Auxnaval internationalitation

Internationalisation of the ancillary industry via identification of business

opportunities

1 Introduction This report highlights potential international business opportunities in the ancilliary shipbuilding and shiprepair industries. Since this is a very wide topic the information in the core of the report should be regarded as an overview and individual organisations should decide how they might best be able to exploit any opportunities in view of their own fields of expertise. Additional information may be found by checking the references.

2 Current state of play in the auxiliary maritime industry

2.1 Atlantic Area Region

2.1.1 Spain Recent years have seen a growing importance of innovation in the Spanish shipbuilding industry. Research, development and innovation investment in the shipbuilding sector has increased by about €1bn (about 10% of turnover) over the past four years. The shipbuilding and shiprepair industry has links with both maritime and non-maritime industries.

2.1.2 Portugal Ship repair turnover was €146m which is a decrease of 15%. However Vianayards is modernising as a response to increased demand from the Navy. Shiprepair activity was in line with expectations in Q1 of 2010. (1)

2.1.3 UK The naval sector has seen significant growth including work from the QE2 Class aircraft carrier, Astute submarine and Type 45 Destroyer programmes. The UK will invest £75bn in offshore wind energy by 2020. The Marine Industries Strategic Framework was launched by the government department for Business Innovation And Skills (BIS).

2.1.4 France CIGAN the maritime industries association was launched in 2009. The French navy market has seen a tendency toward global fleet contracts. The main shiprepairer DCNS is taking orders from non-Navy fleets. STX-France S.A. has two yards and delivered one of the biggest cruiseships in Europe and this received a “6 golden pearls” notation from Bureau Veritas.

Table 1 Guidelines & legislation time frames

3 Potential Developing Markets

3.1 Exhaust/Airborne Emissions Control

Table 2 Main airborne emissions and their effects Table 2 shows the main detrimental effects of airborne pollutants caused by shipping and offshore platforms. These emissions are subject to a wide range of legislation which is becoming stricter with time. The most notable Maritime legislation is MARPOL (“Marine Pollution”) Annex VI which covers SOx and NOx and Ozone depleting substance emissions (others too?). The level of emissions permitted varies for different regions.

3.1.1 Policy

3.1.1.1 MARPOL Annex VI

3.1.1.1.1 NOx and SOx The revised MARPOL Annex VI sets limits on NOx and SOx emissions from ship exhausts, and prohibits deliberate emissions of ozone depleting substances. It also allows for Emissions Control Areas (ECA) for SOx, particulates and NOx. SOx has been associated with respiratory health problems and MARPOL allows for Sulphur Emission Control Areas (SECA). The current ECAs are: Baltic Sea (SOx), North Sea (SOx) and North America (SOx and NOx). (2) The International Maritime Organisation (IMO) unanimously agreed adopted amendments to MARPOL annex VI amendments and these came into force on 1 July 2010. The sulphur content of fuel (used globally) will reduce from 4.5% to 3.5% from 1 January 2012. The sulphur content of fuels used on ships in Sulphur Emission Control Areas (SECA) was reduced to 1% from 1 July 2010 and will reduce further to 0.1% from 1 January 2015. There are currently two SECA areas: North Sea and The Baltic Sea. However it is expected that EU countries, USA, Japan, Singapore and Australia will also be declared SECA by 2015. This will encourage the use of marine distillate fuels or sulphur emission control measures such as the installation of scrubbers. There are different standards relating to emissions to air which are known as Tier I, Tier II and Tier III. These all belong to MARPOL Annex VI. The regulation also applies to fixed and floating rigs and to drilling platforms.

3.1.1.1.2 VOCs The MARPOL Annex VI also sets requirements for Volatile Organic Compound (VOC) management on crude oil tankers. From 1st July 2010 all tankers were required to

Emission type Region of impact Main effects Nitrogen Oxide (NO2) Local

Regional Global

Health Acid rain Global warming

Sulphur Dioxide (SO2) Local Regional

Health Acid rain

Carbon Dioxide (CO2) Global Global warming Particulate Matter PM2.5/10

Local Health

implement a VOC management plan specific to the ship. This will cover the minimisation of loss of VOCs for at least the loading, sea-passage and unloading.

3.1.1.2 CO2 emissions The International Maritime Organisation (IMO) has three parts to it’s work on energy efficiency and Greenhouse Gas (GHG) emissions, these are: technical measures, operational measures and market measures. These are voluntary but may become mandatory via MARPOL Annex VI. Technical measures include the Energy Efficiency Design Index (EEDI) for ships. This will require certain efficiency level (measured in e.g. CO2 per ton-km) for different ship sizes and types. Progressive tightening of the limits will improve technical measures which lead to reductions in emissions. The Ship Energy Efficiency Management Plan (SEEMP) aims to improve emissions through operational means using the Energy Efficiency Operational Indicator (EEOI) tool for monitoring. Proposed actions under market measures include contribution schemes for all shipping for CO2 emissions or only for those ships which do not meet the EEDI requirement. This would use an emissions trading system. There may also be rebate schemes to take into account the socio-economic differences between developed and under-developed nations. In late 2010 the IMO circulated proposed draft regulations to make mandatory the technical and operational measures (described above). They would be implemented as ammendments to MARPOL Annex VI. The proposed amendments will be considered for adoption at the next meeting of the IMO Marine Environment Protection Committee (MEPC) in July 2011.

3.1.2 Opportunities MARPOL Annex VI Tier II standards are expected to be met by combustion process optimization. The parameters examined by engine manufacturers include fuel injection timing, pressure, and rate (rate shaping), fuel nozzle flow area, exhaust valve timing, and cylinder compression volume. MARPOL Annex VI Tier III standards are expected to require dedicated NOx emission control technologies such as various forms of water induction into the combustion process (with fuel, scavenging air, or in-cylinder), exhaust gas recirculation, or selective catalytic reduction. (3) Scrubbers are an established technology in land based systems with a short payback time. Aalborg have installed a large scrubber on the Ro/Pax “Tor Ficaria” for its 21MW main engine. Aalborg Industries (4): used this ship in a case study to determine costs and payback times for in retro-fit and new-build scenarios : Costs Retro-fit

(USD) New build

(USD) Capital Cost $2,900,000 $2,900,000Installation $3,000,000 $1,500,000Running & Maintenance (inc. 2% of fuel cost) $181,440 $181,440Payback Period 1.35 years 1.01 years

3.2 LNG as fuel for ship engines The technology for using LNG as fuel is not new as it is used by LNG carriers. However it is not widely used in other ships save for some ferry businesses in Norway and Japan, and a few North Sea offshore support vessels. Norway is keen to promote LNG as a fuel since it is much less polluting than diesel. Diesel/LNG dual-fuel engines are available as new products or as retro-fit.

3.2.1 Policy LNG as fuel is an obvious choice to meet emissions requirements of MARPOL Annex VI ECA areas.

3.2.2 Challenges Ship owners are reluctant to invest in LNG based ships without a reasonable infrastructure in place, on the other hand LNG suppliers are reluctant to invest in this without a secure demand for LNG.

3.2.3 Opportunities The technology for using LNG already exists and has been implemented in LHG carriers for many years. A DNV project has shown that a concept VLCC design running on LNG would have the following benefits over a traditional VLCC:

• emit 34% less CO2 emissions • 82% less NOx • 94% less SOx • eliminate entirely the need for ballast water • eliminate entirely the venting of cargo vapours (VOCs) • use 25% less energy

The use of LNG in a single- or duel-fuelled engine also dramatically reduces the production of SOx and NOx particles.LNG can be used for cooling the engine intake air, allowing a more air into the cylinder before combustion. Cooling from theLNG can also be used to prevent the loss of cargo (crude oil) via the evaporation of VOC vapour leaking to atmosphere. A heat exchanger using LNG cools the vapour from the cargo holds so that they condense back down to liquid form. These ‘light fractions’ can be stored for selling at port or can be used to drive the engine. DNV estimates a cost saving of 45% over a 20 year period compared to using Heavy Fuel Oil. However one of the stumbling blocks to the uptake of LNG is the relatively limited availability of LNG. Ship owners are reluctant to invest in LNG based ships without a reasonable infrastructure in place, on the other hand LNG suppliers are reluctant to invest in this without a secure demand for LNG. The German Classification society Germanisher Lloyd have guidelines for using gas as a ship fuel which have already come into force.

3.3 Offshore Wind Energy On-shore wind energy technology is well developed whilst the same is not true of offshore technology. In addition there are logistical issues with offshore wind installation and maintenance which are not relevant for onshore wind. The offshore wind industry is unusual in that it requires the whole marine supply chain. Offshore wind can be categorised into shallow water (up to about 50m water depth) and deep water installations. A deep-sea installation may operate from a floating platform and will obviously require longer transmission lines to reach the end user and a mooring system.

3.3.1 Policy In 2007 more than 40% of the new electricity generation capacity was from wind. While a large proportion of this was onshore installations at sea will become increasingly important. In theory the energy available could meet the entire electricity demand for Europe (5). Offshore wind can make a significant contribution to all three of the key objectives of the New Energy Policy: reducing greenhouse gas emissions, ensuring security of energy supply, and improving EU competitiveness.

3.3.2 Challenges Offshore wind is relatively expensive and technologically underdeveloped compared to onshore wind meaning that investors have been cautious. Turbine manufacturers tend not to have experience of offshore application. In addition there are several bottlenecks in the supply chain [EC COM(2008) 768] :

• Limited availability of turbine components • Affordable installation vessels • Suitable harbour facilities • Skilled personnel • Equipment infrastructure • Lack of access to grid connection points at sea. There is little or no demand at the

point of production. • Little experience of applying environmental legislation to offshore industry (e.g.

“Birds”, “Habitats” and “Environmental Impact Assessment” At the moment the offshore wind industry competes on one hand with onshore industry for turbine components whilst on the other hand it competes with the oil and gas exploration industry for equipment and expertise. CESA and EWEA have urged the European Commission to develop programmes and funding mechanisms to ensure that there is sufficient infrastructure to support the offshore renewable industry. They argue that US$7.87bn is needed for the building of heavy turbine installation vessels (TIVs) cable laying vessels to support the offshore wind industry. Design and operation challenges include forces and interactions of sea and wind on the installed structure; the mooring system design and the risk of collision of floating platforms with passing ships.

3.3.3 Opportunities Although the onshore wind energy industry is fairly mature the offshore industry presents challenges which shipyards are suited to meet. Offshore wind energy has higher installation and maintenance costs compared to onshore systems but it has a number advantages.

• Offshore turbines can be larger than those onshore due to the difficulty and logistics of transporting large components by land to an onshore installation site.

• Offshore winds are typically stronger and more stable. • Turbines at sea generally cause less concern for stakeholders in the region (e.g.

noise, visual impacts) The UK government has stated a need for 33GW of installed power by 2020 (6) and they have also set aside £60m for establishing world class offshore manufacturing infrastructure for offshore wind energy at port sites in England. There are separate devolved agreements for ports in Scotland, Wales and Northern Ireland. Applications will be welcome from manufacturers, or joint applications from manufacturers and ports. Offshore wind manufacturers will be able to apply for support for major investments and funding will be available from April 2011 to March 2015 (7). Offshore projects will create an opportunity for grid lines that connect both new generation capacity and establish or increase transmission capacity between different regions – however cross-border synergies are not currently being exploited (5)].

3.4 Tidal/Wave Energy There are two established techniques for harvesting energy from tides :

• Tidal Barrage – a dam retains water on an outgoing tide and generates power on the head of water

• Tidal stream generator – using a submerged turbine or oscillating device A tidal barrage has a large generating capacity (for example a proposed barrage on the river Severn, UK could generate 17TWh (4.4% of UK demand). However it involves huge civil works and can be hugely detrimental to the local environment. For example the loss of 75% of the inter-tidal habitat (which is internationally protected). Tidal stream generators divide into two categories: turbine and oscillating device. The turbine device is similar in design to a commonly seen wind generator whilst an oscillating device may have blades which alternately move up and down.

3.4.1 Opportunities Pulse Tidal have a 100kW device operating on the river Humber, UK and plan to install a 10MW system off the Isle of Skye in 2012. In February 2010 The Carbon Trust announced £22m to support six marine energy projects from it’s Marine Renewable Proving Fund (8).

3.5 Arctic Resources

Figure 1 Map of Artic Oil&Gas Resources (from USGS)

In 2008 the US Geological Survey estimated that there were 90 billion barrels of (technically recoverable) oil in the North of the Arctic Circle. In addition they estimated 1,670 trillion cubic feet of natural gas and 44 billion barrels of technically recoverable natural gas liquids. These resources were contained in 25 geographical areas. These Artic resources account for 13% of the world’s undiscovered oil, 30% of the undiscovered natural gas and 20% of the undiscovered natural gas liquids in the world.

3.5.1 Policy No-one owns the Arctic region : countries which surround the region are limited to a 370km (200 nautical miles) economic zone from their coast. These countries are Russia, Norway, Greenland, Canada and the United States. Under the United Nations Convention of the Law of the Sea Russia, Norway, Canada and Denmark (via Greenland) are trying to lay claim to certain territories in the Arctic region. (Although the USA has been involved in the Law of the Sea Convention it has not ratified it). The Arctic is comparatively free off pollution although it does suffer from ‘long range’ pollutants carried by prevailing global winds and sea currents. In some areas the pollutant levels are greater than urbanised regions.

3.5.2 Challenges Environmental concerns: The World Wildlife Fund (WWF) defines 200 global ecoregions. These are a “unit of land or water containing a geographically distinct assemblage of species, natural communities, and environmental conditions.” The Arctic

region contains 11 of these ecoregions, 4 of which are considered to be seriously threatened by oil&gas development and transportation (9). These areas are:

• the Alaskan North Slope Coastal Plain ecoregion (Arctic National Wildlife Refuge and National Petroleum Reserve)

• the Barents/Kara Sea ecoregion • Canadian Low Arctic Tundra • Canadian Boreal Forests ecoregions (the Mackenzie River Valley and Delta).

Business concerns: In 2009 Russia warned that disputes over Arctic oil & gas resources could lead to armed conflict. Mr Putin said “Many conflicts, foreign policy actions and diplomatic moves smell of oil and gas. Behind all that there often is a desire to enforce an unfair competition and ensure access to our resources.”In a separate document it stated that the Arctic resources were important for their energy security and they set out a plan for establishing military bases along it’s Arctic border (10). In August 2010 Greenpeace activists halted drilling from a Cairn Energy rig for two days. Later Cairn admitted that they had spent $185m and had not made a commercial discovery of hydrocarbons – this caused a 7% drop in their share price. Cairn Energy may start drilling off Greenland in April 2011. This is two months earlier than the usual drilling season. Greenpeace are concerned that difficult weather conditions increase the risk of environmental catastrophe especially since Cairn Energy is a small company with no experience in Arctic waters. There are also financial risks. Richard Rose from Oriel Securities (stockbrokers), said "Drilling in Greenland is still seen as high risk given the lack of drilling to date and frontier nature of the acreage. It's a huge opportunity but I wouldn't describe the market as being confident that it will make a commercial discovery. After some positive drilling results last year, I'd say the odds have gone from 20-1 to 10-1." (11).

3.5.3 Opportunities BP and Gazprom (via joint venture Slavneft) are investing an estimated $15 - $18bn in the preliminary development of the Messoyakha field which has 560 million tonnes of oil reserves and 230 billion cubic metres of gas. The capital expenditure target for 2011 is $4.6bn.

3.6 Maritime Tourism Demand for cruising worldwide increased 110% over the period from 1998-2008 whilst in Europe the figure was 165%. Recreational boat ownership is growing at a rate of 5-10% per annum. A European Commission report on Maritime Tourism focuses on the facilities available on-shore for tourists and recognises the environmental impact of cruise shipping (12). Most of the port calls are in the Mediterranean. Piraeus has the largest number of port calls at 900 whilst Barcelona receives the greatest number of passengers (1,600,000 annually). The report also looks at the investment into ports. This investment divides into facilities for tourism and those which reduce the environmental footprint. On the topic of technologies to reduce the environmental impact of maritime tourism the report focuses on shore-side electricity (“cold ironing”) and compares it to two ship-based

systems: sea water scrubbing (SWS) and selective catalytic reduction (SCR). Shore-side electricity has the advantage that it eliminates airborne emissions and noise from the ship. However, since the electricity must be produced somewhere the overall reduction in emissions is not so large. Using a cost-benefit analysis which measures societal benefits in Euros so that they may be compared with investment costs the report finds that shore-side electricity gives a benefit ratio of €1.84 – that is to say that for every €1 invested the societal benefits are €1.84. (This is not a value, just a unit of measurement). For SCR and SWS the figures are €15.42 and €6.55 respectively indicating that shore-side electricity is less beneficial. The reasons for this are that EU regulations require a low sulphur fuel so the emissions from the ship are not that much greater than from shore; SCR and SWS reduce emissions at sea and at shore; there is no time required for connection/disconnection.

3.7 Ship Slow steaming Ship operators started to operate “slow steaming” on their routes in response to fuel price increases and economic slow-down. Traditionally container ships would steam at maximum speed to their destination and then may have to wait at port for or anchor out of port for a few days before unloading/proceeding to their next destination. The thinking behind slow steaming it is that it is more beneficial to operate a ship at lower than normal speed and reduce fuel consumption and port costs. Traditionally it has been thought that slow-steaming will be a permanent feature of container shipping however 47% of the trans-pacific strings are choosing not to slow down. Brokers have suggested that this may be due to the current shortage of 400teu containers. According to Maersk Line chief operating officer Morten Engelstoft, slow steaming is a permanent and industry-wide shift that will not be abandoned after the economic recovery (13). Dr. Hermann Klein of Germanischer Lloyd also believes that rather than returning to full speed, shipowners would demand vessels with a more flexible optimum speed to allow owners to react more efficiently to market demand.

3.7.1 Challenges Ship main engines are optimised to run at a particular load and therefore operating a slow steaming regime on an unmodified engine decreases it’s efficiency. Engine manufacturers such as Wärtsilä have developed a ‘slow-steaming package’ which can be retro-fitted to their some of their engines. This enables the engine to run optimally at a range of speeds without a permanent de-rating of the engine. It gives a better combustion at lower loads (down to 20% load in the case of the Wartsila retrofit system) leading to lower fuel consumption and lower engine component temperatures a wider range of optimum engine operating point meaning that the engine can operate more efficiently in the slow-steaming regime.

3.7.2 Opportunities Opportunities may be limited since this type of retro-fit is undertaken by service engineers from the engine manufacturer.

3.8 Brazil Many companies are increasing their presence in Brazil to take advantage of it’s growing offshore industry. Two shipyards have been built to service orders from the government owned Transpetro. Transpetro are the largest shipowner in Latin America and the main fuel transport and logistics company in Brazil. The shipyards are Estaleiro Atlântico Sul (EAS) and Estaleiro Promar S.A (14) Estaleiro Promar S.A. is a jointly owned subsidiary of STX and PJMR. Some contracts awarded in 2010 include:

• Hamworthy: design and supply of cargo handling systems for eight LPG tankers operated by Petrobras

• Roll-Royce: £15m contract for the supply of propulsion and control systems for

seven newbuild offshore vessels. The vessels are being built in Brazil

• Keppel Offshore and Marine (Singapore) delived an FPSO conversion under contract from SBM Offshore N.V. and Petrobras Netherlands B.V. The FPSO is for the Jubarte field, Brazil.

• STX Norway Offshore and PJMR will invest around US$100m over 3 years to

support the building of more complex vessels. They will set up a new shipyard in Brazil (Forteleza, Ceará state) with an area of 320,000m2 which will employ 1500 people in addition to subcontractors. The capacity will be about 20,000tonnes of steel per annum.

• This year DOF have signed contracts for a total of 7 new builds altogether worth $1,200m.

3.8.1 Challenges According to Paul Bartlett (15) offshore companies in Brazil face some challenges: overheads are higher and regulations can be difficult to comply with ( e.g. the requirement to employ a certain number of Brazilians when Brazilian personnel are in short supply and productivity can be an issue).

3.8.2 Opportunities Brazil lacks a ship repair infrastructure which will be a problem in coming years given the increasing number of vessels operating there. DOF ASA operate a fleet of 67 vessels comprising of anchor handlers, platform supply vessels and subsea construction vessels and they are increasing their presence in the region. Chief Executive Mons Aase said that growth seen in 2009 had continued in 2010 (15).

3.9 Russia Traditionally Russia shipyards worked almost exclusively on naval projects; merchant shipbuilding work was carried out in other countries such as Poland, Finland, East Germany and Ukraine. Russia shipyard capacity is huge and only third of this is being utilised, the government is therefore keen that Russian commercial shipping companies place more orders with Russian shipyards. The state owned shipbuilding company is JSC United Shipbuilding Corporation (“USC”) and their goal is to strengthen commercial

shipbuilding in Russia but they will be starting from almost nothing and they will need foreign help to achieve this. However they have identified a need for service vessels for the Shtokman gas field and Pacific shelf projects; commercial ships and ice-breakers for Artic shipping routes which is expected to increase 400% over the next 10 years

3.9.1 Policy USC estimates a requirement for 1400+ commercial vessels in the period to 2020. These are: Vessel Type QuantityIcebreakers (Nuclear + Conventional) 24Research vessels 27Offshore Platform-mounted nuclear power plants 7LNG Carriers 25Exploration and drilling rigs 54Supply/Auxiliary vessels 90Tankers (> 70,000dwt), bulkers, mulit-purpose 230Passenger and freight ro-ro vessels 30Fishing vessels 180River vessels, mixed river/sea, industrial ships, Russian Federal Supervision Service vessels

750

According to UKTI Russia is looking for foreign help to build up it’s shipbuilding market. Rolls Royce has established a sales office in St. Petersburg, Singapore and Korea are on board and Germans and French have shown interest. (16)

3.9.2 Challenges The problem that Russian shipyards face is that they are not big enough to produce 80,000 dwt Panamax containers which are the most commonly required. Also many of the shipyards do not have room to expand due to their location.

3.9.3 Opportunities As stated, USC will require foreign help to grow their merchant shipbuilding industry so that they can service their oil and gas interests.

3.10 India India has a large but disorganised ship repair market with an estimated value of $500 million. The overall shipbuilding market in India is projected to be around $20 billion by 2020 (17). Ship repair consist mainly of small shops which are unable to offer a “one-stop-shop”. In addition there is a lack of faith or trust in the existing businesses – there is a perception that they are unprofessional. The shipping ministry has asked all major port trusts to diversify from being just a port to ship repairing business to increase their revenue and provide more repair units to the country. They produced a table of the potential market measured in Rupees crore (crore is a unit in the Indian numbering system equivalent to 107) (18)

.

Type of ship

Potential (Rs crore)

€ million equivalent

Foreign ships on overseas trade visiting Indian Ports 1,400 227.4Domestic ships on overseas trade 200 32.5Coastal service vessels 190 30.9Offshore rig 400 65.0Naval and coast guard vessels 100 16.2Other merchant vessels 500 81.2TOTAL 2,790 453.2

In November 2009 it was reported that Goltens aim to target at least 10 per cent of this market saying that they estimated an investment of at least $10 million over 3 years (17). They aim to offer professionalism and specialised services. The main market for Goltens is in marine (~75%) with most of this being in ship repair. But their business also includes the operation, maintenance and servicing of power plants. This is a competitive sector but they have an advantage in that they also make the parts for these plants. This accounts for about 20% of their business and while offshore is about 5%. Their main competitors are engine manufacturers since they also carry out engine maintenance and would like to sell spares. The advantage for Goltens is that they are independent. They are also trying to set up a training centre in the Philippines and now in India, because the majority of seafaring and technical people come from these two countries.

3.10.1 Opportunities The shipbuilding industry could be worth $20billion by 2020 with a requirement for quality/trustworthy service and ‘one-stop-shops’.

3.11 Ship Recycling

3.11.1 Policy The International Convention for the Safe and Environmentally Sound Recycling of Ships will come into force when it has been ratified by 15 states which is likely to be sometime between 2012 and 2015. It will require ships to have an inventory of hazardous materials (IHM) also known as a Green Passport, and will prohibit the use of certain materials in new builds. Ship recycling facilities must be authorised and must submit a plan of how a ship will be recycled which must be approved. Ships flying a flag of a country which approves the convention can only be recycled in authorised centres. In 2004 Lloyds Register were the first classification society to issue an inventory of hazardous materials. They have published a document entitled “Guide to the Inventory of Hazardous Materials (GreenPassport)” (19).

3.11.2 Opportunities Shipowners which have adopted the convention include FLOPEC, Gulf Energy Maritime (GEM) PJSC, Wallenius Marine AB, Odfjell Management AS and Caledonian Maritime Assets Ltd (CMAL). They have obtained a Lloyds Register approved Inventory of Hazardous Materials.

3.12 Short Sea Shipping and Inland Waterways Environmental concerns may help to shift the emphasis from road and rail transport to inland waterway and short sea shipping routes. This will increase demand for new builds and ship repair. According to the European Barge Association only 25% of the inland fleet is less than 20 years old while in the deep sea fleet more than 300 transport ferries are greater than 30 years old (1).

Figure 2 Specific emissions of NOx per passenger-km or tonne-km and per mode of transport, 1995-2009 (20) However, inland shipping is also subject to stringent emissions regulations. Looking at the left hand side (Freight) of the graph in Figure 2 it can be seen that inland waterway freight transport performs better in terms of NOx emissions compared with road freight. However the gap between the two is closing. Referring to Figure 3, in terms of particulate matter inland waterway freight is now has higher emissions than road freight. This is due mainly to the fuel type used which has meant that the use of gas fuelled engines is becoming more widespread in coastal vessels. For example Sea-Cargo (Norway) has recently

Figure 3 Specific emissions of PM per passenger-km or tonne-km and per mode of transport, 1995-2009 (20) ordered two ro-ro freighters powered by a single Bergen V12 gas engine (Rolls Royce) and NSK Shipping (Norway) ordered a 70m LNG-fuelled coaster. Rolls-Royce have produced a series of new ship designs for coastal and short sea shipping using gas engines and low resistance hull forms. It is claimed that the new hull forms are 20-30% more efficient. The designs have come out of a Norwegian Research project called NyFrakt (21) B9 Shipping envisage 300dwt sailing cargo ships which could be 100% carbon free using existing technology. These could be operational within 24 months (22).

3.13 Green shipping Whilst shipping carries 80% of the global trade it only accounts for 3% of CO2 emissions. Ernst-Christoph Krackhardt of the European Marine Equipment Council (EMEC) suggest that a short term target for green shipping would be to increase the energy efficiency of ships by 30% and in the long term to do so by 60%.

3.13.1 Opportunities There are seven main areas in which to consider improvements on ships to reduce their environmental impact:

• Gas emissions (SOx, NOx, CO2 and particulate matter) • Ship waste disposal • Bilge water treatment • Black waste water treatment

• Grey waste water treatment • Ballast water treatment • Underwater coatings

In terms of new-build ships, additional technologies that might be considered are alternative forms of ballast and light-weight materials. The main barriers to the implementation of lightweight materials are fire safety and class regulations which may lag behind the technology. Traditional methods and equipment may hinder the implementation and a Life Cycle Assessment may have to be undertaken to justify the technology.

3.13.2 Policy EMEC have written a guide to the equipment available for the greening of ships. For each issue the guide is divided into the legal basis (if any) relating to the issue, a statement of the problem and possible solutions/mitigations. The guide is available at http://www.emec-marine-equipment.org/green/

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