Master Project 2 Sem 1 1819 HamedullahR3F13...

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OPTIMIZATION OF LIQUEFIED NATURAL GAS BUNKERING VESSEL DESIGN HAMEDULLAH MUHAMMAD A project report submitted in fulfilment of the requirements for the award of the degree of Master of Project Management School of Civil Engineering Faculty of Engineering Universiti Teknologi Malaysia DECEMBER 2018

Transcript of Master Project 2 Sem 1 1819 HamedullahR3F13...

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OPTIMIZATION OF LIQUEFIED

NATURAL GAS BUNKERING VESSEL DESIGN

HAMEDULLAH MUHAMMAD

A project report submitted in fulfilment of the

requirements for the award of the degree of

Master of Project Management

School of Civil Engineering

Faculty of Engineering

Universiti Teknologi Malaysia

DECEMBER 2018

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DEDICATION

"Imagine that you enter a parlor. You come late. When you arrive, others have long preceded you, and they are engaged in a heated discussion, a discussion too heated for them to pause and tell you exactly what it is about. In fact, the discussion had already begun long before any of them got there, so that no one present is qualified to retrace for you all the steps that had gone before. You listen for a while, until you decide that you have caught the tenor of the argument; then you put in your oar. Someone answers; you answer him; another comes to your defense; another aligns himself against you, to either the embarrassment or gratification of your opponent, depending upon the quality of your ally’s assistance. However, the discussion is interminable. The hour grows late, you must depart. And you do depart, with the discussion still vigorously in progress."

Kenneth Burke, The Philosophy of Literary Form

With this spirit, I humbly dedicate my research to a long-standing academic and practical conversations.

Hamedullah Muhammad Kuala Lumpur 2018

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ACKNOWLEDGEMENT

In preparing this project report, I was in contact with many people, researchers, academicians, and practitioners. They have contributed towards my understanding and thoughts. In particular, I wish to express my sincere appreciation to my supervisor, Dr. Zulhasni Abd Rahim, for encouragement, guidance, and invaluable feedback. Without his continued support and interest in my research, this project report would not have been the same as presented here.

I am also indebted to Universiti Teknologi Malaysia Kuala Lumpur’s (UTM-KL) lecturers and support staffs, especially those from SPS where I have spent the past two and half years in pursuing my Master program. I could not list them all here but I pray that God Almighty rewards them with better rewards for their dedication. My fellow postgraduate students have also gone out of their ways to assist me in preparing this project report so to them I owed a debt that can never be repaid in full.

It is not easy to put up with daily office matters, after-work house chores, children and lonely weekends for a long stretch of time. For that, I owed the world to my wife, Norsyazwani Che Mohamed for putting up with my commitment and constraints for the past two long years. Her belief in me kept me going and her prayers helped me to reach the destination.

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ABSTRACT

Liquefied Natural Gas (LNG) has emerged as one of the alternative marine

fuels for ship owners in order to comply with the Sulphur cap implemented under the

IMO 2020. A new type of purpose-designed LNG Bunkering Vessel (LBV) has been

in development to meet the demand for LNG bunkering operation. Based on the slow

emergence of several competing designs since 2017, there is still uncertainty on what

the dominant design would be for LBV. New firms entering into the market must look

into and decide what will be the design of their choice. The objectives of this study are

to evaluate the designs through benchmarking analysis of Charterers’ requirement and

selecting the design that is most likely would be the dominant design in the future.

Three (3) worldwide tenders for LBV within 2017 – 2018 have been selected as the

subjects for the case study. Through market analysis, Charterers’ mandatory

requirements and preferred solutions are identified. Focus groups consisting relevant

stakeholders are engaged to provide additional solutions and also come out with

several designs. The designs are then technically and commercially evaluated. The

research identified fourteen (14) key functional requirements out of eighty (80)

specified and also contributed ten (10) additional solutions. Three designs namely D1

(full compliance with best technical specification), D2 (full compliance with adequate

technical specification) and D3 (optimized specification) are proposed through

morphological analysis. The research found several key characteristics of Charterers’

requirement; majority of them are payload functions, emphasis on compatibility and

preference for flexibility to maintain worldwide trading. The commercial evaluation

found that there is significant price differential between designs, with the extreme

being 14% between D1 and D3. The study shows that there are trade-offs to be

considered in terms of performance envelope, compatibility, flexibility, ease of

operation and ship price when considering for the optimum LBV design.

Keywords: LNG Bunkering Vessel, Dominant Design, Morphological Analysis

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ABSTRAK

Gas asli cecair (LNG) telah menjadi salah satu pilihan bahan bakar alternatif

kepada pemilik kapal laut bagi mematuhi had sulphur bahan bakar kapal yang baru

dilaksanakan dibawah IMO 2020. Kapal pengisi bahan bakar kapal jenis LNG (LBV)

telah direka dan dibina untuk memenuhi keperluan LNG sebagai bahan bakar kapal.

Perkembangan dan persaingan reka bentuk – reka bentuk LBV bermula dari tahun

2017 didapati agak perlahan dan masih terdapat ketidakpastian mengenai reka bentuk

dominan bagi LBV. Syarikat-syarikat baru yang ingin menceburi pasaran bekalan

LNG sebagai bahan bakar kapal harus meneliti dan memilih reka bentuk yang sesuai.

Objektif kajian ini adalah untuk menilai reka bentuk LBV berdasarkan analisa

keperluan pencarter dan memilih reka bentuk yang mungkin akan menjadi reka bentuk

dominan Tiga tender untuk LBV daripada seluruh dunia sepanjang 2017 – 2018 telah

dipilih sebagai subjek untuk kajian ini. Keperluan mandatori dan teknologi pilihan

pencarter telah dikenalpasti melalui analisa tersebut. Sesi sumbang saran bersama

kumpulan fokus yang terdiri daripada pengamal industri yang relevan telah dijalankan

untuk mengenal pasti teknologi pilihan tambahan dan mengusulkan beberapa reka

bentuk LBV. Reka bentuk – reka bentuk ini kemudiannya dinilai secara teknikal dan

komersil. Kajian ini telah menegenalpasti empat belas (14) keperluan mandatory

pencarter daripada lapan puluh (80) keperluan asal tender dan telah berjaya

mengusulkan sepuluh (10) teknologi tambahan. Tiga reka bentuk iaitu D1 (patuh

menyeluruh dengan spesifikasi teknikal terbaik), D2 (patuh menyeluruh dengan

spesifikasi teknikal yang mencukupi) dan D3 (spesikasi optima) telah diusulkan hasil

analisi morpologi. Kajian ini telah mengenal pasti ciri-ciri teknikal utama yang

diperlukan oleh pencarter; fungsi teknikal yang berkenaan dengan beban bayar,

penekanan terhadap keserasian reka bentuk dan kecenderungan untuk reka bentuk

yang fleksibel bagi perdagangan laut dalam. Hasil penilaian komersil mendapati

terdapat jurang harga kapal yang besar diantara reka bentuk – reka bentuk yang telah

diusulkan; jurang terbesar adalah diantara D1 dan D3 sebanyak 14%. Kajian ini

menyimpulkan bahawa dalam mencari reka bentuk LBV yang optimum, timbal-balik

antara had prestasi, keserasian, kefleksibelan, kemudahan untuk operasi dan harga

kapal perlu diambil kira.

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TABLE OF CONTENTS

TITLE PAGE

DECLARATION ii@

DEDICATION iii@

ACKNOWLEDGEMENT iv@

ABSTRACT v@

ABSTRAK vi@

TABLE OF CONTENTS vii@

LIST OF TABLES x@

LIST OF FIGURES xi@

LIST OF ABBREVIATIONS xii@

LIST OF SYMBOLS xiii@

LIST OF APPENDICES xiv@

CHAPTER 1@ INTRODUCTION 1@

1.1@ Background of Eaglestar 1@

1.2@ LNG as Marine Fuel and LBV 2@

1.3@ Problem Statement 5@

1.4@ Research Questions 7@

1.5@ Research Objectives 7@

1.6@ Significance of Study 7@

CHAPTER 2@ LITERATURE REVIEW 9@

2.1@ Introduction 9@

2.2@ LNG Bunkering Overview 10@

2.2.1@ Methods of LNG Bunkering 10@

2.2.2@ LBV Worldwide Database 11@

2.3@ LBV Design Overview 12@

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2.3.1@ Ship Design Process 12@

2.3.2@ LBV Design Background 14@

2.4@ Dominant Design Theory 15@

2.4.1@ Emergence of Dominant Design in New Industry 15@

2.4.2@ Selection of Future Dominant Design 16@

2.5@ Charterers: The Key Stakeholder 17@

2.6@ Morphological Analysis 21@

CHAPTER 3@ RESEARCH METHODOLOGY 25@

3.1@ Introduction 25@

3.2@ Research Design 25@

3.2.1@ Part 1 – Market Analysis 26@

3.2.2@ Part 2 – Morphological Analysis 27@

3.2.3@ Part 3 - Evaluation 28@

3.3@ Population of Research 28@

3.4@ Data Analysis 30@

CHAPTER 4@ RESULTS AND DISCUSSION 31@

4.1@ Introduction 31@

4.2@ Analysis of Charterers’ Functional Requirements 31@

4.3@ Morphological Analysis of Solutions 34@

4.4@ Technical Evaluation and Analysis 38@

4.4.1@ Performance Envelope 42@

4.4.2@ Compatibility with Customers and Terminals 43@

4.4.3@ Trading Flexibility 43@

4.4.4@ Ease of Operation 44@

4.5@ Commercial Evaluation and Analysis 44@

4.5.1@ Cost of High Performance, Flexibility and Redundancy 46@

4.5.2@ Vulnerability of Optimization 47@

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CHAPTER 5@ CONCLUSION AND RECOMMENDATIONS 51@

5.1@ Introduction 51@

5.2@ Findings and Discussions 52@

5.2.1@ Design Evaluation for LBV through Market Analysis 52@

5.2.2@ Selection of Dominant Design for LBV through Morphological Analysis 53@

5.3@ Limitations and Future Works 54@

REFERENCES 59@

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LIST OF TABLES

TABLE NO. TITLE PAGE

Table 2.1@ Comparison between LNG Bunkering Methods 10@

Table 2.2@ LBV Database – In Operation and On Order Book 11@

Table 3.1@ Research Population 29@

Table 4.1@ Charterers' Functional Requirements 33@

Table 4.2@ Charterer A - Preferred Solutions 34@

Table 4.3@ Charterer B - Preferred Solutions 35@

Table 4.4@ Charterer C - Preferred Solutions 35@

Table 4.5@ Morphological Chart of Function and Solution for LBV 36@

Table 4.6@ Price Comparison Between Designs 45@

Table 4.7@ D1 Detail Commercial Evaluation 48@

Table 4.8@ D2 Detail Commercial Evaluation 49@

Table 4.9@ D3 Detail Commercial Evaluation 50@

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LIST OF FIGURES

FIGURE NO. TITLE PAGE

Figure 1.1@ IMO Global Sulphur Cap 3@

Figure 1.2@ British Petroleum - Marine Fuel Market Transition Graph (British Petroleum, 2018) 3@

Figure 1.3@ IHS Markit – Worldwide LNG Fuelled Database 4@

Figure 1.4@ Dominant Design Paths (Henderson & Clark, 1990) 6@

Figure 2.1@ Three Methods to Bunker LNG (DMA, 2012) 11@

Figure 2.2@ Design Spiral Diagram 13@

Figure 2.3@ General Arrangement of LBV 15@

Figure 2.4@ Power-Interest Ratio of Stakeholders in LNG Bunkering 20@

Figure 2.5@ LNG Bunkering Main Stakeholders Triangle 20@

Figure 2.6@ Morphological Chart and Overview (Zeiler, 2018) 23@

Figure 3.1@ Research Design 26@

Figure 4.1@ D1 Design 37@

Figure 4.2@ D2 Design 37@

Figure 4.3@ D3 Design 38@

Figure 4.4 @ D1 - Technical Evaluation 39@

Figure 4.5@ D2 - Technical Evaluation 40@

Figure 4.6@ D3 - Technical Evaluation 41@

Figure 5.1@ D1 Design - Main Particulars 56@

Figure 5.2@ D2 Design - Main Particulars 57@

Figure 5.3@ D3 Design - Main Particulars 58@

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LIST OF ABBREVIATIONS

CCS - Cargo Containment System

ECA - Emissions Control Areas

HFO - Heavy Fuel Oil

IMO - International Maritime Organization

ITPS - Intermediate tank-to-ship (via pipeline)

LBV - LNG Bunkering Vessel

LNG - Liquefied Natural Gas

LNGC - LNG Carrier

LPG - Liquefied Petroleum Gas

LSA - International Life-Saving Appliance Code

MARPOL - The International Convention for the Prevention of

Pollution from Ships

MEPC - Marine Environmental Protection Committee

MGO - Marine Gas Oil

NOx - Nitrogen Oxides

RFP - Request for Proposal

SOLAS - The International Convention for the Safety of Life at

Sea

STS - Ship-to-ship

TTS - Truck-to-ship

TEU - Twenty Foot Equivalent Unit

VLSFO - Very Low Sulphur Fuel Oil

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LIST OF SYMBOLS

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LIST OF APPENDICES

APPENDIX TITLE PAGE

Appendix A@ Compilation of All Charterers’ Technical Requirements 62@

Appendix B@ Sample of Clarification Form with Charterer 70@

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CHAPTER 1

INTRODUCTION

1.1 Background of Eaglestar

Eaglestar Marine Holdings (L) Ltd was incorporated in 2017 as a ship

management company. Previously it was part of the larger MISC Group under

Fleet Management Services (FMS). Eaglestar is jointly owned by MISC Berhad

and AET with a 50%-50% split. Currently Eaglestar is managing a strong fleet

of 96 vessels ranging from LNGC, Aframax, Panamax, VLCC, Suezmax,

Dynamic Positioning Shuttle Tanker (DPST) and LNG floaters. Eaglestar is also

actively building new vessels and as of 2018, is managing 10 newbuilding

projects in South Korean yards.

With rich experience in LNG shipping since the inception of Malaysia

LNG exports in 1980s, Eaglestar has built a solid reputation as the reputable and

reliable LNG operator. With that background, Eaglestar have keen interest to

expand its ship management portfolio in LNG bunkering business. In fact, from

early 2017, the company have entered into several tender bidding for the

provision of LBV both in Europe and Asia. Along the way, Eaglestar have

developed working relationships with small scale word class shipyards from

Korea and China to source for the best designs that can suit the ever growing

demand for LBV. The division that are responsible for technical proposal on

any tender bid is the Project Management team. The same team will usually

roll-over to detail engineering phase and project supervision; ensuring the

continuity of supervision is not disrupted.

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1.2 LNG as Marine Fuel and LBV

Large seagoing vessels traditionally use HFO with a Sulphur content of

up to 3.5%, while smaller vessels use distillates with Sulphur content less than

1.0%. Heavy fuel oil, i.e. residual fuel, consists of the fractions of crude that

remains in the refinery process after its extraction of lighter and more valuable

fractions, such as naphtha, petrol, diesel, and jet fuel. The advantage of HFO for

the ship-owners is its low price compared to distillates. For the refineries, selling

residual fuel has been an alternative to making large investments (in process

equipment) to convert more of the residual fuel to distillates (Lindstad, Rehn,

& Eskeland, 2017).

IMO decided at its 70th session of the MEPC in October 2016 to reduce

the maximum Sulphur content in the exhaust gas to air from 3.5% to 0.5% from

2020 as shown in Figure 1.1. It can be seen as an extension – a globalization –

of the regionally motivated Emissions Control Areas (ECAs) already in place,

though these impose a 0.1% Sulphur cap for areas near the coasts of North

America and Northern Europe (North Sea and Baltic Sea). These ECAs

establish stricter emissions requirements for vessels operating within coastal

areas, e.g., 0.10% sulphur limits for marine fuels, Tier III NOx controls for

engine exhaust.

One of the ways to comply with this regulation is via fuel switching;

either switching to lower Sulphur distillates like MGO, blends like VLSFO or

alternative fuels namely LNG, LPG, Methanol and Biogas. Figure 1.2 shows

that it is anticipated that post-2020, VLSFO and MGO will dominate the fuel

market mix with over 70% market share but among the alternative fuels, LNG

is touted to be the main choice with 7% market share in 2020 (British Petroleum,

2018). LNG offers lower local pollution emissions compared to distillate fuels.

For NOx emissions, current engine designs equal those of distillate fuels, and

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proposed improvements to engine design may reduce emissions to meet Tier III

levels without after treatment.

Figure 1.1 IMO Global Sulphur Cap

Figure 1.2 British Petroleum - Marine Fuel Market Transition Graph

(British Petroleum, 2018)

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Research indicates that the SOx and PM emissions of natural gas meet

current, pending, and proposed standards for marine vessel operations and can

significantly reduce local pollutants from vessel operations (Thomson, Corbett,

& Winebrake, 2015). More importantly, LNG already fulfils the global

availability criteria and already overcome the hurdles related to international

legislation (DNV-GL, 2018). There is a strong growth anticipated for LNG as

marine fuel in the future. Figure 1.3 shows that currently there are 233 vessels

– in operation and on order book – that are equipped with LNG propulsion. The

total outlook for LNG as marine fuel consumption in 2021 is expected to be

around 1.95 MMt (IHS Markit, 2017).

Figure 1.3 IHS Markit – Worldwide LNG Fuelled Database

The main sources for LNG as marine fuel are mainly two; (a)

liquefaction plants/onshore import terminals/FSRU and (b) small local

liquefaction facilities that uses pipeline gas. From here, it can be transferred for

fuel using LNG deliverers such as containerized storage tanks, LNG road

tankers or bunker vessels/barge. It is very unlikely that any of the LNG

Suppliers and their facilities described above will bunker ships directly. The

large amount of hazardous material involved (primarily LNG but also

refrigerants and high-pressure gas) results in strict and onerous safety and

environmental policies that normal shipping would find difficult and costly to

comply with (SGMF, 2018).

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Having said that, LNG terminals can technically transfer LNG to ships

directly without using any intermediate transfer mode. This however, will

require the ship to sail to the LNG bunkering terminal, a change of practice from

oil bunkering. On the other hand, LNG can be transferred from barges or even

small LNG carriers, which can be moored alongside a ship anywhere in a port

(with the agreement of the port authority). In this regard, the current practice of

marine fuel bunkering remains the same but the deliverer i.e. bunker vessel has

to be developed. Against this backdrop, a new type of purpose-designed LBV

has emerged to meet the demand for LNG bunkering operation. It utilizes the

technologies used on board of conventional LNGC and small-scale LNGC with

the addition of specialist equipment to handle STS LNG transfer.

1.3 Problem Statement

Previous studies of several industries show that product technologies do

not fully developed at the outset of their commercial lives (Henderson & Clark,

1990). The emergence phase of a new technology or solution might possibly be

a very confusing one. There will be a degree of agreement on what the major

systems would be but little is foreseen on the ways they should be put together.

There would be several experimental designs competing for the market but

ultimately it will be brought to end by the emergence of a dominant design as

illustrated by Figure 1.4. The same phenomena are observed in LNG bunkering

industry which itself is a fairly new industry; the first LBV came into operation

in 2013 and at the time of writing, there are only four LBVs in operation. All

four are designed to perform similar functions yet the technologies used are

somewhat different.

For firms that are looking into entering the LNG bunkering market, there

are values in selecting a future dominant design. It has been shown that firms

are not doomed when their entry design choices turn out to be ‘wrong’

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(Tegarden, Hatfield, & Echols, 1999). For early entrants, switching to dominant

design is associated with increased chances of survival and market share. In

addition, the ‘knowledge building phase’ that they went through gives them

technical and commercial edges against newcomers.

Figure 1.4 Dominant Design Paths (Henderson & Clark, 1990)

Compared to other methods e.g. containerized LNG, truck-to-ship,

shore-to-ship, it is foreseen that LNG bunkering via ship-to-ship (STS) method

would be the most feasible method of bunkering in the future (Choi & Navarro,

2017). With that said, based on the slow emergence of several competing

designs since 2017, it is apparent that there is still uncertainty on what the

dominant design would be for LBV. New firms entering into the market must

look into and decide what will be the design of their choice.

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1.4 Research Questions

The research will specifically try to address the following research

questions:

1. How does one evaluate the various LBV designs in the market

today?

2. How does design evaluation optimizes the final design of LBV?

1.5 Research Objectives

The research is focused on fulfilling two objectives:

1. Carrying out design evaluation for LBV through market analysis

of Charterers’ requirement.

2. Selecting the design that is cost-efficient and fit-for-purpose

which will likely be the future dominant design through

morphological analysis.

1.6 Significance of Study

The study contributes to the body of knowledge in several aspects;

1. The research complements the gap that is observed in the market.

Since the market is still in its early phase and the dominant design

is yet to emerge, the study provides a solution on how to evaluate

competing designs against the actual customer requirement.

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2. The study is done using data from actual tenders for LBV within

2017-2018, incorporating perspectives from Customer, Ship

Operator and Shipyards. It provides a more realistic analysis on

the matter to interested stakeholders.

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REFERENCES

Albrecht, J. (2015). Stakeholder Involvement in developing LNG as a ship fuel

in the Baltic Sea region. University of Jyväskylä.

Alvarez, A., & Ritchey, T. (2015). Applications of General Morphological

Analysis : From Engineering Design to Policy Analysis. Swedish

Morphological Society, AMG Vol 4, No. 1.

Anderson, P., & Tushman, M. (1990). Technological Discontinuities and

Dominant Designs: A Cyclical Model of Technological Change.

Administrative Science Quarterly, 35, 604-633.

British Petroleum. (2018, October 22). MARPOL 2020 - BP. Retrieved from

BP Global: https://www.bp.com/content/dam/bp-

trading/en/global/trading/Documents/7718%20MARPOL%20Brochure

_web.pdf

Choi, W., & Navarro, J. (2017). Purpose Designed LNG Bunkering Vessels

(LBV): Some Characteristics and Features. Design, Construction &

Operation of LNG/LPG Ships. Glasgow: RINA.

Corkhill, M. (2018, April 28). LNG bunker vessel fleet hits 15 mark. Retrieved

from LNG World Shipping:

http://www.lngworldshipping.com/news/view,lng-bunker-vessel-fleet-

hits-15-mark_50805.htm

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