6 Shipping - 2020 - tcm144-536398 PDF

SHIPPING 2020
TECHNOLOGY INVESTMENTS IN THE NEW MARKET REALITY

Claus Winter Graugaard
28. Jan 2013, Poland
CONTENTS
WHY Shipping 2020
Det Norske Veritas AS. All rights reserved.
METHODOLOGY AND
ASSUMPTIONS
FINDINGS
BEYOND 2020
CONTENTS
WHY Shipping 2020
WHY SHIPPING 2020
What is Shipping 2020

QUESTION:
What technologies should be installed

to meet new environmental regulations
and higher fuel prices?
CHALLENGE:
Uncertainties associated with market trends

and drivers, fuel choices, technology
developments and other variables.
The wrong investment decisions
will be detrimental to both the industry
and individual ship owners.
Wrong decisions impact the financial
bottom line and the environment.
ANSWER:
Shipping 2020 aims to indicate which

technologies are most likely to be adopted
by the industry by 2020.
METHODOLOGY AND ASSUMPTIONS
Megatrends and external drivers

ECONOMIC GROWTH
AND DEMAND FOR
TRANSPORT
REGULATORY AND
STAKEHOLDER
PRESSURE
FUEL TRENDS
Boom or bust?
Growth level and level

of contracting
Global or local
regulations?
Sustained
high fuel prices?
Overcapacity of
vessels?
Further requirements on
GHG emissions?
LNG cheaper
than HFO?
Rating schemes and

requirements from
charterer and public
Development of
LNG infrastructure
Impact of sulphur
regulations
The Process the regulatory future is demanding
CONTENTS
METHODOLOGY AND
ASSUMPTIONS
The process the big picture

Scenario
A
Environmental
regulations
Technology
trends
Scenario
B
Scenario
C
Fuel trends
(price, mix)
SIMULATION
MODEL
RESULTS
Scenario
D
World economy
and demand
for transport
Investment profile
and ship
characteristics
Scenarios created to capture uncertainties

ECONOMIC
GROWTH
SCENARIO A:
FULL STEAM AHEAD
HIGH
SCENARIO B:
KNOWING THE ROPES
High growth scenario
High economic growth
Higher prices for all types of fuels
Cost of emissions up
and on the rise in 2020
Little regulatory or stakeholder

pressure on the environment
LNG price decoupling from oil prices

and significantly lower
LOW
HIGH
Low economic growth
Low economic growth

LNG price decoupling
from oil prices
Limited implementation of MBM results

in a medium price on CO2 emissions
Little regulatory or stakeholder

pressure on the environment
Low fuel prices in general, but high

demand keeps the MGO price up
SCENARIO D:
IN THE DOLDRUMS
SCENARIO C:
SINK OR SWIM
LOW
11
REGULATORY
AND
STAKEHOLDER
PRESSURE
Technologies have been assessed against

relevant regulations
MOTIVATING REGULATIONS
TECHNICAL MEASURE
RETRO-FIT
SECA 1%S
SECA 0.1%S
GLOBAL 0.5%S
NOX TIER III
EEDI
Low sulphur heavy fuel oil

SOx scrubber
Distillate fuel
Pure LNG engine
20 %
Dual-fuel engine
20 %
Exhaust gas recirculation

Selective catalytic reduction
Propulsion efficiency devices
2%
Waste heat recovery
4%
Shaft generators
0-1%
Hull shape optimisation
5%
Contra-rotating propulsion
4%
Air cushion
6%
Wind power
2%
Smaller engine/de-rating (speed reduction)
10 %
System efficiency improvement

Hybrid propulsion system (Diesel-Mechanical-Electric)
Ballast Water Treatment System
Water injection
Water in fuel
Low NOx tuning
Considered, but not selected due to limited impact/effect
Lightweight constructions
Reduction of seawater ballast capacity
13
ENERGY
EFFICIENCY
BALLAST
WATER
Ship owner survey motivation and barriers

Compliance and fuel efficiency are the main motivation,
and cost and technology maturity are the main barriers
Main motivation
Main barriers
Source: DNV survey (23 respondents)
14
Ship owner survey investment preferences

Investment horizon (payback requirements) and how much of the fuel cost
is paid by the ship owner impact the cost-effectiveness of many measures
15
Which technologies do ship owners envisage

using in the future?
FIGURE 3: FAMILIARITY AND EXPERIENCE WITH TECHNOLOGIES
FIGURE 4: LIKELIHOOD OF IMPLEMENTING TECHNOLOGIES

System efficiency improvement (Aux)
Waste heat recovery
Distillate fuel
EGR system
Low NOx tuning
Shaft generators
SCR system
SOx scrubber
Dual-fuel engine
Water emulsification
Humid air motor/ direct water injection
Hybrid propulsion system
Counter-rotating propulsion
Pure LNG engine
Air cushion
Wind & solar power

Distillate fuel
Shaft generators
Waste heat recovery
SOx scrubber
System efficiency improvement (Aux)
Low NOx tuning
EGR system
Counter-rotating propulsion
Dual-fuel engine
SCR system
Hybrid propulsion system
Pure LNG engine
Water emulsification
Air cushion
Humid air motor/ direct water injection
Wind & solar power
1
Low
3
Score
5
High
1
Low
Familiarity with technology
Likely to be retrofitted
Tested
Likely to be implemented on new builds
3
Score
5
High
16
Time spent in ECA

Approximately 40% of the world fleet enters into the North America
or Northern Europe ECA during a year
Half of these vessels spend less than 5% of their time there
Time spent in ECA
Share of fleet
Source: AIS Data
17
Model illustration: Simulation of individual ships

Investment profile
and ship
characteristics
Generate a
representative
sample of the
current world fleet
Technology
alternatives
Assign each ship a

ship owner
investment profile
Results
Technology cost
decreases with
more installations
Annual technology
and fuel type
decisions per ship
2020
2019
2018
2017
2016
2015
2014
2013
2012
Fuel price
and regulatory
requirements
Add newbuildings to
the fleet each year
Growth in seaborne
transport
Remove scrapped ships

from the fleet each year
18
Fleet used in the simulation model

In total 48,400 ships in 2011 comprising the international trading fleet
except passenger ships and ferries
Example: Container Feeder (2500 TEU)

Engine and operation
Scrubber
30%
20,0
Annual operating time
250 days
18,0
Installed power
21 MW
16,0
Annual fuel consumption
16800 tonnes
Increased FC - scrubber
3%
Fuel cost
HFO
750 $/tonne
MGO
1000 $/tonne
LNG
15 $/MMBtu
LNG installation price (mill $)
Time in ECA
Fuel Switch
LNG
14,0
12,0
10,0
8,0
6,0
4,0
2,0
Financial
0,0
Discount rate
15%
Investment horizon
5 years
0,0
2,0
4,0
6,0
8,0
Scrubber price (mill $)
The colours show which solution is the best option given the
assumption on the left and the capital cost of scrubber and LNG
20
10,0

Scrubber
Time in ECA
30%
250 days
18,0
Installed power
21 MW
16,0
16800 tonnes
3%
LNG
20,0
Fuel cost
Fuel Switch
14,0
12,0
LNG price 75% of HFO10,0
HFO
750 $/tonne
MGO
1000 $/tonne
LNG
11 $/MMBtu
8,0
6,0
4,0
2,0
Financial
0,0
Discount rate
15%
Investment horizon
5 years
0,0
2,0
4,0
6,0
8,0
21
10,0

Scrubber
50%
20,0
250 days
18,0
Installed power
21 MW
16,0
16800 tonnes
14,0
3%
Fuel cost
HFO
750 $/tonne
MGO
1000 $/tonne
LNG
11 $/MMBtu
Time in ECA
Fuel Switch
LNG
12,0
10,0
8,0
6,0
4,0
2,0
Financial
0,0
Discount rate
15%
Investment horizon
5 years
0,0
2,0
4,0
6,0
8,0
22
10,0
FINDINGS
23
FINDINGS
Finding 1
No LNG fuelled ships
B
5,000 LNG fuelled ships
More than 1 in 10 new buildings in the next 8 years

will be delivered with gas fuelled engines
From 2012-2019 the LNG price is the main
Share of LNG fuelled newbuildings

Scenario D
contributing factor,
From 2020 the global sulphur limit and EEDI are

the main drivers
In scenario D, we foresee about 1,000

newbuildings from 2012-2020 and some 6-700
retrofits
In addition, there will be many smaller vessels

fitted with gas engines
Ferries, passenger vessels, tugs
24
FINDINGS
Finding 2
No scrubbers
Scrubbers are a significant option after 2020 (but not before)
Few ships spend more than 30% of their time in and
Ship owner investment profile
ECA justifying a scrubber before 2020
In 2020, with the global sulphur requirements,

scrubbers become a significant solution
Scrubbers can be retrofitted and can take 25%

of the market, 15-20,000 ship
Still, 70% of ships will run on distillates
SOx reduction options in 2020
In the short term LNG can only take a small part

of the market
Uncertainty about the 2020 limit will slow technology

development and uptake
25
C
20,000 scrubbers
FINDINGS
Finding 3
No ships on destillates
In 2020, the demand for marine distillates

could be as high as 200-250 million tonnes annually
A 0.1% limit in ECAs (2015) is expected to increase

the demand to 45 million tonnes
The current annual global demand for marine distillates

is about 30 million tonnes
With a global sulphur limit HFO demand may drop

from 300-350 million tonnes to only 80-110 million
tonnes in 2020
Depends on the number of scrubbers in use
Energy efficiency measure will only slow the fuel

demand in the short term
The use of LNG will not significantly impact the

demand of other fuels
26
Fuel mix in 2020
40,000 ships on destillates
27
FINDINGS
Finding 4
3,000 ships
>10% CO2 reduction
B
8,000 ships
>10% CO2 reduction
Newbuildings in 2020 will emit up to 10 to 35% less CO2 than todays ships.
The EEDI will be a driver for more than half of this reduction
Phase 0 of EEDI (2013) will encourage
CO2 emission reduction on newbuildings
cost-effective measures
In Phase 1 (2015) and 2 (2020), up to half the

reductions are motivated by EEDI alone
Due to short investment horizon and low fuel

burden, these reductions are not cost effective
for the ship owner
But in the long-term these are cost-effective
EEDI reduction on newbuildings
Small differences between scenarios
Fuel prices are already so high that any

variation does not affect uptake
Operational measures not included
28
FINDINGS
C
A
Finding 5
No BW treatment
Ballast water treatment systems will be installed

on at least half of the world fleet
The Ballast Water Management Convention
Annual expected ballast water

treatment installations
has not yet entered into force, but
The schedule for mandatory treatment of BW is

fixed (2019)
The US has decided to implement a similar scheme

for all ships in US waters (2013)
Other countries have local requirements
This will motivate a significant part of the world

fleet to implement a treatment system irrespective
of BWMC progress
29
BW treatment for all ships
FINDINGS
Finding 6
No ships with EGR or SCR
2,500 ships with EGR or SCR
At least 30-40% of newbuildings

will be fitted with EGR or SCR by 2016
Both EGR and SCR are currently under

NOx treatment installations
development and need more time to mature
LNG is an alternative but does not seem to

replace EGR or SCR installations, even with
low LNG prices
Will a ship owner opt for a Tier III engine

even if the ship is initially not planned
for sailing in an ECA?
Lower second-hand value due to the loss of

geographic flexibility
30
The study shows that 4-7 million tons of LNG p.a is required by 2020
corresponds to 0.2-0.3% of global LNG production 2010
2020
Supply
1000 LNG fuelled

ships
4-7 Million tons

p.a of LNG as
fuel for shipping
2013
Demand
37 ships in
operation & 31
ships on order
Limited volume of
LNG as fuel for
shipping
31
Approx. 1000 vessels will be fuelled by LNG and sailing

within regions, primarily in the ECA zones
1200
Forecast of LNG fuelled ships

per ship segment
Under low economic growth and little

environmental pressure scenario D, the
number of new buildings has been
estimated to be around 1000 by 2020
1000
800
600
YTD 28 ships in operation and

29 ships in order book
400
Offshore vessels and ferries dominate the

LNG fuelled fleet and order book today, but
there are on-going projects to develop
concepts and designs for most ship types
200
2010
2011
2012
2013
2014
2015
Tank Bulk Container RoRo Offshore
2016
2017
General cargo
2018
2019
Passenger ships
Combined with stricter emissions control

regulations, Europe and North America
will experience a growth in LNG fuelled
offshore ships
0
2020
Other
Forecast of the LNG fuelled ships

per region
Australia & New Zealand

China
South America
Japan & Korea
Midde East & India
South East Asia
Asia will play an important role, after 2020,

driven by stricter regulations nations such
as Singapore and Hong Kong
North America
Europe
Tank
32
Bulk
Container
50
RoRo
100
150
Offshore
200
250
General cargo
300
350
400
Passenger ships
450
Other
37 LNG fuelled ships in operation worldwide

Ships in operation
Year
2000
2003
2003
2006
2007
2007
2007
2007
2008
2009
2009
2009
2009
2009
2009
2010
2010
2010
2010
2010
2010
2011
2011
2011
2011
Type of vessel
Car/passenger ferry
PSV
PSV
Car/passenger ferry
Car/passenger ferry
Car/passenger ferry
Car/passenger ferry
Car/passenger ferry
PSV
PSV
Car/passenger ferry
Car/passenger ferry
Car/passenger ferry
Patrol vessel
Car/passenger ferry
Patrol vessel
Car/passenger ferry
Patrol vessel
Car/passenger ferry
Car/passenger ferry
Car/passenger ferry
PSV
Chemical tanker
Car/passenger ferry
PSV
Owner
Fjord1
Simon Mkster
Eidesvik
Fjord1
Fjord1
Fjord1
Fjord1
Fjord1
Eidesvik Shipping
Eidesvik Shipping
Tide Sj
Tide Sj
Tide Sj
Remy Management
Fjord1
Remy Management
Fjord1
Remy Management
Fjord1
Fjord1
Fosen Namsos Sj
DOF
Tarbit Shipping
Fjord1
Solstad Rederi
Class
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
GL
DNV
DNV
Year
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2013
2013
Type of vessel
Car/passenger ferry
PSV
PSV
PSV
General Cargo
PSV
PSV
Car/passenger ferry
Car/passenger ferry
Car/passenger ferry
PSV
RoPax
Owner
Fjord1
Eidesvik
Olympic Shipping
Island Offshore
Nordnorsk Shipping
Eidesvik Shipping
Island Offshore
Torghatten Nord
Torghatten Nord
Torghatten Nord
REM
Viking Line
Class
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
LR
Updated 10.01.2013
Excluding LNG carriers and inland waterway vessels
34
34 confirmed LNG fuelled newbuilds

Confirmed orderbook
Year
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
Type of vessel
Car/passenger ferry
Harbor vessel
High speed RoPax
Ro-Ro
Ro-Ro
RoPax
RoPax
General Cargo
Car/passenger ferry
Car/passenger ferry
Ro-Ro
Ro-Ro
Tug
PSV
PSV
Patrol vessel
Car/passenger ferry
Tug
Tug
Owner
Torghatten Nord
Incheon Port Authority
Buquebus
Sea-Cargo
Sea-Cargo
Fjordline
Fjordline
Eidsvaag
Norled
Norled
Norlines
Norlines
Buksr & Berging
Harvey Gulf Int. Marine
Finish Border Guard
Society of Quebec ferries
CNOOC
CNOOC
Class
DNV
Year
Type of vessel
Owner
2014
Car/passenger ferry
Society of Quebec ferries LR
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
DNV
ABS
ABS
GL
LR
CCS
CCS
2014
Car/passenger ferry
Society of Quebec ferries LR
2014
Tug
Buksr & Berging
DNV
2014
PSV
ABS
2014
PSV
ABS
2014
Gas carrier
SABIC
BV
2014
Gas carrier
SABIC
BV
2014
PSV
Remy Shipping
DNV
2014
PSV
Siem Offshore
DNV
2015
PSV
ABS
2015
Container Ship
TOTE Shipholdings
ABS
2015
Container Ship
TOTE Shipholdings
ABS
2015
LEG Carrier
Evergas
BV
2015
2015
LEG Carrier
LEG Carrier
Evergas
Evergas
BV
BV
Class
Updated 15.01.2013
Excluding LNG carriers and inland waterway vessels
35
Sailing LNG fuelled vessels, examples
Stril Pioner
Viking
Energy
Mastrafjord, Raunefjord,
Patrol vessels
Barentshav,
Bergen,
Sortland
Moldefjord
Viking
Lady also with
Fuel
cell!
Bergensfjord,
Stavangerfjord
Tidekongen,
Tidedronningen,
Tideprinsen
Larger ships and new ship types for gas as ship fuel
Source: Rolf Jensen
Source: Theo Van Loon
Sea Cargo Express; Nov 2012
Source: Incat
New ferry of Buquebus
37
Concept studies
38
Global LNG bunker demand by 2020
Europe & the Baltic Sea

China
1.4 2.2 million
0.3 0.8 million
North America
0.07 0.09 million
Japan & Korea
0.3 0.5 million
Middle East & India
0.9 1.4 million
0.3 0.7 million
SEA
0.4 0.7 million
South America
Australia & NZ
0.3 0.4 million
0.1 0.2 million
LNG Bunkering demand 2012
LNG Bunkering demand 2020

Equivalent to 4 -7 million tons of LNG
39
Current and forecast of global LNG bunkering infrastructure

by 2020
Tadoussac
Duluth
Europe*
Incheon
Tacoma
New York
Shaanxi
Fujairah
Fourchon
Hubei
Tokyo Bay
Busan
Singapore
Buenos Aires
Existing
Bass Strait
Planned (Feasibility study, risk study, proposed locations, pending approval)
Proposed (currently being discussed)

* See detailed map
40
LNG Bunkering grid in Europe by 2020

Existing
1.
2.
3.
4.
5.
Flor
CCB
Halhjem
Snurrevarden
Risavika
6
Proposed
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
Gothenborg
Pori
Turku
Sillame
Helsinki
Paldiski
Riga
Swinoujscie
Lubeck
Rostock
Helsingborg
Copenhagen
Aarhus
Aberdeen
Dunkerque
Marseilles
Barcelona
Algeciras
1
7
2
3
4
5
Planned
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
Bod
Mongstad
ra
Lysekil
Porvoo
Stockholm
Tallin
Klapeida
Hirtshals
Brunsbttel
Hamburg
Rotterdam
Antwerp
Zeebrugge
Ghent
Vestbase
Existing
24
21
23
17
16
25 12 27
22
34
18
11
14
35
33
15
10 26
13
28
32
31 30
29
19
20
36
37
38
39
Planned (Feasibility study, risk study, proposed locations, pending approval)
41
Proposed (currently being discussed)
FINDINGS
Future delivery capacity of technologies and fuel

Ballast water and sulphur regulations
set requirements on ships in operation
In 2020 60,000 ships have to switch fuel

or clean the exhaust
Are 20,000 scrubbers retrofitted

between 2019 and 2020 possible?
Will there be enough low sulphur fuel available

and at what price?
Will the availability uncertainty of LNG bunkering

facilities slow uptake of gas fuelled engines?
By 2020 30-60,000 ships will have to install

a ballast water treatment system
How many ballast water systems

can be retrofitted each year?
44
FINDINGS
Two-tier second-hand and charter market

Will there be a two-tier charter market,
and which technologies would give a price premium?
Todays ships will compete with increasingly

more energy efficient ships
Ships built after 2016 with a NOx Tier II

compliant engine will not be able
to enter an ECA
Will a ship with a scrubber or LNG

as fuel have a higher second-hand value?
Will many ship owners build beyond todays

requirements and aim for 2020 standards?
45
BEYOND 2020
46
BEYOND 2020
Future regulations
Numerous regulations can become important after 2020
GHG
High attention today, but little progress
Black carbon and particulate matter
Increasing attention, but difficult to measure and control
Hull bio-fouling (transport of alien species)
Guidelines developed, may results in regulations

over the next 10-15 years
Underwater noise
Raising concerns about possible impact on

ocean-dwelling mammals, but science remains unclear
47
Safeguarding life, property

and the environment
www.dnv.com
48

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SHIPPING 2020

TECHNOLOGY INVESTMENTS IN THE NEW MARKET REALITY

WHY Shipping 2020

Det Norske Veritas AS. All rights reserved.

WHY Shipping 2020

Det Norske Veritas AS. All rights reserved.

WHY SHIPPING 2020

What is Shipping 2020

What technologies should be installed

Uncertainties associated with market trends

Shipping 2020 aims to indicate which

Det Norske Veritas AS. All rights reserved.

METHODOLOGY AND ASSUMPTIONS

Megatrends and external drivers

Growth level and level

Rating schemes and

Det Norske Veritas AS. All rights reserved.

METHODOLOGY AND ASSUMPTIONS

The Process the regulatory future is demanding

Det Norske Veritas AS. All rights reserved.

Det Norske Veritas AS. All rights reserved.

METHODOLOGY AND ASSUMPTIONS

The process the big picture

Det Norske Veritas AS. All rights reserved.

METHODOLOGY AND ASSUMPTIONS

Scenarios created to capture uncertainties

High growth scenario

High economic growth

Higher prices for all types of fuels

Little regulatory or stakeholder

LNG price decoupling from oil prices

Low economic growth

Limited implementation of MBM results

Little regulatory or stakeholder

Low fuel prices in general, but high

Det Norske Veritas AS. All rights reserved.

METHODOLOGY AND ASSUMPTIONS

Technologies have been assessed against

NOX TIER III

Low sulphur heavy fuel oil

Exhaust gas recirculation

Waste heat recovery

Hull shape optimisation

Smaller engine/de-rating (speed reduction)

System efficiency improvement

Considered, but not selected due to limited impact/effect

Det Norske Veritas AS. All rights reserved.

METHODOLOGY AND ASSUMPTIONS

Ship owner survey motivation and barriers

Source: DNV survey (23 respondents)

Det Norske Veritas AS. All rights reserved.

METHODOLOGY AND ASSUMPTIONS

Ship owner survey investment preferences

Source: DNV survey (23 respondents)

Det Norske Veritas AS. All rights reserved.

METHODOLOGY AND ASSUMPTIONS

Which technologies do ship owners envisage

FIGURE 4: LIKELIHOOD OF IMPLEMENTING TECHNOLOGIES

Ballast Water Treatment System

Low sulphur heavy fuel oil

Familiarity with technology

Likely to be implemented on new builds