Fuels Options for Large Engines Today & Tomorrow

Transcription

1 Fuels Options for Large Engines Today & Tomorrow AVL Large Engines Conference, Graz 11/12.April 2018 Dr. Wolfgang Warnecke, Chief Scientist Mobility for Shell International

2 Definitions & Cautionary Note The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this presentation Shell, Shell group and Royal Dutch Shell are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words we, us and our are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. Subsidiaries, Shell subsidiaries and Shell companies as used in this presentation refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as joint ventures and joint operations respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as associates. The term Shell interest is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest. This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. 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There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell s Form 20-F for the year ended December 31, 2016 (available at and These risk factors also expressly qualify all forward-looking statements contained in this presentation and should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, February 27, Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this presentation. We may have used certain terms, such as resources, in this presentation that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 20-F, File No , available on the SEC website You can also obtain this form from the SEC by calling SEC-0330.

3 ENERGY RESOURCES ARE ABUNDANT Shell Copyright Projects & of Technology Shell

4 THE EVOLUTION OF THE WORLD S ENERGY SYSTEM Date Month

5 DECLINE IN LEVELISED COSTS OF ELECTRICITY FROM RENEWABLE ENERGIES

6 SHELL SKY ENERGY SCENARIO: Global Energy Demand 2020 Transport - Ship: 10,6 EJ (2,5%) Total: 416 EJ Shipping +45 % Global Energy Demand 2070 Transport - Ship:15,3 EJ (2,5%) Total: 623 EJ WORLD TOTAL FINAL ENERGY CONSUMPTION BY SECTOR IN SKY Source:

7 A MAJOR ISSUE IN TRANSPORTATION: THE EMISSION CHALLENGE Reduce GHG (CO 2 ) Emissions Reduce Local Air Quality related Emissions Reduce Noise Emissions Copyright Copyright Shell of Global Shell International Solutions

8 CO 2 -EMISSIONS CHANGES BY SECTORS 2016/1991, GERMANY

9 SOURCES OF ENERGY RELATED AIR POLLUTION FOSSIL FUELLED POWER PLANTS ROAD TRANSPORT: CARS, TRUCKS, BIKES RESIDENTIAL HEATING AND COOKING Coal, Fossil fuels Fossil fuels Fossil fuels and Bioenergy NON ROAD TRANSPORT INDUSTRY: COMBUSTION PROCESSES MINING ACTIVITIES Fossil fuels Fossil fuels Coal, Fossil fuels International

10 AIR POLLUTION EAST TO WEST TREND Global view of Air Pollution: The darker color the color, the higher the air pollution Source : AirplumeLabs International & Diesel Gate: Starting further discussion & development on Air-polluting emissions.also in the Marine and Power Gen.sector

11 IMO Outlook JANUARY 2020 IS LIKELY TO HAVE SIGNIFICANT IMPACT: The IMO global bunker fuel sulphur specification change to 0.5% The Emission Control Zones (ECAs) spec. change to 0.1%S - whilst a large shift, only impacted ~300 kbd of demand. Up to 3 mbd of HSFO demand will be displaced by 0.5%. There has been a mixed response from the refining industry which may struggle to cope with this large spec. change. The shipping industry have a difficult choice between cost and capital. Magnitude and duration of price dis-continuity between HSFO and Gasoil is uncertain. Graphics source: Argus

12 Near Term Choices MARINE VESSELS OPERATORS WILL HAVE A NUMBER OF CHOICES OF HOW TO COMPLY WITH THE NEW SULPHUR SPECIFICATIONS 0.1/0.5 % S Fuel Oil Switch MGO/DMA to LSFO Scrubber New/Retrofit LNG New Build/Retrofit Minimize operational Convenient and widely Cheaper fuel and quick Proven technology and difficulty and cost available payback reduction Sox/Nox Variability of quality of Operational experience in Limited operating Lower CO2 emissions blends per supplier industry experience Growing availability Only a few suppliers can offer reliable supply Higher cost Thermal shock and lubricity Ship stability and space Safe sludge handling and Cost advantage to MGO/DMA issues disposal necessary Shell will supply differentiated LSFO MGO/DMAB will remain key products for Shell Shell can supply HSFO 3.5% Shell is an innovation leader in LNG Specific Shell Lubricants required

13 Option 1: Low sulfur liquid fuels Crude Crude distillation unit Naphtha HDT Kero/gasoil Platformer HDS LPG Mogas EC ECGO ECR 0.5% Residual grades High Vacuum unit Long residue VGO Catalytic cracking Hydrocracking Kero Gasoil Distillate grades 0.5% Residual grades vacuum residue Thermal cracking/ VB Residue hydroprocessing Fuel oil 0.5% Distillate grades HS residual fuel oil 0.5% Residual grades SDA DAO Asphalt Slurry/Hydrowax 0.5% Residual grades 0.5% Residual grades LS residual streams Higher Demand on Gasoil fraction also due to increase in Road Transportation

14 Option 2 scrubbers (open vs closed loop) open loop closed loop Works with sea water (using basic buffering capacity to absorb SO x ) No added chemicals needed Outlet water contains soluble sulfates and traces of other contaminants discharge quality concerns Solid sludge captures most of solid particles and is disposed at ports Works with sea water plus some sodium hydroxide better buffer capacity less water needed Needs chemicals storage on board Minimal discharge water (bleed fraction) Sludge + hold tank water treated at port Good solution for sea water with low buffering capacity or with strict discharge rules Not practical for long journeys. A hybrid concept (closed + open) can be used.

15 Option 3 - LNG THE NEW ENERGY FUTURE BY 2050 Shell s Scenarios team expects the global population to grow by 2 billion people by 2050, primarily in cities. This growth will lead to a doubling of global energy demand (compared to the year 2000) and rising CO 2 emissions. FUEL OPTIONS Electricity Traditional fuel NATURAL GAS IS CLEANER BURNING At Shell, we believe that natural gas should be the cornerstone of the world s energy system as it is globally available, has the lowest emissions of any fossil fuel, and can be used cost effectively to fuel all aspects of our lives. LNG Cool and liquify natural gas 50+ years experience 600x smaller In the city Distribution Delivery Outside the city End users End users World population 9 billion Energy demand will double Storage Distribution Delivery Needs equipment and infrastructure investment Distribution & delivery Biofuel Natural gas People living in cities 75% Increased emissions WHAT ARE THE ADVANTAGES? 2,000,000,000 VEHICLES 800,000,000 TODAY Hydrogen Reduce local emissions (cleaner air) Reduce noise* Non-toxic & biodegradable No black smoke Lower total cost of ownership (in comparison to diesel) Reduces greenhouse gas emissions No sulphur/ aromatics (less odour) *Limited to SI engines with sound intensity measured in watts/m 2 at peak load and idle conditions

16 Option 3 - LNG Allows to meet all present emissions limits (SOx, NOx Tier III) PMs virtually absent CO 2 greatly reduced with respect to HFO (- 20/25%) BUT: New technology that still needs to be matured Crew needs proper training to be able to safely handle LNG Scarcity of bunkering hubs High CAPEX and not really suitable for retrofit (i.e. only for new builts) Most concerning: extent of methane slips and their influence on the environment (2 strokes better than 4 strokes) Future Trends Dual Fuel concept (LNG + gasoil) most likely to spread (flexibility in type of fuel available) LPG, LBG, LEG could spread along LNG (also as blends) Strong option on a longer term (2030+)

17 Bunker Demand Compared with 300kbd LSFO displaced during the ECA transition in 2015, the 3mbd 2020 transition could have a dramatic impact. LNG

18 NEXT GENERATION FUELS: THERE S NO SILVER BULLET There needs to be a technology neutral approach to allow all options to develop BETTER & MORE BIOFUELS Heavy duty transport and aviation need Biofuels MORE GAS Emission reduction potential and affordable HYDROGEN Hydrogen has the potential to play an important role in a low-carbon energy system (GREEN) ELECTRONS IN TRANSPORT Photons to Electrons will become large and affordable. Electrons from Water Splitting (H 2 ) or Synthetic Fuels Production are options aside BEVs Copyright Shell Global Solutions

19 DENSE ENERGY CARRIERS (DEC) FUELS: POWER-TO-X (PTX) POWER-TO-GAS (PTG) POWER-TO-LIQUIDS (PTL) Dense Energy Carriers

20 ROUTES TO SYNFUELS MGO

21 CHEMICAL PTL SYNTHESIS PATHWAYS

22 GREEN HYDROGEN AND DOWNSTREAM SYNTHESIS PRODUCTS ( Syn Fuels )

23 PTL FUEL EXAMPLE: OME PRODUCTION & SPECIFICATION Diesel B7 (EN 590) H 2 CO 2 MeOH Formaldehyd (CH 2 O) DME OME n=1 OME n=2 OME n=3 OME n=4 Methylal (C 3 H 8 O 2 ) Trioxan (C 3 H 6 O 3 ) OME n=1 (C 3 H 8 O 2 ) OME n=2 (C 4 H 10 O 3 ) OME n=3 (C 5 H 12 O 4 ) OME n=4 (C 6 H 14 O 5 ) OME Formula CH1,83O0,01 C2H6O C3H8O2 C4H10O3 C5H12O4 C6H14O5 Melting Point ( C) Boiling Point ( C) Density, liquid at 15 C (kg/m³) kinematic Viscosity at 2-4,5 <0,1 0,64 1,05 1,75 40 C(mm²/s) Cetane Number > Oxygen Content (m%) 1,2 34,7 42,1 45,3 47,1 48,2 PtL Fuels Do Not Comply with today s EN 590 Fuels Spec. Volumetric calorific value H u at 15 C (MJ/l) Potential Issues Property similar to LPG Non useable as ICE fuel Non useable as ICE fuel Production, Fuel Efficiency Production, Fuel Efficiency Example: Energy Density per Volume only 50% of conventional Middle Distillate (AGO/LSFO/MDO)

24 INVESTMENT CONSIDERATIONS Investment pattern for PTL differs significantly from other alternatives and is not aligned with current regulation Fuels Production Fuels Distribution Fuel Usage/Equipment PTL H BEV NA + ++ WtT TtW current regulation has clear split

25 FORESEEABLE DIVERSIFICATION OF FUELS IN TRANSPORTATION SEGMENTS City Car Long Distance Car Light Truck Municipal Fleets Heavy Truck Off road: Agriculture, Construction, Mining Rail Marine Aircraft Copyright Shell Global Solutions Even long term true?

26 SUMMARY IMO 2020 TRANSITION PROVIDES BOTH A CHALLENGE & OPPORTUNITY FOR THE REFINING & SHIPPING INDUSTRY, WITH SIGNIFICANT UNCERTAINTY IN THE INITIAL YEARS The final regulatory requirements are likely to remain unclear until early The Refining industry is preparing for the opportunity to convert the High Sulphur Fuel Oil length and meet the additional distillate demand. The Shipping industry faces significant uncertainty with potentially higher fuel costs or the need for capital investment. Markets are likely to see a 1-2 year period of increased volatility and changing supply & demand volumes. Shell will be working together with Customers on their options, a quality 0.5% Bunker fuel, LNG as the future fuel, MGO or 3.5% to those with scrubbers. Could New (eg. synth.) fuels provide a long term opportunity for shipping to deliver CO 2 neutral transport? Have other Options as Hydrogen or Electrification a Future? International 26

27 International Thank you

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