LNG for Shipping – Current status Small Scale LNG 22nd Oct 2013 Claus Winter Graugaard Head of Customer Service & Business Development

LNG as ship fuel

First LNG fuelled ship: GLUTRA in 2000

LNG fuelled cruise liner type ferry: Stavangerfjord in 2013

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There are currently 81 confirmed LNG fuelled ship projects

Updated 06.09.2013 Excluding LNG carriers and inland waterway vessels

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42 LNG fuelled ships in operation worldwide Ships in operation Year 2000 2003 2003 2006 2007 2007 2007 2007 2008 2009 2009 2009 2009 2009 2009 2010 2010 2010 2010 2010 2010 2011 2011 2011 2011

Type of vessel Car/passenger ferry PSV PSV Car/passenger ferry Car/passenger ferry Car/passenger ferry Car/passenger ferry Car/passenger ferry PSV PSV Car/passenger ferry Car/passenger ferry Car/passenger ferry Patrol vessel Car/passenger ferry Patrol vessel Car/passenger ferry Patrol vessel Car/passenger ferry Car/passenger ferry Car/passenger ferry PSV Chemical tanker Car/passenger ferry PSV

Owner Fjord1 Simon Møkster Eidesvik Fjord1 Fjord1 Fjord1 Fjord1 Fjord1 Eidesvik Shipping Eidesvik Shipping Tide Sjø Tide Sjø Tide Sjø Remøy Management Fjord1 Remøy Management Fjord1 Remøy Management Fjord1 Fjord1 Fosen Namsos Sjø DOF Tarbit Shipping Fjord1 Solstad Rederi

Class DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV GL DNV DNV

Year 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2013 2013 2013 2013 2013 2013 2013

Type of vessel Car/passenger ferry PSV PSV PSV General Cargo PSV PSV Car/passenger ferry Car/passenger ferry Car/passenger ferry PSV RoPax Car/passenger ferry Harbor vessel General Cargo RoPax High speed RoPax

Owner Fjord1 Eidesvik Olympic Shipping Island Offshore Nordnorsk Shipping Eidesvik Shipping Island Offshore Torghatten Nord Torghatten Nord Torghatten Nord REM Viking Line Torghatten Nord Incheon Port Authority Eidsvaag Fjordline Buquebus

Class DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV DNV LR DNV KR DNV DNV DNV

Updated 06.09.2013 Excluding LNG carriers and inland waterway vessels

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39 confirmed LNG fuelled newbuilds Confirmed orderbook Year 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 2014 2014 2014* 2014 2014 2014 2014* 2014

Type of vessel Ro-Ro Ro-Ro RoPax Car/passenger ferry Car/passenger ferry Ro-Ro Ro-Ro Tug Patrol vessel Car/passenger ferry Tug Tug Car/passenger ferry Tug PSV PSV PSV PSV Gas carrier Gas carrier Product tanker General Cargo General Cargo PSV Car/passenger ferry Car/passenger ferry

Owner Sea-Cargo Sea-Cargo Fjordline Norled Norled Norlines Norlines Buksér & Berging Finish Border Guard Society of Quebec ferries CNOOC CNOOC Society of Quebec ferries Buksér & Berging Harvey Gulf Int. Marine Harvey Gulf Int. Marine Harvey Gulf Int. Marine Harvey Gulf Int. Marine SABIC SABIC Bergen Tankers Egil Ulvan Rederi Egil Ulvan Rederi Remøy Shipping Aktien-Gesellschaft EMS Samsoe Municipality

Class DNV DNV DNV DNV DNV DNV DNV DNV GL LR CCS CCS LR DNV ABS ABS ABS ABS BV BV LR DNV DNV DNV GL DNV

Year 2015 2015 2015 2015 2015 2015 2015 2015 2015 2016 2016 2016

Owner Siem Offshore Siem Offshore Simon Møkster Shipping Harvey Gulf Int. Marine Harvey Gulf Int. Marine Evergas Evergas Evergas TOTE Shipholdings TOTE Shipholdings Boreal Transport Boreal Transport

Class DNV DNV ABS ABS BV BV BV ABS ABS

Updated 06.09.2013 Excluding LNG carriers and inland waterway vessels

* Conversion project

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Type of vessel PSV PSV PSV PSV PSV LEG carrier LEG carrier LEG carrier Container Ship Container Ship Car/passenger ferry Car/passenger ferry

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All engine concepts are in use for ship propulsion

Updated 06.09.2013 Excluding LNG carriers and inland waterway vessels

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Methane slip from gas engines have improved significantly, and further technical development is anticipated

CH4 emission [g/kWh]

4-stroke DF / pure gas Measured / expected - High Measured - Average

Measured / expected - Low

Diesel engines

2-stroke DF

Methane slip varies significantly, but marine gas engines delivered from 2013 have lower emissions of GHG equivalents than similar diesel engines "Why LNG as Fuel?" © Det Norske Veritas AS. All rights reserved.

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DNV Shipping 2020 study 4-7 million tons of LNG p.a is required by 2020 corresponds to 0.2-0.3% of global LNG production 2010

2020

Supply

1000 LNG fuelled ships

4-7 Million tons p.a of LNG as fuel for shipping

2013

Demand

42 ships in operation & 39 ships on order

Limited volume of LNG as fuel for shipping

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Approx. 1000 vessels will be fuelled by LNG and sailing within regions, primarily in the ECA zones 1200

Forecast of LNG fuelled ships per ship segment

 Under low economic growth and little environmental pressure scenario D, the number of new buildings has been estimated to be around 1000 by 2020

1000 800 600

YTD 42 ships in operation and 39 ships in order book

400

 Offshore vessels and ferries dominate the LNG fuelled fleet and order book today, but there are on-going projects to develop concepts and designs for most ship types

200

2010 2011 2012 2013 2014 2015 Tank Bulk Container RoRo Offshore

2016 2017 General cargo

2018 2019 Passenger ships

 Combined with stricter emissions control regulations, Europe and North America will experience a growth in LNG fuelled offshore ships

0 2020 Other

Forecast of the LNG fuelled ships per region

Australia & New Zealand China South America Japan & Korea Midde East & India South East Asia

 Asia will play an important role, after 2020, driven by stricter regulations nations such as Singapore and Hong Kong

North America Europe Tank

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Bulk

Container

50 RoRo

100

150

Offshore

200

250

General cargo

300

350

400

Passenger ships

450 Other

A look to the past may light the future

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Global sulphur cap of 0.5% in 2020 will drive LNG fuel market globally

Existing ECAs Upcoming ECAs? Global requirements 2020 / 2025*: Sulphur < 0.50% * Date TBD pending 2018 review – but 2020 will apply in EU waters

ECA sulphur requirements 2010: Sulphur < 1.0% 2015: Sulphur < 0.1%

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NOx requirements 2011: NOx Tier II, -20% 2016: NOx Tier III, -80%* *New builds, only m ECA

EU sulphur Directive - revision highlights  Revised Directive agreed by EU; - Alignment with MARPOL Annex VI - Agreement on 0.5% in EU waters in 2020 - PAX vessel requirements at 1,5% in all non-ECA EU waters until 2020 (200 NM) - State aid for technology investments (scrubbers, LNG, infrastructure)

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Global LNG bunker demand by 2020

Europe & the Baltic Sea China

1.4 – 2.2 million

0.3 – 0.8 million 0.07 – 0.09 million

North America

Japan & Korea

0.3 – 0.5 million

Middle East & India

0.9 – 1.4 million

0.3 – 0.7 million

SEA 0.4 – 0.7 million

South America Australia & NZ

0.3 – 0.4 million

0.1 – 0.2 million

LNG Bunkering demand 2012

LNG Bunkering demand 2020 Equivalent to 4 -7 million tons of LNG

4-7 million tons of LNG p.a is required for 1000 ships in 2020. This corresponds to 0.2-0.3% of global LNG production of 2010

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Shell’s plans for LNG bunkering facilities in recent years

Shell self commitment: 25 % of Shell controlled vessels to run on LNG in 2025 (25% of approx. 1500 vessels  375 ships) LNG for ships © Det Norske Veritas AS. All rights reserved.

Some interested Suppliers 1. Shell/Gasnor 2. Bomin-Linde 3. GDF-SUEZ 4. Fortis BC 5. BP 6. SLNG 7. Woodside 8. KOGAS 9. CNOOC 10. ENN 11. …..

Some thoughts about LNG as fuel pricing  Gas price in Europe (Feb 2013): 11 to 12 $/mmBTU; in US: 3-4 $/mmBTU;  US: Liquefaction 5 $/mmBTU (LNG 10 $/mmBTU)  HFO price 720 $/t  18 $/mmBTU (equal LNG at to 840 $/t; (49 MJ/kg))  MGO price 1000 $/t approx. 25 $/mmBTU (LNG at 1167 $/t; (49 MJ/kg))  Assumed distribution costs: 3 to 6 $/mmBTU - LNG Europe on board of ship: 14 to - 18 $/mmBTU (11+3=14; 12+6=18) - LNG US on board of ship: - Baseline Henry Hub: 10 to 15 $/mmBTU (3+5+3; 4+5+6) - Baseline LNG price US: 13 to 16 $/mmBTU (10+3; 10+6) - Baseline LNG price Europe: 14 to 18 $/mmBTU (11+3; 12+6)

42 MJ/kg=11,6 kWh/kg; 1mmBTU=293 kWh; 0,040 mmBTU/kg

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LNG as a fuel for ships and the world of rules and regulations 2000

 2001 first DNV Class rules for gas fuelled ships  2004 NMD proposal to develop the IMO IGF Code  2010 IMO MSC.285(86) in force  2013 DNV Rules Part 6 Ch 13: Gas Fuelled Ship Installations (Ver. Jan 2013)  2013 IMO IGF-Code: International Code of safety for ships using Gases or other lowflashpoint Fuels (draft Feb 2013)

2013

 2013 DNV SfC 3.325 Competence Related to the On Board use of LNG as fuel (Ver. April 2013)  2013 ISO Guidelines for systems and installations for supply of LNG as fuel to ships (OGP Draft 118683) (draft published in June 2013)

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 DNV Recommended Practice on LNG bunkering - Oct 2013

ECA Trade - Hamburg – St. Petersburg – Hamburg - round-trip via Kiel Canal Stage

Operation

1

Idling in port

2

Manoeuvring

3

Bunkering

4

Canal passage

5

Cruising

6

Manoeuvring

7

Idling in port

8

Manoeuvring

9

Cruising

10

Canal passage

55 nm

11

Manoeuvring

36 nm

12

Idling in port TOTAL

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Distance 36 nm 55 nm 758 nm 20 nm 20 nm 758 nm

1738 nm

1. STRATEGY – FUEL DECISION  Financial attractiveness and technical feasibility of available ECA compliance measures Evaluated measures

The case ship

1. Switching to low sulphur fuel

 Container feeder

2. Retrofitting a scrubber system

 Abt. 1.000 TEU

3. Converting to Dual Fuel engines and install LNG tank

 Main engine abt. 8MW kW (medium speed)

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Total cost of DF conversion for the case vessel is estimated to 5,7 MUSD Cost estimate for DF configuration with 300 m3 LNG tank Delta costs for DF system components

Conversion of DF engines + GVU

1.4

LNG tank + gas equipment

1.8

Yard work

2.5

Total cost

5.7 0

1

2

3 Costs [Million USD]

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4

5

6

Cumulated costs DF retrofit of 1000 TEU container vessel operating 100% in ECA ENGINE AND OPERATION

Cumulative Total Cost [USD] compared to HFO-baseline ECA 2015 SOx compliance only

20

Emission compliance ECA SOX Time in ECA

100%

Installed power

ca. 8,000 kW

Baseline

HFO

Accumulated costs [MUSD]

15

10

5

FUEL PRICE HFO

650 USD/tonne

-5

MGO

1,050 USD/tonne

-10

LNG

HFO / HFO±10%

0 0

1

2

3

4

5

6

7

8

9

11

10

12

13

14

15

-15

FINANCIAL Discount rate

-20

0%

Years

Investment decision Retrofit Scrubbers Retrofit

MGO-baseline

LNG = HFO + 10%

LNG = HFO

LNG = HFO - 10%

Tax regime

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None

The path to becoming ‘LNG Ready’ - DNV Service for owners, designers, yards 1. STRATEGY – FUEL DECISION • High level technical feasibility • Fuel consumption estimates

2. CONCEPT CAPTURE

• Financial feasibility

• Detailed technical feasibility study

• Cost, pay-back time and sensitivity analysis

• Performance benchmarking

• Fuel availability

(Machinery and tank evaluation and optimization) • Concept Design Review (Statement - class acceptance)

3. INITIAL DESIGN

• HAZID

• Approval in Principle

4. RISK ASSESSMENT • Gas fuel safety risk assessment (mandatory by IMO)

Decision Points. Proceed with the LNG option or not.

CLASS APPROVAL (after vessel is ‘LNG Ready’)

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Published Thursday, August 29, 2013  UASC, Hyundai Heavy ink $2bn deal - Hyundai to build new greenest and largest container vessels for UASC

 United Arab Shipping Company (UASC) has signed a new vessel building program for some of the greenest and largest container vessels in the world.  contract was signed with HHI for five 18,000 TEU vessels and five 14,000 TEU vessels. The order includes options for one additional 18,000 TEU vessel and six additional 14,000 TEU vessels.  These vessels will also be the first large container vessels that will be "LNG ready" at delivery."

LNG for ships © Det Norske Veritas AS. All rights reserved.

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First domestic LNG fuelled ferry in EU

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Safeguarding life, property and the environment www.dnv.com

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