GL Your competitive edge Take the lead through innovation

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1 Costs and benefits of LNG-fuelled feeder container vessels Dr. Pierre C. Sames, Senior Vice President Strategic Research and Development GL Your competitive edge Take the lead through innovation

2 Contents Introduction attractions to using LNG LNG-fuelled container vessel concepts LNG as fuel for feeder container vessels assumptions of study fuel price scenario key results LNG supply and bunkering Outlook Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 2

3 Attractions for using LNG as ship fuel 1. 90%-95% reduction of Sulphuroxide emissions required within Emission Control Areas (ECAs) by 2015 required globally by 2020, pending a review at IMO by reduction of Nitrogen-oxide emissions to IMO Tier III levels only for pure gas engines and dualfuel four stroke engines required within Emission Control Areas by % to 25% reduction of Carbondioxide emissions Methane slip needs to be avoided during bunkering and usage g/kwh Emission compone nts (100% load) ,1 so urce: M A N CO2 NOx SOx 6S70ME-C - 23 % - 80 % - 92 % 6S70ME-GI (with EGR) Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 3

4 Historic records of fuel prices update Gas and ship fuel prices (monthly averages) LNG Zeebrugge HFO Rotterdam MGO Rotterdam but consider small scale LNG supply costs! USD / mmbtu Jan-06 Apr-06 Jul-06 Jan-07 Apr-07 Okt-06 Jul-07 Jan-08 Apr-08 Okt-07 Jul-08 Jan-09 Apr-09 Okt-08 Jul-09 Jan-10 Apr-10 Okt-09 Jul-10 Jan-11 Apr-11 Okt-10 Jul-11 Okt-11 Jan-12 Sources: apxendex.com, x-rates.com, bunkerw orld.com, graph by PCS/GL LNG: Liquefied Natural Gas, HFO: heavy fuel oil (IFO 380), MGO: marine gas oil, BTU: British thermal Unit = 1,06 kj Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 4

5 Projects exploring LNG as ship fuel for container vessels GL 1200 TEU feeder (2009) IPP 4200 TEU (2011), AiP* by GL mobile tank system (2012), AiP* by GL DSME TEU (2011), AiP* by GL IHIMU TEU (2012), AiP* by GL Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 5 *) Approval in Principle, stating technical feasibility

6 LNG as ship fuel for container feeder vessels an extension to the joint study by GL and MAN GL and MAN presented a joint study on cost and benefits of LNG as ship fuel for container vessels. They compared a standard container vessel with advanced vessels using LNG as ship fuel, scrubber systems and waste heat recovery systems, addressing 2500 TEU to TEU vessels. This extension to the original study focuses on 900 TEU to 2500 TEU container feeder vessels. The same assumptions are used again except for the LNG tank volume which is taken to supply fuel for the entire roundtrip of the container feeder vessel. Speed (knots) ME power (kw) Roundtrip (nm) ECA share 900 TEU ,0% 1250 TEU ,0% 1550 TEU ,0% 1800 TEU ,0% 2100 TEU ,0% 2500 TEU ,0% Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 6

7 Fuel price scenario delivered to the ship Fuel price scenario HFO 2.7% S MGO 0.1% S LSHF 0.5% S LNG USD/mmBTU Source: GL-MAN container vessel advanced propulsion roadmap LNG delivery costs of 4 USD/mmBTU have been added to the LNG wholesale price. Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 7

8 Results for 1250 TEU vessel (100% ECA operation share) 8 Annual cost advantage for 1250 TEU container vessel (compared to a standard vessel using standard fuels) Scrubber LNG musd 0 Invest % ECA, LNG at 13 $/mmbtu Source: GL container feeder vessel advanced propulsion roadmap Annual cost advantage compared to the standard vessel is significant once strict fuel-quality regulations are in place. Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 8

9 Payback for LNG technology 48 Payback for LNG system (start in 2015) 900 TEU 1250 TEU 1550 TEU 1800 TEU 2100 TEU 2500 TEU Payback (months) % 30% 40% 50% 60% 70% 80% 90% 100% Share of operation inside ECA Source: GL container feeder vessel advanced propulsion roadmap Payback for smaller vessels is faster due to relatively smaller additional invest Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 9

10 Payback for LNG technology Payback for LNG system (start in 2015) TEU 1250 TEU 1550 TEU 1800 TEU 2500 TEU 2500 TEU Payback (months) ECA operation share varies for ship size 2000 $/m³ 3000 $/m³ 4000 $/m³ 5000 $/m³ Specific cost for LNG tank system Source: GL container feeder vessel advanced propulsion roadmap Doubling LNG tank specific costs almost doubles payback time. Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 10

11 Payback for LNG technology Payback for LNG system (start in 2015) Payback (months) possible in USA -12,2 $/mmbtu 900 TEU 1250 TEU 1550 TEU 1800 TEU 2100 TEU 2500 TEU -10,2 $/mmbtu typical for Europe -8,2 $/mmbtu -6,2 $/mmbtu -4,2 $/mmbtu -2,2 $/mmbtu Fuel price differential (LNG-MGO) ECA operation share varies for ship size Source: GLcontainer feeder vessel advanced propulsion roadmap LNG prices strongly affect payback time Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 11

12 LNG vs. scrubber technology 9 Fuel price differential to make LNG system more attractive than scrubber system MGO - LNG ($/mmbtu) c 900 TEU 1250 TEU 1550 TEU 1800 TEU 2100 TEU 2500 TEU Source: GL container feeder vessel advanced propulsion roadmap LNG is preferred once LNG price differential to MGO is 6$/mmBTU or more. Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 12

13 Payback (months) for a 1250 TEU vessel LNG price 13 $/mmbtu 15 $/mmbtu 17 $/mmbtu LNG spec. tank price 2000 $/m $/m $/m LNG specific tank price has a lower effect on payback than the price of LNG. Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 13

14 LNG supply and bunkering GL and Hamburg Port Authority studied LNG bunkering in the port of Hamburg within the CNSS project. A hazard identification showed that a large LNG spill due to a collision is the most critical case. The navigational safety study showed that the largest probability of a LNG bunker vessel is due to a collision when it is in transit. LNG bunker supply in north European ports will be made available with bunker vessels / barges. Sources for small cargoes of LNG are Rotterdam, Zeebrugge and Norway. Intermediate terminals are operating / planned in several ports and bunker vessels will distribute small LNG quantities in port. spec cost (USD/mmBTU) 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 Costs for LNG delivery by bunker supply vessel delivered net volume per year 1000 cbm BSV in port 1000 cbm BSV from Zeebrugge 3000 cbm BSV from Zeebrugge Source: GL estimates Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 14

15 Conclusions Using LNG as ship fuel is attractive due to lower air emissions than for standard fuels. The new GL study looks into LNG and scrubber solutions for several container feeder vessels operating partly inside ECAs. The study shows that LNG-MGO price difference, LNG tank costs and operating share inside ECA are the dominant parameters to be considered for future LNG-fuelled propulsion solutions. Similar conclusions are valid for other ship types, eg, product tankers. Costs and benefits of LNG-fuelled feeder container vessels last modified: , PCS No. 15

16 Thank you for your kind attention.