shipping 2020_tcm4-518936

SHIPPING 2020 TECHNOLOGY INVESTMENTS IN THE NEW MARKET REALITY

Tor E. Svensen, President DNV Maritime and Oil & Gas

Det Norske Veritas AS. All rights reserved. 2

CONTENTS

WHY "Shipping 2020"

METHODOLOGY

FINDINGS

Det Norske Veritas AS. All rights reserved.

Newbuildings in 2020 will emit up to 30% less CO2 than todays ships

- The EEDI will be a driver for two-thirds of this reduction

1,000 newbuildings will be delivered with LNG engines towards 2020

- Assumes an LNG price that is 30% lower than that of HFO

- This represents 10-15% of the expected newbuildings (tankers, bulk carriers, containerships, offshore supply vessels)

Distillate fuel is the most likely choice to meet ECA emission requirements

- Scrubbers not a significant option before 2020

3

Shipping 2020 DNVs predictions


WHY

"Shipping

2020"


What is Shipping 2020?

WHY "SHIPPING 2020"

QUESTION:

What technologies should be installed to meet

new environmental regulations and higher fuel

prices given the uncertainties associated with

market trends and drivers, fuel choices,

technology developments and other variables?

ANSWER:

"Shipping 2020" aims to indicate

which technologies are

most likely to be adopted by the

industry by 2020.

CHALLENGE:

The wrong investment decisions

will be detrimental to both the industry

and individual shipowners.

Wrong decisions impact the financial

bottom line and the environment.


Megatrends and external drivers

Fuel trends (price, mix)

WHY "SHIPPING 2020"

World economy and demand for transport

Technology trends

Environmental regulations


Difficult choices ahead

WHY "SHIPPING 2020"


METHODOLOGY


Variables included in the simulation

METHODOLOGY

SHIP TYPE/SEGMENT

Number of ships

Age distribution

ME & Aux power

Number of aux engines

Ballast water capacity

Existing ships ME & Aux SFC

Newbuildings ME &Aux SFC

SHIP OWNER

& OPERATIONAL PROFILE

Days in cruise

Days in ECAs

ME & Aux engine cruise load

Investment horizon

Discount rate

Share of fuel paid

TECHNOLOGIES

Capital & operating expenses

Retrofit capital & operating expenses

Fuel reduction ME & Aux

Learning rate

SCENARIOS

Fuel price variables

Fleet development

(newbuildings, scrapping)

CO2 price trends

Regulatory requirements

INPUT

PARAMETERS


Technologies have been assessed against relevant regulations

MOTIVATING REGULATION

TECHNICAL MEASURE RETRO-FIT SECA 1%S SECA 0.1%S GLOBAL 0.5%S NOX TIER III EEDI ENERGY

EFFICIENCY

BALLAST

WATER

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 Considered, but not selected due to limited impact/effect

Water in fuel Considered, but not selected due to limited impact/effect

Low NOx tuning

Considered, but not selected due to limited impact/effect

Lightweight constructions Considered, but not selected due to limited impact/effect

Reduction of seawater ballast capacity Considered, but not selected due to limited impact/effect

METHODOLOGY


Scenarios have been created

LOW

LOW HIGH

HIGH

SCENARIO D:

IN THE DOLDRUMS

SCENARIO C:

SINK OR SWIM

SCENARIO A:

FULL STEAM AHEAD

SCENARIO B:

KNOWING THE ROPES

REGULATORY

AND

STAKEHOLDER

PRESSURE

ECONOMIC

GROWTH

METHODOLOGY

High economic growth

High fuel prices, with MGO twice

HFO and LNG 10% higher than HFO

Little regulatory or stakeholder

pressure on environment

Low economic growth

Little regulatory or stakeholder

pressure on environment

LNG price decoupled from oil price,

at about 70% HFO

Low economic growth

Limited implementation of MBM gives a

medium price on CO2 emissions

High fuel prices, with MGO twice HFO

and LNG 10% higher than HFO

High economic growth

Cost of CO2 emissions up

and on the rise in 2020

LNG price decoupled from oil price and

is significantly lower, 30% of HFO


Adds newbuildings

to the fleet each

year

Generates a

representative

sample of the

current world fleet

12

Illustration of model: simulation of individual ships

2020 2013 2014 2015 2016 2017 2018 2019

Simulates fuel

prices on a

monthly basis

until 2020

Simulates annual

retrofit and fuel

decisions for all

existing ships until

2020 2012

Simulates annual

retrofit and fuel

decisions for all

newbuildings until

2020

Removes

scrapped ships

from the

simulated fleet

each year

LNG

HFO

MGO

ECA 0.1% SOx Global 0.5% SOx

ECA Tier III NOx

EEDI Phase 2 EEDI Phase 1

ECA 0.1% SOx

LNG

Dual fuel

engine

LNG LNG LNG LNG LNG LSHFO LSHFO LSHFO

Improve

sys. eff.

Improve

prop. eff.

METHODOLOGY


FINDINGS


With low LNG prices, 1,000 newbuildings

will be fuelled by LNG within the next 9 years

1,000 ships equal 10-15% of the expected newbuildings (average before 2020)

Includes ships with either pure LNG or a dual-fuel engine with full flexibility

Larger vessels will benefit more from LNG

than smaller vessels

In 2018-2020, about

30% of newbuildings

will be delivered

with LNG engines

Finding 1

FINDINGS

14

2012 2014 2013 2015 2016 2018 2017 2020 2019

0%

5%

10%

15%

20%

25%

SH

AR

E O

F S

HIP

S B

UIL

T

2012 -

2020

CUMULATIVE UPTAKES OF LNG ENGINES


A global sulphur limit in 2020 will result in a demand for

200-250 million tonnes of marine distillates per annum

This equals the total US distillate fuel oil consumption in 2010

The current annual global demand for marine distillates is 30 million tonnes

A 0.1% limit in ECAs is expected

to increase the demand

to 45 million tonnes

Consumption of HFO will plummet

from about 290 million tonnes in 2019

to only 80-110 million tonnes in 2020

Finding 2

FINDINGS

15

SH

AR

E O

F T

OT

AL F

UE

L U

SE

WORLD FLEET FUEL MIX

2012 2014 2013 2015 2016 2018 2017 2020 2019

0

%

20%

40%

60%

80%

100%

HFO LSHFO MGO LNG


Newbuildings in 2020 will emit up to 30% less CO2

Most of the reduction will be found on tank, bulk and container vessels

Two-thirds of the reduction will be achieved through regulatory drivers (EEDI),

while one-third of the reduction will be motivated by cost-efficiency alone

No significant costs for ship owners expected until 2020. From 2020, more

measures are to be implemented and costs are expected to increase sharply

Most common compliance options before 2020:

- Hull shape optimisation

- Reductions in installed power

Most common compliance options starting in 2020:

- LNG engines

- Propulsion efficiency devices

- Hull optimisation

Finding 3

FINDINGS

16


LNG becomes a cost-efficient option for vessels

spending more than 30% of their sailing time in ECAs

When the 0.1% sulphur limit is enforced in North America and Northern Europe

in 2015, approximately 40% of the world fleet will be affected

Small tankers and general cargo carriers which spend all their time

in ECAs will be significantly affected

The threshold for LNG being a cost-effective compliance option

is when the vessel spends about one-third of its time in an ECA

Very low LNG prices can reduce the threshold

to 20% of time spent in an ECA

Finding 4

FINDINGS

17


Distillates preferred for ECAs - scrubbers not a significant option before 2020

A low LNG price compared to HFO favours investing in LNG engines

rather than in scrubbers

A limited proportion of the global fleet will spend enough time in ECAs

to justify retrofitting a costly system

When the global sulphur limit enters into force in 2020,

scrubbers may potentially be fitted to several thousand ships

There are, however, significant uncertainties, particularly concerning costs

and expected cost reductions due to learning effects,

which are high in the initial stages of technology innovation

Finding 5

FINDINGS

18


Newbuildings in 2020 will emit up to 30% less CO2 than todays ships

About 30% of sailing time in ECAs can justify an LNG-fuelled engine

1,000 newbuildings will be delivered with LNG engines towards 2020

Distillates preferred for ECAs and scrubbers not a significant option before 2020

In 2020, the demand for marine distillates will be 200-250 million tonnes

"Shipping 2020" Summary

FINDINGS

19


Safeguarding life, property

and the environment

www.dnv.com

20

shipping 2020_tcm4-518936

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