LNG AS MARINE FUEL THE MARKET AND TECHNOLOGIES OTMW-N 14-16.09.2015 GLASGOW Tomas Aminoff Director, Vessel Integration 1
Alternative fuels and engine development The market of LNG Technologies Tank technologies Engine technologies Q&A / 20 2 Wärtsilä
Global energy demand and supply Other Shipping Transportation 90 16% 10 2% Global Energy Demand 450 82% NG 125 23% Supply per fuel type LPG 10 2% Methanol 1,5 0% Other 228,5 41% Oil 185 34% All units in Quadrillion BTU Quadrillion = 10 15 BTU = British Thermal Unit, amount of energy needed to cool or heat one pound of water by one degree Fahrenheit, approx. 1055 joules 3
Natural gas a strongly growing market 4
Future gas trade Global gas supply forecast Source: IEA Medium Term Gas Report 2012 Disappears Reduces GEOSTRATEGIC: Russia, Australia, Qatar, East Africa 5
USD/bbl USD/MMBTU Oil price The world is drowning in oil Saudi Arabia has not been willing to give up its strategy to regain market share This means that more of the high-cost oil production from Canada, Russia and Norway and US shale oil are squeezed out of the market. 140 120 100 Weekly oil and gas prices Weekly oil and gas prices WTI Brent Henry Hub 7 6 5 OPEC has finally said it s ready to talk to other global producers to achieve fair prices and the U.S. government reduced its crude output estimates. OPEC won t agree to carry the burden alone in propping up oil prices by cutting supply; non-member nations would have to share the burden 80 60 40 20 0 4 3 2 1 0 Why is it so hard to cut production for OPEC? If Saudi Arabia cuts back on its production again and the oil price increases, shale oil production in the US will increase significantly within a period of 12-24 months. Brent oil price forecast (USD)bbl) Q1 Q2 Q3 Q4 Year 2014 108 110 103 77 100 2015E 55 64 50 47 54 33 31 29 27 25 23 21 19 17 15 Oil production Oil (Mb/d) OPEC N. America World supply 98 97 96 95 94 93 92 91 90 89 88 2016E 50 53 56 59 55 2017E 60 63 67 70 65 Source: Clarksons, OPEC, Nordea Markets 6
Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 bbl/d Mcf/d Oil price Shale oil and gas production declining As expected, onshore shale projects are taking the hardest hit on E&P cuts Natural gas production across all major shale regions in EIA s Drilling Productivity Report is projected to decrease for the first time in September. US US Shale oil oil production US US Shale gas production Bakken Region Eagle Ford Region Haynesville Region Marcellus Region Niobrara Region Permian Region Utica Region Bakken Region Eagle Ford Region Haynesville Region Marcellus Region Niobrara Region Permian Region Utica Region 6.000.000 5.000.000 4.000.000 3.000.000 2.000.000 1.000.000-50.000.000 45.000.000 40.000.000 35.000.000 30.000.000 25.000.000 20.000.000 15.000.000 10.000.000 5.000.000 - Structural changes in the oil market are likely to keep the oil price low for a longer period. The US shale oil production, the lifting of sanctions against Iran and the rivalry between Iran and Saudi Arabia could actually lead to a price war. On top of that, growth in China s demand for oil is declining. All this makes it hard to see a sustainable oil price level of around USD 100/barrel over the next few years. Source: EIA, Nordea Markets 7
Oil price Most analyses expect rebound. Timing? Why will the oil prices recover? Producer economies need $100 oil New discoveries not compensating for natural decline Oil demand is slowly increasing and will continue to do so China economic growth? Why did the oil price crash? Record high US supply No OPEC cuts (for a change) Return of off-market crude e.g. Libya Slow-down in Chinese demand growth Long-term confidence is High Why must activity increase? Well decline rates and the need to maintain production New finds in 2014 lowest for 60 years More and more wells needed for less and less production Industry is confident of oil price recvery Half of the market is supportive of > $100 oil by 2020 But others, including OPEC, are preparing for a new price floor < $80 Source: Douglas-Westwood 8
LNG - China to cut gas prices to stimulate weak gas demand, planned LNG import terminal is delayed 25 20 LNG Price LNG, $/MMBtu China $/MMBtu USA $/MMBtu EU-28 $/MMBtu Japan $/MMBtu 15 10 5 0 2009 2010 2011 2012 2013 2014 2015 Gas demand in China is the weakest in over a decade, which could trigger significant oversupply Low oil prices prompting industries to switch back to cheaper oil and LPG As a result of the exceptionally weak demand in North China gas markets, Chinese NOC Sinopec will delay the start-up of its 2.2mn tons/year (t/y) LNG import terminal in Tianjin to 2017. According to Wood Mackenzie, despite the outlook for global LNG demand looking increasingly subdued, the number of LNG projects proposed to take a final investment decision in 2015 and 2016 has not reduced significantly, in contrast to the 45 upstream oil & gas projects which have postponed FID so far in 2015. Source: LNG Insight, Wood Mackenzie 9
2010-Dec 2011-Feb 2011-Apr 2011-Jun 2011-Aug 2011-Oct 2011-Dec 2012-Feb 2012-Apr 2012-Jun 2012-Aug 2012-Oct 2012-Dec 2013-Feb 2013-Apr 2013-Jun 2013-Aug 2013-Oct 2013-Dec 2014-Feb 2014-Apr 2014-Jun 2014-Aug 2014-Oct 2014-Dec 2015-Feb 2015-Apr 2015-Jun 2015-Aug USD/Day Number of vessels LNG Spot rates declining, prospects of oversupply SHORT- TERM China is the fastest expanding major LNG market. Weakness in China comes at a difficult time for sellers in the global LNG market with 50mn t/y of new capacity due on line next year. With demand in Japan and South Korea remaining soft, the slowdown in China raises the prospect of a global glut in LNG. 160.000 140.000 120.000 100.000 80.000 60.000 40.000 20.000 0 Aug 2011 95.625 LNG 160K CBM Spot rate Aug 2012 124.000 Aug 2013 109.000 *Most LNG traded with long-term contracts Aug 2014 68.000 Aug 2015 30.500 50 45 40 35 30 25 20 15 10 5 0 LNG carrier deliveries and orderbook 27 16 3 Fleet 18 Orderbook 32 28 19 39 46 Enough work for all scheduled deliveries? 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 34 12 LONG-TERM LNG demand is expected to grow by 4,5 % p.a. from 2013 toi 2035. The number of LNG importing countries is expected to reach 48 in 2025 in from 29 in 2014 and 12 in 2000. As such the need for FSRUs and FLNGs will increase dramatically Source: Clarksons, LNG Insight, Hoehg LNG, Douglas-Westwood 10
Market summary There is enough hydrocarbons in gaseous stage to satisfy the energy demand Price of LNG is a question mark The global price spread has reduced More geographical areas will get LNG import The energy market is in chaos / 20 11 Wärtsilä
LNG as marine fuel The market and Technologies LNG STORAGE TANK TECHNOLOGIES / 20 12 Wärtsilä
Gas storage onboard ships Membrane IMO Type A - B IMO Type C 13
Comparison of IMO IGC Code independent tanks Tank Type Description Pressure Advantages Disadvantages A B Prismatic tank adjustable to hull shapes. Full secondary barrier Prismatic tank adjustable to hull shapes. Partial secondary barrier < 0,7 barg Space efficient Boil-off gas handling More complex fuel system, (compressor required) < 0,7 barg Space efficient Boil-off gas handling More complex fuel system (compressor required) B Spherical (Moss type). Full secondary barrier < 0,7 barg Reliable / proven system Boil-off gas handling More complex fuel system (compressor required) C Pressure vessel (cylindrical shape with dished ends). No secondary barrier required < 10 barg Allows pressure increase Very simple fuel system Little maintenance and easy installation Space demand on board the ship comparatively large 14
IGF Code 6.9 Regulations for the maintaining of fuel storage condition 6.9.1 Control of tank pressure and temperature 6.9.1.1 With the exception of liquefied gas fuel tanks designed to withstand the full gauge vapour pressure of the fuel under conditions of the upper ambient design temperature, liquefied gas fuel tanks' pressure and temperature shall be maintained at all times within their design range by means acceptable to the Administration, e.g. by one of the following methods:.1 reliquefaction of vapours;.2 thermal oxidation of vapours;.3 pressure accumulation; and.4 liquefied gas fuel cooling. The method chosen shall be capable of maintaining tank pressure below the set pressure of the tank pressure relief valves for a period of 15 days assuming full tank at normal service pressure and the ship in idle condition, i.e. only power for domestic load is generated. 6.9.1.2 Venting of fuel vapour for control of the tank pressure is not acceptable except in emergency situations. This means that if you don t have a Type C tank you must have some BOG managements system onboard regardless if it is used or not 15
Heat leakage will leak into the LNG Heat flux from ambient into the cryogenic LNG LNG Terminal Bunker barge Transport / storage Atmospheric storage Gas evaporates maintaining constant temperature and pressure 0 bar(g) - 161 C In a pressurized tank, heat leak into the tanks increasing the liquid LNG s pressure and temperature 0..3 bar(g) - 161..-142 C 16
Tanks that cannot be pressurized When bunkering with type A and B tanks: Maximum pressure in tank is limited to 0,7 bar(g) The bunkered LNG has to have a lower pressure/temperature to avoid rapid evaporation Depending on storage time, LNG saturation temperature may be 3 bar(g) or even higher Bunkering hot LNG is like opening the lid of a pressure cooker (while still boiling) Reducing the pressure from 3 bar(g) to ambient pressure would result in 8 % of the liquid has to be boiled off during bunkering Bunkering 200 ton during 1 hour would release fuel adequate for 100 MW! 17
Base case: Pressurized tank To engines Main gas heater (MGE) 1. Cylindrical pressurized tank 2. Tank pressure created by PBU 3. MGE for gas consumers 4. Sufficient solution for low pressure engines with back-up fuel Glycol/water mixture Operating pressure: 5 bar(g) Maximum pressure: 9 bar(g) Pressure Build up Unit (PBU) Glycol/water mixture Simple and Proven Concept > bunkering of all LNG qualities is possible 18
Pressurized tank + centrifugal pump To engines Main gas heater (MGE) Glycol/water mixture Operating pressure: 5 bar(g) Maximum pressure: 9 bar(g) 1. Cylindrical pressurized tank 2. Gas pressure created by centrifugal pump 3. LNG evaporated in MGE 4. Preferred solution for low pressure engines without back-up fuel 5. Required solution for moderate and high-pressure gas engines Second pressure control method for low pressure aux engines Identical tank pressure bunkering of all LNG qualities is possible 19
Pressurized rectangular tank + centrifugal pump + compressor To engines Main gas heater (MGE) Glycol/water mixture Operating pressure: 5 bar(g) Maximum pressure: 6 bar(g) 1. Rectangular pressurized tank 2. Gas pressure created by centrifugal pump 3. LNG evaporated in MGE 4. Lower tank pressure might be required 5. Further gas pressure management might be required (gas compressors) 6. Increased cost of steel structure Higher complexity bunkering of all LNG qualities without BOG management is challenging 20
Atmospheric rectangular tank + centrifugal pump + compressor + BOG management To engines Main gas heater (MGE) Glycol/water mixture Operating pressure: 0-1 bar(g) Maximum pressure: 0-1 bar(g) 1. Rectangular atmospheric tank 2. Gas pressure created by centrifugal pump 3. LNG evaporated in MGE 4. Gas compressor + heater to handle NBOG 5. Increased cost of steel structure or membrane tanks 6. Vapor return line for bunkering? 7. Atmospheric tanks will require Gas Combustion Unit or reliquefaction plant Maximum complexity minimum possible tank pressure bunkering of all LNG qualities is starts to be questionable 21
LNGPac Simplified P&ID M1 G1 M2 22
Bar(g) Bunkering procedure 1. Check that on board bunkering line is inerted and cooled down 2. Collapse the gas pressure in the tank 3. Open the main filling line 4. Close the filling line valves 5. Inert the piping with N 2 8 5 2 Time 23
Bar(g) Tank pressure increase 1. Open pressure control valve 2. LNG flow by the hydrostatic pressure into the vaporizer 3. LNG is vaporized and gas is returned to the tank 8 5 2 Time 24
LNG as marine fuel The market and Technologies NG ENGINE TECHNOLOGIES 25
High Pressure Low Pressure Engine Technologies Multi - Fuel Single Fuel Dual Fuel Liquid and gaseous fuels Low pressure gas injection Otto Principle Gas only Gaseous fuels only Low pressure gas injection Otto Principle Gas Diesel Liquid and gaseous fuels High pressure gas injection Diesel Principle Bi-Fuel Liquid and gaseous fuels as an cocktail Combine of Otto and Diesel process? 26
Dual Fuel technology + Simple fuel handling + Meet all existing and agreed international emission regulation + High efficiency on high loads + Wide fuel flexibility + HFO/MDO/MGO/Crude + LNG/Ethane + Simple to arrange redundancy for single failure on fuel supply system Requirements on gas quality Power reduction Wide experience from marine and land base applications (medium speed) First experience from marine low speed 27 applications 21 September 2015 coming LNG as marine on-line fuel The market 2016 and Technologies Dual Fuel Liquid and gaseous fuels Low pressure gas injection Otto Principle Medium Speed Low Speed High Speed? Makers Wärtsilä, MAN, MAK, HIMSEN WINGD (former Wärtsilä)
Gas Diesel technology + Wide fuel flexibility and tolerance against various gas qualities + Simple to arrange redundancy for single failure on fuel supply system + High efficiency on low loads + High power density Gas Diesel Liquid and gaseous fuels High pressure gas injection Diesel Principle Pressure must be built up to 300 bar Costly fuel handling system NOx not meeting IMO Tier 3 Experience from (marine and) land base applications (medium speed) First experience from marine low speed applications coming on-line Medium Speed Low Speed High Speed? Makers Land based only: Wärtsilä MAN MAN 28
Gas only technology + High efficiency + Meet all existing and agreed international emission regulation + Simple engine technology + High efficiency Gas only Gaseous fuels only Low pressure gas injection Otto Principle Redundancy for single failure is costly Sensitive for abnormality in fuel supply system Requirements on gas quality Power reduction Wide Experience from marine and land base applications (medium speed) 29 Medium Speed Low Speed High Speed Makers Rolls-Royce Land based only: Wärtsilä, MAN, Himsen, GE NA (Mostly) none marine applications: CAT, Cummins, MTU
Bi-fuel technology + Certain fuel flexibility (cocktail) + Simple gas supply technology + Cheapest retrofit solution + Simple to arrange redundancy for single failure on fuel supply system Bi-Fuel Liquid and gaseous fuels as an cocktail Combine of Otto and Diesel process? Performance? Emissions? Require a rather high amount of liquid fuel (up-to 30%) Wide Experience in China on in-land waterways? Also on-line in Europe Medium Speed Low Speed High Speed NA NA Makers Seems to be mostly 3 rd party suppliers doing retrofit 30
Technology summary Bunker process Also when something not go according to plan Fuel availability The right choice for you Fuel supply system Engine capability / 20 31 Wärtsilä
Thank you Tomas Aminoff Director, Vessel Integration tomas.aminoff@wartsila.com / 20