alternative fuels lng – a short or a medium term solution?

9 November 2011

Alternative fuels LNG – a short or a medium term solution?

Ketil Djønne – Vice President, External Relations

© Det Norske Veritas AS. All rights reserved.

9 November 2011

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Key driver - stricter environmental requirements

Requirement

2010: SOx < 1,0% (ECA)2015: SOx < 0,1% (ECA)2020: SOx < 0,5% (global)

Compliance tech.

• HFO + scrubber• Distillate fuels• LNG, other fuels(?)

Existing fleets

Requirement

2011: NOx Tier 2 (global)2016: NOx Tier 3 (ECA)

Compliance tech.

• Tuning, SCR, HAM, water emulsion, EGR, LNG, other fuels(?)

Newbuilds

CO2 regulations on the way


9 November 2011

Key drivers – shrinking crude reserves, increasing prices – and some environment councious owners/transport users/first movers

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9 November 2011

� Heavy Fuel Oil (with exhaust cleaning)

� Distillate fuel oils

� LNG

� CNG

� LPG

� GTL (incl methanol)

� Biofuels / biogas and alcohols

� Hydrogen (as energy carrier)

� Batteries (as energy carrier)

� Nuclear

The “full” list of future fuel alternatives

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Our bet is that hydrocarbons will dominate the future mix

We believe it boils down to oil and natural gas

Our bet is that hydrocarbons will dominate the future mix

We believe it boils down to oil and natural gas


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Hybrid propulsion – The Prius of the seas

FutureTechnologies emerging towards 2020

BatteryPack

Fuel Cell

Solar Panel

TraditionalDiesel electric propulsion system

Diesel Engine

Optimal energy use


8. November 2011

Forecast – total world wide vessel contracting - DWT

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LNG environmental performance

But what about methane slip???

In short; a real issue, buteffective improvementsare now being made


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4 USD/mmbtu

7-8 USD/mmbtu

10-11 USD/mmbtu

LNG can be great from an economic perspective – but price differential is crucial


9 November 2011

The Age of LNG is here

� History of modern LNG carriers goes back to 1969 – 40+ years. Today: ~ 350 LNG/C

� All LNG carriers used to be LNG fuelled – gas fuelled ships is not a new concept

� History of LNG fuelled ships other than LNG carriers since 2000 – 11 years

� Today: ~ 22 LNG fuelled vessels in operation. All in Norway. Around same number of LNG fuelled ships on order.

� Increasing interest for LNG fuel around the world

� Different LNG distribution projects in progress

The Age of LNG FUEL is here


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LNG is safe

� Two main areas of difference from other fuels:- Cryogenic effects

- Forms gas clouds

� LNG has a strong track record- No significant incidents with ships

- Very few incidents on land

� But, this performance is due to:- Stricter requirements- Good safety behaviour

LNG success stories in Norway due to Government requirements AND incentives


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DNV has classified a large fleet of LNG fuelled ships

22 Ships in operation22 Ships in operation Confirmed orderbookConfirmed orderbookYear Type of vessel Owner Class2000 Car/passenger ferry Fjord1 DNV2003 PSV Simon Møkster DNV2003 PSV Eidesvik DNV2006 Car/passenger ferry Fjord1 DNV2007 Car/passenger ferry Fjord1 DNV2007 Car/passenger ferry Fjord1 DNV2007 Car/passenger ferry Fjord1 DNV2007 Car/passenger ferry Fjord1 DNV2008 PSV Eidesvik Shipping DNV2009 PSV Eidesvik Shipping DNV2009 Car/passenger ferry Tide Sjø DNV2009 Car/passenger ferry Tide Sjø DNV2009 Car/passenger ferry Tide Sjø DNV2009 Patrol vessel REM DNV2009 Car/passenger ferry Fjord1 DNV2010 Patrol vessel REM DNV2010 Car/passenger ferry Fjord1 DNV2010 Patrol vessel REM DNV2010 Car/passenger ferry Fjord1 DNV2010 Car/passenger ferry Fjord1 DNV2010 Car/passenger ferry Fosen Namsos Sjø DNV2011 PSV DOF DNV

Year Type of vessel Owner Class2011 Car/passenger ferry Fjord1 DNV2011 PSV Solstad Rederi DNV2011 General Cargo Nordnorsk Shipping DNV2012 PSV Olympic Shipping DNV2012 PSV Eidesvik DNV2012 PSV Eidesvik DNV2012 Ro-Ro Sea-Cargo DNV2012 Ro-Ro Sea-Cargo DNV2012 High speed RoPax Buquebus DNV2012 PSV Island Offshore DNV2012 PSV Island Offshore DNV2012 PSV REM DNV2013 Ro-Ro Norlines DNV2013 Ro-Ro Norlines DNV2013 Car/passenger ferry Torghatten Nord DNV2013 Car/passenger ferry Torghatten Nord DNV2013 Car/passenger ferry Torghatten Nord DNV2013 Car/passenger ferry Torghatten Nord DNV2013 RoPax Viking Line LR2013 PSV Harvey Gulf Int. Marine ?2013 PSV Harvey Gulf Int. Marine ?

Planned conversionYear Type of vessel Owner2011 Car/passenger ferry Fjord1 DNV2011 Chemical tanker Tarbit Shipping GL2013 RoPax Fjordline DNV2013 RoPax Fjordline DNV

Zero serious incidents, 10 years experience, 20 ships, 200 000 operation hours !


9 November 2011

LNG - more than just small scale…


9 November 2011

So why is LNG for ships developing so slowly?

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� Fuel availability / infrastructure, “chicken and egg”

� Bunkering regulations needed

� Technology / cost issues specific to each business case

� Authorities can incentivise more rapid LNG uptake


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Key take-aways

� Much is going on in R&I and some full scale commercial application (Bio fuel, hybrid, LNG)

� Future will probably produce a variety of solutions

� Depressed economy and many new buildings hampers change

� Each business case is different – but LNG makes sense for a lot of them

� Bunkering regulations needed - but industry is now developing practices and standards

� Authority support and incentives required to incubate LNG growth

� LNG is safe - because we are dealing with the risks!


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Safeguarding life, property and the environment

www.dnv.com

alternative fuels lng – a short or a medium term solution?

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