Staggered adoption rate

First adoption will occur from ship owners who have access to significant CAPEX. Adoption will occur in an ad hoc, vessel-by-vessel approach whereby retrofitting and new builds will have to fit with the existing operations plans.

Training and best practice

Demand for experienced operations professionals will increase, but there is limited supply and best practice for smaller, coastal vessels. The primary source of best practice on LNG maintenance & refueling is for tankers. The regulatory regime is still in a nascent stage, with further guidelines and regulations on both new builds and operations.

Return on investment?

Absence of a clear ROI for marine vessels to prove categorically prove economic model. The likely adoption rate will be heavily influenced by the success of LNG haulage on shore. Similarly, given the 25+ year life cycle of vessels the ROI for retrofitting will vary significantly.

Availability of alternatives

LNG is not the only option available to ship owners seeking to comply with the EPA regulations. These alternatives are not without their own challenges. Ship owners could also:a) Burn low sulfur fuels

such as Marine Diesel Oil (MDO); or

b) Fit abatement technologies (i.e. exhaust gas scrubbers)

421 3

INTRODUCTION GROWTH MATURITY

Liquefied Natural Gas for marine transportationWhen will LNG be adopted by the marine market in the United States?

Market drivers

Why is there so much interest in LNG as a marine fuel?

Regulatory driver

The catalyst for change in the marine fuel market is environmental regulation, enacted by the International Maritime Organization (IMO). These regulations, which will become more stringent in 2020, regulate the level of Sulphur Oxides, Nitrogen Oxides and Particulate matter emitted.

Environmental

Studies of converted diesel engines have shown a reduction of:

• Sulphur Oxides by 90-95%

• Carbon Dioxide by up to 25%

• Nitrogen Oxides by 90%

• Particulate Matter by 100%

Price differential

8 trillion cubic meters of natural gas reserves in the United States has led to a 10 year low in gas prices. The marine market is expected to see a 20% or better price advantage for LNG over Ultra Low Sulfur Diesel for the foreseeable future.

Economic disruption

Fuel cost is 80% of total costs for ship operators, therefore a cheaper, regulatory compliant fuel source may have a major impact on competitiveness.

LNG exports

The U.S. DOE’s desire to establish the US as a significant LNG exporter will take a number of years to be realised. While the export market fully develops, there will be increasing availability for the domestic LNG market.

The US shipping industry is facing an inevitable period of upheaval. The next 3-10 years will see great change, although opinion is divided regarding the speed of change driven by the possible use of LNG as a marine transportation fuel.

In preparation for their upcoming market development report, FC Business Intelligence has released a snapshot of the CHALLENGES and market DRIVERS that the United States LNG marine market is facing.

REGULATORY DRIVER

E

CONOMIC DISRUPTION

PRICE DIFFERENTIAL

Time

North American Emissions Control Area

Entry in to force: 1 August 2012

Enforced by: Environmental Protection

Agency (EPA) and the US Coast Guard

(USCG)

4

LNG marine market: where are we now?

Natural Gas has the potential to play a significant role in a number of transportation markets in the United States and globally. Currently, the marine LNG market is being built by pioneering companies making substantial investments and forming strategic partnerships.

LNG EXPORTS ENVIRONMENTAL

STAGGERED AVAILABILITY OF

TRAINING AND

RETURN ON

ADOPTION RATE ALTERNATIVES

BEST PRACTICE IN

VESTMENT?

Rat

e of

ado

ptio

n

21

Sulphur Oxides

Carbon Dioxide

Nitrogen Oxides

Particulate Matter

90-95%

up to 25%

90%

100%

80%

53

Hierarchy of challenges

What are the challenges to the LNG marine market reaching a critical mass?

Join the conversation

Thank you for your interest in LNG as a marine transportation fuel market in the United States. FC Business Intelligence Ltd hopes you found the information interesting.

Please get in touch if there is more information, data, interviews with executives or networking opportunities that you need. For more information please visit www.lngmarineevent.com and/or contact Piers French at pfrench@fc-bi.com.

LNG market development presentation © 2013 FC Business Intelligence Ltd®

The information of this document was prepared by FC Business Intelligence Ltd and its partners. FC Business Intelligence Ltd has no obligation to tell you when information in this document changes. FC Business Intelligence Ltd makes every effort to use reliable, comprehensible information, but we make no representation that it is accurate or complete. In no event shall Nuclear Energy Insider and its partners be liable for any damages, losses, expenses, loss of data or profit caused by the use of the material or contents of this document.

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