WÄRTSILÄ SHIP POWER JAAKKO ESKOLA SENIOR EVP DEPUTY TO THE CEO PRESIDENT, SHIP POWER 1 / Doc.ID: Revision: Status:
The most complete Marine Offering on earth 2 / Doc.ID: Revision: Status:
Market trends and drivers Development of the global economy drives marine trade and transportation growth Development of oil & gas prices stimulates investments in exploration and production of offshore oil & gas Environmental regulations drive demand for environmental solutions and LNG as a marine fuel Increasing focus on energy efficiency and environmental performance The development of efficient vessels, environmental solutions and gas technology will be our priority in meeting your evolving needs. 3 / Doc.ID: Revision: Status:
THROUGH OFFERING LEADER IN Strategic focus Wärtsilä s strategy for the marine and oil & gas market To be recognised as the leading provider of innovative products and integrated solutions in the marine and offshore oil & gas industry. Energy efficiency Gas and dual-fuel solutions Environmental solutions Lifecycle solutions for ship owners and operators Integrated solutions for the shipbuilding industry, owners and operators The most competitive products and delivery process for the marine industry 4 /
Why do our customers choose us? The fundamentals has not changed just the order of importance Wärtsilä does: Continuously responsive to customer needs, competent and reliable Integrated system supplier, total solution provider Provide high-quality life-cycle power solutions, maintenance and service suitable to customers Enhancing customers business through superior energy, operational and environmental efficiency Trusted partner Customer needs: Customer understanding - Understands customers business and needs - Matching offering that suits the needs Trustworthy partner - Has good references - Reliable - Takes responsibility Customer management - Easy to work with - Competent personnel - Response time Efficient systems - High quality - Innovative 5 /
This is what we bring to the market Project services Support during project development and execution Comprehensive product portfolio Marine lifecycle services Ship design and naval architecture Financial services Integration engineering Project transport & logistics Project management Site management and supervision Commissioning Environmental technologies Engines and gensets Propulsion equipment Power distribution Automation & Control Power drives Pumps and valves LNG liquefaction and regasification Operational support All maintenance (schedule & unscheduled) Performance optimization Fixed & variable pricing Performance guarantees Lifecycle cost guaranteed 6 / Doc.ID: Revision: Status:
THE MOST COMPLETE MARINE OFFERING ON EARTH Automation Ballast Water Management Compressors Engines & Generating Sets Exhaust Gas Cleaning Gas Systems Gears Inert Gas Integrated solutions Marine Lifecycle Solutions Oil Separation Power Electric Systems Project Management Propulsors Pumps & Valves Seals, Bearings & Stern Tubes Services Ship Design Waste & Fresh Water Management
The most complete Marine Offering on earth 8 / Doc.ID: Revision: Status:
Truly global 70 countries 160 locations 18000 people The only player in the market with a truly global presence and capability to service customers 24/7 on all continents Every second ship in the world is equipped or served by Wärtsilä 9 / Doc.ID: Revision: Status:
Market drivers and Competitive landscape 10 / Doc.ID: Revision: Status:
Market drivers Environment Emissions legislation (Nox) 2015-2016 postponed (sulphur still to be implemented) Financial impact for owners & increased uncertainty with fleet renewals/upgrades LNG LNG bunkering availability Wärtsilä proven technology Fuel types being used Offshore Deepwater requiring more power High oil price Brazil and China Merchant Fleet supply and demand volatility Low cost manufacturing 11 /
Increasing environmental regulation and alternatives for decreasing emissions NO x SO x PARTICULATE MATTER GREENHOUSE GAS BALLAST WATER Acid rains Ozone depletion Acid rains Impact on air quality Global warming Damage to local eco-systems Tier II (2011) Tier III in ECA* (2016) 3.5% (2012) ECA 0.1% (2015) Global 0.5% (2020) Along with SO x reduction Under evaluation by IMO Global ballast water convention Wärtsilä is offering a multi-solution approach to meet requirements for different owner needs, ship types and operating profiles. LNG Simultaneous reduction of GHG / SO x / NO x / PM Market: mainly ships with regular routes and limited autonomy requirements operating in ECAs Infrastructure development is needed for larger uptake Conversion solution available HFO NO x : SCR or wet methods SO x : Scrubbers Market: mostly merchant ships operating a significant time in ECAs MGO NO x : SCR or primary methods Market: ships operating a limited time in ECAs, small ships *Emissions Control Areas 12 /
Regulation 2012 Jan 1: Europe confirmed draft changes to sulphur in fuel directive. 2014 Jul 1: Ecdis mandatory for existing passengerships (<500 gt) 2014 Jul 1: Ecdis mandatory for newbuilding cargoships (>3,000gt and <10,000 gt) 2012 Jul 1: Ecdis mandatory for 2014 Jan 1: IMO ballast water newbuilding passengerships (>500 convention applies to vessels built gt) and newbuild tankers (>3,000gt). pre 2009 (implies treatment technology needs installing on vessels with ballast capacity 1,500 gt to 5,000 gt) 2014 Jan 1: US ballast water requirements for existing ships (ballast water capacity 1,500 cu m to 5,000 cu m) 2016 Jan 1: IMO ballast water convention applies to all other vessels (implies treatment technology needs installing on vessels with ballast water) 2014 Jul 1: Noise levels: The code on noise levels onboard ships will come into effect when the new regulation enters into force. 2016 Jul 1: Ecdis mandatory existing tankers (>3,000 gt) 2016 Jan 1: US ballast water requirements for existing ships (ballast Water capacity less than 1,5000 cu m or greater than 5,000 cu m) 2016 Jan 1: IMO NOx tier III rules in force (newbuildings operating in an ECA) 2018 Jan 1: Ecdis mandatory existing cargo vessels (<20,000 gt) 2018 Jul 1: IMO low-sulphur fuel availability survey completed (to determine if 2020 global reduction to 0.4% should be deferred to 2024) 2024 Jan 1: Sulphur in fuels global limit drops from 3.5% to 0.5% (2018 survey pending) 2020 Jan 1: European rules on sulphur in fuels forces drop to 0.5% regardless of IMO 2018 availability study 2012 2013 2014 2015 2016 2017 2018 2019 2020 2013 Jan 1: EEDI becomes mandatory for newbuildings. Benchmark set. 2013 Jan 1: US ballast water requirements start for newbuildings. 2013 Jul 1: Ecdis mandatory for newbuilding cargoships (> 10,000 gt). 2013 Jan 1: Ship Energy Efficiency Management plan and EEDI comes into force. 2013 Aug 1: Maritime Labour Convention. 2015 Jul 1: Ecdis mandatory existing tankers (>3,000 gt) 2015 Jan 1: SOx ECA limits sulphur in fuel drops from 1.0% to 0.1% (SOx in emissions should be equivalent if post combustion exhaust gas cleaning technology is used) Source : Lloyd s List. 50,000 gt) ECDIS=Electronic chart Display and Information system, EEDI=Energy Efficiency Design index 2017 Jul 1: Ecdis mandatory existing cargo vessels (20,000 gt to 2020 Jan 1: Potential start of market-based measure to further curb CO2 emissions from shipping (and contribute to the UNFCCC initiated climate 2020 Jan 1: Sulphur in fuels global limit drops from 3.5% to 0.5% (2018 survey pending) 13 /
The competition has changed ** * E&A Propulsion Gas Systems LGE 4-stroke medium speed SHIP POWER Flow Systems Local pumps makers MARIC Ship Design 2-stroke Environmental solutions EGCS Major Shipyards IGS BWMS 14 /
Our expertise in the gas value chain LNG liquefaction & terminal LNG terminal & Regasification (FSRU/JRU) Distribution & transport Small-scale LNG plants LPG/LEG/LNG tanker LNG receiving terminal Power generation Production LNG fuelled vessels LNG carrier Oil tanker with VOC LNG fuelled vessels LNG bunkering & barges Exploration & development FPSO Flare recovery Oil separation Exploration & Drilling Production & liquefaction Transport & storage Receiving terminals & regasification Distribution & transport to the users LNG fuel gas systems for OSVs On- & Offshore small scale liquefaction Antiflaring/VOC Oil separation Gas FPSO LNG fuel gas systems LPG, LEG & LNG cargo handling Jetty & Floating regasification Bunkering & barges Receiving terminals Gas/LNG distribution/logistics Feed gas to Power plants 15 / 3 March 2014 Wärtsilä Ship Power
Clear leadership in dual-fuel applications Power Plants Merchant Offshore Cruise and Ferry Navy Others DF Power Plant 67 installations 354 engines Output 4600 MW Online since1997 LNGC 141 vessels 567 engines Multigas Carrier 5 vessels 20 engines Conversion 1 Chem. Tanker Ro-Ro 2 vessels 8 engines OSV s vessels 96 engines Production 2 platform 9 FPSO s 1 FSO 40 engines LNG Cruise ferry 1 vessels 4 engines Complete gas train LNG ferries 5 ferries 20 engines Complete gas train Coastal Patrol DF-propulsion DF main and auxiliary engines TUG 2 vessel 2 engines each Mechanical drive Guide Ship 1 vessel /engine IWW 2 vessel 3 engines 6 segments > 1 000 engines > 9 000 000 running hours 16 / Doc.ID: Revision: Status:
R & D 2S DualFuel engines New 4S engine portfolio Wärtsilä 3C New generation X engines Medium voltage power drive LNGPac ISO System Integration at its best Evergas WST 45U BWMS aquarius EGC Gas reformer 17 /
Shipping outlook 18 / Doc.ID: Revision: Status:
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Shipbuilding has moved to Asia China has gained the top merchant builder position Contracting volumes - Share by region (GT) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% In 2012, Chinese yards won back some of the contracting share they lost to South Korea in 2011. This continued in 2013. Source: Clarkson Research Services China P.R. Japan South Korea Europe Other Asia Rest of world 19 /
Shipping and shipbuilding demand depends on global economy 12,0% 10,0% Projected 8,0% 6,0% 4,0% 2,0% 0,0% -2,0% -4,0% -6,0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Seaborne trade growth GDP growth Political and economic issues continue to limit growth in the short-term. The global economic outlook for the medium- to long-term is more positive due to more robust growth projections for developing economies and the concurrent recovery of western economies. Source: IMF, Clarkson Research Services 20 /
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Number of vessels M CGT Contracting activity development 6 000 5 000 4 000 3 000 2 000 1 000 100 90 80 70 60 50 40 30 20 10 Contracting activity improved in 2013 Finance and poor freight markets are clouding recovery The contracting product mix has been spread across the various vessel sectors Regulations and fuel prices driving towards eco designs and gas as a fuel Accelerated demolition creating additional demand High proportion of contracts with options attached in 2013 Owners wanted to take advantage of the attractive newbuilding prices in a rising market 0 0 Number of vessels CGT Source: Clarkson Research Services 21 /
1990-01 1990-07 1991-01 1991-07 1992-01 1992-07 1993-01 1993-07 1994-01 1994-07 1995-01 1995-07 1996-01 1996-07 1997-01 1997-07 1998-01 1998-07 1999-01 1999-07 2000-01 2000-07 2001-01 2001-07 2002-01 2002-07 2003-01 2003-07 2004-01 2004-07 2005-01 2005-07 2006-01 2006-07 2007-01 2007-07 2008-01 2008-07 2009-01 2009-07 2010-01 2010-07 2011-01 2011-07 2012-01 2012-07 2013-01 2013-07 2014-01 INewbuilding price Index Clarksea index USD/Day Earnings and newbuilding prices Earnings and newbuilding prices 250 Newbuilding prices increased steadily during 2013 accross all sectors. 60000 200 50000 150 40000 30000 100 20000 50 10000 0 0 Newbuilding Price Index ClarkSea Index $/Day Source : Clarkson Research Services Earnings dropped in January from December highs, however remain in an improved level. VLCC rates fell dramatically during the last week of January bringing average earnings down by 58% w-o-w to $20,387/day. 22 /
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 USD/Day 2000-01 2000-05 2000-09 2001-01 2001-05 2001-09 2002-01 2002-05 2002-09 2003-01 2003-05 2003-09 2004-01 2004-05 2004-09 2005-01 2005-05 2005-09 2006-01 2006-05 2006-09 2007-01 2007-05 2007-09 2008-01 2008-05 2008-09 2009-01 2009-05 2009-09 2010-01 2010-05 2010-09 2011-01 2011-05 2011-09 2012-01 2012-05 2012-09 2013-01 2013-05 2013-09 2014-01 2014-04 2014-08 2014-12 2015-04 2015-08 2015-12 USD/Tonne Bunker fuels Focus on fuel efficiency, regulatory issues 1400 MGO forecasts do not seem to have any response to the upcoming SECA limits 1200 1000 800 600 MGO bunker prices, Rotterdam MGO Forecast 380cst bunker prices, Rotterdam MDO bunker prices, Rotterdam 400 200 0 Issues of fuel efficiency and impending environmental regulations are making owners increasingly conscious of more eco designs. In addition the owners may increasingly wish to scrap more inefficient tonnage at an age below the historical norm. Price of fuel for the ship vs. price of the ship 40 000 35 000 30 000 25 000 20 000 15 000 10 000 5 000 0 Bunker cost Source: Clarkson Research Services, Consensus Economics Inc. Fundamental change in the economics of shipping 23 /
Natural gas, USD/MMBTU Gas prices Natural gas price historical and forecast (IMF) 20 18 16 14 12 10 8 6 4 2 Natural Gas, Russian Natural Gas border price in Germany, US$ per MMBTU Natural Gas, Indonesian LNG in Japan, US$ per MMBTU Natural Gas, Natural Gas spot price at the Henry Hub terminal in Louisiana, US$ per MMBTU 3,666 LNG to Japan Russian pipeline gas Oil&Gas Companies are basin 2014 spending plans on U.S. natural gas prices of $3.66 Henry Hub 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 As LNG gains a more substantial share of the gas market, it is expected that the traditional oil indexed long term gas transportation contracts are likely to switch to an independent, hub or spot based pricing method. Source : IMF The effects of this movement in the gas markets are expected to lower gas prices, as the differential between current oil and gas prices increases and individual gas futures markets help to mitigate risks associated with the spot market, increasing the attraction of gas as a fuel versus coal and oil. 24 /
Offshore outlook 25 / Doc.ID: Revision: Status:
Million tonnes / year USD Million Strong growth in LNG supply and demand Natural gas is becoming an increasingly popular fuel for power generation offering a relatively safe (compared to nuclear); cheap (compared to oil); and clean (compared to coal) energy source. Demand for natural gas to increase by 55% over the next 20 years 30% of global gas imports are via LNG Lack of new LNG export capacity limited trade in 2012 and 2013 Wordl LNG exports and imports 2012 700 600 500 400 300 200 100 Growth supply in recent years driven by Middle East, demand driven by Asia Significant project delays and cost overruns Large Australian projects coming online Potential future supply from Russia, US shale gas, W & E Africa & Mediterranean CAPEX on FLNG expected to increase significantly Asia will dominate FLNG regas projects as domestic gas demand grows. CAPEX on FLNG Liquefaction vessels 12000 10000 8000 6000 4000 2000 0 Export capacity Export production Import capacity Impport consumption 0 2014 2015 2016 2017 2018 2019 2020 Source: Douglas-Westwood, Petroleum Economist, SP BI 26 /
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Number of units 537 663 677 718 736 776 Offshore contracting outlook Offshore contracting historical and forecast 1200 1000 800 600 400 200 0 Historical Forecast The offshore oil and gas industry is recognised as a key growth area for the future of oil production and fleet growth. Whilst some oil producing areas are in long term decline, this has only encouraged exploration in less conventional areas, resulting in a need for more specialised and technologically advanced structures. The long-term forecast requirement for structures engaged in the offshore oil and gas business is based upon analysis and modelling of future fields coming online. Offshore mobile contracting is expected to total 537 in 2014, slightly up from 2013. Long-term projections suggest an average of 661 contracts p.a. (2013-2019) compared to an average of 589 p.a. (2008-2012). Despite the supplyside growth in the OSV and rig sectors, demand is still expected to increase significantly, leading to further contracting in these sectors. The expectation for offshore supply-side expansion is supported by the future field developments, notably by those in the deep water. Source : Clarkson Research Services, OFC September 2013 27 /
Contracting update 28 / Doc.ID: Revision: Status:
Number of vessels LNG Carriers LNG Carrier Contracting activity 90 80 70 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 F Medium- and long-term new build potential are promising - long liquefaction and regasification project list Short term overcapacity - export project delays Closure of nuclear plants and environmental issues associated with coal use in Asia and Europe bring good news to LNG market 2015 F 2016 F 2017 F 2018 F 2019 F Source: Clarkson Research Services, SP BI 29 /
01.09 03.09 05.09 07.09 09.09 11.09 01.10 03.10 05.10 07.10 09.10 11.10 01.11 03.11 05.11 07.11 09.11 11.11 01.12 03.12 05.12 07.12 09.12 11.12 01.13 03.13 05.13 07.13 09.13 11.13 01.14 # of vessels Million CGT Contracting Activity Development All vessels 250 5 200 4 150 3 100 2 50 1 0 0 Merchant Offshore Cruise and Ferry Special vessels 3 months moving average in CGT Source: Clarkson Research Services, Contracting activity as per 3rd of February 2014 30 /
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