Master Class April 3, 2014 The use liquefied natural gas (LNG) as ship fuel has raised the interests of many shipping and shipbuilding companies around the world. There are three important drivers which make LNG as ship fuel one of the proactive future technologies for shipping lines: reduction of considerable emissions (SOx, partially CO2), perceived costs benefits of LNG compared to heavy fuels. However, the shipping industry seems to be reluctant to broadly embrace LNG and make investments in their fleets. At this Master Class experts from Damen Shipyards, Anthony Veder, Port of Rotterdam, and STC-Group will explore the latest developments on ship technology, finance, regulations and facilities. LNG in Shipping Moving towards a paradigm shift? Venue: STC-Group, Lloydstraat 300, ROTTERDAM, Thursday April 3, 2014 from 17:00 to 19:30 Free entrance, but sign-up is compulsory. To sign up, please send your contact details to [email protected]This Masterclass is an activity of ‘HBO in de Haven’ Master Class
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STC-NMU Masterclass LNG in shipping - moving towards a paradigm shift?
The use liquefied natural gas (LNG) as ship fuel has raised the interests of many shipping and shipbuilding companies around the world. There are three important drivers which make LNG as ship fuel one of the proactive future technologies for shipping lines: reduction of considerable emissions (SOx, partially CO2), perceived costs benefits of LNG compared to heavy fuels. However, the shipping industry seems to be reluctant to broadly embrace LNG and make investments in their fleets. At this Master Class experts from Damen Shipyards, Anthony Veder, Port of Rotterdam, and STC-Group will explore the latest developments on ship technology, finance,regulations and facilities.
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Master Class April 3, 2014
The use liquefied natural gas (LNG) as ship fuel has raised the interests of many shipping and shipbuilding companies around the world. There are three important drivers which make LNG as ship fuel one of the proactive future technologies for
shipping lines: reduction of considerable emissions (SOx, partially CO2), perceived costs benefits of LNG compared to heavy fuels. However, the shipping industry seems to be reluctant to broadly embrace LNG and make investments in their fleets. At this Master Class experts from Damen Shipyards, Anthony Veder, Port of Rotterdam, and
STC-Group will explore the latest developments on ship technology, finance, regulations and facilities.
LNG in Shipping Moving towards a paradigm shift?
Venue: STC-Group, Lloydstraat 300, ROTTERDAM, Thursday April 3, 2014 from 17:00 to 19:30 Free entrance, but sign-up is compulsory.
To sign up, please send your contact details to [email protected] This Masterclass is an activity of ‘HBO in de Haven’
Master Class
Platform for knowledge exchange between education, business community and
association of young port professionals
Master Class Knowledge platform for young port professionals
Aat HoornApril 3, 2014
LNG as an alternative fuel forshipping - the big picture
Lloyd’s List, 2 September, 2013
UASC may choose gas to power 18,000 teu vessels.UASC: new vessels will be some of the most technologically advanced and environmentally friendly boxships yet built.• UNITED Arab Shipping Co may power the 18,000 teu ships it has
ordered with liquefied natural gas, an industry first.• All will be built by Hyundai Heavy Industries.• The ships will be classed by DNV.
Emissions
Source: Pounder’s Marine Diesel Engines and Gas Turbines
The legislation gear
Marpol Annex VI Sulphur regulations
General Requirements (Resolution MEPC.176(58), 2008)
• The sulphur content of any fuel oil used on board ships shall notexceed the following limits:– 1 4.50% m/m prior to 1 January 2012;– 3.50% m/m on and after 1 January 2012; and– 0.50% m/m on and after 1 January 2020.
• While ships are operating within an Emission Control Area, the sulphurcontent of fuel oil used on board ships shall not exceed the followinglimits:– 1.50% m/m prior to 1 July 2010;– 1.00% m/m on and after 1 July 2010; and– 0.10% m/m on and after 1 January 2015.
Results
• For any fuel used on board, global sulphur must bereduced to 0.5% from January 1, 2020.
• Reducing environmental harm caused by ship emissionsimposes large costs on ships, particularly when operating in emission control areas.Source: Jiang, Kronbak, & Christensen, 2014
Emission Control Area’s
Source: Lloyds Register
The need for regulations
• As the sulphur in fuels burn, it will form SOx, which is oneof the pollutants to the environment especially in the formation of acid rain. Continued exposure over a long time changes the natural variety of plants and animals in an ecosystem. Also the sulphur content in fuel oil has a large impact on the particle level in the exhaust gas.
• Ships have options to reduce sulphur emissions in the ECA’s.
Source: Notteboom, 2010
Low sulphur fuels
• Switch to low sulphur fuel oil or destillates No capital costs High price (+30 – 50%) Not attractive for charterer/cargo owner Blending needs to be done carefully
• ‘Loss of power’ incidents• Change-over between HFO and MDO / MGO (Compatibility, thermal
shocks, gassing of hot gas oil)
> 2 Cst
< 2 oC/min
Source: JOWA
Source: MAN
< 2 Cst
‘End of tail’ scrubbers
• Use of scrubbers. Effective High capital costs Space Disposal of waste streams Additional fuel consumption conflicts with CO2 reduction
Source: Alfa Laval
Liquified natural gas
• Use LNG as fuel Low Nox for lean burn engines, low particles Methane slip Offers potential cost savings (Acciaro, 2014) Expensive retrofit needed, engine, fuel tanks, piping, safety (IGF
code) Price difference LNG and other marine fuels Availability
Selecting efficient engine for 14,000 teu 14000teu: 12k98MC-C6/ME-C6
For all calculation 15% sea margin and 10% engine margin have been assumed. A service rating of 90% SMCR, including a 15% sea margin. MAN B&W ME: ME-C, ME-B engine can be delivered/Converted to the GI system MAN B&W ME: ME-C, ME-B engine can be delivered/Converted to the GI Sys.
Estimating for each type of vessel 3300teu 5,527,110.96
For retrofitting& large installation 300 $/kw 6500teu 10,175,292.96
For new Ship 250 $/kw 14000teu 12,719,116.20
Scrubber installation
Operating cost cost per slot per annum total opex
3300 (Panamax) 1.270,91 4.194.000
6500(New- Panamax) 818,46 5.320.000
14000(Mega- Panamax) 522.50 7,315,000
Capital expenditure and Operating Cost
Operating Cost 3,300t teu 6,500teu 14,000 teu
Manning 950,000.00 1,020,000.00 1,020,000.00
Repair and maintenance 1.044.000,00 1.100.000,00 1.150.000,00
Insurance 550,000.00 850,000.00 1,100,000.00
Stores and lubes 275,000.00 275,000.00 350,000.00
Administration 175,000.00 175,000.00 175,000.00
Port charges 1,200,000.00 1,900,000.00 3,520,000.00
Tot operating costs per annum 4.194.000,00 5.320.000,00 7.315.000,00
Tot cost per slot per annum 1.270,91 818,46 522,50
LNG dual Fuel Engine
Capex for DF engine Conversion (mil US$) 3,300 teu 6,500 teu 14,000 teu
Main Engine Increase (incl. EGR) 3 4 5
FGS System 3 3 3
LNG Fuel Tank (incl. construction cost) 5.5 6 8
Additional Equipment 1 2 3
Total 12.5 15 19
15% additional investment for conversion 16.67 19.55 21
Synthesis data Key message …
14
-
2
4
6
8
10
2013-2015 2015-2019 2020-2025
Mil
US$
3300 teu MGO6500 teu MGO14000 teu MGO3300 teu LNG6500 teu LNG14000 teu LNG
Benefit from LNG vs MGO (US$, ml)
- 1.00 2.00 3.00 4.00 5.00 6.00 7.00
3300 teu 6500 teu 14000 teu
Mil
$
2015-2020
2020-2025
Benefit scrubber vs. HFO during 10 years
• The financial benefit of the LNG alternative will depend on the cost spread between HFO and MGO.
Conclusion Net present Value and IRR
15
Internal return ration of dual fuel Engine vs. Scrubber installation
43
95
138
10 26 43
-
50
100
150
200
3300 6500 14000
NPV
M
illio
ns
LNGScrubber
Comparing NPV, LNG vs. Scrubber
0%
50%
100%
150%
200%
3300 6500 14000
IRR
LNGScrubber
Basic assumptions: • Discount rate : 11% • Inflation rate : 4% • The period is 10 years (2015 – 2024)
NPV and IRR for a period of
10 years are more positive
for LNG
Contrasting advantages and disadvantages
Option Pros Cons
Distillate fuel No more little modifications and investment Well known and tested
Higher fuel cost Prices likely to increase Fuel availability uncertain Wear and tear
Scrubber Can use cheaper Higher sulphur fuel Fuel availability
Take up space Significant investment cost No significant reduction of NOx Requires additional energy during operation Costly to deliver produced sludge
LNG
SOx content of virtually 0% Currently cheaper fuel , but future price development is uncertain Reduces NOx and CO2 remarkably
• The pay back period is about 2,5 years and for more large vessels event is less .
• The payback time is more sensitive to HFO price if the vessel operates longer inside ECA’s.
• DF sys. shows sensitivity to global cap enforcement at 2020 when differential price between LNG and HFO-MGO will boom by increasing demand over MGO. (Inelasticity of demand and supply)
NPV & PBT 3. If the Capex for conversion to DF increase 10 $mil
3300 teu
6500 teu
14000 teu
• Payback for the larger vessels
shows a stronger dependency on the investment than for the smaller vessels
• payback for all vessels shows at
higher rate of cash out but payback time is shorter for DF sys.
Conclusion
• Using LNG promises less emission and less fuel costs. LNG Vs scrubber systems for the fleet in the trade rout of Fareast to north of Europe
• With 44% ECA exposure, LNG system payback time below three years. • The dual fuel system is attractive as long as differences of LNG price
(delivered on board) to HFO is less than 150 $/ton. • For larger vessels , Eca exposure with higher than 44% , is expected to
show the shortest payback times . • Use of scrubber system reduces payback time and is more attractive
than MGO
Conclusion
• An dual-fuel offers lower fuel costs, maintenance cost and better chartering potential .
• ECA exposure is a crucial factor while the Capex plays important role in payback time & feasibility
• An LNG price of up to 550$/ton provides a competitive advantage for dual-fuel engine vs scrubbers in terms of payback in this study
• It may lead to a higher Capex but a longer period of economic depreciation. It makes economic sense for banks to confront with less risk by financing on dual fuel engine vessels.
Recommendation • For all type references vessels , dual fuel engine has higher financial
attractiveness and technically is more feasible. • If the global sulphur cap enters into force after 2025, the payback time
increases by about 1 year. • Higher 44% presence at ECA gives a less payback period when the
engines need to burn more 0.1% MGO, assuming an HFO-MGO spread of ~780$/ton.
• The LNG solution is more expensive than the scrubber solution. If LNG is also used outside ECA after 2020, the business case becomes more interesting with a payback period of less than 2.5 years with 44% ECA exposure.
• As for the scrubber solution, the payback period is most sensitive to the HFO-MGO spread. Referring to chapter predicting a limitation of price difference is difficult as the LNG infrastructure is also unknown
DAMEN SHIPYARDS GROUP L I Q U E F I E D N AT U R A L G AS
Rotterdam 2014-04-03
* EGR = Exhaustgas Recirculation System, removes another 40% of NOx emissions. These NOx regulations might be postponed till 2021
Source: Adapted from DNV
Why LNG?
LNG IN SHIPBUILDING
FUEL SYSTEM BACKGROUND ENGINES
Impact PM Lead SOx NOx VOC CO CH4 CO2 N2O CFC Local Health and welfare X X X X X X
Regional
Acidification X X Photochemical Oxidants X X X
Global
Indirect greenhouse effect X X X X X Direct Greenhouse effect X X X X X Stratospheric Ozone depletion X X X
[Fiaz A., World Bank (1991)]
Diesel LNG
Harmful emissions related to transport
LNG IN SHIPBUILDING
FUEL SYSTEM BACKGROUND ENGINES
Methane Pioneer °1957
LNG IN SHIPBUILDING
Long track record for LNG and shipping FUEL SYSTEM BACKGROUND ENGINES
Methane =
CH4
LNG components
Ethane =
C2H6
Propane =
C3H8
LNG IN SHIPBUILDING
FUEL SYSTEM BACKGROUND ENGINES
LNG infosessie
Source: GIIGNL
To remember 1. Upcoming regulations force us to take action
2. LNG offers a clear environmental benefit
3. LNG is the fastest growing prime fuel/energy
source
4. LNG is a mixture of different components
5. The mixture varies geographically
6. This reflects in different energy contents => fuel consumption
7. There are big uncertainties about price, but given the ample resources of NG and the foreseen price increase of diesel fuel due to de-sulphurization, LNG seems promising
LNG IN SHIPBUILDING
FUEL SYSTEM BACKGROUND ENGINES
Logistic chain
LNG truck
Bulk Terminal
Break Bulk Terminal
LNG Carrier
Small LNG Carrier
LNG bunker vessel LNG propelled vessel
LNG power plant Electricity grid
LNG fueling station LNG transport truck
FUEL SYSTEM BACKGROUND ENGINES
LNG IN SHIPBUILDING
The energy content of LNG is 1.8 time < diesel fuels ⇒ Need +/- 2 times the fuel for the same work
→ 2 times bigger fuels storage tanks OR 2 times higher bunkering frequency
Storage tanks contain LNG at -162°C and withstand +/- 10 bar pressure ⇒ Insulated cylindrical storage tanks → Hard to fit in ship design → Lots of “lost” space
Rule of thumb: 4-5 times the space required for LNG for equal bunkering
intervals
The need to make a compromise
LNG IN SHIPBUILDING
FUEL SYSTEM BACKGROUND ENGINES
LNG IN SHIPBUILDING
Bunker connection
LNG storage tank
Fuel conditioning (cold box) Gas Engine
Master gas valve
Additional systems required: - Fuel heating system (start from dead ship?) - Inerting system - Ventilation - Safety systems - Automation & control
LNG fuel system
Source: Adapted from TGE
FUEL SYSTEM BACKGROUND ENGINES
No standard => What to choose?????
Pressurized LNG supply system
- Vacuum insulated cylindrical tank - Vaporizers, valves, etc… in “cold box” - Bottom outlet for “tank vaporizer” - High pressure tank (6-8 bar) - Design pressure 8-10 bar
Source: Adapted from TGE
LNG IN SHIPBUILDING
FUEL SYSTEM BACKGROUND ENGINES
Pumped LNG supply system
Source: Adapted from TGE
- Bilobe or conical shape possible - Cryogenic pump inside tank - All outlets on top - Low pressure (0-3 bar) - Design pressure 4 bar - Equipment in ventilated processing room
(more flexible)
LNG IN SHIPBUILDING
FUEL SYSTEM BACKGROUND ENGINES
To remember
1. Need for additional space for fuel storage (4-5 x) of higher bunker frequencies
=> Compromise… => Loss of cargo space => Hydrodynamic implications (VCG)
2. Start from dead ship can be a challenge for 100% gas propelled vessels
3. Fuel can be supplied by pressure or by volume
LNG IN SHIPBUILDING
FUEL SYSTEM BACKGROUND ENGINES
Lean burn - Pure Gas – Dual Fuel – Pilot Injection – Emergency Diesel Many different names for equal/similar technologies
⇒ Creates uncertainty in the market Most technologies have their own specific advantages
Limited suppliers and limited power ranges
Ship performance is determined by engine availability in stead of functional requirements only
Engine behaviour
Engine power output depends on NG quality (geographically) De-rating at high temperatures (due to engine knock) Maintenance intervals and cost
→ some parts are expensive and need regular maintenance, fouling of the engine itself is much less
Dynamic load response
LNG IN SHIPBUILDING
Engine demystification FUEL SYSTEM BACKGROUND ENGINES
Engine technologies
Lean Burn Diesel principle Otto principle
Ordinary Diesel Dual fuel Emergency Diesel Pure Gas • Intake: Air enters the engine • Combustion: Diesel is injected in the hot air and auto-ignites
• Intake: Air and gaseous fuel enter the engine • Combustion: A substantial amount of diesel is injected and auto-ignites, thereby igniting the air gas mixture
• Intake: Air and gaseous fuel enter the engine • Combustion: A small amount of diesel is injected and auto-ignites, thereby igniting the air gas mixture
• Intake: Air and gaseous fuel enter the engine • Combustion: A small pre-combustion chamber, filled with a stoichio-metric air-gas mixture is ignited by a spark
LNG IN SHIPBUILDING
FUEL SYSTEM BACKGROUND ENGINES
To remember
1. Different engine types create uncertainty
2. Limited power ranges for NG engines make ship design difficult
3. NG engines have specific characteristics • Dynamic behaviour • De-rating • Maintenance
LNG IN SHIPBUILDING
FUEL SYSTEM BACKGROUND ENGINES
The LNG safety onion model
Source: SEA Consulting / GIIGNL
LNG IN SHIPBUILDING
Safety rules
1. Prevent leak of vapour and liquid to the atmosphere
2. In case of a leak, use protection (cryogenic materials, drip trays, water curtains)
3. In case of a leak, prevent ignition (EX equipment, safety, security and exclusion zones)
LNG IN SHIPBUILDING
G ST2013 Life Cycle Cost
DAMEN E3 Ferry
Time, i.e. fuel consumption
Cost
CAPEX DD
CAPEX LNG
Three parameters influence the economical feasability:
(1) Add. investment cost LNG system, (2) Price difference LNG and fuel oil, (3) Operational profile of the vessel.
A successful port of the future cannot do without a successful region and vice versa. The port needs a region that people like to live, work and recreate in.
The Port of Rotterdam Authority views LNG small sca le as an important element in achieving a sustainable shipping and a s ustainable Port.
The Port of Rotterdam Authority remains a key discu ssion partner in this respect and a connecting factor between science, go vernment organizations and the business sector.
• Spatial planning • Environmental restrictions• Safety requirements for LNG bunkering • Checklists• Safety distances• Minimum passing distances for other
vessels• Simultaneous activities• Accreditation of LNG bunker vessels• Accreditation for power supply vessels• Safety requirements for repairs• Operational reports
Main supplier of skilledlabour force to port of Rotterdam and Dutch maritime cluster
Focussed on the business with verticaleducation model
Largestmaritimesimulator park in Europe
STC-Group within the Dutch maritime cluster
Education and training for all professionals in the transport chain
The shipping and transport world of the STC-Group: a global approach, one-stop-shop for the transport chain
“We educate from door to door”
Profile Master Shipping and Transport
• A Master Shipping in Transport is a manager who is mainly involved in directing, coordinating and managing shipping, port and transport related activities and the relevant infrastructure.
• He / she is a competent professional who has knowledge of the industry and is excellently equipped with the right skills to occupy a management position within the shipping and logistics sector.
• In their work, graduates must be able to say the following. “I know my facts (content), I am competent (competency), I know when and how to apply my knowledge and skills in specific situations (judgement) and I understand the implications relating to social and ecological well-being (ethics).”
Target Group
Bachelor Degree
in relevantsubject
Preferably 2 yearsworkingexperience
The Master Program is open to people who have excellent
English proficiency AND have:
Bachelor Degree
Preferably2 yearsworkingexperiencein shipping, transport, logistics or related
Admission conditions
Thesis
Research and management skills
Port CaseShipping Case
Courses:AQT; CMS;
HRM
Domain: Maritime
management
Domain: Logistics
Courses:SCM; COM;
HIN, ILO, PDM
Domain: Finance andeconomics
Courses: ECO S; ECO P;
FCM-I; FCM-II; FCM-III
Domain: Shipping
management
Courses:SBC; FLM; SBP, ISM,
ENG
Domain: Law andPolicies
Courses: LAW; POL; OCM; SEC
Curriculum Master Shipping and Transport
Master follows a study approach
Source: Skills sheets
Challenge students to work on problem-driven cases. Let them identify theirknowledge gaps, how to analyse and diagnose the problems, before coming
up with the answer / solution
Skills development framework Problem driven approach
‘I hear and I forget, I see and I remember, I do and I understand’ (Confucius)
Didactical model
Academic year (60 credits) followed by thesis project (21 credits)
Intensive course
All lecturers are maritime experts
SimulationsManagement games, Full mission simulators
Field Trips: Logistics center, Container terminal, vessel visit, ship yard etc.