LNG AS A BUNKER FUEL WARTSILA IMSF CONFERENCE, OSLO MAY 2012 / 25 Wärtsilä
Until now.. / 25 Wärtsilä
From now on. Established Emissions Controlled Areas Emissions Controlled Areas under consideration Shipping critical points / 25 Wärtsilä
The Question? What will be shipping industry s response to increasing environmental challenges LOCAL LOCAL NO x Acid rains Tier II (2011) Tier III (2016) SO x Acid rains Sulphur content in fuel LOCAL GLOBAL Particulate matter Direct impact on humans Locally regulated CO 2 Greenhouse effect Under evaluation by IMO 4 Wärtsil / 25 Wärtsilä ä 19 April 2012
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 The main driver: SOx regulations 4,5% Global SECAs EU: Baltic & North sea, English Channel, US Coastal waters 3,5% 1,5% 1,0% 0,5% 0,1% Ports Ports & Inland NOTE: today s average %S in HFO is 2,7
What solution? Several different alternatives are viable for emissions regulations fulfillment: 1 2 3 Change to lowsulphur distillate fuels Does not fulfill NO X limits! Apply exhaust gas treatment technologies Switch to LNG
THE GENERAL ANSWER LNG IS CLEAN LNG PROVIDES COMPLIANCE WITH EMISSION REQUIREMENTS WITHOUT ABATEMENT TECHNOLOGIES GHG -25% -85% -100% Emission values [%] 100 90 80 70 60 50 40 30 NO x SO x -100% 20 10 Particulates Dual-Fuel engine in gas mode Diesel engine 0
Key questions Natural gas is great, but where do I get it? Where is the infrastructure and can I depend on gas It s the chicken and egg dilemma
The challenge vessel operators are facing LNG HFO HFO HFO HFO LNG? 9 Wärtsilä
..Challenges LNG Infrastructure missing Rules and regulations for LNG onboard ships are not fully yet there Bunkering rules missing-safety procedures existing
LNG BUNKERING BY TRUCK / 25 Wärtsilä
Million tonnes/year Million tonnes/year Imbalances between import and export capacities still exist 2 500 Export Capacity 1 800 1 600 Import Capacity 2 000 Malaysia Oman 1 200 Italy 1 500 Russia Spain 1 000 Asia-Pacific Indonesia Africa Middle East Latin America Europe North America Grand Total China 1 000 Qatar 800 India Existing 475 Nigeria176 389 60076 25 3 1 144 United States Australia Japan Planned 500 and Proposed 137 Rest of 211 world 400 26 86 32 Rest 491 of world 200 Under Construction 281 35 316 - - Export plants Import plants Suspended 35 75 110 Speculative 20 45 21 86 Export terminals plans were suffering serious delays already before world economic crisis. Rising construction costs and labour shortages have delayed final investment decisions (FID) and put back construction and start-up dates for many liquefaction projects. Grand Total 912 467 424 199 111 35 2148 Long term fundamentals are perceived to be strong as demand for energy recovers, production of oil from traditional fields declines and environmental regulations push for cleaner fuels Uncertainty regarding potential for shale gas; as shale gas exploitation might undermine demand for LNG Bunker fuel retail network, need for secondary distribution and storage Major challenge is who will invest first?... Retailers or shipowners? 1 400 France Sources: / 25 Petroleum Wärtsilä Economist
Demand for gas and LNG is increasing Demand for natural gas is expected to grow LNG will grow faster than pipeline gas Source: Demand for natural gas from BP s energy outlook, IEA / 25 Wärtsilä
Natural gas trades, demand and availability Newbuilding prices are very attractive Source: Clarkson Research Services
LNG is economical... INTERNAL USE ONLY Source: Methanex 15 / 25 Wärtsilä
Different views on the future of LNG 16 Wärtsilä
Global Sulphur Cap introduced after 2025 0,1% 4,5% 3,5% Introduction of 0.50%S Global Cap After 2025:Increased compliance due to introduction of the global sulphur cap in different areas of the world, Adoption of scrubbing will be more widespread as vessels are built with scrubbing capability Bunker demand will drop slightly as a result of increased use of LNG, and other alternative fuels Switch to diesel will result in global bunker distillate demand rising from 30% 40% after 2015, falling slightly as owners opt for scrubbers but rises after through 2025 until more newbuilding designs with scubbers and residual demand outstrips distillates after 2035 Source: Robin Meech / 25 Wärtsilä
Gas-fuelled vessels - Market development & drivers Estimated new building market (contracting) Total newbuilding market forecasts-ihs Fairplay March 2012 Political & regulations Environmental legislation Gas handling regulations Predictability of energy policies # of 3 000 vessels Gas fuelled vessels market - LNG price<hfo price Gas fuelled vessels market-lng in current price level 2 500 2400 Economical Cost of gas vs. abatement technology Gas price vs. alternative fuels (HFO) 2 000 1790 Gas availability & bunkering infrastructure 1 500 Engine technology exists Technological Onboard gas storage technology is improving, but feasible already today 1 000 700 Further application engineering needed 500 29 330 100 400 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Main drivers for the market are environmental legislation, fuel price and gas availability *IHS Fairplay/Lloyds Fairplay = SAI (Institute of Shipping Analysis)
Crucial role of US to gas development INTERNAL USE ONLY 19 / 25 Wärtsilä 3 July 2009 Presentation name / Author
Shale gas effect on LNG pricing US is Saudi Arabia of shale gas swims in centuries of supply Natural Gas bargain price gas drivers INTERNAL USE ONLY shale supply + bargain prices / 25 Wärtsilä
US LNG exports appear economical Source: Economic Commission for Europe, Committee on Sustainable Energy, Francisco de la Flor, 2012 21 / 25 Wärtsilä 3 July 2009 Presentation name / Author
Thank you! www.wartsila.com Business Analyst evelyne.namanda@wartsila.com 22 Wärtsilä Sailing on LNG Byung Sam Ahn, Wärtsilä Ship Power