ports and cities which aimed i.a. at developing a shore side electricity system for commercial shipping as a means of reducing ship borne air pollution in port cities. 9