LNG Gas Supply System for Submarine

LNG

3‐5

Maritime Propulsion 3/31/16: LNG engine set in Crowley’s new ConRo ship …………………………………………………………..

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HHP Insight 3/30/16: LNG Diesel ‐ dual fuel powerplant placed in first of two ships………………………………………………..

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15‐16

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Maritime Propulsion 3-11-16: MAN Diesel & Turbo inks deal with Japan’s JFE…………………………………………………………

FT 03/09/16: Time called on era of ever bigger container‐ ships……………………………………………………………………………...

WSJ 03/09/16: Chevron LNG bet meets big chill……………………………………………………………………………………………….……..

FT 2/11/16: Maersk’s stumble highlights sluggish state of global trade …………………………………………………………………..

01/10/16:US will be a gas supplier to the world by tomorrow ………………………………………………………………………..……..

WSJ 12/02/15: Out of Bounds CO2 elutes‐ ‐ talks………...……………………………………………………………………………………….…….

Gas Marine Fuel 12/03/15: The Majority of shipping vessels are set to run on LNG within 10 years…………………………

SMi 12/03/15 Presents its masterclass on...Gas as a Marine Fuel.…………………………………………………………………………...

Marine Link 11/03/15: First LNG Containership Transits the Panama Canal……………………………..…………………………...…

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LNG Gas Supply System for ME GI gas injection system Manifold product‐ ‐ ‐ sheet……………………………………………... 6

Within 10 years the majority of shipping vessels will run on LNG...a cleaner, alternative fuelsource. The newest innovation in LNG carrier engine design, M-type, electronically controlled, gas injection (ME-GI) engines, optimize the capability of slow speed engines by running directly off BOG (removing the need to reliquefy the gas) or utilizing fuel oil, and ME-GI propulsion results in less fuel consumption.

Environmental legislation is currently impacting the marine market segment. Ships were traditionally powered by Heavy Fuel Oil (HFO), which produces high levels of harmful pollutants. LNG is one of the only fuel source able to comply with the environmental legislation.Dynamic Controls designs and manufacture the gas supply system for ME-GI gas-injection system manifolds.

CONTENTS:Page:

The following pages 3 thru 36 , represent various publications/news articles regarding LNG applications, markets, and developments. LNG Gas Supply System for ME GI gas injection system Manifold (‐ ‐ ‐ 3 page brochure)…………………………………………

Issue Date: 12 Apr 2016

Page 1 of 36

LNG

Marine Link 11/03/15: ABS deems Crowley Product Tanker “LNG Ready’‐ …………………………...………………………………..

Issue Date: 12 Apr 2016

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WSJ 07/22/15: Economic Anchor. July 22, 2015………………………………………………………………………………………………………..

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IGU World LNG Report 2015 edition—section 5 …………………….………………...………………………………………………………….. 22‐34

Marine Link 06/10/15: DSME launches LNG carrier for Turkey…………………………………………………………………………………..

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Motorship 11/27/13: MAN hosts phase of EU LNG initiative. November 27, 2013.………………………………………………….

35‐36

CONTENTS—CONTINUED

The following pages 3 thru 35, represent various publications/news articles regarding LNG applications, markets, and developments.

Issue Date: 12 Apr 2016

Page 3 of 36

Issue Date: 12 Apr 2016

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Issue Date: 12 Apr 2016

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Gas Supply System for ME-GI gas-injection system Manifold

LNG

Market(s) for Dynamic Controls’ LNG, gas supply system for ME-GI gas-injection system manifolds are,Container ships, and other cargo ships—Please refer to, Shipping Industry Fleet -page 21 of 36.

19 Apr 2016

Piellisch, Rich. Crowley is building two LNG-fueled Commitment- class ConRo ships for the PuertoRico trade. March 30, 2016 . http://hhpinsight.com/ marine/2016/03/crowley-maritime- sets-first-man-engine/. 4/21/16.

Methane Manifold Block Exploded View Nitrogen Manifold Block Exploded ViewGas Supply System

•ME-GI Gas-Injection System Manifolds for New Build and Retrofit market(s) WorldwideApplication

Product Code Sizes Type of Manifold Design PressureNon-

Vented Ventilated Methane Ethane

No. of DCL cartridge valves in each manifold

GVT-C4-A-1-D-1-A-4 1" Single line 400 Bar/5801 psi X X 16

GTV-C4-A-1-D-2-A-4 1” Dual line 400 Bar/5801 psi X X 16

GVT01-C4-A-1-D-1-A-4 1” Single line 400 Bar/5801 psi X X X 16

GVT01-D5-B-1-D-1-A-4 1 ½” Single line 420 Bar/6207 psi X X X 16

GVT01-E6-B-1-D-1-A-4 2” Single line 420 Bar/6207 psi X X X 16

GVT-A2-3-A-1-A-1-A-4 ¼” Small block * 4

* Small block with A2 valves installed, used on Nitrogen only and is supplied as an additional unit with all the above

DCL Cartridge Valves, refer to: 1 of 27

Page 6 of 36

Issue Date: 12 Apr 2016

The main engine has been set onto Crowley Maritime Corporation’s new vessel, El Coquí, the first of two new Commitment Class ConRo (combination container and Roll/On Roll/Off) ships ‐ that will be pow ‐ered by liquefied natural gas (LNG) for use in the ocean cargo trade between Jacksonville and Puerto Rico.

“This state of the art engine technology will ‐ ‐ ‐ add efficiency while con ‐tinuing to reduce impacts on the environment, one of Crowley’s toppriorities,” said John Hourihan, senior vice president and general man ‐ager, PuertoRico services.

“Utilizing this green technolo‐gy is just anoth ‐ er way we are demonstrating our commit ‐ment to the people of Puer ‐to Rico, our customers and the environ ‐ment. It alsobears mentioning that neither of these ships, which have been designspecifically for the Puerto Rico trade, gets built without the Jones Act – a federal statute that provides for the promotion and maintenance of a strong American merchant marine.”

A video showing the progress of setting the engine may be viewed online here.

The engine was placed using a series of heavy lifts by 500 ton ‐cranes inthe shipyard of VT Halter Marine, a subsidiary of VT Systems, Inc., where El Coquí (ko kee) and sister ship, Taíno (tahy noh), are under ‐ ‐construction. The engine has a total weight of 759 metric tons and measures 41 feet high, 41 feet in length, and 14.7 feet wide.

“Customers will not only be able to experience the same reliable and dedicated service they have with Crowley today, but also will have the added benefit of lower emissions once these two ships join the Crowley fleet,” said Jose “Pache” Ayala, Crowley vice president, Puerto Rico. “Crowley is making a significant investment in the Puerto Rico trade to provide faster transit times while continuing with the ability to carry and deliver the containers, rolling cargo and refrigerated equipment our customers count on.”

Designing, building and operating LNG powered vessels is very much‐ in

LNG Engine set in Crowley’s new ConRo ship—March 31, 2016http://hhpinsight.com/marine/2016/03/crowley-maritime-sets-first-man-engine/

line with Crowley’s overall EcoStewardship positioning and growth strategy. The company formed an LNG services group in 2015 to bring together the compa ‐ny’s extensive resources to provide LNG vessel design and construction management; transportation; prod ‐uct sales and distribution, and full scale, project man ‐ ‐agement solutions.

These Commitment Class, Jones Act ships are de ‐signed to travel at speeds up to 22 knots while maxim ‐izing the carriage of 53 foot, 102 inch wide contain ‐ ‐ ‐ ‐ers. Cargo capacity will be approximately 2,400 TEUs (20 foot equivalent units), with additional ‐ ‐ ‐ space for nearly 400 vehicles in an enclosed Ro/Ro garage.

Crowley Maritime is trumpeting the seUng of the main engine onto its new El Coquí container ship as ‘a critical milestone.’ El Coquí is the first of two Commitment class LNG diesel dual fuel ‐ ‐ships being built for the Puerto Rico trade. Photo from Crowley’s excellent video shows the MAN Diesel & Turbine 8S70ME C8.2 GI ‐ ‐ engine ‘A frame’ being lowered ‐ into place.

Crowley Maritime reported “another critical mile ‐stone” as the main engine has been installed in its El Coquí newbuild, the first of two Commitment class‐ConRo (combination container and Roll/On Roll/Off) ‐ships that will be powered by liquefied natural gas to connect Jacksonville and San Juan.

The engine is a MAN Diesel & Turbo design 8S70ME ‐ ‐C8.2 GI built at ‐ the Tamano Works of Mitsui Engineer ‐ing & Shipbuilding in Japan. It was installed in El

LNG-Diesel Dual Fuel Powerplant Placed in First of Two Ships –March 30, 2016http://hhpinsight.com/marine/2016/03/crowley-maritime-sets-first-man-engine/

CrowleyMaritimeSets1stMANEngine. in Dual Fuel, LNG, Marine, Milestones by Rich Piellisch

Page 7 of 36

Issue Date: 12 Apr 2016

The engine is a MAN Diesel & Turbo design 8S70ME C8.2 GI built at the ‐ ‐ ‐Tamano Works of Mitsui Engineering & Shipbuilding in Japan. It was installed in El Coquí by VT Halter Marine in Mississippi, where a second Commitment class ship, the Taíno, is also under‐ construction.

“This state of the art engine technology will ‐ ‐ ‐ add efficiency while con ‐tinuing to reduce impacts on the environment, one of Crowley’s top priorities,” Crowley Puerto Rico services senior VP John Hourihan said in a release.

Placed in Stages

The engine was placed in stages via a series of heavy lifts by 500 ton ‐cranes at the VT Halter yard.

“This ship is basically being built around the engine,” Jensen Maritime construction manager Patrick Sperry says in a video on the El Coquíin ‐stallation. (Jensen is Crowley’s Seattle based naval architecture subsidi ‐ ‐ary. Also quoted in the video are Crowley new construction engineering manager Raymond Bland and construction management VP Ray Martus.)

Faster

“Crowley is making a significant investment in the Puerto Rico trade to provide faster transit times while continuing with the ability to carryand deliver the containers, rolling cargo and refrigerated equipment our customers count on,” said Crowley Puerto Rico VP Jose “Pache” Ayala.

The Jones Act compliant, Commitment class, ‐ ‐ Jones Act ships are de ‐signed to travel at speeds up to 22 knots while maximizing the carriage of 53 foot, 102 inch wide containers. ‐ ‐ ‐ Cargo capacity will be approxi ‐mately 2,400 TEUs (20 foot equivalent units), with additional space for ‐ ‐ ‐nearly 400 vehicles in an enclosed Ro/Ro garage.

Deep Experience in Puerto Rico

In addition to their main ME GI engines (the first ‐ to be built in Ja ‐pan; HHP Insight, July 30, 2014), each of the new Crowley ships will have three MAN Diesel & Turbo 9L28/32DF auxiliary engines.

Crowley notes that it has served the Puerto Rico market since 1954, “longer than any other carrier in the trade.” The firm has more than 250 Puerto Rico employees, and is “the No. 1 ocean carrier between the island commonwealth and the U.S. mainland with more weekly sailings and more cargo carried annually than any other shipping line.”

Continued: LNG- Diesel dual fuel powerplant placed in First of Two ships.-March 30, 2016http://hhpinsight.com/marine/2016/03/crowley-maritime-sets-first

The 8S70ME C8.2 GI ‐ ‐ engine weighs 759 metric tons.

Coquí by VT Halter Marine in Mississippi, where a second Commitment ‐class ship, the Taíno, is also under construction.

There are two MAN diesel enginesinstalled on/in each ConRo container ships, each engine has the

Dynamic Controls, LTD. ME GI‐ gas injection‐system manifold(Refer to page 3 5 of‐ 35)

The DCL ME GI gas injection system ‐ ‐ manifold.

Page 8 of 36

G50ME C9 Engine Successfully ‐ Passes TATMAN Diesel & Turbo’s G50 engine has successfully passed its Type Approval Test at Mitsui in Japan. Upon entering service,the engine will power the world’s first ethane fuelled eco ‐ ‐friendly LEG (Liquefied Ethane Gas) carrier – the first of threesuch vessels to be built in China by SinoPacific Shipyard for the German shipowner, Hartmann Reederei. Besides oper‐ating on ethane,

Finland Breaks the Ice on LNG

Polaris undergoing ouVitting at Arctech Helsinki Shipyard in January (Photo: Eric Haun)Due for delivery in Q2 2016, Finland’s new icebreaker Polaris is the world’s first to fea‐ture dual fuel liquified natural gas (LNG) and diesel propul ‐sion, earning the icebreaking vessel designations as the Finland’s most powerful and the world’s greenest.

Big Power for the Prince of Wales

MT30 gas turbine lifted into the U.K. Royal Navy’s latest aircraft carrier HMS Prince of Wales (Photo: John Linton) The U.K. Royal Navy’s Queen Elizabeth Class aircraft carri‐ers presently under construction are due to become the centerpiece of the nation’s defense force. Upon entering operation, each ship will essentially serve as floating four ‐acre military base capable of travelling up to 500

MAN Diesel & Turbo Inks Deal with Japan’s JFEPosted by Michelle HowardSupply of German manufacturer’s energy efficient marine en ‐ ‐gines to Japanese market complies with stringent environmen ‐tal regulations

Japanese engine manufacturer JFE has entered a new coopera ‐tion agreement with MAN Diesel & Turbo for MAN's 32/44CR, 35/44DF, 48/60CR and 51/60DF modern four stroke‐ enginetypes. The agreement applies to marine newbuild projects for ships to be deployed on Japanese domestic trade routes, and where the shipyards and shipowners involved are located in Japan. JFE has produced and supplied medium speed diesel ‐engines since 1964 under the SEMT Pielstick license, which was acquired by the MAN Group backin 2006.

The aforementioned MAN Diesel & Turbo common rail engines cover‐ apower range of 3,600 to 21,600 kW and their well proven, state of the ‐ ‐ ‐ ‐ art, fully electronically controlled, ‐common rail injection system is ‐suitable for both heavy fuel oil and distillate fuels. This technology,developed in house by ‐ MAN Diesel & Turbo and fully optimized for its engines, provides superior performance in terms of fuel consumption and smoke emissions, especially at part load, com ‐pared to the same engines’ IMO Tier II versions that feature conventional injection system.

Upon customer request, the common rail ‐ engines can be pro ‐vided with ECOMAP capability, an innovative feature for the MAN 32/44CR and 48/60CR engines: the flexibility of the CR‐system permits the engine to be programmed to follow differ ‐ent SFOC/power characteristics, with each having an optimal efficiency at different load points. Hence, the customer is pro ‐vided with the potential to realize a better fuel economy through changing the engine’s operating profiles. Especially aboard vessels with multi engine installations, the combination ‐of such CR engines with an intelligent power management sys ‐tem enables the maximal exploitation of the engines’ flexibility potential.

The dual fuel engines covering the power range of 3,180 ‐ to 18,000 kW can be operated in the Otto (gas mode) or Diesel (diesel mode) cycles from LNG in the former to more tradi ‐tional HFO, MDO or MGO in the latter mode. Significantly, the dual fuel engines can switch between these fuels at any ‐engine load between 15 to 100 percent maximum continu ‐ous rating (MCR) without disruption to the power supply.Extremely environmentally friendly operation is achieved in gas mode when using LNG as fuel with negligible sulphur (SOx) and particle emissions, while carbon dioxide (CO2) and nitrogen oxide (NOx) emissions are respectively reduced by 20 and 85 percent compared to diesel mode. Accordingly, running the engines in gas mode complies even with the stringent IMO Tier III levels without the need for any exhaust‐gas after treatment.‐

Issue Date: 21 Mar 2016

Page 9 of 36

Time called on era of ever-bigger container ships –March 9, 2016http://hhpinsight.com/marine/2016/03/crowley-maritime-sets-first-man-engine/

The race to operate ever bigger container ships could ‐ be sail ‐ing towards the finishing flag after a consultancy said that pur ‐suing yet another big increase in size would not be cost ‐efficient.

Up to now, shipping lines have found that the larger the ship is, the cheaper it is to carry each container. The capacity of the biggest container ships afloat has risen sharply in the last five years and more than doubled since 2000.High quality global journalism requires investment.

But Drewry Shipping Consultants said the next step up in size ‐would impose such significant costs on ports that they would outweigh the advantages of moving cargo in ever larger ves ‐ ‐sels.

The research by Drewry comes after lines have poured billions of dollars since the financial crisis into new, bigger ships, which has contributed to the industry’s financial woes. Lines have not only had to find hundreds of millions of dollars per vessel to buy the ships but have suffered sharp earning declines as the new ships have created excess capacity, driving down fees per container shipped.

Denmark’s AP Møller Maersk, whose Maersk Line operates ‐the world’s biggest container ship fleet, warned in Febru‐ary that the combination of factors was producing market con ‐ditions “significantly worse” than during the 2008 09 financial ‐crisis.

The highest capacity ships currently afloat ‐ — Mediterranean Shipping Company’s Oscar class, introduced last year — are 395m long, 59m wide and can carry 19,224, 20ft equivalent units (TEUs) of containers. A 40ft container — the most com ‐monly used size ‐ — is around two TEUs. Fifteen years ago, the biggest vessels carried only around 8,000 TEUs.

Tim Power, Drewry’s managing director, said the consultancy had modelled the overall costs of moving containers on a se ‐ries of ship sizes and had found efficiency savings on the big ‐gest ships currently afloat.

But the company then ran a simulation on a still larger ‐ behe ‐moth that carried 24,000 TEUs and might exceed the 400m length and 60m breadth that is the current maximum for to ‐day’s ships.Issue Date: 12 Apr 2016

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MELBOURNE, Australia—Six years ago, Big Oil was so confident in the outlook for global energy demand that it bet tens of billions of dollars to turn part of a remote Australian island known for its breeding grounds of rare sea turtles into a vast gas export‐ hub.

Now, the Chevron Corp. led Gorgon plant ‐ has become emblematic of how quickly the assumptions that underpinned giant energy bets world wide have been shaken ‐ by falling energy prices.

On Tuesday, Chevron said it had started producing liquefied natural gas—natural gas cooled to a liquid form so it can be transported by ship—from the Gorgon project and the company expects to send its first cargo to customers in Asia next week. However, the plant is becoming operational at a time when investors are more skittish about the health of China’s economy, amid an oversupply of major commodities.

Last month, Chevron, which owns nearly 50% of Gorgon, was among 10 U.S. oil companies whose credit ratings were cut by Standard & Poor’s due to the oil price rout. Another of Gorgon’s ‐ big investors— Exxon Mobil Corp.—had its triple A corporate rating placed ‐ on watch by S&P for a possible downgrade.

Many experts say Gorgon, now estimated to cost $54 billion to build versus an original budget of $37 billion as site construction progresses, offers a scant return on the huge investment with energy prices at current levels. Oil prices were at around $60 a barrel—and rising—in September 2009, when Chevron, Exxon and Royal Dutch Shell PLC signed off on the project’s construction. That is roughly 60% above where oil prices sit now.

Gas sales from LNG projects in the Asia Pacific‐ regionsuch as Gorgon are linked to swings in oil prices, meaning returns on investment are more vulnerable to volatility in commodity markets than export ‐oriented facilities in the U.S. In 2015, LNG prices in Asia roughly halved.

Energy companies say shareholders will benefit from a guaranteed revenue stream from Australia, backed up by a stable regulatory regime. Chevron estimates gas output from Gorgon will last at least 40 years.Also, Chevron and its partners have locked Asian customers including China into deals linked to oil prices that last up to 20 years, meaning they must pay for natural gas supply whether they need it or not.“We expect legacy assets such as Gorgon will drive long term ‐ growth and create shareholder value for decades to come,” John Watson,Chevron’s chief executive, said. Spokespeople for Exxon and Shell, which own about 25% of Gorgon each, declined to comment.

Last year, China’s LNG imports fell 1% as the econo ‐my cooled. At the same time, rapid growth in North American shale gas production sparked fears of ‐ a global energy glut that is likely to take years to clear.

“We’re looking at a world of significantly lower returns compared to the old days of the LNG indus ‐try,” said Michelle Neo, a Singapore based analyst ‐ at energy consultancy FGE.

Gorgon is Chevron’s biggest global bet on LNG and it will produce up to 15.6 million metric tons of LNG a year, plus enough gas to generate electricity for 2.5 million Australian homes.

Gorgon, along with seven other gas export facilities ‐ in Australia and neighboring Papua New Guinea, promised to help redraw the energy map by moving the epicenter of the global gas trade away from the politically volatile Middle East. About $180 billion was committed by companies including Chevron,ConocoPhillips and France’s Total SA to Australia’s gas export industry between 2009 and‐ 2012.

As well as concerns raised by the impact of falling prices on margins, onshore LNG projects are costly because they require refrigeration tanks and a network of transportation pipelines, while in many cases sea channels need to be created for LNG tankers to arrive at ports and load up.

In addition, Gorgon’s checkered record since starting construction has undermined confidence in its returns.

The project “is the poster child of rampant cost inflation gone wrong in the Australian LNG industry,” said Neil Beve ‐ ridge, a Hong Kong based ‐ senior analyst at Sanford C. Bernstein. He estimated that the project’s overall cost could come in at close to $60 billion, or roughly $4,000 a ton of capacity—about twice the current break even estimate ‐ based

Chevron plans more capital spending cuts– March 9, 2016http://hhpinsight.com/marine/2016/03/crowley-maritime-sets-first-man-engine/

on current prices.

Gorgon’s construction on isolated scrubland off Australia’s northwestern coastline coincid ‐ed with a parallel investment boom in other resources such as ironore and gold.

The result was that Chevron had to pay more to hire people—from pipe fitters to welders—while the construction frenzy helped to drive up the cost of raw material imports such as steel. A strength ‐ening Australian currency inflicted more pain for Chevron, which had calculated its costs in U.S. dollars.

Barrow Island’s status as a government protected nature ‐ reserve since 1910 also brought complications. Chevron and its partners had to comply with strict environmental conditions, ranging fromshrouded lights to avoid disturbing the nighttime mating of marine turtles to some of the world’s toughest quarantine procedures to cut the risk of invasive species being brought in by workers.

Chevron expects the project to add a little more than 200,000 barrels a day to its production when fully operational. That compares with the company’s output of 2.67 million barrels a day in the final three months of 2015. Gorgon and another Australian LNG project, known as Wheatstone, together accounted for nearly half the US$15.4 billion that Chevron invested in oil and gas in 2014.

However, such LNG projects will welcome long term ‐ cargo revenue and analysts recognize their future potential, despite current price concerns.

“If you look from the point when the investment decisions were taken, back between 2009 and 2011, then the project economics are pretty marginal and have suffered,” Giles Farrer, a research director at consultancy Wood Mackenzie Ltd. in London, said. “[But] if you look at the point where we are now, the projects are going to deliver fantastic revenue.”

Issue Date: 12 Apr 2016

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For moving containers during 2015 than 2014, and the group reporter a $2.5bn net loss for the fourth quarter of last year.

US railroads including Union Pacific, the largest, have also recorded big falls in profits for the fourth quarter.Companies that ship dry bulk commodities arein precarious financial positions after rates to charter vessels fell to the lowest levels since the Baltic Dry Index was set up in 1985 to track such data.

One key question now is how far the sharp falls in prices for moving goods are a leading indicator of further de ‐mand problems in a global economy shaken by China’s deepening slowdown.The general picture of gloom is countered by conditions in oil tanker markets. Here, despite some recent falls in rates, owners can still generate profits by charging$50,000 a day for a very large crude carrier.It is also noteworthy that Maersk forecasts growth in world container trade of 1 to 3 per cent in 2016, not a downturn in traffic. The air freight market — often quick to slow down in a downturn — is experiencing modest growth. US railroads, while losing traffic in many areas, are benefiting from the booming domestic car market.

Erik Stavseth, analyst at Oslo ‐based Arctic Securities, says de ‐mand to move freight in many markets appears to be slackening. But he says that in most shipping markets the problem is that own ‐ers were too optimistic about future growth levels and over ‐invested in new vessels.Mr Stavseth points to the oil tanker market as one of several cases in the global economy that illustrate the delicate balance between supply and demand.While the low oil price has stimu ‐lated demand for crude and hence the need to move it, thebiggest factor in the tanker sec ‐tor’s positive performance is that the market is short of ships. “That tanker rates are strong doesn’t really underline that the economy is great,” says Mr Stavseth. “It just underlines that the supply demand balance is ‐positive.” There is little doubt that conditions in the market to move dry bulk commodities are catastrophic. Average short term ‐rates to charterCapesize carri ‐ers — the larg ‐ est kind — were at $2,756 per day on Thursday, well below their roughly $8,000 operating cost. Paul Slater, a shipping fi ‐nance expertbased in Florida, says China’s de ‐mand for commodities has waned not only because of its economic slowdown but also because of changes in the coun ‐try’s buying practices. The Chi‐

nese government under Xi Jinping has brought order to once chaotic commodity buying practices, ‐greatly reducing China’s stock ‐pile.

But overall demand is flat rather than declining and few industry observers believe a surge could revive the dry bulk ship market, which has been swamped by ves ‐ sel deliveries that expected to increase the world fleet by 4 per cent this year.

“There’s really an extreme over ‐supply of vessels, built on the premise that China doesn’t slow down,” says Mr Stavseth.

Most industry observers believe container shipping lines’ prob ‐lems reflect world economic con ‐ditions more closely than trends in other transport segments. Con ‐tainer shipping lines such as Maersk and Hong Kong’s Orient Overseas International, parentof Orient Overseas Container Line, carry manufactured andsemi finished ‐ goods. They are

consequently far more exposed to worldwide consumer demand.

Maersk’s stumble highlights sluggish state of global trade –February 11, 2016http://www.ft.com/intl/cms/s/0/1d744f1e-d044-11e5-831d-09f7778e7377.html#axzz45ehsMWg8

Robert Wright in New York

Issue Date: 12 Apr 2016

Page 12 of 36

Container throughout at the Port of Singapore, the world’s second busiest container port after Shanghai, was down 8.7 per cent in 2015 on the rec ‐ord 33.9m 20 foot equivilant ‐ units han ‐ dles in 2014. Maersk said container de ‐ mand grew by 0 to 1 per cent in 2015.

But even in this market, the problem has been least as much shipping lines’ over optimism in forecasting ‐ future demand and buying big new ships as it is underlying weakness in demand. N

Drewry, the London based shipping ‐consultants, calculate that shipping lines earned and average $2,063 per 40 foot ‐container in 2014, but that the figure fell to $1,570 in 2015, and is down to $1,548 so far this year.

No sector illustrates the complexities of the demand swings currently sweeping freight markets as well as the US’s rail ‐road industry.

According to the Association of Ameri ‐can Railroads, the number of carloads moved in the first five weeks of 2016 fell 15.7 per cent on the same period last year. Movements of containers and truck trailers — together known as in ‐termodal traffic, which is counted sepa ‐rately — were 4.8 per cent up.

The carload figures were domi ‐nated by a 30 per cent decline in coal traffic. This is a reflection of falling worldwide demand for the US’s high quality metallurgical ‐coal and power companies’ grow ‐ing preferencefor gas for generating electricity.

The low oil price, mean‐while, helped to depress once buoyant ‐movements of oil and refined products.The increasein intermodal shipments looks positive. But that trend reflects mainly the end of last year’s go ‐ slow at US west coast ports, which held up many container movements.

While global economic weakness has sent earnings tumbling atoperators of dry bulk vessels, and also put container shipping com‐

panies’ profits under pressure, a very different set of factors has played out in the market for mov ing ‐ crude oil.The crude price collapse since mid 2014 ‐ has increased de ‐mand to move oil, while ship ‐owners, who suffered a pro‐

longed period of weakness in 2012 and 2013, did not place the excess orders that dry bulk ship ‐owners and container shipping lines did.

Tanker owners have also benefit ‐ed from changes in the oil market

following the crude price rout. More of the world’s oil supplies are now coming from low cost ‐producing areas led by the Gulf, and this makes tanker voyages longer, and therefore soaks up more capacity.

But there are some signs of weak ‐ ness in the tanker market. For example, shipowners face a sud ‐den surge of competition with the return to the market of Iran’s oil tankers, following the lifting of international sanctions.

Air freight is particularly vulnera ‐ble in economic downturns.When demand softens, shippers tend to move freight from expen ‐sive aircraft to far cheaper con‐tainer ships.

Data from the International Air Transport Association, the air ‐lines’ representative body, sug ‐gest such a process might be un‐

Continued—Maersk’s stumble highlights sluggish state of global trade –February 11, 2016

Issue Date: 12 Apr 2016

Page 13 of 36

der way. They show a gap open ‐ing up between world trade growth and the more sluggish expansion of the air cargo sec ‐tor.

Trade nevertheless continues to

grow, albeit very modestly. Traffic in December 2015 was0.8 per cent up on the same month in 2014.

Conditions for air cargo opera ‐tors, however, have deteriorat ‐ed sharply. Record deliveries of large passenger jets with sub ‐stantial cargo holds meant that capacity to move air freight was6.5 per cent up year on year in ‐ ‐December. Only 43.9 per cent of available capacity was used.

Continued—Maersk’s stumble highlights sluggish state of global trade –February 11, 2016

These difficult conditions were the backdrop to Boeing’s decision last month to slow production of its 747 jumbo jet, which sells mainly to cargo operators.

Issue Date: 12 Apr 2016

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The Energy Atlantic, a 290-metre tanker steaming slowly through the Gulf of Mexico, is about to make history. It is scheduled to arrive on Tuesdayat Cheniere Energy’s SabinePass liquefied natural gas plant on the coast of Louisiana, to be loaded with the first cargo of LNG to be exported from the “lower 48” contiguous states of the US.The shipment is a momentous event for energy markets, marking the arrival of the US as a gas supplier to the world.

The plunge in oil prices since the sum- mer of 2014 has dragged down the value of LNG, which is often sold on crude- linked contracts, and damped the excite- ment over US exports. The economics of shipping gas from the US were compel- ling two years ago, but are now margin- al. Deteriorating market conditions have put the brake on any new investments in US LNG.Even so, US LNG exports are likely to have a significant impact, holding down energy costs for consumers in Europe, Latin America and Asia. They will also provide tough competition for anyone hoping to build rival LNG plants, such as the proposed projects in east Africa, the west of Canada, or Russia. By the end of the decade, the US is likely to be the world’s third-largest exporter of LNG, after Qatar and Australia.

Combined with the new suppliesfrom Chevron’s huge Gorgon and Wheat- stone projects in Australia, which are scheduled to come on stream this year, exports from the US are making it a buyers’ market for LNG.

“There is an awful lot of LNG sloshing

around the world at the moment, with even more to come,” says Frank Harris of Wood Mackenzie, a consultancy. “And that is putting downward pressure on prices.”A decade ago, this prospect seemed wildly unlikely. US gas production was in decline and by the 2010s the country was expected to be a large importer of LNG, not an exporter.

The shale revolution, the result of advances in production techniques that made it possible to extract gas at commercially viable rates from previ- ously unyielding rocks, meant that US production started rising again in 2006, and since 2011 it has been break- ing new records every year.

Charif Souki, Cheniere’s visionary founder whowas ejected from the company at the end of last year, was one of the first to see the potential for LNG exports from the US. In 2010, he submitted the first application to regulators toconvert the LNG import terminal that Cheniere had built at Sabine Pass, which was being barely used because US domestic gas production was so strong, into a liquefaction plant.

Many in the industry were skeptical that the project could be made to work but the plan took a decisive step for-most of the production from Sabine Pass’s first “train”, as LNG production units are known. After that contract was signed, the trickle of proposals for

similar projects turned into a flood.The US Department of Energy has received applications to export LNGabout 60 per cent of the entire gas production of the US.So far, however, just five plants have started construction: Cheniere’s

Sabine Pass and its Corpus Christi project in Texas; Freeport LNG, also in Texas; Cameron LNG in Louisiana; and Cove Point LNG, on the east coast in Maryland.

progress because they were fast enough at signing up customers on long-term contracts that guarantee their revenues. Since the end of 2014 those customers, mostly utilities in Europe and Asia, have been reluctant to make any further commitments.

ward in October 2011 when Britain’s BGGroup signed a 20-year contract to buy The price of LNG delivered in north-

east Asia, including Japan and South Korea, the world’s two largest mar- kets, has fallen along with oil. It has dropped to about $6.65 per million

US will be a gas supplier to the world by tomorrow– January 10, 2016http://hhpinsight.com/marine/2016/03/crowley-maritime-sets-first-man-engine/

British thermal units, just a third of its price of almost $19 per mBTU two years ago, according to Argus, the information service.

for 54 projects. If they all went ahead,they would have the capacity to liquefy At that price, with benchmark US gas at

about $2.40 per mBTU, plus liquefaction costs of $3 to $3.50 per mBTU, plus transport at about $2 per mBTU, LNG from Louisiana or Texas does not look commer- cially attractive.Similar calculations apply in Europe. Bench- mark UK National Balancing Point gas has dropped by almost a half since 2013 to about $5.20 per mBTU, meaning that LNG exports from the US to Britain are unlikely to cover all of their costs.Since 2013, most of the new LNG projects launched worldwide have been in the US. However, the deteriorating economics

make it unlikely that any new plants will be

Those projects have been able to makeapproved for a while.The plants that have already started con- struction, though, are highly unlikely to be stopped. This is because the companies buying LNG from one of these plants have typically made firm commitments for 20 years under which they have to pay the charges they have promised, even if they do not use the capacity.The US LNG projects will add to global over- supply. Bernstein Research has estimated that the world’s liquefaction capacity will in

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Continued—US will be a gas supplier to the world by tomorrow-January 10, 2016http://hhpinsight.com/marine/2016/03/crowley maritime sets first man engine/‐ ‐ ‐ ‐ ‐

the next three years rise by 90m tonnes per annum, which is about 35 per cent of present demand.Nikos Tsafos of Enalytica, a research com- pany, says US LNG should help hold gas prices down for a few years at least.When the global oversupply is finally ab- sorbed by rising demand, the next wave of plants in the US, including projects backed by ExxonMobil and Kinder Morgan, will be poised to benefit.There are other promising potential new sources of LNG in the world, including the projects to develop large gas discoveries

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World leaders are hammering out ways to cut their countries’ carbon emissions in Paris. But what about all the carbon dioxide—from planes and ships—emitted outside any one coun- try’s borders?Airlines and the global maritime indus- try count among the world’s biggest CO2-emitting industries. Unlike emis- sions from power plants or passenger cars, CO2 from planes and ships ply- ing international routes aren’t tabulat- ed as part of any one country’s total emissions. Those totals are the main subject of haggling in Paris this week and next, aimed at coming up with a concrete plan to limit man-made climate change.That omission is ratcheting up pres- sure on negotiators in Paris to figure out how to handle that uncounted CO2, and whether to force the industries’ global watchdogs to come up with a credible, separate plan to rein in air and sea emissions.One big challenge: It’s hard to peg just how much CO2 the two industries are emitting in the first place.

A recent European Parliament report estimated between 3 and 4 of global, man-made CO2 emissions camefrom inter-

national commercial flights and ship- ping. Left unchecked amid efforts to reduce emissions elsewhere, that share could grow to as much as 40 of global emissions by 2040, the re- port warned.

The International Civil Aviation Organi- zation, a United Nations body, puts the current contribution from internation- al aviation to global C02 emissions at 1.3 . Its shipping counterpart, the International Maritime Organization, said in a report last year that from 2007 to 2012 such emissions reached an average 3.1 of the global output.The issue hasn’t been at the top of the climate-change agenda among negoti- ators in the yearlong run up to the Paris talks. But the threat of a more forceful approach to reining in air and sea emission has long shadowed those industries. It is also flaring anew as an irritant for environmental groups, which say executives haven’t done enough to come up with a plan on their own.

“Progress has been insufficient,”said Andrew Murphy, a representative for Transport & Environment, an envi- ronmental advocacy group.

A preliminary paragraph in the draft of the Paris accord—a document global leaders hope will spell out a final, concrete plan—could require that countries work through the U.N. agencies to slice up emissions from such international trips by air and sea and apportion them to individual coun- tries.The ICAO and IMO have taken leading roles in trying to broker the details of any agreement, and representatives of both are in Paris now.Countries with rapidly growing air- lines, or those heavily dependent on tourism, argue any moves to limit flight emissions will favor more ma- ture markets, such as those in the U.S. and Europe. The airline industry, meanwhile, has fought against what it worries would be a patchwork of national regulations and taxes that would govern its emissions.The European Union has, for instance, threatened that the lack of a global agreement on international flight emissions could spur it to revive efforts to include them in its carbon cap-and-trade mechanism, something carriers so far successfully have fought.

“We are supportive of ICAO putting together a framework that gov- erns the entire planet,” said Mark Dunkerley, chief executive of Ha- waiian Airlines par-

For the shipping industry, the IMO has imposed an

efficiency

standard for

ships built since2013.

Out-of-Bounds CO2 Elutes Talks—by Robert Wall and Costas Paris– December 2, 2015

http://www.wsj.com/articles/out of bounds co2 clouds emissions tallying 1449107855‐ ‐ ‐ ‐ ‐ ‐ ‐

Carbon dioxide ‐ emission from ships don’t count toward national totals.Issue Date: 12 Apr 2016

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Environmental legislation is the key factor currently im ‐pacting the marine segment. While ships were traditionally powered by Heavy Fuel Oil (HFO), which produces high levels of harmful pollutants, including sulphur dioxide (SOx), international law now states that shipping fuel can contain no more than 3.5% sulphur. Further, the limit in Emission Control Areas (ECAs) or Sulphur Emission Control Areas (SECAs), which current ‐ly include coastal areas such as the Baltic Sea, North Sea and the waters surroundingNorth America and the Carib ‐ bean, is 0.1%.

LNG is one of the only fuelsources able to comply with these strict limits and, with the majority of vessels oper ‐ating in coastal areas, the need for LNG compliant solu ‐ ‐tions is set to become a must for operators in the very near future. Ten years from now, the majority of vessels will run on LNG and conventional vessels will have very limited trading options. This supports the CapEx argument – while you may have to pay more for your LNG compliant solu ‐ ‐tions in the short term, there will be significantly more val ‐ue to be gained from it down the line.

Against this backdrop, SMi’s Gas as a Marine Fuel master ‐ class will examine the grow ‐ing demand for LNG as a ma ‐ rine fuel as a result of an in ‐creasing emphasis on envi ‐ronmental performance and how to best prepare for it by examining how this is be‐ing implemented world‐wide, with focus on recent developments in Europe and the US. The full day pro ‐ ‐gramme will also explore the recent technical and regula ‐tory developments and how you can best adapt to these changes.

“LNG is one of the only fuel sources

able to comply

with these strict

limits…”

The Majority of Shipping Vessels are Set to Run on LNG within 10 years, with Conventional Vessels having very Limited Trading Options | Gas as a Marine Fuel . Dec. 2015

Source: E-mail from [email protected] as a Marine Fuel | 3rd December 2015, Central London, UK

Register online to network with latest attendees in- cluding ExxonMobil: www.smi- online.co.uk/2015gasmari nefuel.aspAlternatively, con‐tact Martin Hughes on tel+44 (0) 20 7827 6078 oremail mhughes@smi ‐online.co.uk

The Baltic Sea / North Sea / English Channel Environmental Control Area came into force on January 1st 2015. All vessels travelling in these areas must now use low sulphur fuels. This master class will examine the issues around one of these “clean” fuels – LNG. Europe is not alone in requiring these improved environmental regimes and the master class will also touch on other areas, particularly North America who also received their first gas fuelled vessel late in 2014.

This master class will examine the growing demand for gas as a marine fuel resulting from increasing emphasis on environ ‐mental performance and how this is being implemented worldwide.

SMi’s presents its masterclass on...Gas as a Marine Fuel 3rd Dec 2015www.smi online.co.uk/2015gasmarinefuel.asp‐

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First LNG Containership Transits the Panama Canal-November 3,2015http://www.marinelink.com/news/containership transits400347.aspx‐

The world’s first LNG powered container vessel, TOTE Maritime’s ‐ Isla Bella, transited the Panama Canal October 30, marking a milestone not only for the maritime industry, but also for the Canal as it nears the completion of its expansion scheduled to open in 2016, the Panama Canal Authority (ACP) announced

The 3,100 TEU capacity, 764 foot long American ‐ ‐ ‐flagged Isla Bella is the first of two Marlin Class containerships contracted by TOTE Maritime and built by General Dynamics NASSCO.Delivered last month the LNG powered vessel features increased ‐fuel efficiency and reduces nitrogen oxide emissions by 98 percent, sulfur oxide emissions by 97 percent and carbon dioxide emissions by 76 percent.

“The Isla Bella is a true engineering feat,” said Panama Canal Administrator/CEO Jorge L. Quijano. “We are honored that this vessel, with its unique technology, transited the Canal.”

Isla Bella is scheduled to begin providing freight service in the fourth quarter of 2015 between Jacksonville, Fla. and San Juan, Puerto Rico.

Upon completion of the second Marlin Class containership, Perla del Caribe, launched in August 2015 and scheduled to enter service in the first quarter of 2016, the vessels will be the largest and most environmentally friendly LNG powered ‐ dry cargo ships in the world.

Isla Bella transiting the locks at Mira Flores (Photo courtesy of the Panama Canal Authority)

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“ABS has played a fundamental role in supporting the ambitions of the maritime industry as it moves to embrace the opportunity of LNG as fuel,” said ABS Chairman, President and CEO Christopher J. Wiernicki. “This milestone builds upon our work to provide owners with the guidance and support they need to move ahead with shipbuilding projects that allow them the flexibility to respond to changes over the lifetime of their vessels.”

According to ABS, who published the Guide for LNG Fuel Ready Ves- sels in 2014, its LNG-Ready endorse- ments allow shipowners and yards the flexibility to limit initial investment while planning for the future conver- sion to dual fuel or gas-powered combustion engines.

Rob Grune, senior vice president and general manager petroleum services

Posted by Eric Haun

Four-ship series built to ABS class is first to take advantage of LNG-Ready approval for potential conversion to LNG fuel in the future

ABS has issued the first LNG-Ready approval in accordance with its Guide for LNG Fuel Ready Vessels to a product tanker, granting LNG-Ready Level 1 approval and approval in principle for Crowley Maritime Cor- poration’s new Jones Act tank-er Ohio, the first in a series of four ships built by Aker Philadelphia Shipyard

By achieving compliance with the ABS Guide for LNG Fuel Ready Vessels, Crowley has the option toconvert the product tankers to LNG propulsion at a later date having already been granted a conceptual review.

for Crowley, said, “As our business continues to shape itself to better meet the requirements of our custom- ers, these vessels that stand ready and able to operate on a cleaner, alterna- tive fuel source are our way of antici- pating future demands.”

Crowley will christen Ohio today at the Tampa Cruise Terminal. The 50,000 dwt, 330,000-barrel-capacity ship has already made two voyages to date carrying clean petroleum prod- ucts to Florida.

The three remaining product tankers are expected to be delivered through 2016.

ABS Deems Crowley Product Tanker ‘LNG-Ready’- November 3, 2015

Source: (http://www.marinelink.com/news/lngready-crowley-product400340.aspx)

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Fleet Size

Rows of shipping containers at the freight terminal at Piraeus port in Greece last week. PHOTO: SIMON DAWSON/BLOOMBERG NEWS

Total Fleet Value$497 Billion

Total Fleet20,134 Ships

Fleet value, in billions

Shipping Industry FleetSource: The Wall Street Journal | Wed. July 22, 2015 |

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and the introduction of a pas ‐ sive partial reliquefaction system add to these LNG ves ‐sels’ efficiency and further help to reduce the unit freight cost.

Over the next 8 months DSME will install the cargo contain ‐ment system capable of transporting 174,000 m3 of LNG and put the ship and its equipment through the re ‐quired tests and trials.

Posted by Eric Haun

Teekay’s first M type, Elec ‐ ‐tronically Controlled, Gas Injection (MEGI) powered‐LNG vessel, Creole Spirit, was floated out at the Daewoo Shipbuilding & Marine Engi ‐neering (DSME) shipyard in South Korea on May 29. The vessel is on charter contract with Cheniere and is expected to enter service early 2016, making it the most efficient LNG ship on the water with the lowest unit freight cost in the world fleet.

The two stroke engine tech ‐ ‐nology provided by MAN Die‐

sel, the MEGI propulsion sys ‐tem, is driving a step change in global LNG vessel efficien ‐cy. While the most efficient Dual Fuel Diesel Electric (DFDE) propulsion systems have daily consumptions in the region of 125 130 metric ‐tons including sea margin, the MEGI vessels have a con ‐sumption of 100 metric tons. That being said, it is not just the fuel consumption that makes the two stroke story ‐so compelling. The reduc ‐tion in the number of cylin ‐ders requiring overhaul, the reduction in the size of the complex electrical systems

The two-stroke enginetechnology provided by MAN Diesel, the MEGI pro- pulsion system, is driving a step change in global LNG vessel efficiency.

Creole Spirit (Photo: Teekay)

DSME Launches LNG Carrier for Turkey—June 10, 2015Source: http://www.marinelink.com/news/launches-carrier-teekay392752.aspx)

Special points of interest:

MAN Diesel & Turbo has marked the final phase of the EU- funded Helios project by hosting an industry conference at its PrimeServ Academy in Copenhagen.

The Motorship attended the event, at which the results of the Heli- os project, aiming to develop a research platform for an LNG- fuelled two-stroke marine Diesel engine. Helios is part of the EU 7th framework programme, and MAN as lead organisation was partnered by Germanischer Lloyd, Kistler Instruments, Sandvik Powdermet, TGE Marine Gas Engineering and four universities - Uppsala, Erlangen, Jonkoping and Lund. (continued on 3 of 17)

MAN Hosts Final Phase of EU LNG Initiative– November 27, 2013

MAN Diesel & Turbo ME GI‐ engine

The MAN Diesel MEGI propulsion system, isequipped with Dynamic Control’s:

Gas Supply System

for ME GI ‐gas‐injection

system Manifold.Refer to pages 3,4,5 of 30.

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The project centred around MAN's ME-GI research engine and it was enlightening to see the two different approaches to gas- fuelled two-stroke developments following our visit to Wartsila in Trieste two weeks ago. MAN's high pressure gas system is un- doubtedly more complex than the competing low-pressure technolo- gy, burns a higher percentage of pilot fuel, and will need EGR or SCR in order to meet IMO Tier III emissions limits. However, it appears to be engineered with an even more highly fail-safe ap- proach to problems with the gas system and a simpler retrofit pos- sibility. In addition, the company says that it offers shipowners the most flexible choice of fuel possi-

ble, and although NOx emissions are currently above Tier III limits, methane slip is very low, so car- bon emissions - and hence EEDI - implications are highly positive, the engine is tolerant to variations in gas quality, and it can run on gas at loads of 10% or lower.MAN is confident that with fur- ther development the pilot fuel percentage can reduce further, and NOx emissions can be cut.

The Helios project has explored wider aspects of LNG as fuel in Europe, including availability, pricing and infrastructure, as well as lubrication and wear issues resulting from using ultra-low sulphur fuels.

The ME-GI engine has already attracted orders, the first being for TOTE container ships, which was

not expected by MAN, as well as Teekay LNG tank- ers and for two larger con- tainer ships for US compa- ny Matson. No doubt the low price of LNG in North America has influenced these orders. MAN ex- pects the market for dual-fuel two-stroke engines to grow rapidly as the lower ECA sulphur lim- its come into force.

Continued—MAN Hosts Final Phase of EU LNG Initiative– November 27, 2013

http://www.motorship.com/news101/lng/man-hosts-final-phase-of-eu-lng-initiative

!

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