6 shipping_2020_tcm144-536398.pdf

SHIPPING 2020 TECHNOLOGY INVESTMENTS IN THE NEW MARKET REALITY Claus Winter Graugaard 28. Jan 2013, Poland

© Det Norske Veritas AS. All rights reserved. 2

CONTENTS

WHY Shipping 2020 METHODOLOGY AND ASSUMPTIONS

BEYOND 2020 FINDINGS


CONTENTS

WHY Shipping 2020


What is Shipping 2020 WHY SHIPPING 2020

QUESTION: What technologies should be installed to meet new environmental regulations and higher fuel prices?

ANSWER: Shipping 2020 aims to indicate which technologies are most likely to be adopted by the industry by 2020.

CHALLENGE: Uncertainties associated with market trends and drivers, fuel choices, technology developments and other variables. The wrong investment decisions will be detrimental to both the industry and individual ship owners. Wrong decisions impact the financial bottom line and the environment.


Megatrends and external drivers METHODOLOGY AND ASSUMPTIONS

ECONOMIC GROWTH AND DEMAND FOR TRANSPORT Boom or bust? Growth level and level

of contracting Overcapacity of

vessels?

REGULATORY AND STAKEHOLDER PRESSURE Global or local

regulations? Further requirements on

GHG emissions? Rating schemes and

requirements from charterer and public

FUEL TRENDS

Sustained

high fuel prices? LNG cheaper

than HFO? Development of

LNG infrastructure Impact of sulphur

regulations

© Det Norske Veritas AS. All rights reserved.

The Process – the regulatory future is demanding…

6

METHODOLOGY AND ASSUMPTIONS


CONTENTS



The process – the big picture METHODOLOGY AND ASSUMPTIONS

Technology trends

Investment profile and ship

characteristics

RESULTS

SIMULATION MODEL

Scenario A

Scenario B

Scenario C

Scenario D

Environmental regulations

Fuel trends (price, mix)

World economy

and demand for transport


Scenarios created to capture uncertainties

11

LOW

LOW HIGH

HIGH

SCENARIO D: IN THE DOLDRUMS

SCENARIO C: SINK OR SWIM

SCENARIO A: FULL STEAM AHEAD

SCENARIO B: KNOWING THE ROPES

REGULATORY AND STAKEHOLDER PRESSURE

ECONOMIC GROWTH

High growth scenario Higher prices for all types of fuels Little regulatory or stakeholder pressure on the environment

Low economic growth

LNG price decoupling from oil prices

Little regulatory or stakeholder pressure on the environment

Low economic growth Limited implementation of MBM results in a medium price on CO2 emissions Low fuel prices in general, but high demand keeps the MGO price up

High economic growth

Cost of emissions up and on the rise in 2020

LNG price decoupling from oil prices and significantly lower



Technologies have been assessed against relevant regulations

13

MOTIVATING REGULATIONS

TECHNICAL MEASURE RETRO-FIT SECA 1%S SECA 0.1%S GLOBAL 0.5%S NOX TIER III EEDI ENERGY EFFICIENCY

BALLAST WATER

Low sulphur heavy fuel oil

SOx scrubber

Distillate fuel

Pure LNG engine

20 %

Dual-fuel engine

20 %

Exhaust gas recirculation

Selective catalytic reduction

Propulsion efficiency devices 2 %

Waste heat recovery 4 %

Shaft generators 0-1%

Hull shape optimisation 5 %

Contra-rotating propulsion 4 %

Air cushion 6 %

Wind power 2 %

Smaller engine/de-rating (speed reduction) 10 %

System efficiency improvement

Hybrid propulsion system (Diesel-Mechanical-Electric)

Ballast Water Treatment System

Water injection

Considered, but not selected due to limited impact/effect

Water in fuel Low NOx tuning Lightweight constructions Reduction of seawater ballast capacity



Compliance and fuel efficiency are the main motivation, and cost and technology maturity are the main barriers

Ship owner survey – motivation and barriers

14

Main motivation

Main barriers

Source: DNV survey (23 respondents)



Investment horizon (payback requirements) and how much of the fuel cost is paid by the ship owner impact the cost-effectiveness of many measures

Ship owner survey – investment preferences

15




Which technologies do ship owners envisage using in the future?

16

FIGURE 3: FAMILIARITY AND EXPERIENCE WITH TECHNOLOGIES FIGURE 4: LIKELIHOOD OF IMPLEMENTING TECHNOLOGIES

Low sulphur heavy fuel oil Distillate fuel

Shaft generators Ballast Water Treatment System

Waste heat recovery Propulsion efficiency devices

Hull shape optimisation SOx scrubber

System efficiency improvement (Aux) Smaller engine/de-rating (speed reduction)

Low NOx tuning Reduction of seawater ballast capacity

EGR system Counter-rotating propulsion

Dual-fuel engine SCR system

Hybrid propulsion system Pure LNG engine

Water emulsification Lightweight constructions

Air cushion Humid air motor/ direct water injection

Wind & solar power

Score High Familiarity with technology

Tested

Low 1 2 3 4 5

Ballast Water Treatment System Low sulphur heavy fuel oil

System efficiency improvement (Aux) Hull shape optimisation

Waste heat recovery Propulsion efficiency devices

Distillate fuel EGR system

Low NOx tuning Shaft generators

Smaller engine/de-rating (speed reduction) Reduction of seawater ballast capacity

SCR system SOx scrubber

Lightweight constructions Dual-fuel engine

Water emulsification Humid air motor/ direct water injection

Hybrid propulsion system Counter-rotating propulsion

Pure LNG engine Air cushion

Wind & solar power

Likely to be retrofitted

Likely to be implemented on new builds

Score High Low 1 2 3 4 5




Approximately 40% of the world fleet enters into the North America or Northern Europe ECA during a year

Half of these vessels spend less than 5% of their time there

Time spent in ECA

17

Time spent in ECA

Share of fleet Source: AIS Data



2012 2013 2014 2015 2016 2017 2018 2019 2020

Assign each ship a ship owner investment profile

Remove scrapped ships from the fleet each year

Add newbuildings to the fleet each year

Generate a representative sample of the current world fleet

Model illustration: Simulation of individual ships

18

Annual technology and fuel type decisions per ship

Technology cost decreases with more installations

Results

Fuel price and regulatory requirements

Growth in seaborne transport

Technology alternatives

Investment profile and ship characteristics



Fleet used in the simulation model

In total 48,400 ships in 2011 comprising the international trading fleet except passenger ships and ferries



Example: Container Feeder (2500 TEU)

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0

20,0

0,0 2,0 4,0 6,0 8,0 10,0

LNG

inst

alla

tion

pric

e (m

ill $

)

Scrubber price (mill $)

20

Engine and operation Time in ECA 30%

Annual operating time 250 days

Installed power 21 MW

Annual fuel consumption 16800 tonnes

Increased FC - scrubber 3%

Fuel cost HFO 750 $/tonne

MGO 1000 $/tonne

LNG 15 $/MMBtu

Financial Discount rate 15%

Investment horizon 5 years The colours show which solution is the best option given the assumption on the left and the capital cost of scrubber and LNG

Scrubber Fuel Switch LNG



0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0

20,0

0,0 2,0 4,0 6,0 8,0 10,0

LNG

inst

alla

tion

pric

e (m

ill $

)


21







MGO 1000 $/tonne

LNG 11 $/MMBtu




LNG price 75% of HFO



0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0

20,0

0,0 2,0 4,0 6,0 8,0 10,0

LNG

inst

alla

tion

pric

e (m

ill $

)


22







MGO 1000 $/tonne

LNG 11 $/MMBtu





FINDINGS


More than 1 in 10 new buildings in the next 8 years will be delivered with gas fuelled engines

Finding 1

From 2012-2019 the LNG price is the main contributing factor,

From 2020 the global sulphur limit and EEDI are the main drivers

In scenario D, we foresee about 1,000 newbuildings from 2012-2020 and some 6-700 retrofits

In addition, there will be many smaller vessels fitted with gas engines Ferries, passenger vessels, tugs

24

FINDINGS

Share of LNG fuelled newbuildings Scenario D

C A D B No LNG fuelled ships 5,000 LNG fuelled ships


Scrubbers are a significant option after 2020 (but not before)

Finding 2

Few ships spend more than 30% of their time in and ECA justifying a scrubber before 2020

In 2020, with the global sulphur requirements, scrubbers become a significant solution Scrubbers can be retrofitted and can take 25%

of the market, 15-20,000 ship Still, 70% of ships will run on distillates In the short term LNG can only take a small part

of the market

Uncertainty about the 2020 limit will slow technology development and uptake

25

Ship owner investment profile

SOx reduction options in 2020

FINDINGS

C A D B No scrubbers 20,000 scrubbers


In 2020, the demand for marine distillates could be as high as 200-250 million tonnes annually

Finding 3

A 0.1% limit in ECAs (2015) is expected to increase the demand to 45 million tonnes The current annual global demand for marine distillates

is about 30 million tonnes

With a global sulphur limit HFO demand may drop from 300-350 million tonnes to only 80-110 million tonnes in 2020 Depends on the number of scrubbers in use The use of LNG will not significantly impact the

demand of other fuels Energy efficiency measure will only slow the fuel

demand in the short term

26

Fuel mix in 2020

FINDINGS

C A D B No ships on destillates 40,000 ships on destillates


27


Newbuildings in 2020 will emit up to 10 to 35% less CO2 than today’s ships. The EEDI will be a driver for more than half of this reduction

Finding 4

Phase 0 of EEDI (2013) will encourage cost-effective measures

In Phase 1 (2015) and 2 (2020), up to half the reductions are motivated by EEDI alone Due to short investment horizon and low fuel

burden, these reductions are not cost effective for the ship owner

But in the long-term these are cost-effective

Small differences between scenarios Fuel prices are already so high that any

variation does not affect uptake

Operational measures not included

28

CO2 emission reduction on newbuildings

EEDI reduction on newbuildings

FINDINGS

C A B D 3,000 ships >10% CO2 reduction

8,000 ships >10% CO2 reduction


Ballast water treatment systems will be installed on at least half of the world fleet

Finding 5

The Ballast Water Management Convention has not yet entered into force, but The schedule for mandatory treatment of BW is

fixed (2019) The US has decided to implement a similar scheme

for all ships in US waters (2013) Other countries have local requirements

This will motivate a significant part of the world fleet to implement a treatment system irrespective of BWMC progress

29

Annual expected ballast water treatment installations

FINDINGS C A D B

No BW treatment BW treatment for all ships


At least 30-40% of newbuildings will be fitted with EGR or SCR by 2016

Finding 6

Both EGR and SCR are currently under development and need more time to mature

LNG is an alternative but does not seem to replace EGR or SCR installations, even with low LNG prices

Will a ship owner opt for a Tier III engine even if the ship is initially not planned for sailing in an ECA? Lower second-hand value due to the loss of

geographic flexibility

30

NOx treatment installations

FINDINGS

C D B A No ships with EGR or SCR 2,500 ships with EGR or SCR


The study shows that 4-7 million tons of LNG p.a is required by 2020 corresponds to 0.2-0.3% of global LNG production 2010

31

Supply 20

20

2013

37 ships in operation & 31 ships on order

4-7 Million tons p.a of LNG as

fuel for shipping

Limited volume of LNG as fuel for

shipping

Demand

1000 LNG fuelled ships


0

200

400

600

800

1000

1200

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Tank Bulk Container RoRo Offshore General cargo Passenger ships Other

Approx. 1000 vessels will be fuelled by LNG and sailing within regions, primarily in the ECA zones

32

Forecast of the LNG fuelled ships per region

YTD 28 ships in operation and 29 ships in order book

Combined with stricter emissions control regulations, Europe and North America will experience a growth in LNG fuelled offshore ships

Asia will play an important role, after 2020, driven by stricter regulations nations such as Singapore and Hong Kong

Under low economic growth and little environmental pressure scenario D, the number of new buildings has been estimated to be around 1000 by 2020

Offshore vessels and ferries dominate the LNG fuelled fleet and order book today, but there are on-going projects to develop concepts and designs for most ship types

Forecast of LNG fuelled ships per ship segment

- 50 100 150 200 250 300 350 400 450

Europe

North America

South East Asia

Midde East & India

Japan & Korea

South America

China

Australia & New Zealand

Tank Bulk Container RoRo Offshore General cargo Passenger ships Other


37 LNG fuelled ships in operation worldwide

34

Ships in operation Year Type of vessel Owner Class 2000 Car/passenger ferry Fjord1 DNV 2003 PSV Simon Møkster DNV 2003 PSV Eidesvik DNV 2006 Car/passenger ferry Fjord1 DNV 2007 Car/passenger ferry Fjord1 DNV 2007 Car/passenger ferry Fjord1 DNV 2007 Car/passenger ferry Fjord1 DNV 2007 Car/passenger ferry Fjord1 DNV 2008 PSV Eidesvik Shipping DNV 2009 PSV Eidesvik Shipping DNV 2009 Car/passenger ferry Tide Sjø DNV 2009 Car/passenger ferry Tide Sjø DNV 2009 Car/passenger ferry Tide Sjø DNV 2009 Patrol vessel Remøy Management DNV 2009 Car/passenger ferry Fjord1 DNV 2010 Patrol vessel Remøy Management DNV 2010 Car/passenger ferry Fjord1 DNV 2010 Patrol vessel Remøy Management DNV 2010 Car/passenger ferry Fjord1 DNV 2010 Car/passenger ferry Fjord1 DNV 2010 Car/passenger ferry Fosen Namsos Sjø DNV 2011 PSV DOF DNV 2011 Chemical tanker Tarbit Shipping GL 2011 Car/passenger ferry Fjord1 DNV 2011 PSV Solstad Rederi DNV

Year Type of vessel Owner Class 2012 Car/passenger ferry Fjord1 DNV 2012 PSV Eidesvik DNV 2012 PSV Olympic Shipping DNV 2012 PSV Island Offshore DNV 2012 General Cargo Nordnorsk Shipping DNV 2012 PSV Eidesvik Shipping DNV 2012 PSV Island Offshore DNV 2012 Car/passenger ferry Torghatten Nord DNV 2012 Car/passenger ferry Torghatten Nord DNV 2012 Car/passenger ferry Torghatten Nord DNV 2013 PSV REM DNV 2013 RoPax Viking Line LR

Updated 10.01.2013 Excluding LNG carriers and inland waterway vessels


34 confirmed LNG fuelled newbuilds

35

Confirmed orderbook Year Type of vessel Owner Class 2013 Car/passenger ferry Torghatten Nord DNV 2013 Harbor vessel Incheon Port Authority 2013 High speed RoPax Buquebus DNV 2013 Ro-Ro Sea-Cargo DNV 2013 Ro-Ro Sea-Cargo DNV 2013 RoPax Fjordline DNV 2013 RoPax Fjordline DNV 2013 General Cargo Eidsvaag DNV 2013 Car/passenger ferry Norled DNV 2013 Car/passenger ferry Norled DNV 2013 Ro-Ro Norlines DNV 2013 Ro-Ro Norlines DNV 2013 Tug Buksér & Berging DNV 2013 PSV Harvey Gulf Int. Marine ABS 2013 PSV Harvey Gulf Int. Marine ABS 2013 Patrol vessel Finish Border Guard GL 2013 Car/passenger ferry Society of Quebec ferries LR 2013 Tug CNOOC CCS 2013 Tug CNOOC CCS

Year Type of vessel Owner Class 2014 Car/passenger ferry Society of Quebec ferries LR 2014 Car/passenger ferry Society of Quebec ferries LR 2014 Tug Buksér & Berging DNV 2014 PSV Harvey Gulf Int. Marine ABS 2014 PSV Harvey Gulf Int. Marine ABS 2014 Gas carrier SABIC BV 2014 Gas carrier SABIC BV 2014 PSV Remøy Shipping DNV 2014 PSV Siem Offshore DNV 2015 PSV Harvey Gulf Int. Marine ABS 2015 Container Ship TOTE Shipholdings ABS 2015 Container Ship TOTE Shipholdings ABS 2015 LEG Carrier Evergas BV

2015 LEG Carrier Evergas BV 2015 LEG Carrier Evergas BV

Updated 15.01.2013 Excluding LNG carriers and inland waterway vessels


Sailing LNG fuelled vessels, examples

Stril Pioner Viking Energy

Mastrafjord, Raunefjord, Bergensfjord, Stavangerfjord Patrol vessels Barentshav, Bergen, Sortland Tidekongen, Tidedronningen, Tideprinsen Moldefjord Viking Lady also with Fuel cell!


Larger ships and new ship types for gas as ship fuel

37

Sea Cargo Express; Nov 2012

New ferry of Buquebus

Source: Incat

Source: Theo Van Loon Source: Rolf Jensen


Concept studies

38 38


Global LNG bunker demand by 2020

39

South America

North America

Europe & the Baltic Sea

Middle East & India

SEA

Japan & Korea

Australia & NZ

LNG Bunkering demand 2020 Equivalent to 4 -7 million tons of LNG

LNG Bunkering demand 2012

0.9 – 1.4 million

China

0.3 – 0.4 million

1.4 – 2.2 million 0.3 – 0.8 million

0.3 – 0.7 million

0.4 – 0.7 million

0.1 – 0.2 million

0.3 – 0.5 million 0.07 – 0.09 million


Current and forecast of global LNG bunkering infrastructure by 2020

40

Existing Planned (Feasibility study, risk study, proposed locations, pending approval) Proposed (currently being discussed)

* See detailed map

Bass Strait

Europe*

Tokyo Bay Busan Fujairah

Singapore

Incheon

Shaanxi

Hubei

Buenos Aires

New York

Fourchon

Tadoussac

Tacoma

Duluth


1 7

2 3 4

5

6

8 9

11

10

12

13 14

16

15

20 19

18 17

22

23

24 26

25 27

28

29 30 31

34 33 32

35

36

39

38

37

LNG Bunkering grid in Europe by 2020

41

1. Florø 2. CCB 3. Halhjem 4. Snurrevarden 5. Risavika

Existing

22. Gothenborg 23. Pori 24. Turku 25. Sillamäe 26. Helsinki 27. Paldiski 28. Riga 29. Swinoujscie 30. Lubeck 31. Rostock 32. Helsingborg 33. Copenhagen 34. Aarhus 35. Aberdeen 36. Dunkerque 37. Marseilles 38. Barcelona 39. Algeciras

Proposed

Planned 6. Bodø 7. Mongstad 8. Øra 9. Lysekil 10. Porvoo 11. Stockholm 12. Tallin 13. Klapeida 14. Hirtshals 15. Brunsbüttel 16. Hamburg 17. Rotterdam 18. Antwerp 19. Zeebrugge 20. Ghent 21. Vestbase

21

Existing Planned (Feasibility study, risk study, proposed locations, pending approval) Proposed (currently being discussed)


Ballast water and sulphur regulations set requirements on ships in operation

In 2020 60,000 ships have to switch fuel or clean the exhaust Are 20,000 scrubbers retrofitted

between 2019 and 2020 possible? Will there be enough low sulphur fuel available

and at what price? Will the availability uncertainty of LNG bunkering

facilities slow uptake of gas fuelled engines?

By 2020 30-60,000 ships will have to install a ballast water treatment system How many ballast water systems

can be retrofitted each year?

Future delivery capacity of technologies and fuel

44

FINDINGS


Will there be a two-tier charter market, and which technologies would give a price premium?

Today’s ships will compete with increasingly more energy efficient ships

Ships built after 2016 with a NOx Tier II compliant engine will not be able to enter an ECA

Will a ship with a scrubber or LNG as fuel have a higher second-hand value?

Will many ship owners build beyond today’s requirements and aim for 2020 standards?

Two-tier second-hand and charter market

45

FINDINGS


BEYOND 2020


Future regulations

GHG High attention today, but little progress

Black carbon and particulate matter Increasing attention, but difficult to measure and control

Hull bio-fouling (transport of alien species) Guidelines developed, may results in regulations

over the next 10-15 years

Underwater noise Raising concerns about possible impact on

ocean-dwelling mammals, but science remains unclear

47

BEYOND 2020

Numerous regulations can become important after 2020


Safeguarding life, property and the environment

www.dnv.com

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