Status and way forward for LNG as a maritime fuel

Transcription

1 Status and way forward for LNG as a maritime fuel Lars Petter Blikom DNV, Norway lars.petter.blikom@dnv.com ABSTRACT AND INTRODUCTION Over the past 10 years, LNG has been proven as a technically viable fuel for commercial ships. Currently, fuel prices and environmental legislation are driving forces for the first steps of an exponential growth in the number of ships fuelled by LNG. This presentation will include a review of current LNG fuelled ships in operation, the order book for LNG fuelled ships under construction, and key lessons learnt so far. The presentation will also focus on the major challenges to future development: bunkering operations and availability of LNG. DNV has also recently finalized a study for expected market penetration of LNG versus other maritime fuels under various scenarios for future development; the results of this study will be presented. THE PAST TEN YEARS OF LNG FUELLED SHIPS The history of the application of LNG as a maritime fuel is short, but is now set to take off. DNV developed the first classification rules for gas fuelled ships in 2000 along with the construction of the world s first LNG fuelled ferry. This very first LNG fuelled ferry project was launched because of a direct requirement from the Norwegian Government to run this specific ferry route on natural gas they were motivated by two things: Increased domestic use of natural gas and close to elimination of local emissions from the ferry operation. Today the fleet of gas fuelled ships has grown to 22 ships covering ferries, offshore supply vessels and coast guard vessels. They are all operating in Norwegian waters, and a major reason for their very existence is a continued push by the Norwegian Government. However, have now passed ten years of operation, the shipowners and their crews seems fairly unanimous in their positive experience with this type of fuel. The complete list of LNG fuelled ships in operation is shown in Table 1. Table 1: Total global fleet of LNG fuelled 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 2008 PSV Eidesvik Shipping DNV 2009 PSV Eidesvik Shipping DNV

2 2009 Car/passenger ferry Tide Sjø DNV 2009 Car/passenger ferry Tide Sjø DNV 2009 Car/passenger ferry Tide Sjø DNV 2009 Patrol vessel REM DNV 2009 Car/passenger ferry Fjord1 DNV 2010 Patrol vessel REM DNV 2010 Car/passenger ferry Fjord1 DNV 2010 Patrol vessel REM 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 Table 2 contains all the ships for which a yard order has been signed. It is worth noticing that the list now expands outside of Norway: The four Ro-Ro vessels operated by Sea-Cargo and Norlines will operated on routes within Northern Europe and the Baltic Sea. The RoPax operated by Viking Line will serve a route between Sweden and Finland. The High speed RoPax operated by Buquebus will be built in Incat, Tasmania for operations between Argentina and Uruguay. The two most recently ordered platform supply vessels will be operated in the Gulf of Mexico by Harvey Gulf. In addition, it is promising to see a list of four vessels already decided for conversion to LNG propulsion. This indicates the beginning of a potentially huge market for conversion projects. Table 2: Total global fleet of LNG fuelled ships under construction Year Type of vessel Owner Class 2011 Car/passenger ferry Fjord1 DNV 2011 PSV Solstad Rederi DNV 2011 General Cargo Nordnorsk Shipping DNV 2012 PSV Olympic Shipping DNV 2012 PSV Eidesvik DNV 2012 PSV Eidesvik DNV 2012 Ro-Ro Sea-Cargo DNV 2012 Ro-Ro Sea-Cargo DNV 2012 High speed RoPax Buquebus DNV 2012 PSV Island Offshore DNV 2012 PSV Island Offshore DNV 2012 PSV REM DNV 2013 Ro-Ro Norlines DNV 2013 Ro-Ro Norlines DNV 2013 RoPax Viking Line LR 2013 PSV Harvey Gulf Int. Marine ABS 2013 PSV Harvey Gulf Int. Marine ABS

3 Planned conversion Year Type of vessel Owner 2011 Car/passenger ferry Fjord1 DNV 2011 Chemical tanker Tarbit Shipping GL 2013 RoPax Fjordline DNV 2013 RoPax Fjordline DNV CURRENT DRIVING FORCES There are at least two very important driving forces for the move towards LNG as a maritime fuel: Emissions regulation leave LNG as one of very few options for compliance Expected future price development for oil versus natural gas indicates a significant difference in favour of natural gas, and hence LNG. The International Maritime Organization s (IMO) plan for combating local emissions from shipping is two-fold; first, SOx emissions will have to be reduced from both existing and newbuild ships operating in so-called emission control areas (ECA). Secondly, NOx emissions will have to be reduced for all newbuild ships operating in international waters. The requirements are being implemented gradually and will have full force from 2015 and 2016, for SOx and NOx, respectively. For their existing fleets, ship owners are left with only three options if they wish to continue trading in ECAs from 2015: switch to low-sulfur fuel, install an exhaust gas purification system (scrubber), or switch to LNG. For newbuild ships delivered after 2016 the choices are even fewer; either switch to LNG fuel or install selective catalyst reduction (SCR) system for cleaning the exhaust gas of NOx. This system would come on top of the scrubbers for cleaning of SOx. Figure 1 shows the already decided ECA areas, but it should be expected that these areas will be extended and decided also for other areas.

4 Figure 1 - Emission Control Areas (ECA) for special emissions requirements The driver related to the price difference between the various fuel options is much more difficult to quantify. Analysts are consistent in always failing to foresee the both oil price and the natural gas price, separately. So we should not expect them to foresee the relative difference between these two fuel sources over the entire lifecycle of the ship, which is what we need in order to make a qualified decision about which fuel offers the better total economic performance. Regardless of the difficulties in foreseeing future prices, there is a general perception in the market that natural gas will be cheaper than oil on an average per energy content basis on the long term. The reason is simply that there is more natural gas reserves left to be developed than there is oil, which should also translate into lower production costs for natural gas than oil as reserves becomes more and more scarce and difficult to extract. In any case, it is worth noticing that this very uncertain difference in future fuel prices is more or less the only thing that matters to the economics of future shipping. With reference to Figure 2 it is very clear that fuel represents the lion s share of daily costs for operating almost any type of ship.

5 Figure 2 - The main cost contributors for some typical ships OUTLOOK In order to try to quantify the impact of these two drivers described above, and others, we decided to apply a scenario planning methodology. This is a methodology that fits well when there is a high degree of uncertainty and you have acknowledged that any single point forecasts would be merely naive. An overview of the method is provided in Figure 3. Figure 3 Scenario planning methodology for developing plausible estimates for the future After deciding on the most important drivers, these were used to define four different scenarios. Inside these four scenarios various other drivers are included in order to describe a

6 plausible future regulatory and business environment. Then estimates for the implementation of each of the available options compliant with regulations are developed taking all parameters of the scenario into account. Figure 4 summarises the result. Figure 4 The results of the scenario planning process CONCLUSION As Figure 4 clearly shows, regardless of which scenario develops, the shipping industry will be divided in their choice of fuels. This leads to several key observations: Firstly, there will be a significant demand for LNG to the maritime industry, so infrastructure for supply to main ports and bunkering locations should be developed as soon as possible in order to ensure that this option is a reality by the time ship owners are forced to choose. Secondly, it is clear that the cost picture for ships in the future will be highly dependent on their choice in fuels, which means the choice of fuel will have a huge impact on the competitive situation between different ship owners. Preparing for this new framework for shipping should be in the biggest interest of all actors involved.