LNG as marine fuel –The market and Technologies · Oil price –Shale oil and gas production declining • As expected, onshore shale projects are taking the hardest hit on E&P

Doc.ID: Revision: Status:© Wärtsilä

LNG AS MARINE FUEL –THE MARKET AND TECHNOLOGIES

OTMW-N 14-16.09.2015 GLASGOW

Tomas AminoffDirector, Vessel Integration

21 September 2015 LNG as marine fuel –The market and Technologies1

Doc.ID: Revision: Status:© Wärtsilä20/

Alternative fuels and engine development

• The market of LNG

• Technologies

• Tank technologies

• Engine technologies

• Q&A



Global energy demand and supply

45082%

102%

9016%

Global Energy DemandOther

Shipping

Transportation

All units in Quadrillion BTU

Quadrillion = 1015

BTU = British Thermal Unit, amount of energy needed to cool or heat one pound of

water by one degree Fahrenheit, approx. 1055 joules

Other228,541%

Oil18534%

NG12523%

LPG102%

Methanol1,50%

Supply per fuel type



Natural gas – a strongly growing market



Future gas trade

Global gas supply forecast

Source: IEA Medium Term Gas Report 2012

DisappearsReduces

• GEOSTRATEGIC: Russia, Australia, Qatar, East Africa



0

1

2

3

4

5

6

7

0

20

40

60

80

100

120

140

US

D/M

MB

TU

US

D/b

bl

Weekly oil and gas prices

WTI Brent Henry Hub

88

89

90

91

92

93

94

95

96

97

98

15

17

19

21

23

25

27

29

31

33

Oil production

OPEC N. America World supply

Oil price – The world is drowning in oil

• Saudi Arabia has not been willing to give up

its strategy to regain market share

• This means that more of the high-cost oil

production from Canada, Russia and

Norway and US shale oil are squeezed out

of the market.

• OPEC has finally said it’s ready to talk to

other global producers to achieve ‘fair

prices’ and the U.S. government reduced

its crude output estimates.

• OPEC won’t agree to carry the burden

alone in propping up oil prices by cutting

supply; non-member nations would have to

share the burden

• Why is it so hard to cut production for

OPEC? If Saudi Arabia cuts back on its

production again and the oil price

increases, shale oil production in the US

will increase significantly within a period of

12-24 months.

Weekly oil and gas prices

Oil production (Mb/d)

Source: Clarksons, OPEC, Nordea Markets

Q1 Q2 Q3 Q4 Year

2014 108 110 103 77 100

2015E 55 64 50 47 54

2016E 50 53 56 59 55

2017E 60 63 67 70 65

Brent oil price forecast (USD)bbl)



Oil price – Shale oil and gas production declining

• As expected, onshore shale projects are taking the hardest hit on E&P cuts

• Natural gas production across all major shale regions in EIA’s Drilling Productivity Report is projected to decrease for the

first time in September.

-

1.000.000

2.000.000

3.000.000

4.000.000

5.000.000

6.000.000

Jan

-07

Jun

-07

Nov-0

7

Ap

r-08

Se

p-0

8

Fe

b-0

9

Jul-0

9

Dec-0

9

May-1

0

Oct-

10

Ma

r-11

Au

g-1

1

Jan

-12

Jun

-12

Nov-1

2

Ap

r-13

Se

p-1

3

Fe

b-1

4

Jul-1

4

Dec-1

4

Ma

y-1

5

bb

l/d

US Shale oil production

Bakken Region Eagle Ford Region Haynesville Region

Marcellus Region Niobrara Region Permian Region

Utica Region

-

5.000.000

10.000.000

15.000.000

20.000.000

25.000.000

30.000.000

35.000.000

40.000.000

45.000.000

50.000.000

Jan

-07

Jun

-07

Nov-0

7

Ap

r-08

Se

p-0

8

Fe

b-0

9

Jul-0

9

Dec-0

9

Ma

y-1

0

Oct-

10

Ma

r-11

Au

g-1

1

Jan

-12

Jun

-12

Nov-1

2

Ap

r-13

Se

p-1

3

Fe

b-1

4

Jul-1

4

Dec-1

4

Ma

y-1

5

Mcf/

d

US Shale gas production

Bakken Region Eagle Ford Region Haynesville Region

Marcellus Region Niobrara Region Permian Region

Utica Region

Source: EIA, Nordea Markets

Structural changes in the oil market are likely to keep the oil price low for a longer period.

The US shale oil production, the lifting of sanctions against Iran and the rivalry between Iran and Saudi Arabia

could actually lead to a price war. On top of that, growth in China’s demand for oil is declining. All this makes it hard

to see a sustainable oil price level of around USD 100/barrel over the next few years.

US Shale oil production US Shale gas production



Oil price – Most analyses expect rebound. Timing?

Producer economies need $100 oil

New discoveries not compensating for natural decline

Oil demand is slowly increasing and will continue to do so

China economic growth?

Well decline rates and the need to maintain production

New finds in 2014 lowest for 60 years

More and more wells needed for less and less production

Why must activity increase?

Why will the oil prices recover?

Why did the oil price crash?

Record high US supply

No OPEC cuts (for a change)

Return of off-market crude e.g. Libya

Slow-down in Chinese demand growth

Industry is confident of oil price recvery

Half of the market is supportive of > $100 oil by 2020

But others, including OPEC, are preparing for a new price floor < $80

Long-term confidence is High

Source: Douglas-Westwood



LNG - China to cut gas prices to stimulate weak gas

demand, planned LNG import terminal is delayed

• Gas demand in China is the weakest in over a decade, which could trigger significant oversupply

• Low oil prices prompting industries to switch back to cheaper oil and LPG

• As a result of the exceptionally weak demand in North China gas markets, Chinese NOC Sinopec will delay the start-up

of its 2.2mn tons/year (t/y) LNG import terminal in Tianjin to 2017.

• According to Wood Mackenzie, despite the outlook for global LNG demand looking increasingly subdued, the number of

LNG projects proposed to take a final investment decision in 2015 and 2016 has not reduced significantly, in contrast to the

45 upstream oil & gas projects which have postponed FID so far in 2015.

Source: LNG Insight, Wood Mackenzie

0

5

10

15

20

25

2009 2010 2011 2012 2013 2014 2015

LNG, $/MMBtu

China $/MMBtu USA $/MMBtu EU-28 $/MMBtu Japan $/MMBtu

LNG Price



95.625

124.000

109.000

68.000

30.500

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

160.000

2010-D

ec

2011-F

eb

2011-A

pr

2011-J

un

2011-A

ug

2011-O

ct

2011-D

ec

2012-F

eb

2012-A

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2012-J

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2012-A

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2012-O

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2012-D

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2013-F

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2013-A

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2013-J

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2014-D

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2015-F

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2015-A

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2015-J

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2015-A

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US

D/D

ay

LNG 160K CBM Spot rate

LNG – Spot rates declining, prospects of oversupply

China is the fastest expanding major LNG market. Weakness in China comes at a difficult time

for sellers in the global LNG market with 50mn t/y of new capacity due on line next year. With

demand in Japan and South Korea remaining soft, the slowdown in China raises the prospect

of a global glut in LNG.

*Most LNG traded with long-term contracts

Aug 2014

Aug 2015

Aug 2012

Aug 2013

Source: Clarksons, LNG Insight, Hoehg LNG, Douglas-Westwood

Aug 2011

SHORT-

TERM

LNG demand is expected to grow by 4,5 % p.a. from 2013 toi 2035. The number of LNG

importing countries is expected to reach 48 in 2025 in from 29 in 2014 and 12 in 2000.

As such the need for FSRUs and FLNGs will increase dramatically

LONG-TERM

27

16

3

18

32

19

28

39

46

34

12

0

5

10

15

20

25

30

35

40

45

50

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Num

ber

of vessels

LNG carrier deliveries and orderbook

Fleet Orderbook

Enough

work for all

scheduled

deliveries?



Market summary

• There is enough hydrocarbons in

gaseous stage to satisfy the energy

demand

• Price of LNG is a question mark

• The global price spread has reduced

• More geographical areas will get LNG

import

• The energy market is in chaos



LNG as marine fuel –The market and Technologies

LNG STORAGE TANK TECHNOLOGIES



Gas storage onboard ships

“IMO Type C”“Membrane” “IMO Type A - B”



Comparison of IMO IGC Code independent tanks

Tank Type Description Pressure Advantages Disadvantages

A Prismatic tank adjustable

to hull shapes. Full

secondary barrier

< 0,7 barg Space efficient Boil-off gas handling

More complex fuel system,

(compressor required)

B Prismatic tank adjustable

to hull shapes. Partial

secondary barrier

< 0,7 barg Space efficient Boil-off gas handling

More complex fuel system


B Spherical (Moss type). Full

secondary barrier

< 0,7 barg Reliable / proven

system

Boil-off gas handling

More complex fuel system


C Pressure vessel

(cylindrical shape with

dished ends).

No secondary barrier

required

< 10 barg Allows pressure

increase

Very simple fuel

system

Little maintenance

and easy installation

Space demand on board

the ship comparatively

large



IGF Code

6.9 Regulations for the maintaining of fuel storage condition

6.9.1 Control of tank pressure and temperature

6.9.1.1 With the exception of liquefied gas fuel tanks designed to withstand the full gauge

vapour pressure of the fuel under conditions of the upper ambient design temperature,

liquefied gas fuel tanks' pressure and temperature shall be maintained at all times within their

design range by means acceptable to the Administration, e.g. by one of the following methods:

.1 reliquefaction of vapours;

.2 thermal oxidation of vapours;

.3 pressure accumulation; and

.4 liquefied gas fuel cooling.

The method chosen shall be capable of maintaining tank pressure below the set pressure of

the tank pressure relief valves for a period of 15 days assuming full tank at normal service

pressure and the ship in idle condition, i.e. only power for domestic load is generated.

6.9.1.2 Venting of fuel vapour for control of the tank pressure is not acceptable except in

emergency situations.

This means that if you don’t have a Type C tank you must have some BOG

managements system onboard regardless if it is used or not21 September 2015 LNG as marine fuel –The market and Technologies15


Heat leakage will leak into the LNG…

Atmospheric storage

Gas evaporates

maintaining constant

temperature and pressure

0 bar(g) - 161˚C

Heat flux from ambient into the

cryogenic LNG

In a pressurized tank, heat leak into the tanks increasing

the liquid LNG’s pressure and temperature

0..3 bar(g) - 161..-142˚C

LNG Terminal Bunker barge Transport / storage



Tanks that cannot be pressurized

When bunkering with type A and B tanks:

• Maximum pressure in tank is limited to

0,7 bar(g)

• The bunkered LNG has to have a lower

pressure/temperature to avoid rapid

evaporation

• Depending on storage time, LNG saturation

temperature may be 3 bar(g) or even higher

• Bunkering hot LNG is like opening the lid of a

pressure cooker (while still boiling)

• Reducing the pressure from 3 bar(g) to

ambient pressure would result in 8 % of the

liquid has to be “boiled off” during bunkering

• Bunkering 200 ton during 1 hour would release

fuel adequate for 100 MW!



Base case: Pressurized tank

1. Cylindrical pressurized tank

2. Tank pressure created by PBU

3. MGE for gas consumers

4. Sufficient solution for low pressure

engines with back-up fuel

Glycol/water mixture

To engines

Pressure Build up Unit

(PBU)

Operating pressure: 5 bar(g)

Maximum pressure: 9 bar(g)

Main gas heater (MGE)


Simple and Proven Concept > bunkering of all LNG qualities is possible



Pressurized tank + centrifugal pump

1. Cylindrical pressurized tank

2. Gas pressure created by centrifugal

pump

3. LNG evaporated in MGE

4. Preferred solution for low pressure

engines without back-up fuel

5. Required solution for moderate and

high-pressure gas engines

• Second pressure control

method for low pressure aux

engines


To engines




Identical tank pressure → bunkering of all LNG qualities is possible



Pressurized rectangular tank + centrifugal pump

+ compressor

1. Rectangular pressurized tank


pump


4. Lower tank pressure might be

required

5. Further gas pressure management

might be required (gas

compressors)

6. Increased cost of steel structure


To engines




Higher complexity → bunkering of all LNG qualities without BOG

management is challenging



Atmospheric rectangular tank + centrifugal pump

+ compressor + BOG management

1. Rectangular atmospheric tank


pump


4. Gas compressor + heater to handle

NBOG

5. Increased cost of steel structure

or membrane tanks

6. Vapor return line for bunkering?

7. Atmospheric tanks will require

Gas Combustion Unit or

reliquefaction plant


To engines

Operating pressure: 0-1 bar(g)

Maximum pressure: 0-1 bar(g)


Maximum complexity – minimum possible tank pressure

→ bunkering of all LNG qualities is starts to be questionable



G1

M2

M1

LNGPac™ Simplified P&ID



8

5

2

2. Collapse the gas pressure in the tank

Ba

r(g

)

Time

3. Open the main filling line

5. Inert the piping with N2

4. Close the filling line valves

1. Check that on board bunkering

line is inerted and cooled down

Bunkering procedure



8

5

2

1. Open pressure control valve

Ba

r(g

)

Time

2. LNG flow by the hydrostatic pressure into the vaporizer

3. LNG is vaporized and gas is returned to the tank

Tank pressure increase



LNG as marine fuel –The market and Technologies

NG ENGINE TECHNOLOGIES



Engine Technologies

Dual – FuelLiquid and gaseous fuels

Low pressure gas

injection

Otto Principle

Bi-FuelLiquid and gaseous fuels

as an cocktail

Combine of Otto and

Diesel process?

Gas DieselLiquid and gaseous fuels

High pressure gas

injection

Diesel Principle

Gas onlyGaseous fuels only

Low pressure gas

injection

Otto Principle

Multi - Fuel Single Fuel

Lo

w P

ressu

reH

igh

Pre

ssu

re



Dual – Fuel technology

+ Simple fuel handling

+ Meet all existing and agreed

international emission regulation

+ High efficiency on high loads

+ Wide fuel flexibility

+ HFO/MDO/MGO/Crude

+ LNG/Ethane

+ Simple to arrange redundancy for

single failure on fuel supply system

• Requirements on gas quality

• Power reduction

Wide experience from marine and land

base applications (medium speed)

First experience from marine low speed

applications coming on-line 2016

Dual – FuelLiquid and gaseous fuels

Low pressure gas

injection

Otto Principle

Makers

Medium SpeedWärtsilä, MAN,

MAK, HIMSEN

Low SpeedWINGD (former

Wärtsilä)

High Speed ?



Gas Diesel technology

+ Wide fuel flexibility and tolerance

against various gas qualities



+ High efficiency on low loads

+ High power density

• Pressure must be built up to 300 bar

• Costly fuel handling system

• NOx not meeting IMO Tier 3

Experience from (marine and) land


First experience from marine low speed

applications coming on-line

Makers

Medium SpeedLand based only:

Wärtsilä MAN

Low Speed MAN

High Speed ?

Gas DieselLiquid and gaseous fuels

High pressure gas

injection

Diesel Principle



Gas only technology

+ High efficiency

+ Meet all existing and agreed

international emission regulation

+ Simple engine technology

+ High efficiency

• Redundancy for single failure is costly

• Sensitive for abnormality in fuel supply

system

• Requirements on gas quality

• Power reduction

Wide Experience from marine and land


Makers

Medium Speed

Rolls-Royce

Land based only:

Wärtsilä, MAN,

Himsen, GE

Low Speed NA

High Speed

(Mostly) none

marine applications:

CAT, Cummins,

MTU

Gas onlyGaseous fuels only

Low pressure gas

injection

Otto Principle



Bi-fuel technology

+ Certain fuel flexibility (cocktail)

+ Simple gas supply technology

+ Cheapest retrofit solution



• Performance?

• Emissions?

• Require a rather high amount of liquid

fuel (up-to 30%)

Wide Experience in China on in-land

waterways? Also on-line in Europe

Makers

Medium Speed NA

Low Speed NA

High Speed

Seems to be mostly

3rd party suppliers

doing retrofit

Bi-FuelLiquid and gaseous fuels

as an cocktail

Combine of Otto and

Diesel process?



Technology summary

The right choice for you

Bunker process

Fuel supply system

Engine capability

Fuel availability

Also when

something not

go according to

plan



Thank you

Tomas AminoffDirector, Vessel Integration

[email protected]

Documents

LNG as marine fuel –The market and Technologies · Oil price –Shale oil and gas production declining • As expected, onshore shale projects are taking the hardest hit on E&P