lng as a bunker fuel - imsf · 2015-02-24 · gas fuelled vessels market - lng price

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LNG AS A BUNKER FUEL

WARTSILA

IMSF CONFERENCE, OSLO

MAY 2012

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Until now…..

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From now on….

Established Emissions Controlled Areas

Emissions Controlled Areas under consideration

Shipping critical points

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The Question?

What will be shipping industry’s response to increasing environmental challenges

LOCAL

GLOBAL

LOCAL

LOCAL

Acid rains

Tier II (2011)

Tier III (2016) NOx

Greenhouse effect

Under evaluation by IMO CO2

Acid rains

Sulphur content in fuel SOx

Direct impact on humans

Locally regulated

Particulate matter

19 April 2012

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Wärtsil

ä

The main driver: SOx regulations

0,1%

4,5%

3,5%

1,5%

1,0%

0,5%

2008

20

09

20

10

2011

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

Global

SECAs

NOTE: today’s average %S in HFO is 2,7

EU: Baltic & North

sea, English Channel,

US Coastal waters

Ports & Inland Ports

Several different alternatives are viable for emissions regulations fulfillment:

Change to low-

sulphur

distillate fuels

Apply exhaust

gas treatment

technologies

Switch to LNG

1 2 3

Does not fulfill NOX

limits!

What solution?

LNG PROVIDES COMPLIANCE WITH

EMISSION REQUIREMENTS

WITHOUT ABATEMENT

TECHNOLOGIES

THE GENERAL ANSWER

LNG IS CLEAN

GHG

NOx

SOx

Particulates

Dual-Fuel engine

in gas mode

Diesel

engine

0

10

20

30

40

50

60

70

80

90

100

Emission

values [%]

-25%

-85%

-100%

-100%

Key questions

Natural gas is great, but where do I get it?

Where is the infrastructure and can I depend on gas…

It’s the chicken and egg dilemma…

The challenge vessel operators are facing

HFO

HFO

HFO

HFO

LNG ?

LNG

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…..Challenges

LNG Infrastructure missing

Rules and regulations for LNG onboard ships are not fully yet there

Bunkering rules missing-safety procedures existing

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LNG BUNKERING BY TRUCK

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…Imbalances between import and export capacities still exist

•Export terminals plans were suffering serious delays already before world economic crisis.

•Rising construction costs and labour shortages have delayed final investment decisions (FID) and put back construction and start-up dates for many

liquefaction projects.

•Long term fundamentals are perceived to be strong as demand for energy recovers, production of oil from traditional fields declines and environmental

regulations push for cleaner fuels

•Uncertainty regarding potential for shale gas; as shale gas exploitation might undermine demand for LNG

•Bunker fuel retail network, need for secondary distribution and storage Major challenge is who will invest first?.... Retailers or shipowners?

Sources: Petroleum Economist

-

500

1 000

1 500

2 000

2 500

Export plants

Mil

lio

n t

on

ne

s/y

ea

r

Export Capacity

Malaysia

Oman

Russia

Indonesia

Qatar

Nigeria

Australia

Rest of world

-

200

400

600

800

1 000

1 200

1 400

1 600

1 800

Import plants

Mil

lio

n t

on

ne

s/y

ea

r

Import Capacity

France

Italy

Spain

China

India

United States

Japan

Rest of world

Asia-Pacific Africa Middle East Latin America Europe North America Grand Total

Existing 475 176 389 76 25 3 1 144

Planned and Proposed 137 211 26 86 32 491

Under Construction 281 35 316

Suspended 35 75 110

Speculative 20 45 21 86

Grand Total 912 467 424 199 111 35 2148

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Demand for gas and LNG is increasing

• Demand for natural gas is expected

to grow

• LNG will grow faster than

pipeline gas

Source: Demand for natural gas from BP’s energy outlook, IEA

Natural gas trades, demand and availability

Source: Clarkson Research Services

• Newbuilding prices are very attractive

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INTERNAL USE ONLY

LNG is economical...

15

Source: Methanex

Different views on the future of LNG

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…Global Sulphur Cap introduced after 2025

• After 2025:Increased compliance due to introduction of the global sulphur cap in different areas of the world,

• Adoption of scrubbing will be more widespread as vessels are built with scrubbing capability

• Bunker demand will drop slightly as a result of increased use of LNG, and other alternative fuels

• Switch to diesel will result in global bunker distillate demand rising from 30%40% after 2015, falling slightly

as owners opt for scrubbers but rises after through 2025 until more newbuilding designs with scubbers and

residual demand outstrips distillates after 2035

4,5% 3,5%

0,1%

Introduction of

0.50%S Global Cap

Source: Robin Meech

0

500

1 000

1 500

2 000

2 500

3 000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total newbuilding market forecasts-IHSFairplay March 2012

Gas fuelled vessels market - LNG price<HFO price

Gas fuelled vessels market-LNG in currentprice level

Gas-fuelled vessels - Market development & drivers

# of

vessels

Estimated new building market

(contracting)

Main drivers for the market are environmental legislation, fuel price and gas availability

700

400

29

2400

1790

330

100

Political &

regulations

Technological

Economical

• Environmental legislation

• Gas handling regulations

• Predictability of energy policies

• Cost of gas vs. abatement technology

• Gas price vs. alternative fuels (HFO)

• Gas availability & bunkering infrastructure

• Engine technology exists

• Onboard gas storage technology is

improving, but feasible already today

• Further application engineering needed

*IHS Fairplay/Lloyds Fairplay = SAI (Institute of Shipping Analysis)

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Crucial role of US to gas development

3 July 2009 19 Presentation name / Author

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Shale gas effect on LNG pricing

US is Saudi Arabia of shale gas…

swims in centuries of supply Natural Gas bargain price

gas drivers … shale supply + bargain prices

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US LNG exports appear economical

3 July 2009 21 Presentation name / Author

Source: Economic Commission for Europe, Committee on Sustainable Energy, Francisco de la Flor, 2012

Thank you!

www.wartsila.com

Business Analyst

evelyne.namanda@wartsila.com

Sailing on LNG – Byung Sam Ahn, Wärtsilä Ship Power 22 © Wärtsilä