Technical study and CBA for LNG as marine fuel in Malta · The LNG market has mainly developed in...

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Technical study and CBA for

LNG as marine fuel in Malta

November, 20th 2019

The sole responsibility of this publication lies with the author. The European Union is not responsible for any use that may be made of the information contained therein

INTRODUCTION AND OBJECTIVE

In view of the requirements of EU AFID Directive 2014/94/EU for thedevelopment of an LNG bunkering infrastructure for Malta’s TEN-T core portsfrom 2025, the study identifies the optimal infrastructure solutions insynergy with PCI Phase 1 and Phase 2.

Results will be used to assist the Government of Malta in the adoption of anational policy for the implementation of the required LNG bunkeringfacilities in Malta, thus stimulating the LNG uptake as a marine fuel andattract potential investors in this sector.

Activities covered in the study: Detailed Option Analysis & CBA Risk Assessment Study Legislative/Regulatory Analysis Training Needs Analysis Project Management, dissemination and public awareness - CEF

Grant Agreement obligation.

Study is 60% funded under CEF-Synergy; Partners – TM Contractor: Tractebel Consortium : PWC, Strategy&, Elengy & MamoTCV

Tractebel - Strategy& | PwC

A consortium of advisors has worked in four work-packages

2

Detailed Option Analysis & CBA1

LNG Bunkering Market Study

Technical and Option Analysis

CBA and sensitivity

scenarios

A

B

C

Risk Assessment2

Preliminary risk

assessment

Role requirements &

reporting

A B

Legislative / Regulatory Analysis3

Identification of leg.,

regulator, codes & st.

Gap

analysis

Proposal of

Amendments

Recommended policy

measures

A B C D

Training Needs Analysis4

Training

identification

Curriculum

proposal

A B


The starting point

The case of LNG for bunkering

Competitive landscape

Results of the CBA analysis

Appendix - Projected LNG for bunkering future demand in Malta

3


Total bunkering activities in Malta have grown in the last years (up to ~1.9 Mton in 2016)

4

1,060

(85.5%)

180

(14.5%)

1,240

2013

1,912

1,302

(81.5%)

217

(17.1%)

390

(20.4%)

1,597

1,521

(79.6%)

296

(18.5%)

1,270

+15.5%

1,053

(82.9%)

2015 20162014

Total bunkers handled in Malta – kton/year

HFO MGO

# of calls 4383 4321 4559 4596

Avg ton/ #

of calls283 294 350 416

Likely increasing due

to bunkering

competiveness

Growth driven by

competitive

prices

Focus of next slide

Sources: Transport Malta; Strategy& analysis


Going forward, bunkering activities in Malta will likely grow in line with GDP, potentially reaching 3.7 Mton in 2056

5

Bunkering volume projections in Malta based on EU GDP growth – Mton/year of HFO/MGO

20

16

1.9

20

56

20

26

2.32.1

3.7

20

31

2.5

CAGR +1.7% p.a.

20

21

Sources: OECD long-term forecast; Transport Malta; Strategy& analysis.

Based on forecasted by OECD of EU GDP

long-term growth, without considering any

efficiency gains

2017 - 2020 2021 - 2025 2026 - 2030 2031 - 2056

Average EU GDP growth p.a. – data in %

1.97% 1.91% 1.90% 1.50%

Average EU GDP growth for 2017-2056 is ~1.7% p.a.

SSS+LSS


Malta is also strategically positioned to become a LNG bunkering hub, especially for LSS ships coming from Suez Canal

North Mediterranean, West, S.W.

MediterraneanMalta has a STRONG geographical advantage as potential hub for long vessels

Potential competition from Suez Canal, Crete and Sicily

North West Europe, U.K., Baltic Sea,

America, Others

Potentially will pass close to North African coast to avoid ECA zone (from Suez to Gibraltar)

To be considered only in case of Mediterranean as full-ECA scenario (IMO)

East , S.E. Mediterranean, Black SeaMalta has NO geographical advantage as potential hub for long vessels

Potential competition from Suez Canal, Turkey, Crete and other Greek ports

Sources: www.suezcanal.gov.eg, Strategy& Analysis

6

North

Mediterranean

West, S.W.

Mediterranean

East , S.E.

Mediterranean;

Black sea

N.W. Europe; UK;

Baltic sea;

America; Others

8,703

3,696

1,005

1,659

2,343

Suez Canal

Malta

Number of vessels entering in Med. Sea from Suez Canal - 2016

Total number of

vessels passing

through Suez Canal

is 16,833 (8,703

South/North and

8,130 North/South)

http://www.suezcanal.gov.eg/


The starting point





7


Note: LNG carriers not included

Sources: DNV-GL LNG Status Update 2017; LNG World Shipping, Strategy& analysis

8

LNG as fuel for ships is emerging as an attractive and growing alternative

76 97

126

175

209 225 234 238 239 241 241 241 35

54 68 87 100 114 114 114 114 114 114

56 46

35 25 21

5

16 32

66

115

0

50

100

150

200

250

300

350

400

LNG ships

355

20

25

20

26

355

20

24

355

2

20

22

7

20

20

355341

20

23

3

355355

20

21

20

19

328

20

12

80

132

20

13

20

11

4

295

20

17

20

16

20

15

20

14

20

18

309

20

09

20

10

Worldwide LNG ships – 2009-2026E Typical end-users

Regular, repetitive, stable and fuel intensive engine utilization vessels

• Passenger Ships

• Cruise Ships

• Service & Supply Vessels

• Container, Ro-Ro & cargo Ships

• Tankers & Bulkers

LNG ships in operation

LNG ships on order

LNG ready ships

Forecast

Out of the 123 ships on

order at 2017, 8 are

planned to be built in 2017


In particular, cruise companies are starting to invest in new LNG-fuelled cruise vessels

1

9

Sources: Public articles and news, Strategy& analysis

2

4

4

2

17

1

Total2019

1

2018 2020 2021 2022 2023

1

2024 20262025

1

1

Number of LNG-fuelled cruise ships on order – delivery dates

Represents ~

25% of all 73

cruise tonnage

on order in 2017

Tractebel - Strategy& | PwC 10

The LNG market has mainly developed in the North/ Baltic Sea region, with Wärtsilä as leading engine maker

LNG-fuelled ships by region in 2017 LNG-fuelled ships by engine maker

Note: LNG carriers not included

Sources: DNV-GL LNGi Status Update 2017; LNG World Shipping, Strategy& analysis

44

28

16

35

10 15

59

7 7

1417

2

22

75

2

Unnamed

0

Others

79

324

In operationOn order

60

13 22

15

8

15

7

55

37

6

Other

global

2

Europe

13

1

Oceania

77

Middle

East

AsiaAmerica

68

28

52

Norway

On order In operation


In fact, an LNG bunkering market has first emerged in Norway, also supported by Governments’ incentive scheme

• An LNG bunkering market has emerged in the last

year in Nordics, after the Baltic and North Sea

became an ECA

• The Norwegian NOx Fund was established in

2008 with the objective of reducing Norwegian NOx

emissions by financing concrete measures for

ships, offshore installations and land-based industry

• The fund is financed by its members

‒ Ferries and cargo vessels pay on the one hand 0.5 € per kilo NOx(1) to the fund, and …

‒ … in return, they can receive support for investments aimed to reduce NOx

• LNG-fuelled ships are eligible for 19€ per kg NOx

yearly emission reductions, limited to 75% of the

additional cost (e.g. CAPEX) of LNG propulsion

• One of the most effective NOx-reduction

measures for ships is switching to LNG fuel,

which reduces the NOx emissions by 85-90%

• There are 60 ships operating on LNG fuel in

Norway (+8 in order)

• The NOx Fund has granted support to over 60

ships converted to LNG or new ships (in

operation and on order)

• The total funding to LNG projects amounts to

more than 110M€ in the last three years

11

Norway’s NOx Fund Background Results

1) 57 gr NOx per kg HFO

Sources: Internet research, LNG as a ship fuel report (DNV-GL), Norwegian NOx Fund as a driving force for LNG use (Viking Line Seminar), Strategy& analysis


LNG infrastructure

Total LNG fleet by type

Existing plus on-order until 2018

11 7

2

20

4

24

Car/passenger

ferry

OtherPSVGeneral

Cargo

Ro-RoRoPax

Norway is pioneer in LNG for bunkering (68 vessels by 2018)

12

8 8

4 5

12

5

10

3

6 6

1

68 69

84

69 65 68 70

63

74 72 72 68

0

5

10

15

20

0

20

40

60

80

100

# new

ships

20182016

# new LNG

ships

20172008 2011 20142012 20152009 2010 2013

% of penetration

1.4% 9.5% 8.6% 4.4% 15.4% 7.2% 7,2% 5,8%14.3%

Norway case – LNG ships evolution

1) Penetration rate is obtained dividing new LNG ships by total new ships every year

Note: average registration from 2013 to 2016 are used to compute the penetration rate from 2017, which is assumed constant

Sources: DNV-GL LNGi Status Update 2017 ; LNG as a ship fuel report (DNV-GL), GIE Small Scale LNG Map, World Shipping Register, Strategy& analysis

11% 11%

New LNG ships New ships (all types)

Total 68 ships

Most LNG Vessels

are operated on

fixed routes, in

relative close range

of home (availability

of LNG)


Different business models for LNG bunkering have been developed in Norway

BunkeringLocal LNG Production/StorageTransportationSupply

Onshore Terminal-to-Ship

• Commonly used in

Norway (8 ports)

• Permanent piping

and loading arms

Truck-to-Ship

• Used in Norway

• Night bunkering

• Truck’s capacity

limits, several

trucks are required

for bunkering(2)

• 15 LNG bunkering terminals in operation, 2 decided, 6

under discussion

• 5 LNG terminals

• 26 small truck terminals

• 8 ship terminal tanks

• Transportation by LNG carrier (e.g., Pioneer Knutsen

1.1k m3) or by truck

Ship-to-Ship (offshore)

• Started in 2015

with the offshore

bunkering of a

chemical tanker by

an LNG bunker

vessel (Skangas)

500-700 m3

35-55 m3

5800 m3

1.1k m3

35-55 m3

Sm

all

LN

G L

oc

al P

lan

ts

1

• Secondary distribution

is done by a new small

scale LNG vessel(1)

• Transportation from

source by LNG carriers Anthony Veder’s Coral Methane

Zeebrugge 261k

m3 – 4 storages

7.5 – 15k m3

150k m3

Re-E

xp

ort

fro

m L

NG

Te

rmin

al2

1

13

1) Currently 1 LNG vessel for transportation from Zeebrugge (7.5k m3) – 1 additional LNG carrier already ordered (15k m3) – 2 additional LNG vessels planned (10k m3)

2) Four truck loads are required for each bunkering operation if the LNG storage on the ferry (125m3) is empty – 1.5 hours each

Sources: Internet research, Strategy& analysis

Portable tank transfer is

not adopted in Norway


Based on our experience, main drivers for bunkering LNG uptake are international regulation and TCO

Drivers Key TrendsRelative

Importance

Regulation

• IMO and governments play a key role for LNG uptake via emission regulations, excise tax, or

subsidies (like the NOx fund in Norway)

• Overall favourable context: Med basin coasts will became an ECA zone in 2020 – Only when Med

will be an ECA, regulation will allow 3 main technologies: Heavy fuel + scrubber, Low Sulphur Fuel

and LNG

4

TCO and

convenience

for end

users

• Price spread between LNG and other fuels will be a key determinant for the LNG bunkering uptake

• Assuming current price scenarios, LNG has similar ΔTCO of LNG vs HFO + Scrubber, while has

always a positive ΔTCO against MGO technology

• Incentives on CAPEX and bonus/malus on pollution are key to make LNG “in the money” (as

Norway)

3

Infrastructure

• Addressable market is generally concentrated in main ports – Investment are high, but market can

scale-up in shorter term, therefore returns could be interesting (only in case of regulatory support

and guaranteed demand)

• Most LNG vessels are operated on fixed routes, in relative close range of home (availability of

LNG)

• Truck-to-ship, implying limited investments, will be the most common initially; in the medium-long

run ship-to-ship bunkering will diffuse and is the preferred option for ship-owners

2

OEM’s

offering

• Technology in place -- main OEM in Europe of LNG engines are Wartsila, MAN and Rolls Royce

• Mainly applicable to new ships – Retrofitting is very costly

• Dual fuel is the most promising technology ensuring flexibility to ship owners

1

Green

image

• Not a key driver for the ship owner (guided by regulation and TCO)

• Increasing impacts for cruise ships, but no major investment in communication yet (e.g. Carnival)1

Source: Strategy& analysis

1

De

tail

s in

th

e

nex

t p

ag

es

2


A

E

BC

D

F

G

IH

15

Regulation is a pre-requisite for LNG bunkering: part of Mediterranean Sea will be an ECA zone starting from 2020

IMO’s world map for ECAs (Emission Control Areas)

Current ECA Possible future ECA

Sources: IMO, Strategy& analysis

0

5

10

15

20

0 500 1000 1500 2000 2500

0

1

2

3

4

5

2005 2010 2015 2020 2025

Global

SECA

SO

x %

Lim

its

NOx - Nitrogen Limit IMO Regulation to NECA and Global Area

SOx - Sulphur Content % Limit in Marine FuelsIMO Regulation to SECA and Global Area

Tier I

Tier III

Tier IIGlobal

Only NECA

NO

x L

imit

s, g

/kW

h

1 Regulation

Engine’s rated speed (rpm)

Rpm 130

Rpm 2000


Regulatory changes will affect LNG bunker uptake – Experts confirm 0.5% Sulphur cap likely to be enforced in 2020

Sulphur

limits

ECA (1) 1,0% 1,0% 0,1% 0,1% 0,1%Whole Med as ECA?

200 miles off coast?

Global 4,5% 3,5% 3,5% 0,5% (2) 0,5% (2)

Enforced in EU Med?

Or whole Med?

NOx

limits

ECA (1)

Tier II on new

builds (3)

Tier III on new

builds (US only

from 2016) (3)

Tier III on new

builds (2021) (3)

Global

16

Overview of regulatory framework – impact in EU and Med

7/2010 1/2012 1/2015 1/2020 1/2025 >2025

Note 1) EU ECAs (Emission Control Areas): North and Baltic Sea

Note 2) Enforcement date review by IMO –in 2018 - will depend also on low sulphur fuel availability by refineries to match the emission requirements, but the consensus in the shipping worlds is for 2020

Note 3) Tier II: avg NOx at 9.6 g/kWh in fuel, Tier III: avg NOx at 2.3 g/kWh in fuel

Sources: Marine Service Gmbh 2014 report, DNV GL 2012 report, Industry news, International Chamber of Shipping, Experts interviews; Strategy& analysis

1 Regulation


Only at that time regulation will call for the adoption of three main technologies…

• Continue to use conventional fuel, which today is

used as the main fuel…

• … with the addition of an exhaust scrubber (specific

regulations to be detailed)

• Requires sizable modifications to the ship and

presents waste management issues

• Often referred to Marine Gas Oil (MGO) and

includes transport fuels such as gasoline and diesel

• This is where refiners make their margins

• If price gap between fuel oil and MGO increases

(higher oil demand), scrubbing becomes economic

• It is the simplest to implement

• LNG could be an alternative to conventional fuel

(potentially dual fuel)

• Today LNG is used in selected ECAs (Norway/

Baltic, USA, Japan) - Global acceptance requires

infrastructure in relevant harbours

• LNG is gaining momentum with vessel and OEMs

• Mainly applicable to new ships (some conversion

trials in Canada)

Conventional

Fuel (HFO)

+Scrubber

Low Sulphur

Fuel

(e.g. MGO)

Liquefied

Natural Gas

(LNG)

0

20

30

40

50

10

LNG Fuel ScrubberLow

Sulphur

Fuel

Conventional

Fuel

SOx EmissionsTonnes per year

CO2 EmissionsTonnes per year

4,000

6,000

2,000

0

8,000

LNG Fuel Conventional

Fuel

ScrubberLow

Sulphur

Fuel

200

160

40

80

120

0

Scrubber Conventional

Fuel

Low

Sulphur

Fuel

LNG Fuel

10

8

6

4

2

0

ScrubberLow

Sulphur

Fuel

LNG Fuel Conventional

Fuel

NOx EmissionsTonnes per year

Particle EmissionsTonnes per year

Overview of alternative technologies Environmental emissions (*)

Note (*): Considering a typical Baltic Sea cargo ship of approximately 2,700 gross tonnes, 3,300 kW main engine and 5,250 yearly sailing hours

Sources: DNV “Greener Shipping in the Baltic Sea” – June 2010; WPCI; Strategy& analysis

1 Regulation


… ship owners will investigate on pros and cons of available alternatives

18

CAPEX Fuel CostFuel

Availability

Operating

costsEmissions Comments

Conventional

Fuel (HFO)

+ Scrubber- ++ ++ - ?

• Significant alterations on-board: tanks, pipes,

pumps and water treatment system

• Slight increase of power consumption

Low Sulphur

Fuel

(e.g. MGO)++ - - - ++ +

• Limited availability of MGO at adequate specs

• No treatment on board

• Minor modifications to existing fuel system on

board

Liquefied

Natural Gas

(LNG)- - ? ? + ++

• Difficult logistics

• Significant alterations required, such as reduced

cargo capacity – New hull integrated tanks are

expected to simplify this issue

• Longer / more complex bunkering operations

(HSE issues, especially for passenger ships)

• Mainly applicable to new ships – difficult

retrofitting

• Well proven technology in selected ECA zones

Choice of Fuel/ Technology in ECA zones

Sources: Interviews, Strategy& analysis

1 Regulation

Strongly Favourable Favourable Legend Strongly Unfavourable Unfavourable Unclear++ + - - - ?


Engine size kW kW kW

• Main 14,100 13,000 8,000

• Auxiliaries 1,650 2,300 1,100

Consumption Tons/d Tons/d Tons/d

• HFO 100% 47.2 39.4 27.7

• MGO 100% 42.9 35.8 25.1

• LNG 100% 35.5 29.7 20.9

Operating days d/year d/year d/year

• Main 280 160 280

19

In last year scenario, LNG seems attractive vs both MGO and HFO + scrubber

TCO for Malta (LNG vs. alternative fuels, in M€)

General Cargo (Ro-Ro) Passenger (Ro-Pax) Container/Feeder (GT<20k)

Note: Maintenance for LNG and MGO assumed equal

Sources: www.shipandbunker.com; Interviews; Strategy& TCO model and analysis

HFO+SCR MGOLNG

5

80

55

71

8 45

5

5042

7

62

Capex MaintenanceFuel cost

1.8

MGOLNG HFO+SCR

24

36

494064

29

7

4

41

35

MGOHFO+SCRLNG

34

42

38 3

3

48

3

30

4

56

25

Pay-back

2 TCO

Based on 2017 average prices (source: www.shipandbunker.com - last 12 months):

LNG (commodity): 5.5$/mmbtu; HFO: 320 €/ton; MGO: 502 €/ton

3.5 2.73.7 2.22.6

Payback

period of LNG

compared to

(HFO + SCR)

and MGO

respectively –

focus of next

slide

http://www.shipandbunker.com/


Payback period has been calculated considering LNG solution compared to (HFO + Scrubber) and MGO respectively

Note: Values of Capex and Opex shown in the graphs have been already discounted assuming a 7% discount factor

Sources: Strategy& TCO model and analysis

2 TCO

0 1 2 3 4 5 6 7

6,000

0

2,000

4,000

$ in Thousands

Capex LNG - Capex (HFO + Scrubber)

Cumulative Opex (HFO + Scrubber) - Cumulative Opex LNG

0 1 2 3 4 5 6 7

0

10,000

5,000

15,000

$ in Thousands

LNG vs (HFO + Scrubber) LNG vs MGO

GE

NE

RA

L C

AR

GO

0 1 2 3 4 5 6 7

2,000

0

1,000

3,000

0 1 2 3 4 5 6 70

2,000

4,000

6,000

8,000

0 1 2 3 4 5 6 7

1,000

0

3,000

2,000

0 1 2 3 4 5 6 70

2,000

4,000

6,000

8,000

PA

SS

EN

GE

RC

ON

TA

INE

R F

EE

D

Time (years) Time (years)

3.5 Yrs 1.8 Yrs

3.7 Yrs 2.7 Yrs

2.6 Yrs 2.2 Yrs

Capex LNG - Capex MGO

Cumulative Opex MGO - Cumulative Opex LNG


Retrofitting requires significant investment both in Opex and Capex…

2 TCO

21

CA

PE

X

LNG SYSTEM

LNG tanks

OP

EX

ENGINE ROOM

MID-BODY SECTION

Main costs of retrofitting

Gas supply system

Retrofit of engines

Modification of machinery systems

Prefabrication & transportation of new

section

Cabins / common spaces, etc.

Retrofitting - Illustrative

CONSUMABLES

Lubricants

MAINTENANCE

FUEL

Gas supply system

Engine maintenance intervals

LNG supply system maintenance

Cost of having the ship off-

hire should also be taken

into consideration

Sources: DNV GL study: “Retrofitting cruise ships to LNG by elongation – A crazy idea?”; Strategy& analysis


… that results overall in an expensive solution if compared with alternatives (e.g. scrubber)

2 TCO

22

7

7

31

8

21

74

LNG tanks and systems

Outfitting

Engineering cost

Steel cost

Total Cost - Excluding off-hire

4 x DF engine retrofit

High level cost estimate for retrofit vs scrubber system for a cruise ship – Million USD

Retr

ofi

tH

yb

rid

sc

rub

ber

5

20

15Equipment

Yard

Total Cost

Note: Maintenance for LNG and MGO assumed equal

Sources: DNV GL study: “Retrofitting cruise ships to LNG by elongation – A crazy idea?”; Strategy& analysis

Considering a ship with

the following

characteristics:

– Beam: 32m

– Length overall: 300m

– Ship GT: 75,000

– Engines: 4x MAN

12V48/60 at

12,600kW

Considering to install a

hybrid system on the ship

using 4 scrubbers, one

per engine


The starting point





23


Malta increased its bunkering activities also thanks to competitive pricing

Bunkering in Malta - kton/year

Sources: Transport Malta; Ship & Bunkering, Strategy& analysis

2013

1,240

2016

1,912

+54%

Average prices of HFO and MGO Dec ‘16 – Dec ‘17 - $/ton

320

503

323

514

328

539

333

548

335

532

385

509

HFO (IFO 380) MGO

Va

lle

tta

Pira

eu

s

Alg

ecira

s

Au

gu

sta

Ge

no

a

Ista

nb

ul

Va

lle

tta

Pira

eu

s

Alg

ecira

s

Au

gu

sta

Ge

no

a

Ista

nb

ul

24


Majority of lines passing by Malta come from Italy, Egypt, Spain and Greece - Piraeus is the most frequent port

Number of 1st last port calls in 2017 – by port

Sources: Transport Malta – Extract of port calls ; Strategy& analysis

101010101010

12121213141515

192020

222223

2731

42

564Las Palmas

Other 234 ports

Antwerpen

Siracusa

Genova

Piraeus

Catania

Le Havre

Port Said

Palermo

Koper

Alexandria

Valencia

Singapore

Palma de Mallorca

Porto Nogaro

Augusta

Algiers

Aliaga

Barcelona

Suez

Tanger Med

Damietta

Number of 1st last port calls in 2017 – by country

Total # of calls

for the extract

received by TM in

2017 is 943

266

10

10

10

12

16

24

26

27

28

29

36

40

68

72

77

192

NET

BEL

Other

ALG

ASIA

MOR

TUN

CRO

SLO

LIB

MAL

TUR

EGY

SPA

FRA

ITA

GRE

Represent

~43% of total

calls reported in

the extractTop three ports

by # of port

calls in 2017

“Other” includes other

countries as well as ports with

less than two port calls in 2017


Most frequent countries of destination are Italy, Egypt, Algeria and Turkey – Piraeus and Salerno are the most frequent ports

Sources: Transport Malta - Extract of port calls; Strategy& analysis

Number of next port calls in 2017 – by port

111111111111

13141415151515161617171717

223031

Palermo

Nemrut Bay

Singapore

Valencia

Skikda

Misurata

593Other 243 Ports

Tripoli

Livorno

Genova

Barcelona

Algiers

Catania

Port Said

Salalah

Suez

Damietta

Algeciras

Salerno

Tanger Med

Alexandria

Beirut

Piraeus

Number of next port calls in 2017 – by country

Total # of calls

for the extract

received by TM in

2017 is 943

332

9

10

11

13

14

17

19

21

27

29

47

47

49

50

66

182

ALG

ITA

EGY

Other

CRO

SAU

UAE

TUN

ASIA

LEB

LIB

OMA

SPA

UK

MOR

GRE

TUR

Represent

~37% of total

calls reported in

the extract

“Other” includes other

countries as well as ports with

less than two port calls in 2017

Top three ports

by # of port

calls in 2017


Today, in the Med area there are 20 LNG terminals in operation and 10 planned or under construction

Existing and planned LNG terminals in the Mediterranean basin

Fos Tonkin

Elengy (1972)

Porto Levante

Adriatic LNG (2009)Panigaglia

GNL Italia (1971)

Revithussa

Desfa (2000)

Cartagena

Enagas (1989)

Sagunto

Saggas (2006)

Barcelona

Enagas (1968)

Huelva

Enagas (1988)3

4 Marmara

Botas (1994)1

2

Fos Cavaou

Fosmax (2010) Olt Offshore

Olt (2013)5

6

Planned/ under evaluation

LNG Terminal

• Falconara Marittima – Api Nova energia

(2018)

• Oristano – 3xEdison (2018), IVI , Higas

• Gioia Tauro1 – LNG Medgas Terminal

(2019)

• Krk Island FSRU – LNG Hrvatska (2019)

• Eagle LNG FSRU – Burns (2020)

• Alexandroupolis FSRU – Gas Trade (2018)

• Saros FSRU – Botas (2019)

• Vassilikos – export terminal 2022

• Iskenderun FSRU– Botas 2019

1

2

3

4

5

6

7

8

9

Aliaga

Ege Gas (2006)

7

8

Aliaga

Etkiliman

(2006)

9

1) Gioia Tauro terminal will be connected to the national gas grid. The project foresees the initial construction of two storage tanks for the regasification activities (send-out of 8 Bcm/y), the

construction of an additional tank in a following phase (total send-out of 12 Bcm/y) and the construction of a storage tank fully dedicated to the alternative uses of LNG (bunkering and truck

loading)

Sources: GIE Small Scale LNG Map 2017, Strategy& analysis

Arzew-Bethioua

Sonatrach

Skikda

Sonatrach

6 LNG export terminal

#

14 LNG Terminal in operation

Planned LNG Terminal

Damietta

SegasEdku

Egyptian LNG

Hadera

Ingl

Legend:

Turkey

Albania

Croatia


The starting point





28


Cost Benefit Analysis has been performed considering market demand as forecasted in the MID Scenario

102129 139 151

234

291312

339

53

549

589

640

2043

2024

2020

2026

2027

2032

2028

2030

2034

2036

2039

2035

2038

2040

2042

2052

2044

2046

2048

2022

2054

2056

2041

2045

2021

2037

2023

2025

2029

2031

2049

2033

2047

2051

2053

2055

2050

438

31

11

Total LNG bunkering consumption in Malta – [ktpa]

LOW

MID

(Base Scenario)

HIGH

2020-2024 2025-2030 2031-2056



The analysis has been focused on four alternative solutions


Phase I Phase II ext. Phase III Volumes captured (ktpa)

2020-2025 2026-2030 2031-2056 CoD 2030 2040 2056

No

investments

Iso-

containers

On-shore

Tank

- 31 234 339

Onshore

Liquefaction

Plant

FSRU

FSU

1

2

3

4

# Solution considered


The CBA analysis has followed three steps, in line with European requirements

Sources: Guide to cost-benefit analysis of investment projects; Strategy& analysis

Phase

CBA analysis overview

Sensitivity analysis

and Risk assessment

Socio-economic

analysisFinancial analysis

Financial analysis from the

project perspective

(no grants / subsidies)

Financial analysis from

promoter perspective

(with grants / subsidies)

Financial sustainability

analysis

Identification of the factors

affecting the financial /

socio-economic analysis

Sensitivity analysis and

identification of the critical

factors

1 2 3

Identification of the socio-

economic benefits

Socio-economic

analysisProcess

steps

ObjectiveAssess the project profitability

and sustainability from a

financial perspective

Stress test the solidity of the

financial and socio-economic

analysis

Assess the benefits of the

project and its contribution to

welfare

KPIs• FNPV (C), FNPV (K)

• IRR (C), IRR (K)

• Financial Payback (C, K)

• FNPV (C), ENPV• ENPV

• ERR

• Economic payback

Preparation of a risk

mitigation plan


The ultimate goal of the CBA has been to confirm whether the project is sustainable for the Society

Sources: Guide to cost-benefit analysis of investment projects; Strategy& analysis

CBA rationale / ultimate goal

Negative CBA outcome

Positive CBA outcome

Risk assessmentSocio-economic analysisFinancial analysis

1 2 3

Financial

analysis

(FNPV)

Project does not

require financial

support>0

<0

Society is better off

with the project

Society is better off

without the project

Sensitivity

analysis

!

Socio-economic

analysis

(ENPV)

>0

<0

Project requires

financial support

Identification of

the EU financial

support

!


To perform the analysis, we have created a flexible and user friendly model which can simulate different scenarios

CONTROL PANEL DASHBOARD / RESULTS

Technical solution 1 RESULTS

1.1 FINANCIAL ANALYSIS

Return on Investment (CAPEX excl. Contingencies)

FNPV(C) Mn € -42

FRR (C) % 4.2%

Return on National Capital (CAPEX incl. Contingencies)

Market scenario FNPV(K) Mn € -28

FRR (K) % 4.8%

F-Payback years 24.6

1.2 ECONOMIC ANALYSIS

Financial Discount Rate ENPV Mn € 345

ERR % 13.2%

B/C RATIO - 2.58

E-Payback years 16.8

Opportunity to chose among different

options and assumptionsAutomatic update of main results


Combination of Isocontainer and Onshore tank shows the highest financial and economic indicators

Summary of CBA results (Mn EUR)


Technical option Financial analysis Economic analysis

Phase II Phase IIICAPEX

(P.II-III)

FNPV(C)

@6.5%FRR(C)

FNPV(K)

@6.5%FRR(K)

Operati

ng

Losses

ENPV

@5%

ERR

(%)B/C

ISO

CO

NTA

INE

RS

ONSHORE

TANK

211

Mn€

-56

Mn€3.5%

-17

Mn€5.4%

-21

Mn€

970

Mn€21.0% 5.14

LIQUEFACTION

PLANT

499

Mn€

-425

Mn€n/a

-336

Mn€n/a

-493

Mn€

372

Mn€9.8% 1.67

FSRU540

Mn€

-375

Mn€-10%

-278

Mn€n/a

-143

Mn€

432

Mn€9.8% 1.71

FSU394

Mn€

-317

Mn€n/a

-246

Mn€n/a

-201

Mn€

453

Mn€10.9% 1.83

1 2

High Capex for options 2 to 4

have an impact on financial

analysis

High Opex for options 2 to 4

have an impact on financial

sustainability


Possiblelocation

1

3 – Liquefaction Plant

2 & 3 offshore

Located somewhere

else in Delimara or

in other ports 2 & 3 – Onshore Tanks

35


Sensitivity analysis has been performed considering critical variables affecting financial and economic results

Identification of critical factors

37

Area Variable UnitΔ

Variable

ΔFNPV

Critical?Δ

ENPVCritical?

Volume Volume ktpa + 1% -2.9% YES 1.3% YES

Costs

Capex Mn € + 1% 3.4% YES -0.2% NO

Opex (excluding commodity) Mn € + 1% 1.6% YES -0.2% NO

LNG Commodity Cost € / ton + 1% 8.0% YES -0.5% NO

Price of Fuels

LNG Price in Malta € / ton + 1% -11.4% YES 0.0% NO

LNG Price in in Med Area € / ton + 1% 0.0% NO 0.7% NO

Margins on HFO/MGO % + 1% 0.0% NO 0.0% NO

EnvironmentPrice of CO2 € / ton + 1% 0.0% NO 0.1% NO

Price of Air Pollutants € / ton + 1% 0.0% NO 0.9% NO

Critical factors Non critical factors

Sensitivity analysis to be

performed on these factors

1

2

3

4


Results of sensitivity analysis show that economics remain positive in any scenario considered

Sensitivity analysis on critical factors for solution 2

38

Variable ScenarioΔ

FNPV

FNPVMn €

FRR%

ΔENPV

ENPV

Mn €

ERR

%

VolumeLOW -130% -124 -3.1% -73% 265 11.3%

HIGH +35% -35 5.4% 98% 1930 23.6%

Capex+25% -73% -93 2.2% -5% 923 18.7%

-25% +72% -15 5.6% 5% 1030 24.5%

Opex+25% -32% -71 2.7% -4% 933 20.2%

-25% +31% -37 4.6% 4% 1020 22.1%

LNG Commodity Cost+25% -156% -138 -5.2% -12% 859 19.7%

-25% +158% 31 7.8% 12% 1094 22.5%

LNG Price+25% +223% 66 9.1% 0% 976 21.1%

-25% -223% -174 n/a 0% 976 21.1%

Economics remain positive

for every scenario


The starting point





39


Projected LNG bunkering demand in Malta ranges between ~150 ktpa and 640 ktpa in 2056

102129 139 151

234

291312

339

53

549

589

640

20

28

20

56

20

26

20

22

20

20

20

34

20

24

20

30

20

32

20

36

20

38

20

40

20

42

20

44

20

46

20

48

20

50

20

52

20

54

1131

438

Total LNG bunkering consumption in Malta – [ktpa]

LOW

MID

(Base Scenario)

HIGH

40

2020-2024 2025-2030 2031-2056



Total LNG bunkering demand by port in Malta - High Scenario

41

Total LNG bunkering consumption in Malta– [ktpa]

HIGH

20

39

20

54

20

51

20

48

20

27

20

26

187

20

23

20

33

20

20

20

21

20

22

20

52

20

24

20

44

20

31

20

25

20

46

20

28

20

29

20

30

20

32

20

34

53

20

35

20

36

20

37

20

38

20

40

20

41

20

42

20

50

20

43

20

45

9

20

47

20

49

20

53

640

20

55

549

20

56

69

438

589

1

Valletta Marsaxlokk Outside Harbour

2020-2024 2025-2030 2031-2056



Total LNG bunkering demand by port in Malta - Mid Scenario

42


2

20

44

20

45

20

40

20

37

20

36

20

35

106

20

38

291

20

46

20

49

20

47

20

48

20

41

234

20

43

20

42

20

39

20

33

20

31

315

20

24

20

23

20

21

20

20

20

22

20

32

20

30

20

29

20

25

20

27

20

26

20

28

20

34

40

339

20

56

20

55

20

54

20

53

20

50

312

20

51

20

52

Marsaxlokk Outside HarbourValletta

MID

(Base Scenario)

2020-2024 2025-2030 2031-2056



Total LNG bunkering demand by port in Malta - Low Scenario

43


3

151

20

50

139

20

52

20

53

20

56

20

55

20

54

20

51

20

46

20

44

20

41

20

43

20

42

20

49

20

47

20

40

102

20

45

129

20

39

20

48

11

20

28

2

20

33

20

29

20

27

20

26

15

20

24

20

25

20

37

20

34

20

30

20

36

20

20

20

21

20

35

20

32

20

23

20

22

41

20

31

20

38

Outside HarbourMarsaxlokkValletta

LOW

2020-2024 2025-2030 2031-2056



Total LNG bunkering demand by vessel in Malta - High Scenario

44


HIGH

20

41

20

39

20

40

438

20

38

20

36

20

37

20

56

20

54

589

20

52

640

20

51

20

55

20

53

20

50

20

48

20

46

20

44

20

49

20

47

20

45

549

20

43

20

42

20

35

20

30

20

23

20

28

20

26

20

24

20

33

20

31

20

22

20

21

20

20

20

34

20

29

69

20

27

20

25

187

20

32

539

1

Gen Cargo Bulk carrierTankersContainersRoRo-RoPax

2020-2024 2025-2030 2031-2056



Total LNG bunkering demand by vessel in Malta - Mid Scenario

45


2

20

37

20

40

20

42

234

20

39

20

38

20

43

20

41

20

35

20

36

106

20

34

20

33

312339

20

52

20

50

20

55

20

51

20

53

20

54

20

45

20

48

291

20

44

20

46

20

49

20

47

20

20

20

24

20

21

20

23

20

22

20

56

4031

20

29

20

30

5

20

27

20

25

20

28

20

32

20

31

20

26

ContainersRoRo-RoPax Tankers Bulk carrierGen Cargo

MID

(Base Scenario)

2020-2024 2025-2030 2031-2056



Total LNG bunkering demand by vessel in Malta - Low Scenario

46


3

20

52

20

51

20

50

20

53

20

56

139

20

55

20

54

20

46

20

47

20

49

20

48

20

45

129

20

44

20

43

20

42

102

20

39

20

40

20

38

20

41

20

35

20

34

20

37

20

36

41

20

30

20

31

20

32

20

33

15

20

28

11

20

27

20

25

151

20

29

2

20

24

20

21

20

26

20

22

20

20

20

23

RoRo-RoPax Containers Tankers Gen Cargo Bulk carrier

LOW

2020-2024 2025-2030 2031-2056



In terms of LNG ships equivalent, # of ships in Malta ranges between 19 and 84 in 2056

Total number of LNG ships in Malta – number of units

47

191818

12

4

4339

36

29

11

84

76

70

56

20

20

52

20

48

20

50

20

46

20

34

20

54

20

42

20

36

20

38

20

32

20

30

20

28

20

56

20

44

20

40

20

26

20

22

20

24

20

20

1

LOW

MID

(Base Scenario)

HIGH

2020-2024 2025-2030 2031-2056



Total number of LNG ships by port - High Scenario

48


HIGH

20

21

20

20

20

23

20

22

20

54

20

45

20

52

20

50

20

49

76

70

20

51

20

53

20

44

20

56

84

20

48

20

46

20

47

20

55

20

33

20

32

7

20

30

4

20

20

38

20

41

20

40

20

31

20

43

20

42

20

39

20

37

20

35

20

36

20

34

56

20

24

20

27

20

29

20

28

20

25

20

26

1

1

Valletta Marsaxlokk Outside Harbour

2020-2024 2025-2030 2031-2056



Total number of LNG ships by port - Mid Scenario

49

2

20

54

20

56

43

20

55

20

43

20

36

20

44

20

31

20

41

20

37

20

47

20

45

20

42

11

20

46

20

52

20

34

20

48

36

20

33

20

32

20

49

29

20

38

20

35

20

51

20

40

20

39

20

53

20

50

39

20

20

20

30

20

24

20

26

20

29

032

20

22

20

27

20

28

20

23

20

21

20

25

MarsaxlokkValletta Outside Harbour


MID

(Base Scenario)

2020-2024 2025-2030 2031-2056



Total number of LNG ships by port - Low Scenario

50

3

12

20

40

20

39

20

30

20

29

20

25

20

34

20

42

42

03

7

20

35

20

38

20

31

1

20

27

20

44

20

28

20

26

20

43

20

41

20

36

20

33

1

20

32

20

22

20

21

20

20

20

24

20

23

20

47

20

46

20

45

20

55

18

20

50

20

51

19

20

48

20

56

20

54

20

53

18

20

49

20

52

Outside HarbourMarsaxlokkValletta

LOW


2020-2024 2025-2030 2031-2056



Total number of LNG ships by type of service (SSS/LSS) - High Scenario

51

HIGH

20

20

84

20

55

20

54

20

53

20

52

20

51

20

50

20

56

20

43

20

42

20

36

20

35

20

46

20

40

20

41

76

20

39

20

34

20

33

20

32

7

20

30

20

45

20

49

56

70

20

47

20

37

20

31

20

44

20

4

20

48

20

38

20

29

20

28

20

27

20

26

20

25

1

20

24

20

23

20

22

20

21

1


2020-2024 2025-2030 2031-2056

LSS

SSS



Total number of LNG ships by type of service (SSS/LSS) - Mid Scenario

52

29

20

41

20

40

36

20

44

20

43

20

42

20

46

20

45

20

49

20

48

20

47

39

20

39

43

20

56

20

55

20

52

20

51

20

50

20

54

20

53

20

22

20

36

20

37

11

2

20

29

20

25

20

27

20

24

20

20

3

20

26

20

30

20

28

20

33

20

35

0

20

32

20

38

20

34

20

31

20

23

20

21

LSS

SSS


2MID

(Base Scenario)

2020-2024 2025-2030 2031-2056



Total number of LNG ships by type of service (SSS/LSS) - Low Scenario

53

20

45

20

48

20

43

20

42

20

51

12

20

55

20

50

18

20

41

20

40

20

39

20

53

18

20

56

19

20

54

20

52

20

49

20

47

20

46

20

44

20

22

20

32

20

26

20

33

4

20

31

1

20

29

20

28

20

27

20

37

20

25

20

24

20

23

20

30

20

20

1

20

21

20

38

20

34

20

36

20

35

1

LSS

SSS


3 LOW

2020-2024 2025-2030 2031-2056



Total number of LNG ships by type of vessel - High Scenario

54

HIGH

20

56

76

20

49

84

20

55

20

53

20

52

20

54

20

51

20

50

20

48

20

47

20

46

70

20

41

56

4

20

34

20

43

20

31

20

30

20

39

20

37

20

35

20

33

7

20

28

20

27

20

26

20

25

1

20

24

20

40

20

44

20

38

20

36

20

42

20

20

29

20

32

20

20

20

22

20

23

20

21

20

45

1

TankersContainersRoRo-RoPax Bulk carrierGen Cargo


2020-2024 2025-2030 2031-2056



Total number of LNG ships by type of vessel - Mid Scenario

55

20

21

20

20

20

22

20

23

20

55

20

56

43

20

46

20

49

20

48

39

20

45

20

52

20

43

20

42

20

51

36

20

40

20

39

20

38

20

35

20

47

11

20

41

20

34

20

54

29

20

53

20

33

20

50

20

44

20

31

20

37

20

36

20

32

20

30

2

20

28

20

26

3

20

27

20

25

0

20

24

20

29

Bulk carrierTankersContainersRoRo-RoPax Gen Cargo


2MID

(Base Scenario)

2020-2024 2025-2030 2031-2056



Total number of LNG ships by type of vessel - Low Scenario

56

19

20

51

20

47

20

46

20

50

20

45

18

20

44

20

43

20

42

20

52

20

56

20

55

18

20

49

20

48

20

54

20

53

20

24

20

36

1

20

23

20

40

20

35

1

20

38

20

34

20

33

20

28

20

31

20

37

20

26

20

25

20

32

20

41

4

20

30

20

39

20

29

12

20

22

20

21

20

20

20

27


3 LOW

Gen CargoContainers Tankers Bulk carrierRoRo-RoPax

2020-2024 2025-2030 2031-2056



Total LNG bunkering and new LNG vessels in Malta by port -Mid Scenario

57

< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 5 31 106 234 291 312 339

Valletta 0 0 2 8 21 28 30 33

Marsaxlokk 0 4 22 64 80 86 92 100

Outside Harbour 0 1 7 34 133 176 189 205


< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 0 2 11 29 36 39 43

Valletta 0 0 0 1 3 3 4 5

Marsaxlokk 0 0 2 6 7 8 8 9

Outside Harbour 0 0 0 4 19 25 27 29


MID

(Base Scenario)



Total LNG bunkering and new LNG vessels in Malta by vessel –Mid Scenario

58

< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 5 31 106 234 291 312 339

RoRo-RoPax 0 0 2 6 13 17 18 20

Containers 0 5 25 73 90 97 104 113

Tankers 0 0 1 10 52 71 76 83

Gen Cargo 0 0 2 16 72 97 105 114

Bulk carrier 0 0 0 1 6 9 9 10


< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 0 2 11 29 36 39 43

RoRo-RoPax 0 0 0 1 1 1 2 2

Containers 0 0 2 7 8 9 9 10

Tankers 0 0 0 1 7 9 10 11

Gen Cargo 0 0 0 2 12 16 17 19

Bulk carrier 0 0 0 0 1 1 1 1


MID

(Base Scenario)



Total LNG bunkering and new LNG vessels in Malta by service (SSS/LSS) - Mid Scenario

59

< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 5 31 106 234 291 312 339

SSS 0 5 27 79 103 114 122 132

LSS 0 0 4 27 131 177 190 206


< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 0 2 11 29 36 39 43

SSS 0 0 2 8 9 10 11 12

LSS 0 0 0 3 20 26 28 31


MID

(Base Scenario)



Total LNG bunkering and new LNG vessels in Malta by port -High Scenario

60

< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 9 53 187 438 549 589 640

Valletta 0 1 4 15 42 56 60 66

Marsaxlokk 0 7 36 106 134 144 155 168

Outside Harbour 0 1 13 66 262 348 374 406


< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 1 4 20 56 70 76 84

Valletta 0 0 0 2 5 7 8 8

Marsaxlokk 0 1 3 10 12 13 14 16




HIGH


Total LNG bunkering and new LNG vessels in Malta by vessel –High Scenario

61

< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 9 53 187 438 549 589 640

RoRo-RoPax 0 1 4 12 26 34 36 39

Containers 0 8 41 121 150 162 173 188

Tankers 0 0 3 19 105 142 152 165

Gen Cargo 0 0 5 32 144 195 209 227

Bulk carrier 0 0 0 3 13 17 18 20


HIGH

< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 1 4 20 56 70 76 84

RoRo-RoPax 0 0 0 1 2 3 3 4

Containers 0 1 3 11 14 15 16 17

Tankers 0 0 0 2 14 18 20 22

Gen Cargo 0 0 1 6 24 32 35 38

Bulk carrier 0 0 0 0 2 2 2 3




Total LNG bunkering and new LNG vessels in Malta by service (SSS/LSS) - High Scenario

62

< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 9 53 187 438 549 589 640

SSS 0 9 45 133 176 195 209 227

LSS 0 0 8 54 262 354 380 413


HIGH

< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 1 4 20 56 70 76 84

SSS 0 1 3 12 16 18 19 21

LSS 0 0 1 8 40 52 57 63




Total LNG bunkering and new LNG vessels in Malta by port –Low Scenario

63

< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 2 11 41 102 129 139 151

Valletta 0 0 1 4 11 14 15 16

Marsaxlokk 0 1 7 21 27 29 31 34

Outside Harbour 0 0 3 16 64 86 92 100


< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 0 1 4 12 18 18 19

Valletta 0 0 0 0 2 2 2 2

Marsaxlokk 0 0 1 2 2 3 3 3



LOW



Total LNG bunkering and new LNG vessels in Malta by vessel –Low Scenario

64

< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 2 11 41 102 129 139 151

RoRo-RoPax 0 0 1 3 6 8 9 10

Containers 0 2 8 24 30 32 35 38

Tankers 0 0 1 5 26 35 38 41

Gen Cargo 0 0 1 8 36 49 52 57

Bulk carrier 0 0 0 1 3 4 5 5


< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 0 1 4 12 18 18 19

RoRo-RoPax 0 0 0 0 1 1 1 1

Containers 0 0 1 2 2 3 3 3

Tankers 0 0 0 1 3 5 5 5

Gen Cargo 0 0 0 1 6 8 8 9

Bulk carrier 0 0 0 0 0 1 1 1


LOW



Total LNG bunkering and new LNG vessels in Malta by service (SSS/LSS) - Low Scenario

65

< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 2 11 41 102 129 139 151

SSS 0 2 9 27 36 41 44 47

LSS 0 0 2 13 65 88 95 103


< 2025 2025 2030 2035 2040 2045 2050 2056

Total 0 0 1 4 12 18 18 19

SSS 0 0 1 2 3 4 4 4

LSS 0 0 0 2 9 14 14 15


LOW


Technical study and CBA for LNG as marine fuel in Malta · The LNG market has mainly developed in...

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Transcript of Technical study and CBA for LNG as marine fuel in Malta · The LNG market has mainly developed in...