Energy Efficient and Green Solutions. Procurement and Finance Day. 20 March 2014 By Henning Mohn, Head of Section Shipping Advisory, DNV GL Singapore

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1 MARITIME JANUARY 2014 Energy Efficient and Green Solutions Procurement and Finance Day 20 March 2014 By Henning Mohn, Head of Section Shipping Advisory, DNV GL Singapore 1 SAFER, SMARTER, GREENER Managing your risks is essential and also has several key benefits Prevention Eliminating unplanned expenses due to preventable accidents Safeguarding reputation through awareness and prevention Costs Reduced CAPEX costs by prioritizing spending on areas with high risks Reduced OPEX by appropriately dedicating resources to high risks Transparency Effective decision making based on clear understanding of risks Effective and streamlined auditing by focusing on risk exposure Prioritization Improved efficiency of resource by prioritizing high impact efforts Focusing on the areas of the organization that really matter 2 1

2 Quiz: Years to remember Future Greenhouse Gas Emissions from Shipping Status Quo Realistic uptake of new fuels ex nuclear Realistic uptake of new fuels incl nuclear Source: DNV R&D 2013/ Chryssakis & Stahl 4 2

3 ECA: The largest challenge yet; but good for the local air quality ? % ECA Tier-3 NOx standard for newbuilds in ECA (- 70%) 0.50% worldwide 6 3

4 ? % ECA Tier-3 NOx standard for newbuilds in ECA (- 70%) 0.50% worldwide RISKS: Market & Finance Operational Technology Suppliers Insurers Yards Class ? % ECA Tier-3 NOx standard for newbuilds in ECA (- 70%) 0.50% worldwide LNG fuel HFO+ Scrubber Lowsulphur distillate LNG fuel Exhaust Gas Recirculation, EGR Selective Catalytic Reduction, SCR LNG fuel HFO+ Scrubber Low-sulphur distillate New solutions? 8 4

5 ? % ECA Tier-3 NOx standard for newbuilds in ECA (- 70%) 0.50% worldwide Share of LNG fuelled newbuildings: Now: 48 LNG fuelled ships : 1000 new LNG fuelled ships 5-7 M tons LNG/year* *: DNV The ballast water regulation are on the verge of realization. If an additional 6 % of world GT ratify, BW regulations will apply Current status on ratification of Ballast Water Regulations Comment Number of states Required for ratification 30 Current status 38 Ballast Water regulations accepted by 36 states, sufficient for regulation ratification % of world gross tonnage Required for ratification 35% Current status 30.38% 4.6% If additional 4.6 % of world gross tonnage accept regulations, regulations will apply

6 Years to remember : ECA 2015+: BWT : Global Sulphur cap 2030: 2x current need for maritime fuels 11 ECA compliance options 12 6

7 Basically 3 options available: 1 LNG as fuel 2 Scrubbers + HFO 3 Low sulphur fuel or fleet redeployment, i.e. give up trading in ECAs 13 There are different options for dealing with ECAs, each with unique risk aspects making investment decisions difficult Main options for most ships: Option Risk LNG Scrubber Fuel switch CAPEX, LNG availability, tank size CAPEX, corrosion (?) Unit size High OPEX over time Alternative options: Biofuels Methanol Hydrogen Battery Other fuels? The cheapest investment may be the most expensive option in the long-run 14 7

8 FINANCIAL ANALYSIS The business case for the LNG fuelled bulk vessel [MUSD] Cumulative discounted cost difference compared to baseline [MUSD] Year LNG = MGO - 25% LNG = MGO - 40% LNG = MGO - 50% Scrubber + HFO MGO HFO Explanation Each line represents the additional cumulative costs of the respective configuration compared to baseline (HFO). LNG has a high investment cost, but depending on the fuel price the operational savings can be significant. Indicates payback time of LNG investment compared to MGO and HFO + Scrubber An LNG price of 600 USD/tonne (LNG = MGO 50%) ensures a payback time of 3.7 years compared to MGO and 4.5 years compared to Scrubber + HFO. 15 TECHNICAL FEASIBILITY Summary of possible LNG tank locations Location Directionof the tanks Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 Front of Front of Front of Front of Inside Aft of superstructure superstructure superstructure superstructure superstructure superstructure Vertical Vertical Vertical Horizontal Horizontal (transverse) (longitudinal) Vertical # of tanks Risk and impact on design Feasible option? Tank entering the cargo area. Superstructure will need to be rearranged. Tanks entering the engine room area. Engine room and superstructure will need to be rearranged. Tanks entering the engine room area. Engine room and superstructure will need to be rearranged. The engine room and superstructure will need to be rearranged. Will occupy too much of the superstructure. Not sufficient space for the required tank sizes (maximum 122 m 3 ). 16 8

9 53 confirmed LNG fuelled newbuilds Confirmed orderbook Year Type of vessel Owner Class 2014 Ro-Ro Norlines DNV 2014 Ro-Ro Norlines DNV 2014 Patrol vessel Finish Border Guard GL 2014 Car/passenger ferry Society of Quebec LR 2014 Car/passenger ferry Society of Quebec LR 2014 Car/passenger ferry Society of Quebec LR 2014 Tug Buksér& Berging DNV 2014 PSV Harvey Gulf Int. ABS 2014 PSV Harvey Gulf Int. ABS 2014 PSV Harvey Gulf Int. ABS 2014 PSV Harvey Gulf Int. ABS 2014 Gas carrier SABIC BV 2014 Gas carrier SABIC BV 2014* Product tanker Bergen Tankers LR 2014 General Cargo Egil Ulvan Rederi DNV 2014 General Cargo Egil Ulvan Rederi DNV 2014 PSV Remøy Shipping DNV 2014 Car/passenger ferry AG Ems GL 2014* Car/passenger ferry AG Ems GL 2014 Car/passenger ferry Samsoe Municipality DNV 2014 Ro-Ro Sea-Cargo DNV 2014 Ro-Ro Sea-Cargo DNV 2015 PSV Siem Offshore DNV 2015 PSV Siem Offshore DNV 2015 PSV Simon Møkster DNV 2015 PSV Harvey Gulf Int. ABS 2015 PSV Harvey Gulf Int. ABS * Conversion project Year Type of vessel Owner Class 2015 LEG carrier Evergas BV 2015 LEG carrier Evergas BV 2015 LEG carrier Evergas BV 2015 Bulk ship Erik Thun LR 2015 Container Ship Brodosplit DNV GL 2015 Container Ship Brodosplit DNV GL 2015 PSV Siem Offshore 2015 PSV Siem Offshore 2015 Container Ship TOTE Shipholdings ABS 2016 Container Ship TOTE Shipholdings ABS 2016 Icebreaker Finnish Transport A. LR 2016 PSV Siem Offshore 2016 PSV Siem Offshore 2016 Chemical tanker Terntank 2016 Chemical tanker Terntank 2016* Ro-Ro TOTE Shipholdings ABS 2016* Ro-Ro TOTE Shipholdings ABS 2016 Car carrier UECC LR 2016 Car carrier UECC LR 2016 Car/passenger ferry Boreal Transport 2016 Car/passenger ferry Boreal Transport 2017 RoPax Brittany Ferries BV 2017 Container Ship Crowley Maritime DNV GL 2017 Container Ship Crowley Maritime DNV GL 2018 Container Ship Matson Navigation DNV GL 2018 Container Ship Matson Navigation DNV GL Updated Excluding LNG carriers and inland waterway vessels 17 Existing and forecast of global LNG bunkering infrastructure Tadoussac Duluth Vancouver Europe* Seattle Santander Tacoma Sarnia Ferrol Barcelona Turkish strait & Zhoushan Marmara Sea Incheon Mississippi river New York Algeciras Valencia Nanjing Fourchon Cartagena Busan Dubai Wuhan Shanghai Jacksonville Hambantota Gaolan Singapore Australia: Discussions Buenos Aires Existing Planned (Feasibility study, risk study, proposed locations, pending approval) Proposed (currently being discussed) * See detailed map 18 9

10 ECA compliance options, little more futuristic 19 Ships for pure battery operation Ships with frequent stays in port and relatively low energy needs Ferries, passenger vessels, short sea shipping Available port power Sufficient charging time, 5 to 10 minutes 30 minutes crossing and max 20 knots 20 10

11 The battery in a hybrid ship will assist in powering the electric motors BATTERY ENGINES Photo: Thomas Førde, Stavanger Aftenblad AUXILIARIES Battery hybridization low utilization Batteries can reduce fuel consumption, maintenance, emissions of CO2, NOx, SOx and particles Diesel engines run at optimal load, when they first run Optimal Load Factor 100% 50% Typical Load Profile Diesel Engine - No battery Battery-only mode In waiting situations In environmental sensitive areas In port Optimal Load Factor 100% 50% Tid Optimized Load Profile Diesel Engine - Battery Battery only Battery only 22 Tid 11

12 Alternative fuels - parameters Fuel Consumption (MTOE* in 2010) Oil-based 4, % for shipping Natural Gas 2,858 (LNG: ) Price ($/MTOE) $600 (HFO) $900 (MGO) Flashpoint ( C) Heating value (MJ/kg) ~ (HFO) 42.7 (MGO) $250-$ (LNG: 48.6) Density (kg/m3) LPG 275 $700-$ Methanol 23 $ Ethanol 58 $ DME 3-5 $990-$ Synthetic fuels 15 N/A > Biodiesel $1000-$1200 >130 ~ Biogas Very low N/A -188 ~48 ~0.76 Hydrogen Very low $1800-$ Nuclear 627 ~$ *) MTOE million tonnes oil equivalents Source: DNV R&I 23 Engine technology and infrastructure Source: DNV R&I 24 12

13 And of course, the good old Energy efficiency focus must still be in place! 25 Throughout the project vessel visits, interviews & workshops reveal the performance in 6 areas Fleet planning and schedule assessment Chartering/booking Voyage execution Speed management Port efficiency Cargo optimization Hull condition Propeller condition Autopilot & rudder Trim and draft Voyage performance Ship performance Fuel management Fuel quality and quantity Bunkering procedures Fuel sampling Main Engine efficiency Aux Engines efficiency & utilization Generator efficiency Main and AUX engines Consumers Cargo Thruster Ventilation, HVAC, cooling/ freezing, lights, frequency drives Insulation and heat losses Misc. consumers Management & Organisation Organizational setup, roles, responsibilities Policy, processes and procedures Communication and training Reporting, review and follow-up Energy Management Advisory March,

14 Conclusions Prepare for the unexpected, rank risk and consequences also in your daily. The environmental scrutiny is increasing, and abatement solutions maturing Cost-issues are prudent Work systematically on energy efficiency initiatives, savings of 2-8% can mean make it or break it Proper purchasing routines is an important part of your cost-control initiatives INCAT