24 september 2010 maritime clusters and sss merenduskonverents 2010
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24 September 2010
Maritime Clusters and SSS
Merenduskonverents 2010
© Det Norske Veritas AS. All rights reserved.
24 September 2010
2
Presentation Overview
DNV
Maritime Clusters - Quick definition- Who is involved
- Government- Industry- Markets
- Cause and effect
New rules of the game - Future regulations- ECAs- In the Baltic
Short Sea Shipping (… and LNG) - Characteristics of SSS in Baltic Sea- ECA rules will force changes- Options to comply
- Redeploy fleet- Low S% fuel- Scrubbers- LNG
- Conclusions- Return on Investment- Save environment and save costs
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24 September 2010
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Who, What, How we do
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Highly skilled people across the world
9,000employees, of which 82% have university degree
300offices
100countries
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A trusted player in shipping
15.5%15.5% of the world’s sailing fleet is to DNV Class (in Gross Tonnes)
17%DNV classed 17% of the world fleet orderbook in 2009 (in Gross Tonnes)
130Authorised by 130 national maritime authorities
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Summary
Companies and society face a new risk reality
DNV helps identify, assess and manage risk
We do this through a unique combination of - risk methodology and management expertise- technical and operational expertise- independence
We help our customers - build trust and confidence towards their stakeholders- make qualified decisions based on independent
assessments- achieve and maintain sustainable performance- ...and so turn risks into rewards
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Maritime clusters
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Typical players The maritime industry consists of
- The ship industry that produces and repair ships.
- The shipping industry providing the seaborne transportation of goods
- Freight and infrastructure as service supplier focused directly towards the organisation of the transportation
In addition, the maritime industry is provided with services, such as: - classification- financing- insurance- education
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24 September 2010
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Maritime cluster – a definition
CompanyCompetitiveness
R&D & innovation
Competence & HR strategy
CountryAttractiveness
Price & quality of resources
Satisfaction with location
Public Policy
Tax & subsidies
Financial Policy
Regulations
Labour market
Cluster dynamicsInnovation pressureKnowledge diffusion
Complementarity
Cluster dynamicsKnowledge sharing
Complementarity
Long term
industry
performance
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24 September 2010
10
Public policies are the catalyst of the cluster
Public policies are prerequisites to attract business:
Labour mobility
Tax regime & financial policies
Local regulations
Education and training
Research & innovation culture
Location attractiveness comprising the three elements of
‘country’,
‘company’
‘cluster’
can be influenced by the public policies of the location
CompanyCompetitiveness
Internationalization
R&D and innovation
Competence and HR strategy
CountryAttractiveness
Price, quality, mobility & relevance of resources
Satisfaction with domestic location &
foreign attractiveness
Public Policy
Tax & subsidiesFinancial Policy
RegulationsLabour market
EducationR&D
Cluster dynamicsInnovation pressureKnowledge diffusion
Complementarity
Cluster dynamicsInnovation pressureKnowledge diffusion
Complementarity
Long term relative
industry performance
3
1
2
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The country’s ability to keep and attract world class companies, determines its competitivenessPrimary characteristics
Regional legal-regulatory framework
Sustainable local economy
Stable political environment
Secondary characteristics
Highly developed infrastructure
Strategic geographic location
CompanyCompetitiveness
Internationalization
R&D and innovation
Competence and HR strategy
CountryAttractiveness
Price, quality, mobility & relevance of resources
Satisfaction with domestic location &
foreign attractiveness
Public Policy
Tax & subsidiesFinancial Policy
RegulationsLabour market
EducationR&D
Cluster dynamicsInnovation pressureKnowledge diffusion
Complementarity
Cluster dynamicsInnovation pressureKnowledge diffusion
Complementarity
Long term relativeindustry
performance
© Det Norske Veritas AS. All rights reserved.
24 September 2010
12
CompanyCompetitiveness
Internationalization
R&D and innovation
Competence and HR strategy
CountryAttractiveness
Price, quality, mobility & relevance of resources
Satisfaction with domestic location &
foreign attractiveness
Public Policy
Tax & subsidiesFinancial Policy
RegulationsLabour market
EducationR&D
Cluster dynamicsInnovation pressureKnowledge diffusion
Complementarity
Cluster dynamicsInnovation pressureKnowledge diffusion
Complementarity
Long term relativeindustry
performance
Attracting the most competitive companies
Companies want to locate in attractive markets
What companies want
Industrial regions of the world compete to attract international business companies by
Excellent infrastructure Attractive tax regimes
…influence how countries compete..
Manufacturing moves to low cost locations Leading companies attract other companies
from the same industry Increasing industrial clustering
…with different results
Key reasons for a locations attractiveness (for HQs) were identified:
Attractive tax rules
Availability of managers with experience and global mindset
High quality of life
Source: AD Little
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24 September 2010
13
New rules of the game
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24 September 2010
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Future regulatory pressures
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European ECAs – a real challenge
ECA (Emission Control Area) requirements:
Maximum level of sulphur in fuel, new and sailing ships:- 1,00% by 1st July 2010- 0,10% by 1st January 2015
(or equivalent measure)
Nitrogen emission for newbuildings:- 80% reduction in NOx emissions
from 1st January 2016
EU fuel requirements today:
0,1% sulphur in ports and inland waterways (or equivalent measure)
ECAECA
New ECA?
New ECA?
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The Baltic Sea is slowly dying. Shipping partly to blame Multiple pollution sources
Extremely vulnerable sea
More than 2,000 ships operating at any time, 10 000 ships yearly
Ship emissions equals all land-based NOx, and twice the SOx emissions from Denmark and Sweden combined
Current annual ship emissions:- SOx: 135 000 tonnes- NOx: 400 000 tonnes- CO2: 19 million tonnes
Gothenburg, SWE
Lübeck and Rostock (GER)Gdansk and Gdynia (POL)
Kaliningrad
Klaipeda (LIT)
Tallinn (EST)
Kilpilahti (FIN)
Primorsk and St.Petersburg (RUS)
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24 September 2010
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Short Sea Shipping (… and LNG)
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Short Sea Shipping
Movement of cargo and passengers by sea between ports situated in geographical Europe or non European countries having a coastline on the enclosed seas bordering Europe.
In the Baltic's … more than 78% share of all seabourne trade (Eurostat: 2008)
Includes domestic and international maritime transport, including feeder services, along the coast, to and from the islands, rivers and lakes.
Challenges!
Environment (external)
Profitable business (internal)
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24 September 2010
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ECA compliance is a ticket to trade
The optimum ECA strategy will: - Reduce business risk and technical challenges
- Align desired ECA solution with company’s financial policy - Ensure new market shares as competitors pull out
Ship owners will benefit from planning now, and seek well-informed partners
A strategy should be laid for different:• - Fleet segments• - Ship ages and conditions• - Types of freight and voyage contracts• - New-builds and ships in operation
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24 September 2010
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What are the options?
Switch to low sulphur fuel
Use of scrubbers
LNG
Re-deploy fleet away from Baltic's and all other ECAs- But how viable is this in the long-term?
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24 September 2010
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The sulphur leap in European ECAs
1%July ’10
0,1%January ’15
1,5% Now
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Low sulphur fuel.
Supply of 1,0% fuel seems OK, but what about 0,10%?
Fuel switch- HFO to MGO/MDO- Fuel change over procedures (time, cost, engine risk)
Technical challenges:- Viscosity, flash point- Boiler safety
Lowest Capital Expense (to change) but highest Operational Expense (to maintain in the long run)
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24 September 2010
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Regular fuel + exhaust cleaning (Scrubber)
Washing of exhaust gas in seawater or high pH solution
Waster purification system, creating sludge
Removal rates: - > 95% of the exhaust SOx, - 40-80% of the particles (PM)
BUT we need to consider a range of hidden extras- Scrubber technology well proven on land, but
limited at sea - 2% fuel penalty- Sludge production and disposal - Integration challenges: SOx scrubbers + NOx
catalysts/SCR- Wash water (Brackish water?). - Energy consumption
Medium high Capex, medium Opex (HFO vs distillate price)
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24 September 2010
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LNG -Technically no obstacles and it is safe
LNG technology safe and well proven
- 40 years of LNG tanker operation- Used as marine fuel since 2001, now in 20 ships- Ongoing research to further improve technical and economical aspects
Relatively high Capex, low Opex
LNG availability - developing bunkering grid in the Baltic Sea, but…?
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24 September 2010
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LNG – The only solution for both SOx and NOx demands
Baltic Sea- Annual ship emissions:
- SOx: 135 000 tonnes- NOx: 400 000 tonnes- CO2: 19 million tonnes
- Equals all land-based NOx and twice the SOx emissions from Denmark & Sweden combined
When LNG replaces conventional fuels:- Nearly 100% reduction SOx / particle
emissions- 85-90% reduced NOx emissions- Approx 15% net reduction CO2 /GHG
emissions
Reduce the strain on road transport
547 TEU container vessel (5000 GT) Propulsion power 3960 kW
Yearly emissions, tonnes/year
SOx NOx CO2 PM
LNG0 31 5 500 0
Low-sulphur HFO (LS380 with 1% sulphur)
50 180 7 250 4Gothenburg, SWE
Lübeck and Rostock (GER) Gdansk and Gdynia (POL)
Kaliningrad
Klaipeda (LIT)
Tallinn (EST)
Kilpilahti (FIN)
Primorsk and St.Petersburg (RUS)
Gothenburg, SWE
Lübeck and Rostock (GER) Gdansk and Gdynia (POL)
Kaliningrad
Klaipeda (LIT)
Tallinn (EST)
Kilpilahti (FIN)
Primorsk and St.Petersburg (RUS)
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24 September 2010
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NOx reduction equals taking 22,000 cars off the road!
Viking Lady’s reduction in NOx emissions compared to diesel operation
LNG fuel
Diesel fuel
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24 September 2010
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Looking ahead - proposed LNG import terminals
Source: 2010 Google Maps
Proposed LNG Import Terminals
Plant Start-up
Sendout Capacity Country
Lithuania LNG 2010-2013 1,5 mill. tonnes/year
Lithuania
Gävle 2012 Sweden
Oxelösund 2012 Sweden
Estonia LNG 2012-2014 3 mill. tonnes/year Estonia
Wilhelmshaven LNG 2014 7,5 mill. tonnes/year
Germany
Świnoujście LNG 2014 7,5 mill. tonnes/year
Poland
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Conclusion
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Return on Investment
Among the three choices LNG has the lowest life cycle costs for ECA operation
• Applies for a typical general cargo ship
• Assumes 2m Euro investment
• LNG=450 USD in 10 years
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Conclusion … short sea shipping is the obvious start
BUT …
Use of LNG makes good sense … financially and environmentally
But, ship-owners will not invest until LNG fuel supply infrastructure is in place
LNG fuel suppliers will not invest in infrastructure without a large fleet
SO …
EU and governments to be frontrunners
Publicly owned ships to run on LNG
LNG fuel to be easily available
LNG fuel to be available at a fair price
THEN …
Ship-owners to start ordering new ships running on LNG
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24 September 2010
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DNV
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Independent 3rd party provider of technical and advisory services
Development partner through whole life-cycle
Ongoing research and development
Thank you
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Safeguarding life, property and the environment
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