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STRICTLY CONFIDENTIALSEPTEMBER 2019
Pathway to Carbon Neutralityin Marine Fuels
Energy Infrastructure
Marine Money Week AsiaTuesday, September 24th - Wednesday, 25th September, 2019
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Shipping’s GHG Emissions
China #1USA #2
Russia #4
Japan #5
Shipping #6
OIL COAL LNG/GAS NUCLEAR RENEWABLE HEP
Power Generation By Source
India #3
< Shipping would be the sixth largest emitter of CO2 while supporting $6 trillion of global trade
< Container lines emit almost as much CO2 as Spain
< Shipping’s energy is almost exclusively oil-based, and moving from inexpensive HFO (heavy fuel oil) to premium-priced LSMGO (low sulfur marine gas oil) to comply with new environmental regulations
Saudi Arabia #10
Germany #7
Circle Size = Amount of CO2 Emissions
If Shipping Were a Country, it Would be the 6th Largest Emitter of CO2
Source(s): Clean Carriers.
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Regulation Timetable
1st Jan 2020 0.5% GlobalSulfur Limit Enforced
IMO CO2 Intensity Reduction Target40% of 2008 volumes
First IMO NOx restriction in North Sea and Baltic
IMO GHG reduction target50% of 2008 volumes
2020
2030
2021
2050
As regulations tighten, LNG is currently best placed for long term compliance
Source(s): Clean Carriers.
90% of liner fleet to use LSFO for compliance by 2020 Initial compliance implies a 50% increase in fuel
costs
LNG fuelled vessels are compliant for SOx, NOx, particulates and a 30% CO2 reduction.Traditional MGO and HFO vessels will be phased out. Delay does not ease the problem.
NOx emissions to be lowered to 70% of Tier II engine output. New Tier III engines or
emission reduction tech required
IMO EEDI. 30% reduction in CO2 efficiency (g/tonne mile) compared to 2000-10 built vessels
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STRICTLY CONFIDENTIALSEPTEMBER 2019
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
GHG Reductions Targets Carbon Emissions Compared with Low Sulphur Compliant Fuels
MAN ME-GI 2050 compliance
Evolution of Carbon Neutral Solutions
LNG Fuel (WtW) LNG Fuel (TtW)Ship Design and Replacement
(per teu basis)
LNG Fuel (WtW)Synthetic Drop-in
Carbon Neutral Fuels
Source(s): Clean Carriers, SEA/LNG-Thinkstep.
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Two Routes to Carbon NeutralityBut only one leverages existing infrastructure
*
* synthetic/bio- ammonia or methanolSource(s): Clean Carriers.
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Production of Synthetic LNG
Electrolysis Methanation LiquefactionH2O H2Synthetic
CH4
SyntheticLNG
Intermittent excess powerfrom carbon free
sources produces Hydrogen (H2)
Captured CO2 from industrial sources is combined H2 under
pressure and heat Produced Synthetic Natural Gas is cooled to -160oC
CO2
Compatible with existing vessels?
A blend of 25% Synthetic LNG = IMO 2050 from fuel alone
Engine
Storage
On-shore
Bunkering
Compatible with existing distribution network?
0 20 40 60 80 100
CO2
SOx
NOx
PM
% of HFO Emissions
Synthetic LNG vs. HFO
Potential excess H2
volumes sold into gas grid or fuel cells
He Oee-
Source(s): Clean Carriers, SEA/LNG.
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Production of Bio-LNG
Anaerobic Digestion Upgrading LiquefactionH2O Biogas Bio-LNG
Intermittent excess powerfrom carbon free
sources produces Hydrogen (H2)
CO2 is removed from the biogas, leaving biomethane
The resulting biomethane is cooled to -160oC
Compatible with existing vessels?
A blend of 25% Bio LNG = IMO 2050 from fuel alone
Engine
Storage
On-shore
Bunkering
Compatible with existing distribution network?
CH4
0 20 40 60 80 100
CO2
SOx
NOx
PM
% of HFO Emissions
Bio-LNG vs. HFO
Source(s): Clean Carriers, SEA/LNG.
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Conventional Production of Methanol
Steam ReformerMethanol Converter Distillation
H2O
CH4CO + CO2 + H2
CH3OH
H2O
Natural gas is mixed with steam and passed over a
catalyst.
“Synthesis gas” is synthesised into methanol. However, water is present.
The remaining water is purged through distillation.
Methanol
0 20 40 60 80 100
CO2
SOx
NOx
PM
% of HFO Emissions
Methanol vs. HFO
Compatible with existing vessels?
Engine
Storage
New vessels required
On-shore
Bunkering
Compatible with existing distribution network?
New infrastructure required
Source(s): Clean Carriers, IMO.
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Production of Synthetic Methanol
Electrolysis Methanol Converter DistillationH2O H2
Synthetic
Methanol
Potential excess H2
volumes sold intogas grid
Intermittent excess powerfrom carbon free
sources produces Hydrogen (H2)
Captured CO2 from industrial sources is combined H2 with
under pressure and heat
CH3OH
H2O
The remaining water is purged through distillation.
Compatible with existing vessels?
Engine
Storage
New vessels Required.
MAN MELGI
On-shore
Bunkering
Compatible with existing distribution network?
New infrastructure Required
High HSEQ requiredCO
2
0 20 40 60 80 100
CO2
SOx
NOx
PM
% of HFO Emissions
Synthetic Methanol vs. HFO
Source(s): Clean Carriers, Methanex.
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Production of Synthetic Ammonia
N 2
Electrolysis Haber Process CoolingH2O H2SyntheticAmmonia
Potential excess H2
volumes sold intogas grid
Intermittent excess powerfrom carbon free
sources produces Hydrogen (H2)
Gases are cooled and ammonia liquified at room
temperature at 10 atm.Toxic and Corrosive
Uninsurable containment risk
Nitrogen from the air is combined with hydrogen at
400-450 Celsius and 200 atmover an iron catalyst.
Intensive energy consumption
N2
NH3
0 20 40 60 80 100
CO2
SOx
NOx
PM
% of HFO Emissions
Synthetic Ammonia vs. HFO
Compatible with existing vessels?
Engine
StorageNew vessels
Required.MAN plan duel-fuel
Main Engine
On-shore
Bunkering
Compatible with existing distribution network?
New infrastructure required – estimated
$6 trillion*
*Source: Sailing on Solar - Environmental Defense FundSource(s): Clean Carriers, EDF.
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Appendix: Cost of Fuels to Consumers
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Fuel Type Cost (USD/mt) Cost (USD/mmbtu)
LNG 249TTF
4.79
HFO 366Rotterdam
9.38
LSFO 588Rotterdam
14.3
MGO 598Rotterdam
14.6
Methanol 315Methanex Provider
15.83
Biodiesel 1329.89GoodFuels provider
32.19
Ammonia 941.97* 41.87*
Hydrogen -- 117-267*
*Research estimate for price in 2050 – these fuels are not currently available. Ammonia: C-Job Naval Architects
Hydrogen: Navigant
Source(s): Platts, industry sources
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Appendix: Local Pollutants
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Local Pollutants
15%
Global NOx Emissions from Anthropogenic Sources
Shipping
NOx, SOx and particulate matter lead to:
o Lung tissue inflammation leading
to lung diseases
o Increased rates of cardiovascular
illness
o Increased viral and bacterial
pathogen susceptibility
o Hospitalizations
o Pre-mature mortality
13%
Global SOx Emissions from Anthropogenic Sources
Shipping
Source: IMO Third GHG StudySource(s): Clean Carriers.
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STRICTLY CONFIDENTIALSEPTEMBER 2019
The Human Cost of Local Pollutants
01
23
4
56
7
89
Sing
apor
e
Denm
ark
Neth
erlan
ds UK
Belg
ium
Irelan
d
Mal
aysia
Japa
n
Mau
ritiu
s
Port
ugal
Top 10 Countries by Early Deaths from Shipping Emissions per 100,000 population
Source(s): Clean Carriers, Corbett, (1) FT/Nature Communications. International Council on Clean Transportation
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Share of Global Mortality from Shipping Emissions
37%
7%
6%
5%
3%
2%
400,000 mortalitiesEstimated per annum(1)
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Recent Air Pollution Fines & Lawsuits
Defendant Case Pollutants (SOx, NOx, PM) Result
China Navigation Co. Pte (2016) Violating US ECA (Non-compliant fuel) Ordered to pay $129,500
Volkswagen Emissions scandal -- Draft settlement with US $4.3bn Total costs estimate $20.10 bn
Exxon Mobil (2017) Violating Clean Air Act (US) 4464 tonnes Ordered to pay $20 million
Petrobras (2018) Violating Clean Air Act (US) 41.6 tonnes Ordered to pay $3.5 million
MSC (2018) Violating US ECA (Non-compliant fuel) Ordered to pay $350,000
Ionian Shipping & Trading Corp., Lily Shipping Ltd (2019) Violating US Caribbean ECA (Non-compliant fuel) Ordered to pay $3 million
Valero Energy (2019) Violating Clean Air Act (US) 491 tonnes Case on-going
Houston Refining (2019) Violating Clean Air Act (US) 140 tonnes Case-on going
Joko Widodo – President of Jakarta (2019) Coalition from Legal Aid 231 AQI* Case on-going
Source(s): industry sources
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Appendix: Bio LNG
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Production of Bio-LNG
Source(s): Clean Carriers.
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STRICTLY CONFIDENTIALSEPTEMBER 2019
Low RiskInfrastructure and Regional Pricing Dynamics Allow Effective Bunker Price Optimization
< LNG is a simple homogeneous product(1) and as a marine fuel provides no co-mingling contamination risk between suppliers as compared to different supplies of low sulphur compliant fuels
< Biodiesel can be used as a primary or secondary drop-in fuel to minimise GHG emissions from pilot fuel consumption (2), as available in the market
< Bunkering operations can be based on transparent operational and price optimization
< 20 bunker vessels are due for delivery by 2021. The projected further requirement of 10 more vessels by 2024 will be supported by CC
Location Index Hub Price
TTF (Netherland/Europe) HH (Henry Hub)
JKM (Japan/Korea) ME Pricing
Colombo2022-5Importer
Source(s): Affinity, Maersk Broker, (1)Thinkstep, (2)IEA