Doc.ID: Revision: Status: 25 / © Wärtsilä
LNG AS A BUNKER FUEL
WARTSILA
IMSF CONFERENCE, OSLO
MAY 2012
Doc.ID: Revision: Status: 25 / © Wärtsilä
Until now…..
Doc.ID: Revision: Status: 25 / © Wärtsilä
From now on….
Established Emissions Controlled Areas
Emissions Controlled Areas under consideration
Shipping critical points
Doc.ID: Revision: Status: 25 / © Wärtsilä
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
4 ©
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
9 © Wärtsilä
…..Challenges
LNG Infrastructure missing
Rules and regulations for LNG onboard ships are not fully yet there
Bunkering rules missing-safety procedures existing
Doc.ID: Revision: Status: 25 / © Wärtsilä
LNG BUNKERING BY TRUCK
Doc.ID: Revision: Status: 25 / © Wärtsilä
…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
Doc.ID: Revision: Status: 25 / © Wärtsilä
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
Doc.ID: Revision: Status: 25 / © Wärtsilä
INTERNAL USE ONLY
LNG is economical...
15
Source: Methanex
Different views on the future of LNG
16 © Wärtsilä
Doc.ID: Revision: Status: 25 / © Wärtsilä
…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)
Doc.ID: Revision: Status: 25 / © Wärtsilä
INTERNAL USE ONLY
Crucial role of US to gas development
3 July 2009 19 Presentation name / Author
Doc.ID: Revision: Status: 25 / © Wärtsilä
INTERNAL USE ONLY
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
Doc.ID: Revision: Status: 25 / © Wärtsilä
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
Sailing on LNG – Byung Sam Ahn, Wärtsilä Ship Power 22 © Wärtsilä