GREEN SHORTSEA SHIPPING The shipowners perspective Juan Riva President European Community Shipowners Associations ECSA Flota Suardíaz

Transcription

1 GREEN SHORTSEA SHIPPING The shipowners perspective Juan Riva President European Community Shipowners Associations ECSA Flota Suardíaz

2 European Community Shipowners Associations ECSA Established in 1965, comprises the national shipowners associations of the EU plus Norway Over 40% of the world merchant fleet Aims: promoting the interests of European shipping so that the industry can best serve European and international trade and commerce in a competitive free enterprise environment to the benefit of shippers and consumers

3 Grupo Suardíaz GRUPO LOGÍSTICO SUARDIAZ: Holding company and corporate services. FLOTA SUARDIAZ: Ro Ro ships operator. Maritime transport of roro cargo with own and chartered ships. LOGÍSTICA SUARDIAZ: Shipping agents (Vapores Suardiaz) and Land transport (TET Suardiaz). SOLUCIONES LOGÍSTICAS INTEGRALES: Integral logistic operator specialized in rail transport and management of logistics centres. SUARDIAZ BOUZAS TERMINAL: Operation and management of the ro ro cargo terminal in the port of Vigo. SUARDIAZ SERVICIOS MARÍTIMOS: Bunkering with own vessels. Maritime transport of crude oil and products.

4 GREEN SHORTSEA SHIPPING The shipowners perspective: SUMMARY From 2015, the phasing in of the new IMO and European regulations on SO x emissions will enhance even more the well known environmental advantages of SSS. But these new regulations will in principle imply an increase of about 50% in bunker costs, making SSS economically uncompetitive in many trades. SSS operators are exploring technical solutions to fulfill the new regulations without increasing their bunker costs. Among them, the use of LNG as marine bunker is probably the most promising one, but there is an urgent need to develop the necessary bunkering infrastructure in ports.

5 Shipping is the most sustainable transport mode In terms of CO 2 emissions and other external costs (noise, congestion, accidents, ). EU Transport Policy priorities include the promotion of Short Sea Shipping and Motorways of the Sea. Obstacles to the development of SSS: Inefficiencies and costs in ports and port services. More complex administrative formalities. Less flexibility than road transport. SSS services must necessarily be competitive in price.

6 Sulphur emissions: Achilles heel of maritime transport SHIPPING PERFORMANCE CO 2 and CO: Excellent NO x : Good SO x : Poor Source: International Chamber of Shipping - ICS

7 Regulation on sulphur content in bunker fuels Sulphur emissions to the atmosphere: Effects: Acid rains: damage to the environment Particulate matter (PM): risk to public health Regulation: International: MARPOL Annex VI EU: Directive 1999/32 as amended by directive 2012/33

8 5,0 GLOBAL 4.5% 4,0 SOx % 3, % Review 2,0 1,0 ECAs 1.5 % 1.0% Major Concern 0.1% (MGO) 0,50%

9 International regulation: Marpol Annex VI Two characteristics Two tier scheme Stricter rules for sensitive areas: Emission Control Areas (ECAs) No convergence, even in the long term. Complicated operation for ships, that have to carry two or even three different bunker qualities. No availability assessment study envisaged for ECAs General ceiling reduction to 0.5% in 2020 could be delayed to 2025, subject to an availability study in 2018 (not applicable in the EU). No such study for ECAs, where 0.1% will be required from 2015.

10 Shipowners dilemma: compliance solutions for new regulations in ECAs (source: DNV) 1. Using MGO and paying over 50% more? 2. Using scrubbers? 3. Using LNG as bunker?

11 Solution 1: Using distillate fuels Bunker prices ($/t) Prices on 19 Jun 2013 MGO: 945 $/t HFO: 622 $/t MGO is over 50% more expensive than HFO Year Average price HFO Average price MGO MGO/HFO % % %

12 Solution 1: Using distillate fuels EASY: Minor engine room adaptation necessary. Separate tanks for at least 2 bunker qualities. BUT VERY COSTLY: Over 50% bunker cost increase while operating in ECAs. Can this cost be passed to customers in the freight market?

13 Solution 1: Using distillate fuels Impact on European Shortsea Shipping Modal backshift to road Finnish study on effects from 2015: Need to increase sea freight rates by more than 25 % ISL Bremen study for the Baltic: 46% loss of cargo to road trailers and containers back shifted to road

14 Solution 2: Scrubbers (1) Several technologies: seawater open circuit, freshwater closed circuit, caustic soda, Success in pilot applications and tests. Very big sizes/weights, placed well over waterline may impair stability. Possible need of permanent ballast (lower dwt). Not available yet for very powerful engines (e.g. large containerships).

15 Solution 2: Scrubbers (2) Cost efficient for new ships operating ONLY or a high percentage in ECAs. Doubts in other cases. Costly, heavy and bulky equipment, retrofitting not always technically and/or economically feasible. Regulation still needed on waste delivery in ports. Shipowners are reluctant to invest at current (high) prices and without certainty on whether cheap HFO will continue being available in the market to be used in conjunction with scrubbers.

16 Solution 3: Using LNG as bunker Clear advantages Practically sulphur free emissions Strong reduction of NO x and PM 25% reduction of CO 2 emissions Lower market price than MGO and maybe than HFO

17 LNG environmental advantages CO 2 : 25% less NO x : 85% less SO x : Ellimination PM: Ellimination 17 17

18 GNL and HFO past and present prices In 2012, energy from HFO was in average 48% more expensive than that LNG

19 LNG / Oil prices future evolution: expected to improve further (DNV study)

20 Solution 3: Using LNG as bunker Clear advantages Practically sulphur free emissions Strong reduction of NO x and PM 30% reduction of CO 2 emissions Lower market price Challenges/Drawbacks Storage on board at 162 ºC Lack of bunkering network in ports (trade restrictions) Double on board storage space needed (vs HFO) Very costly retrofitting IMO Safety Code still in development Unburned methane emissions to be avoided

21 Solution 3: Using LNG as bunker Economical aspects, from Norwegian experience in coastal trades Started 10 years ago Some 30 ships now in operation: ferries, off shore supply vessels, coastguard units. Other 25 in construction Newbuilding cost 10 20% higher Maintenance somewhat higher (0 to 10%) Competitive in cost compared to distillates (similar or maybe cheaper than HFO)

22 Solution 3: Using LNG as bunker Engine technology: Dual fuel engines well proved in large LNG tankers. Methane slip problem easy to solve in high pressure dual engines. But have problems to fulfill NO x Tier III. Retrofitting relatively easy in large slow speed engines to high pressure LNG. More complex and expensive for medium speed engines.

23 Solution 3: Using LNG as bunker Is universal retrofitting feasible? Technically surely YES Economically, indeed NO, depending on: Ship s age (remaining operating life up to recycling) Ship type, speed and bunker costs share in total costs Trade: operating time in ECAs

24 Solution 3: Using LNG as bunker A big problem: No bunkering facilities in ports Ports with large LNG import terminals may manage to supply directly imported LNG In other ports: Small liquefaction local plants and distribution by cryogenic road tanks. LNG barges: costly, especially when number of ships using LNG is still low. Removable tanks (such as containers) is possible in some cases (low quantities).

25 greenship.org ECA retrofit study Large consortium majority Danish: Maersk, DSA, Man, LRS, DNV, etc. 2 retrofit solutions analized: scrubber and LNG 2 scenarios: and Ship analyzed: dwt tanker

26 Conclusions: greenship.org ECA retrofit study Cost of the LNG solution: 7.56 mus$ (including 40 days off hire: 680,000 US$) LNG 1.7 musd more expensive than scrubber Payback period of 3 years for 100% operation in ECA

27 Conclusions on LNG bunkering Technical aspects Technology is available and proved. Retrofitting technically viable in most cases. Normally no higher safety risk with LNG. IMO and ISO specific regulations still under way. Economic aspects Very attractive for new buildings in medium/ long term, especially in ECAs. Retrofitting economically viable only in special cases (e.g. high speed crafts). Lack of bunkering infrastructure: Partnerships (shipowner, suppliers, port) are key for development.

28 Forecast ships burning LNG DNV: For 2020, about 1,000 ships fueled by pure LNG or dual LNG/HFO. About 10/15% of expected newbuildings LR: Lower expectatives. For 2025, about 1,350 new ships built to burn LNG. Only 250 for 2020.

29 Directive proposal on the deployment of alternative fuels infrastructure COM(2013) 18 final All maritime and inland ports of the TEN T Core Network to be equipped with LNG refueling points by 31 December 2020 at the latest. LNG refueling points for waterborne vessels shall comply with the relevant EN standards, to be adopted by IMPORTANT: Avoid European technical standards, different from global IMO ISO standards.

30 Commission s Staff Paper: Actions towards a comprehensive EU framework on LNG for shipping With targeted, limited public financial support it should be possible to lay the ground for initial fuelling infrastructure development along the EU coastline and effectively break the chicken and egg situation, with the market then picking up without additional public support needed.

31 Commission s Staff Paper: Actions towards a comprehensive EU framework on LNG for shipping Possible sources for EU financing: Work Programme for the development of Motorways of the Sea (MoS) within the Trans European Transport Network (TEN T) European R+D Framework Programme. European Regional Development Fund (ERDF). Lending of the European Investment Bank (EIB). Possible State Aids, in accordance with the Guidelines on National Regional Aid

32 Possible source for public incentives without national budget expenditure Reduction in Ports Dues On ships On cargo and on passengers On concessions for LNG bunkering facilities

33 Thank you