cost and benefits of using alternative fuels · fuel prices – historic data europe vs. usa hfo...

Cost and benefits of using

alternative fuels

Joint study of DNV GL and MAN Diesel & Turbo

Christian S. Mørch (presenting), Hendrik W. Brinks (presenting),

Pierre Sames, Niels B. Clausen, Christos Chryssakis, Per R. Kristensen

Introduction

New emission regulation

High focus on fuel alternatives

Compare alternatives for a specific ship

Focus on comparing fuels

Variant ECA fuel Non-ECA, 2018-2019 Non-ECA, 2020 -

Base MGO HFO LSFO 0.5%

LNG LNG LNG LNG

LPG LPG LPG LPG

Methanol Methanol Methanol Methanol

LNG/HFO LNG HFO LSFO 0.5%

LPG/HFO LPG HFO LSFO 0.5%

Methanol/HFO Methanol HFO LSFO 0.5%

ULSFO 0.1% ULSFO 0.1% ULSFO 0.1% ULSFO 0.1%

DNV-GL and MAN Diesel & Turbo joint study - Cost and benefits of using alternative fuels

Length, O.A. 225 m

Breadth, Mld. 32.26 m

Draught, Scantling 14.2 m

Main Engine 1 x MAN B&W 6G60ME-C9.5

SMCR 11,500 kW at 92 RPM

NCR (90% SMCR) 10,390 kW at 88.8 RPM

Design speed at NCR 15 knots

PTO Aft mounted fixed ratio, 778 kW

Genset 3 x MAN 7L23/30H at 944 kW

D N

V

3

0

2

2 2

V

0

.

0

2

1 11

11

2

222 2

2

2

2

2 2

2

2

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

2

1

Application – LR1 tanker (75,000 d.w.t.)

D N

V

3

0

2

2 2

V

0

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0

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1 11

11

2

222 2

2

2

2

2 2

2

2

1

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1

1

1

1

1

1

1

1

1

1

1

1

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1

1

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1

D N

V

3

0

2

2 2

V

0

.

0

2

1 11

11

2

222 2

2

2

2

2 2

2

2

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

2

1

D N

V

3

0

2

2 2

V

0

.

0

2

1 11

11

2

222 2

2

2

2

2 2

2

2

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

2

1

0

2

4

6

8

10

ΔC

AP

EX

(m

illio

n U

SD

) CAPEX costs:

- Engine upgrades

- Fuel supply system

- Fuel storage

- Engineering and installation

0

2

4

6

8

10

LNG LNG/HFO LPG LPG/HFO Methanol Methanol/HFO ULSFO 0.1%

ΔC

AP

EX

(m

illio

n U

SD

) CAPEX costs:

- Engine upgrades

- Fuel supply system

- Fuel storage

- Engineering and installation


Application – trading route


Leg State Total

distance

(nm)

Approach

(h/leg)

Port

(h/leg)

Houston –

Rotterdam

Cargo

(diesel)

5,052 10 36

Rotterdam –

Ventspils

Ballast 961 10 36

Ventspils –

Houston

Cargo

(MGO)

5,670 10 36

0 1 2 3 4 5 6

Transit (87%)

Approach (3%)

Port (10%)

Power (MW)

PropulsionPTOAuxiliary

Fuel prices – historic data

Europe vs. USA

HFO and

Methanol: same

price

LNG and LPG

cheaper in USA

MGO slightly

cheaper in

Europe 2010 2011 2012 2013 2014 20150

5

10

15

20

25

30

35

Fu

el

pri

ce

($

/GJ

on

LH

V b

as

is)

Time

HFO (380 cSt)

MGO/MDO

Methanol

LPG (US)

LNG (US)


Fuel price scenarios

High price

scenario based on

mid 2014 prices

For LNG and

LPG distribution

costs are added

2012 2014 2016 2018 2020 20220

5

10

15

20

25

30

35

40

45

Fu

el

pri

ce

($

/GJ o

n L

HV

ba

sis

)

Time

HFO (380 cSt) HFO/LSFO: High price

MGO/MDO MGO: High price

Methanol (US) Methanol: High price

LNG (US) LNG: High price

LPG (US) LPG: High price


Fuel price scenarios

High price scenario based on mid 2014 prices

For LNG and LPG distribution costs are added

Low price scenario based on mid 2015 prices

Less price reduction for methanol and LNG

2012 2014 2016 2018 2020 20220

5

10

15

20

25

30

35

40

45

Fu

el

pri

ce

($

/GJ

on

LH

V b

as

is)

Time

HFO (380 cSt) HFO/LSFO: Low Price

MDO/MGO MGO: Low Price

Methanol Methanol: Low Price

LPG (US) LPG: Low Price

LNG (US) LNG: Low Price


Annual cashflow for single-fuel variants

LNG and LPG

generate a

positive cashflow

after the

investment

Methanol and

ULSFO not

financially

attractive 2017 2018 2019 2020

-10

-8

-6

-4

-2

0

2

Investments

An

nu

al

ca

sh

flo

w (

mU

SD

)

Time

High-price scenario

LNG

LPG

Methanol

ULSFO 0.1%

Globalsulfur cap:

0.5%


Annual cashflow for combined variants

Combined

variants are not

affected by global

sulfur cap

A global sulfur

cap favours the

single-fuel

variants

2017 2018 2019 2020-10

-8

-6

-4

-2

0

2

Investments

An

nu

al cash

flo

w (

mU

SD

)

Year

High-price scenario

LNG

LNG/HFO

LPG

LPG/HFO

Methanol

Methanol/HFO

Globalsulfur cap:0.5%


Payback time for LNG and LPG

Payback time is faster for

single-fuel variants

Payback time is faster by

increased speed

Payback time is faster in

the high price scenarios

LPG is at least comparable

to LNG

Shorter payback

Less sensitive to price

scenario

Less investments


12 13 14 15

40

60

80

100

120

140

Pa

yb

ac

k t

ime

(m

on

ths

)

Speed (knots)

High price scenario

LNG

LNG/HFO

LPG

LPG/HFO

12 13 14 15

40

60

80

100

Pay

ba

ck

tim

e (

mo

nth

s)

Speed (knots)

LPG: Low price scenario

LPG: High price scenario

Payback time as a function of fuel-price spread

For most of the period 0.5% S

fuel (LSFO) is the relevant

comparison

LNG requires a larger

discount than LPG

Single fuel variants (LNG or

LPG) are better than to use

the alternative fuel only in the

ECA

Methanol: Requires ~18%

discount on MGO to be

comparable to LNG


2 3 4 5 6 7 8 9

40

60

80

100

120

140

Pa

yb

ac

k t

ime

(m

on

ths

)

Price spread: LSFO - LNG ($/mmbtu)

High-price scenario

Payback LNG

Payback LNG/HFO

15% 20% 25% 30% 35% 40% 45%

2 3 4 5 6 7 8 9

40

60

80

100

120

140

Pa

yb

ac

k t

ime

(m

on

ths

)

Price spread: LSFO - LPG ($/mmbtu)

High-price scenario

Payback LPG

Payback LPG/HFO

15% 20% 25% 30% 35% 40% 45%

Conclusions

Regulations call for alternative fuels

as a means of compliance

Costs and benefits for various fuels

(LNG, LPG, methanol, ULSFO) were

investigated

LNG and LPG were found to be the

most promising options

For the most promising alternative

fuels, the best option is to use the

fuel both in ECAs and non-ECAs.

Financial attractiveness is highly

dependent on fuel price scenario. DNV-GL and MAN Diesel & Turbo joint study - Cost and benefits of using alternative fuels

Back-up slide

1500 2000 2500 3000 3500 400060

80

100

120

140P

ayb

ack t

ime (

mo

nth

s)

Specific cost LNG tank system ($/m3)

LNG

LNG/HFO


Back-up slide 2

30% 40% 50% 60% 70% 80% 90% 100%49%

50%

51%

52%

53%

54%

55%

56%

HFO

MGO

Eff

icie

ncy (

%)

Engine load (%)

LNG

LPG

Methanol


Back-up slide 3

2017 2018 2019 2020-10

-8

-6

-4

-2

0

2

Investments

Glo

ba

l su

lfu

r ca

p:

0.5

%

Annu

al ca

sh

flo

w (

MU

SD

)

Year

Low-price scenario

LNG

LNG/HFO

LPG

LPG/HFO

Methanol

Methanol/HFO

HVO/HFO

ULSFO

2017 2018 2019 2020-10

-8

-6

-4

-2

0

2

Investments

Glo

ba

l su

lfu

r ca

p:

0.5

%

An

nu

al ca

sh

flo

w (

mU

SD

)

Year

High-price scenario

LNG

LNG/HFO

LPG

LPG/HFO

Methanol

Methanol/HFO

HVO/HFO

ULSFO


cost and benefits of using alternative fuels · fuel prices – historic data europe vs. usa hfo...

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