The LNG fuel solution in shipping

DNV GL © SAFER, SMARTER, GREENER DNV GL ©

The LNG fuel solution in shipping

1

Dr Gerd Würsig (Segment Director),

DNV GL ©

Gas for propulsion- before year 2000

2

CNG as fuel in ships in Russia, Netherlands, US, Canada, Australia

Gas engine installations offshore (FPSOs)

LNG carriers (dual fuel boiler / steam turbine propulsion)

Today about 400 LNG Carriers

DNV GL ©

The development trend is moving from LOCAL …

3

Norway

2000 – 2013

DNV GL ©

… to GLOBAL …

4

DNV GL ©

59 LNG fuelled ships in operation worldwide (1/2)

5

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* Oil/chemical tanker Tarbit Shipping GL 2011 Car/passenger ferry Fjord1 DNV 2011 PSV Solstad Rederi DNV 2012* Car/passenger ferry Fjord1 DNV

Year Type of vessel Owner Class 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 2013 Car/passenger ferry Torghatten Nord DNV 2013 Tug Incheon Port Authority KR 2013 General Cargo Eidsvaag DNV 2013 RoPax Fjordline DNV 2013 High speed RoPax Buquebus DNV 2013 Tug CNOOC CCS 2013 Tug CNOOC CCS 2013 Car/passenger ferry Norled DNV 2014 Car/passenger ferry Norled DNV 2014 Tug Buksér & Berging DNV 2014 RoPax Fjordline DNV 2014 Patrol vessel Finish Border Guard GL 2014 Tug Buksér & Berging DNV 2014 Gas carrier Veder Rederijzaken BV 2014 Gas carrier Veder Rederijzaken BV

Ships in operation

* Conversion project Updated 17.03.2015

Excluding LNG carriers and inland waterway vessels

DNV GL ©

59 LNG fuelled ships in operation worldwide (2/2)

6

Year Type of vessel Owner Class 2014 Gas carrier SABIC BV 2014 Gas carrier SABIC BV 2014 PSV Remøy Shipping DNV 2014 General Cargo Egil Ulvan Rederi DNV 2014 General Cargo Egil Ulvan Rederi DNV 2015 PSV Harvey Gulf International ABS 2015 Ro-Ro Norlines DNV GL

Ships in operation

* Conversion project Updated 17.03.2015

Excluding LNG carriers and inland waterway vessels

DNV GL ©

80 confirmed LNG fuelled newbuilds – DNV GL also first choice for future projects (1/2)

7

Year Type of vessel Owner Class 2015 Ro-Ro Norlines DNV GL 2015 Car/passenger ferry Society of Quebec ferries LR 2015 Car/passenger ferry Society of Quebec ferries LR 2015 Car/passenger ferry Society of Quebec ferries LR 2015 PSV Harvey Gulf Int. ABS 2015* Oil/chemical tanker Bergen Tankers LR 2015 Car/passenger ferry AG Ems DNV GL 2015* Car/passenger ferry AG Ems DNV GL 2015 Car/passenger ferry Samsoe municipality DNV GL 2015 Tug CNOOC CCS 2015 Tug CNOOC CCS 2015 Tug Drydocks World 2015 PSV Siem Offshore DNV GL 2015 PSV Siem Offshore DNV GL 2015 PSV Simon Møkster Shipping DNV GL 2015 PSV Harvey Gulf Int. ABS 2015 PSV Harvey Gulf Int. ABS 2015 PSV Harvey Gulf Int. ABS 2015 Tug NYK NK 2015 Gas carrier Chemgas Shipping 2015 Gas carrier Evergas BV 2015 Gas carrier Evergas BV 2015 Gas carrier Evergas BV 2015 Bulk ship Erik Thun LR 2015 Container ship Brodosplit DNV GL 2015 Container ship Brodosplit DNV GL

Year Type of vessel Owner Class 2015 PSV Siem Offshore DNV GL 2015 PSV Siem Offshore DNV GL 2015* Oil/chemical tanker Furetank Rederi BV 2015 Container ship TOTE Shipholdings ABS 2016 Container ship TOTE Shipholdings ABS 2016 PSV Harvey Gulf Int. ABS 2016 Icebreaker Finnish Transport Agancy LR 2016 PSV Siem Offshore DNV GL 2016 PSV Siem Offshore DNV GL 2016 Gas carrier Chemgas Shipping 2016 Oil/chemical tanker Terntank BV 2016 Oil/chemical tanker Terntank BV 2016 Oil/chemical tanker Terntank BV 2016* Ro-Ro TOTE Shipholdings ABS 2016* Ro-Ro TOTE Shipholdings ABS 2016 Car carrier UECC LR 2016 Car carrier UECC LR 2016 Car/passenger ferry Boreal DNV GL 2016 Car/passenger ferry Boreal DNV GL 2016 Container ship GNS Shipping ABS 2016 Container ship GNS Shipping ABS 2016 Ro-Ro SeaRoad Holdings DNV GL 2016 Car/passenger ferry BC Ferries LR 2016 Car/passenger ferry BC Ferries LR 2016 Gas carrier Ocean Yield DNV GL 2016 Gas carrier Ocean Yield DNV GL

* Conversion project

Confirmed orderbook

Updated 17.03.2015 Excluding LNG carriers and inland waterway vessels

DNV GL ©

80 confirmed LNG fuelled newbuilds – DNV GL also first choice for future projects (2/2)

8

Year Type of vessel Owner Class 2016 Car/passenger ferry Seaspan Ferries BV 2016 Car/passenger ferry Seaspan Ferries BV 2016 Gas carrier Navigator Gas ABS 2016 Gas carrier Navigator Gas ABS 2016 Gas carrier Navigator Gas ABS 2016 Gas carrier Navigator Gas ABS 2016* RoPax Baleària BV 2016 Container ship Universal Marine DNV GL 2016 Container ship Universal Marine DNV GL 2016 Cable layer DEME Tideway DNV GL 2017 Container ship Universal Marine DNV GL 2017 Container ship Universal Marine DNV GL 2017 Tug Østensjø Rederi 2017 Tug Østensjø Rederi 2017 Tug Østensjø Rederi 2017 RoPax Rederi AB Gotland DNV GL 2017 Oil/chemical tanker Groupe Desgagnés BV 2017 Oil/chemical tanker Groupe Desgagnés BV 2017 Container ship GNS Shipping ABS 2017 Container ship GNS Shipping ABS 2017 Car/passenger ferry BC Ferries LR 2017 Oil/chemical tanker Terntank BV 2017 Container ship Crowley Maritime DNV GL 2017 Container ship Crowley Maritime DNV GL 2017 Car/passenger ferry Tallink BV 2018 Container ship Matson Navigation DNV GL 2018 Container ship Matson Navigation DNV GL

* Conversion project

Confirmed orderbook


DNV GL ©

LNG uptake by vessel segment

9


DNV GL ©

DNV GL – trusted partner for LNG fuel projects

10


DNV GL © 2014

LNG as a fuel for ships - the content in the rules exist -

2000

2013

2001 first DNV Class rules for gas fuelled ships 2004 NMD proposal to develop the IMO IGF

Code 2010 IMO MSC.285(86) in force 2014 IMO IGF-Code: International Code of

safety for ships using Gases or other low-flashpoint Fuels (approved in principle by MSC 94 in Nov 2014)

2013 ISO Guidelines for systems and installations for supply of LNG as fuel to ships (ISO TS 18683, Jan 2015)

DNV-GL RP-G106: Recommended Practice for the development and operation of LNG bunker facilities (published Nov 2013)

March 2015: In operation: 59 ships (2000/2014) Under construction: 80 ships (2015/2018)

DNV GL ©

Legislation supports the use of clean fuels - Possible developments towards 2030 -

12

2016

NOx tier III for new builds in North

America

2015 2018 2030

EEDI phase 4

2025 2020

Additional ECAs established

Operational requirements on

CO2

HK Recycling convention ratified

Adopted

Possible

Global CO2 monitoring, reporting

and verification

0.1% ECA sulphur limit

EU CO2 monitoring, reporting and verification

Ballast Water Convention - entry

into force

BC, noise, bio-fouling and VOC

regulation

EEDI phase 1 EEDI phase 2

EEDI phase 3

0.5% global sulphur cap

EU Recycling Regulation

EU 0.5% sulphur cap

US BW requirements

0.5% global sulphur cap

DNV GL ©

What happened to the energy prices during the life time of a ship (25 years: 1990/2015)?

DNV GL internal use only

13

6

6

2

2

1

1

4

4

3

3

5

5

Prices in the figures: yearly average until 2014. 2014 spot prices at the beginning of the month

Lhv used for gas.

Middle of March 2015

• IFO 380: 9,09 $/mmBTU=349 $/t

• MGO 0,1% S: 15,34 $/mmBTU= 622 $/t

• Gas TTF: 7,86 $/mmBTU (lhv)

DNV GL ©

Low oil price is not possible even on the mid term time scale

14

DNV GL ©

There are different options for dealing with ECAs, each with unique risk aspects making investment decisions difficult

15

LNG Scrubber Fuel switch

Alternative options:

• Lower bunker cost • Compliance • Proven solution

• Easier retrofit • Investment cost

No additional CAPEX needed

Biofuels

Op

tio

n

Ben

efi

ts

Main options for most ships to comply in ECA:

Methanol

Battery

Hydrogen

Other fuels?

Ris

k • Availability

• Price • Technical maturity

• Technical maturity • Operating cost • Handling chemicals

High operating cost

DNV GL ©

Fuel decision

Risk assessment

Initial design

Concept review

16

Scrubber LNG

(LNG Ready service)

MGO

Other

(Methanol, Battery ++)

Scrubber selection &

benchmarking

Technology Qualification

Approval in principle

Risk assessment

Engine/tank selection

review

Concept HAZID

Concept design review

Concept HAZID

Detailed tech feasibility

study

Makers selection review

Technology Qualifica-

tion

ECA and fuel decision support Business Case


DNV GL ©

GAS READY (X1, X2, X3, …) where qualifier XN is: XN Content Comment

GAS READY

D The design for the ship with LNG as fuel is found to be in compliance with the GAS FUELLED notation rules applicable for the new-building, ref. Pt.1 Ch.1 Sec.2 A300.

Mandatory

S

Structural reinforcements to support the fuel containment system (LNG fuel tank(s)) are installed, and materials to support the relevant temperatures are used

T Fuel containment system (LNG fuel tank(s)) is installed

P

The ship is prepared for future gas fuel system installations: Pipe routing, structural arrangements for bunkering station, gas valve unit space, fuel preparation space if relevant (optional)

MEc Main engine(s) installed can be converted to dual fuel Mandatory (can be replaced with MEi)

MEi Main engine(s) installed can be operated on gas fuel

AEc Auxiliary engines installed can be converted to dual fuel The auxiliary engine capacity after conversion shall be sufficient for the ship power balance.

AEi Auxiliary engines installed can be operated on gas fuel

B Boilers installed are capable of burning gas fuel

Misc Additional systems and equipment are installed on board from new building stage.

Based on agreement between owner and yard, and detailed list provided to Society for acceptance.

17

DNV GL ©

Some thoughts on future ship fuel

Ships built today will need to be prepared for low sulphur fuels after 2020/2025 (LNG, Scrubber, Fuel Switch)

Beyond 2016 additional NOx reduction is needed to be able to approach USA/Canada

LNG is not the only fuel alternative but we see it as the most relevant:

– LNG is the only clean fuel which is world wide available on a large scale to meet the needs of world wide shipping for the foreseeable future

– LNG price will not depend on shipping needs because shipping will not become a dominant user of natural gas.

– Pricing for LNG depends on energy prices for power production, households and feed stock prices for chemical industry but not for shipping


18

DNV GL ©

Some thoughts on future ship fuel

LNG as a fuel has the potential to be price competitive with oil as ship fuel

Natural gas has the potential to become cheaper than the oil based alternatives

– Future 0,5% sulphur fuels are expected to cost about 80% of 0,1% sulphur MGO

– Natural gas resources will last longer than oil resources

The LNG bunker infrastructure is developing

– Bunkering during cargo operation done in Sweden and Norway

– First bunker vessels ordered (7 bunker ships on order)

– Bunkering possible in Antwerp, Rotterdam other ports will follow

Renewable energy will not play a role as ship fuel in the foreseeable future

– Production of liquid fuels for shipping from renewable sources will not happen before oil and gas resources are exhausted or the use of oil and gas is banned


19

DNV GL ©

HFO the ship fuel for ever? - shrinking HFO and increasing oil production

Source: BP, comp HFO capacity GEWUE 21 3 2015.xlsx

20

DNV GL ©

The fuel market is extremely volatile: Business case example (Prices used from 1st October 2014)

22

-2

0

2

4

6

8

10

12

14

16

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Cum

ulat

ive

disc

ount

ed c

ost [

MU

SD]

Year

Cumulative discounted cost [MUSD]

Fuel Switch HFO Base line Scrubber LNG @ 11.4USD/MMBtu LNG @ 9.4USD/MMBtu

HFO

Scrubber

1. LNG at 9.4 USD/MMBtu2. LNG at 11.4 USD/MMBtu

Fuel switch

LNG

1 2

ESTIMATES ONLY – VESSEL WITH 100% ECA EXPOSURE

Payback:

- 2 years to Scrubber

- 2.5 years to Fuel Switch

• IFO 380: 14,98 $/mmBTU=575 $/t

• MGO 0,1% S: 21,74 $/mmBTU=880 $/t


DNV GL ©

The fuel market is extremely volatile: Business case example (Prices used from 10TH March 2015)

23

ESTIMATES ONLY – VESSEL WITH 100% ECA EXPOSURE

-2

0

2

4

6

8

10

12

14

16

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Cum

ulat

ive

disc

ount

ed c

ost [

MU

SD]

Year

Cumulative discounted cost [MUSD]

Fuel Switch HFO Base line Scrubber LNG @ 10USD/MMBtu LNG @ 8USD/MMBtu

HFO

Scrubber

1. LNG at 8 USD/MMBtu2. LNG at 10 USD/MMBtu

LNG

1

2

Payback:

- 5 years to Fuel Switch

Fuel switch • IFO 380: 9,09 $/mmBTU=349 $/t

• MGO 0,1% S: 15,34 $/mmBTU= 622 $/t


DNV GL ©

Purpose of a GAS READY notation

Assist owners who at new building stage want to include preparation for a potential later conversion to LNG fuel operation

Provide a useful framework for contract negotiations between owner and yard

Provide clear guidance on a relevant scope for all involved parties in the NB project: Yard, owner, banks, designer, approval engineers, surveyors

25

DNV GL ©

The GAS READY notation

The notation has different levels and corresponding requirements.

The minimum mandatory level includes:

– Verification of compliance with GAS FUELLED rules of the overall design for future LNG fuel operations

– Installation of main engine(s) capable of being converted to dual fuel operation

In addition optional levels may be included, i.e. it can be chosen to include preparation for later installations, or actual installation and certification of parts of the LNG fuel systems.

26

DNV GL ©

Application of GAS READY notation

The GAS READY class notation provide compliance with rules in force at the time of Contract for Construction for the new-building.

The rules and international regulations in force at the time of a later ship conversion to LNG fuel will be applicable:

– At time of conversion, documentation shall be submitted for approval. The design verification from the new building stage will be used to support the approval.

27

DNV GL ©

Examples of relevant use of notation

GAS READY (D, MEc, S)

– the future LNG fuelled design is examined and found to be in compliance with rules in force at time of new building

– the installed main engine is of a type which can be converted to gas/duel fuel operation

– the ship is constructed with the necessary structural reinforcement and low temperature materials for the future LNG fuel tank (s)

– If the details of the LNG tank system is not known at NB stage, a relevant weight can be included in calculations for global strength, and a relevant temperature to be assumed. Details of the local supports can be prepared later. The chosen weights/ temperature will then pose limitations to the later conversion.

28

The LNG fuel solution in shipping

Documents

Transcript of The LNG fuel solution in shipping