Hellenic Shipping News Posidonia Conference Costs and benefits of LNG-fuelled container vessels Christian Freiherr von Oldershausen, Senior Vice President Global Sales, GL SE

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Contents Introduction • motivation to use LNG as ship fuel • regulatory development • container vessel concepts using LNG LNG as ship fuel for container vessels • GL – MAN study • assumptions • fuel price scenario • additional investment • results Outlook Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 2

Attractions for using LNG as ship fuel Emission components (100% load) CO2

NOx

SOx

1000 - 23 %

100 g/kWh

1. 90%-95% reduction of Sulphuroxide emissions required within Emission Control Areas (ECAs) by 2015 required globally by 2020, pending a review at IMO by 2025 2. reduction of Nitrogen-oxide emissions to IMO Tier III levels only for pure gas engines and dualfuel four stroke engines required within Emission Control Areas by 2015 3. 20% to 25% reduction of Carbondioxide emissions Methane slip needs to be avoided during bunkering and usage

10

- 80 %

1

- 92 %

0,1

6S70ME-C s o urc e : M A N

Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 3

6S70ME-GI (with EGR)

Historic records of fuel prices Gas and ship fuel prices (monthly averages) LNG Zeebrugge

HFO Rotterdam

MGO Rotterdam

but consider small scale LNG supply costs!

35

USD / mmBTU

30 25 20 15 10 5

Ja n- 0 6 Ap r- 0 6 Ju l-0 6 Ok t -0 6 Ja n- 0 7 Ap r- 0 7 Ju l-0 7 Ok t -0 7 Ja n- 0 8 Ap r- 0 8 Ju l-0 8 Ok t -0 8 Ja n- 0 9 Ap r- 0 9 Ju l-0 9 Ok t -0 9 Ja n- 1 0 Ap r- 1 0 Ju l-1 0 Ok t -1 0 Ja n- 1 1 Ap r- 1 1 Ju l-1 1 Ok t -1 1 Ja n- 1 2

0

Sources: apxendex.com, x-rates.com, bunkerw orld.com, graph by PCS/GL LNG: Liquefied Natural Gas, HFO: heavy fuel oil (IFO 380), MGO: marine gas oil, BTU: British thermal Unit = 1,06 kJ Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 4

Regulatory development IMO issued interim guidelines in 2010. These are not mandatory for flag states. GL (and also other class societies) have issued their own guidelines. GL guidelines offer additional interpretations. IMO subcommittee BLG currently works on the IGF-code, finalisation before Jan. 2013 planned. The IGF code should be published with the next SOLAS revision in 2014. Harmonisation of the IGC-code with the future IGF-code is required to ensure consistent regulation. ISO TC 67 started on LNG bunkering standard.

GL guidelines (VI-3-1)

Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 5

Projects exploring LNG as ship fuel for container vessels

GL 1200 TEU feeder (2009)

IPP 4200 TEU (2011), AiP* by GL

DSME 14000 TEU (2011), AiP* by GL Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 6

*) Approval in Principle

LNG as ship fuel for container vessels – a new joint study by GL and MAN GL and MAN teamed up in late 2010 to jointly develop a roadmap for container vessel advanced propulsion solutions, with the aim to support decision making. The study compares a standard container vessel with advanced vessels using LNG as ship fuel, scrubber systems and waste heat recovery systems. The standard vessel uses required fuels depending on time and location of its operation. The same TIER III-related measures are assumed for all variants and, therefore, these have no effect on the cost differences between the standard vessel and the variants. Lower earning due to space for LNG tanks, scrubbers and WHR is accounted for. Speed (knots)

ME power (kW)

Roundtrip (nm)

ECA share

2.500 TEU

20

14.500

5.300

65,1%

4.600 TEU

21

25.000

13.300

11,0%

8.500 TEU

23

47.500

23.000

6,3%

14.000 TEU

23

53.500

23.000

6,3%

18.000 TEU

23

65.000

23.000

6,3%

Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 7

Fuel price scenario – delivered to the ship Fuel price scenario 50

HFO 2.7% S

LSHF 0.5% S

MGO 0.1% S

LNG

USD/mmBTU

40

30

20

10

0 2010

2015

2020

2025

2030

2035

2040

2045

2050

Source: GL-MAN container vessel advanced propulsion roadmap

LNG delivery costs of 4 USD/mmBTU have been added to the LNG wholesale price. Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 8

LNG tank volume depends on endurance LNG tank volume (for half roundtrip endurance)

14.000

18000 TEU, 11500 nm

12.000

14000 TEU, 11500 nm

m3

10.000

8500 TEU, 11500 nm

8.000 6.000 4.000

4600 TEU,6650 nm

2.000

2500 TEU, 2650 nm

0 0

10.000 20.000 30.000 40.000 50.000 60.000 70.000 80.000 Total installed engine power (kW)

Source: GL-MAN container vessel advanced propulsion roadmap

Total installed power comprises main engine and auxiliary engines (incl. reefer loads). Two bunker actions per roundtrip were assumed. Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 9

Estimates for total additional invest vs. total installed power Specific additional costs for LNG installation (half-roundtrip endurance with LNG)

500

USD/kW

400 300 200 100 0 2500 TEU, 2650 nm

4600 TEU, 6650 nm

8500 TEU, 11500 nm

14000 TEU, 18000 TEU, 11500 nm 11500 nm

So urce: GL-M A N co ntainer vessel advanced pro pulsio n ro admap

Type C LNG tank assumed for 2500 TEU vessel, type B LNG tanks for larger vessels Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 10

Results for 2500 TEU vessel (65% ECA operation share) Annual cost advantage for 2500 TEU container vessel (compared to a standard vessel using standard fuels)

10 LNG

8

LNG + WHR

6 4

mUSD

2 0 Invest

2015

2016

2017

2018

2019

2020

-2 -4 -6 -8

Source: GL-MAN container vessel advanced propulsion roadmap

-10

Annual cost advantage compared to the standard vessel is significant once strict fuel-quality regulations are in place and/or the vessel is sailing mostly within ECAs. Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 11

Results for 14000 TEU vessel (6.3% ECA operation share) Annual cost advantage for 14000 TEU container vessel (compared to a standard vessel using standard fuels)

LNG

20

LNG + WHR

10

0 mUSD

Invest

2015

2016

2017

2018

2019

2020

-10

-20

-30 Source: GL-MAN container vessel advanced propulsion roadmap

-40

cost advantages are higher with WHR system for larger vessels Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 12

Payback for LNG technology Payback for LNG system (start in 2015) 2500 TEU

4600 TEU

8500 TEU

14000 TEU

18000 TEU

72

Payback (months)

60 48 36 24 12

LNG at 13 $/mmBTU 0 0%

10%

20%

30%

40%

50%

60%

70%

Share of operation inside ECA So urce: GL-M A N co ntainer vessel advanced pro pulsio n ro admap

payback for smaller vessels is faster due to relatively smaller additional invest Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 13

Payback for LNG technology Payback for LNG system (start in 2015) 2500 TEU

4600 TEU

8500 TEU

14000 TEU

18000 TEU

84

Payback (months)

72 60 48 36 24 12 ECA operation share varies for ship size

0 1000 $/m³

2000 $/m³

3000 $/m³

4000 $/m³

5000 $/m³

Specific cost for LNG tank system So urce: GL-M A N co ntainer vessel advanced pro pulsio n ro admap

LNG tank prices affect payback time. Higher specific LNG tank price values are assumed for smaller tanks. Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 14

Payback for LNG technology Payback for LNG system (start in 2015)

Payback (months)

2500 TEU

144 132 120 108 96 84 72 60 48 36 24 12 0

4600 TEU

8500 TEU

14000 TEU

18000 TEU

typical for EU typical for US

typical for Asia

ECA operation share varies for ship size

9 $/mmBTU

11 $/mmBTU

13 $/mmBTU

15 $/mmBTU

17 $/mmBTU

19 $/mmBTU

21 $/mmBTU

LNG price in 2011 So urce: GL-M A N co ntainer vessel advanced pro pulsio n ro admap

LNG prices strongly affect payback time Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 15

Payback (months) for a 2500 TEU vessel LNG price

13 $/mmBTU

15 $/mmBTU

17 $/mmBTU

2000 $/m3

8

18

33

3000 $/m3

11

22

38

4000 $/m3

13

26

43

LNG spec. tank price

LNG specific tank price has a lower effect on payback than the price of LNG. Doubling LNG spec. tank price increases payback by 30 to 60%. Increasing LNG price (from 13 to 17 $/mmBTU) increases payback by a factor of 3 to 4.

Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 16

Conclusions Using LNG as ship fuel is attractive due to lower air emissions than for standard fuels. A joint GL-MAN study looked into LNG and scrubber solutions for several container vessel sizes operating partly inside ECAs. The study shows that operating share inside ECA, LNG-HFO price difference and LNG tank costs are the dominant parameters to be considered for future LNG-fuelled propulsion solutions. Similar conclusions are valid for for other ship types, eg, tanker.

Editors: • Dr. Pierre C. Sames, Senior Vice President, Research and Rule Development GL SE • Niels B. Clausen, Senior Manager Low Speed, Engine and System Application, MAN Diesel & Turbo Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 17

The first LNG-fuelled vessel with class GL

Hellenic Shipping News Posidonia Conference – Costs and benefit of LNG-fuelled container vessels | 2012-06-05 | No. 18

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