The 2020 fuel Challenge in the Mediterranean

The 2020 fuel Challenge in the Mediterranean Dr Gerd-Michael Würsig, Business Director, DNV GL 1 SAFER, SMARTER, GREENER

Maximum fuel sulphur content (by mass - % m/m*) established by the EU Directive on ship fuel outside EU SECAs ** inside EU SECAs ** Exceptions Ships at berth in EU ports (includes at anchor) Passenger ships on regular services to/from EU ports 0.10% Not if timetable < 2 hrs or engines switch off and shoreside electricity Until 01-01-2020 1.5% From 01-01-2020 0.50% Until 31-12-2014 1.00% Ships using Approved Emission Abatement Methods**** Other ships/cases From 18-06-2014 3.50% *** From 01-01-2020 0.50% From 01-01-2015 0.10% 1999L0032 EN 17.12.2012 006.001 1 (includes: Directive 2012/33/EU of the European Parliament and of the Council of 21 November 2012 ) 2

Revised Directive agreed by EU; Alignment with MARPOL Annex VI Agreement on 0.5% in EU waters in 2020 3

EU Exclusive Economic Zone in the Mediterranean 4

LNG as fuel is still a young technology today First non gas carrier with LNG: 2000 2-stroke engine available: late 2012 (MAN), mid 2014 (Wartsila) First bunker ships available: 2016 (seven ships on order) IMO IGF-Code for LNG and CNG Adopted at IMO MSC-95, 12 of June 2015 In force: 2017 70 vessels running, 80 vessels are ordered (August 2015) 5

LNG supply for ships Pipeline gas coming from large distances will not be used as LNG ship fuel To much energy loss: liquefiers need 6 to 10% of the energy in the produced LNG to liquefy natural gas (same energy is needed for 1000 to 1500 km pipeline transport) Import terminals can supply bunker ships (size will be between 1000 to 8000 m**3 LNG and may be above) Export terminals only can supply free production capacity For sustainable business (after start up period and market building phase) a bunker supplier has to sell LNG with a competitive supply surcharge 2 to 3 $/mmbtu seem to be possible (6000 to 8000 m**3 bunker sold per week) A bunker ship may operate 200 to 300 sm around a supply terminal Is there enough possibility for supply in the Mediterranean? 6

LNG supply for ships is possible from LNG import terminals - import terminals in the Mediterranean - 7

Energy prices current development - Of 09 th September 2015 IFO 180/380: 7,76/6,73 $/mmbtu; 298/259 $/t MGO 0,1% S: 12,28 $/mmbtu; 497 $/t 6 Gas TTF: 7,37 $/mmbtu (lhv); 341 $/t 5 4 2 1 3 1 6 5 4 2 3 8

Why the oil price should come back to high prices? (range of production costs and part of production) 90 $/bbl 60 $/bbl 30 $/bbl Source: SNB (Swiss National Bank; 17.12.2014; www.snbchf.com) (Based on data from: Seadrill, Morgan Stanley Equity Research and the International Energy Agency) 9

AIS data from 2014-04 until 2014-09, all segments, all sizes, >90% inside the area 10 21/09/2015

How many ships can use LNG as fuel in the Meditarranean More than 10.000 ships operate in the Mediterranean. A large no is crossing and operate also in other areas. Approx. 1.200 operate permanently in the Mediterranean Only these ships can supplied the whole year with LNG from terminals in the Mediterranean 11

Ships operating more than 90% of the year in the Mediterranean 75 % of all ships are up to 30 years old; L < 30 m: 86%; 30 < L < 100 m: 68%; L > 100 m: 84% 25% of all ships are older than 30 years 59 % of ships are up to 20 years old approx. 500 ships are older than 20 years 12

What ship types operate permanently in the Mediterranean? 25% of all ships above 30 m length are passenger ships/ferries (30 % of L> 100 m) 40 % of all ships above 30 m length are dry cargo (18%), container (6%) and tanker (16%) ships 13

SeaRoad - LNG fuelled RoRo for Australia - GT 25,200 Trade Melbourne, Devonport (Tasmania) Length over all 181.52 m Lenght between perp. 171.31 m Breadth 26.60 m Depth to main deck 8.90 m Draught (designed) 5.90 m Draught (scantling) 6.30 m Deadweight Design speed Main Engine /LNG & MDO) 7,980 t 20.50 kn (MAK 8M46DF), Twin screw Trailer lane metres 1,929 m Delivery third quarter of 2016 2 x 7,200 kw (Dual Fuel Class DNV GL (1A1, General Cargo Carrier Ro-Ro, GAS FUELLED, EO, NAUT-AW, BIS, TMON, DGP, PIMS-Hull) 14

The biggest market segment are Passenger ships/ferries 281 Passenger ships/ferries operating only in the Mediterranean 164 ships above 100 m length, 117 ships between 30 and 100 m length Similar distribution of building dates in ships below and above 100 m length: 77 % of all ships are up to 30 years old; 50 % are up to 20 years old approx 140 ships are older than 20 years 15

How many passenger ship/ferries may operate on LNG as fuel? Newbuilding rate in passenger ships: 7,3 ships/a average over for the last 30 years; (1986/1995: 7.8; 1996/2005:10.0; 2006/2015: 4,1) 23 to 24 LNG fuelled passenger ships/ferries are possible (if all newbuildings from 2017 onwards are LNG fuelled). Higher number possible if ships built before 1996 are replaced by newbuildings with LNG (49% =140 ships) 16

MGO Scrubber LNG Other (LNG Ready service) (Methanol, Battery ++) Fuel decision ECA and fuel decision support Business Case Concept review Scrubber selection & benchmarking Concept design review Detailed tech feasibility study Concept HAZID Engine/tank selection review Concept HAZID Makers selection review Initial design Technology Qualification Approval in principle Technology Qualification Risk assessment Risk assessment DNV GL internal use only 17

LNG as ship fuel has the potential to improve the environmental footprint of ships significantly LNG is the only alternative fuel which is world wide available within the next decades and which can compete in fuel price with oil based fuels In a developed market LNG distribution costs will be on a level which keeps LNG competitive to oil based fuel The low oil price lead to a competition between LNG and HFO+Scrubber with both fuel solution on the same level with regard to overall costs. The international acceptance of LNG as fuel has been demonstrated by IMO with the preparation and adoption of the IMO IGF Code in June 2015 With 70 ships running and 80 on order the practical prove for LNG as fuel has been done The technology for propulsion, storage and bunkering of LNG as fuel is available on the market now With 7 bunker vessels on order the infrastructure for LNG supply starts to become available in the years to come 18

2013 Source: Fjordlines Source: Vesseltracker; Photo: 29.6.2015, river Elbe 19

HFO the ship fuel for ever? - shrinking HFO and increasing oil production Source: BP, comp HFO capacity GEWUE 21 3 2015.xlsx 20

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