Pathway to Carbon Neutrality in Marine FuelsSecure Site Ful… · LSMGO (low sulfur marine gas oil) to comply with new environmental regulations Saudi Arabia #10 Germany #7 Circle

STRICTLY CONFIDENTIALSEPTEMBER 2019

Pathway to Carbon Neutralityin Marine Fuels

Energy Infrastructure

Marine Money Week AsiaTuesday, September 24th - Wednesday, 25th September, 2019

2

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Shipping’s GHG Emissions

China #1USA #2

Russia #4

Japan #5

Shipping #6

OIL COAL LNG/GAS NUCLEAR RENEWABLE HEP

Power Generation By Source

India #3

< Shipping would be the sixth largest emitter of CO2 while supporting $6 trillion of global trade

< Container lines emit almost as much CO2 as Spain

< Shipping’s energy is almost exclusively oil-based, and moving from inexpensive HFO (heavy fuel oil) to premium-priced LSMGO (low sulfur marine gas oil) to comply with new environmental regulations

Saudi Arabia #10

Germany #7

Circle Size = Amount of CO2 Emissions

If Shipping Were a Country, it Would be the 6th Largest Emitter of CO2

Source(s): Clean Carriers.

3

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Regulation Timetable

1st Jan 2020 0.5% GlobalSulfur Limit Enforced

IMO CO2 Intensity Reduction Target40% of 2008 volumes

First IMO NOx restriction in North Sea and Baltic

IMO GHG reduction target50% of 2008 volumes

2020

2030

2021

2050

As regulations tighten, LNG is currently best placed for long term compliance


90% of liner fleet to use LSFO for compliance by 2020 Initial compliance implies a 50% increase in fuel

costs

LNG fuelled vessels are compliant for SOx, NOx, particulates and a 30% CO2 reduction.Traditional MGO and HFO vessels will be phased out. Delay does not ease the problem.

NOx emissions to be lowered to 70% of Tier II engine output. New Tier III engines or

emission reduction tech required

IMO EEDI. 30% reduction in CO2 efficiency (g/tonne mile) compared to 2000-10 built vessels

4

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

GHG Reductions Targets Carbon Emissions Compared with Low Sulphur Compliant Fuels

MAN ME-GI 2050 compliance

Evolution of Carbon Neutral Solutions

LNG Fuel (WtW) LNG Fuel (TtW)Ship Design and Replacement

(per teu basis)

LNG Fuel (WtW)Synthetic Drop-in

Carbon Neutral Fuels

Source(s): Clean Carriers, SEA/LNG-Thinkstep.

5

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Two Routes to Carbon NeutralityBut only one leverages existing infrastructure

*

* synthetic/bio- ammonia or methanolSource(s): Clean Carriers.

6

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Production of Synthetic LNG

Electrolysis Methanation LiquefactionH2O H2Synthetic

CH4

SyntheticLNG

Intermittent excess powerfrom carbon free

sources produces Hydrogen (H2)

Captured CO2 from industrial sources is combined H2 under

pressure and heat Produced Synthetic Natural Gas is cooled to -160oC

CO2

Compatible with existing vessels?

A blend of 25% Synthetic LNG = IMO 2050 from fuel alone

Engine

Storage

On-shore

Bunkering

Compatible with existing distribution network?

0 20 40 60 80 100

CO2

SOx

NOx

PM

% of HFO Emissions

Synthetic LNG vs. HFO

Potential excess H2

volumes sold into gas grid or fuel cells

He Oee-

Source(s): Clean Carriers, SEA/LNG.

7

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Production of Bio-LNG

Anaerobic Digestion Upgrading LiquefactionH2O Biogas Bio-LNG



CO2 is removed from the biogas, leaving biomethane

The resulting biomethane is cooled to -160oC


A blend of 25% Bio LNG = IMO 2050 from fuel alone

Engine

Storage

On-shore

Bunkering


CH4

0 20 40 60 80 100

CO2

SOx

NOx

PM

% of HFO Emissions

Bio-LNG vs. HFO

Source(s): Clean Carriers, SEA/LNG.

8

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Conventional Production of Methanol

Steam ReformerMethanol Converter Distillation

H2O

CH4CO + CO2 + H2

CH3OH

H2O

Natural gas is mixed with steam and passed over a

catalyst.

“Synthesis gas” is synthesised into methanol. However, water is present.

The remaining water is purged through distillation.

Methanol

0 20 40 60 80 100

CO2

SOx

NOx

PM

% of HFO Emissions

Methanol vs. HFO


Engine

Storage

New vessels required

On-shore

Bunkering


New infrastructure required

Source(s): Clean Carriers, IMO.

9

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Production of Synthetic Methanol

Electrolysis Methanol Converter DistillationH2O H2

Synthetic

Methanol

Potential excess H2

volumes sold intogas grid



Captured CO2 from industrial sources is combined H2 with

under pressure and heat

CH3OH

H2O

The remaining water is purged through distillation.


Engine

Storage

New vessels Required.

MAN MELGI

On-shore

Bunkering


New infrastructure Required

High HSEQ requiredCO

2

0 20 40 60 80 100

CO2

SOx

NOx

PM

% of HFO Emissions

Synthetic Methanol vs. HFO

Source(s): Clean Carriers, Methanex.

10

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Production of Synthetic Ammonia

N 2

Electrolysis Haber Process CoolingH2O H2SyntheticAmmonia

Potential excess H2

volumes sold intogas grid



Gases are cooled and ammonia liquified at room

temperature at 10 atm.Toxic and Corrosive

Uninsurable containment risk

Nitrogen from the air is combined with hydrogen at

400-450 Celsius and 200 atmover an iron catalyst.

Intensive energy consumption

N2

NH3

0 20 40 60 80 100

CO2

SOx

NOx

PM

% of HFO Emissions

Synthetic Ammonia vs. HFO


Engine

StorageNew vessels

Required.MAN plan duel-fuel

Main Engine

On-shore

Bunkering


New infrastructure required – estimated

$6 trillion*

*Source: Sailing on Solar - Environmental Defense FundSource(s): Clean Carriers, EDF.

11

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Appendix: Cost of Fuels to Consumers

12

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Fuel Type Cost (USD/mt) Cost (USD/mmbtu)

LNG 249TTF

4.79

HFO 366Rotterdam

9.38

LSFO 588Rotterdam

14.3

MGO 598Rotterdam

14.6

Methanol 315Methanex Provider

15.83

Biodiesel 1329.89GoodFuels provider

32.19

Ammonia 941.97* 41.87*

Hydrogen -- 117-267*

*Research estimate for price in 2050 – these fuels are not currently available. Ammonia: C-Job Naval Architects

Hydrogen: Navigant

Source(s): Platts, industry sources

13

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Appendix: Local Pollutants

14

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Local Pollutants

15%

Global NOx Emissions from Anthropogenic Sources

Shipping

NOx, SOx and particulate matter lead to:

o Lung tissue inflammation leading

to lung diseases

o Increased rates of cardiovascular

illness

o Increased viral and bacterial

pathogen susceptibility

o Hospitalizations

o Pre-mature mortality

13%

Global SOx Emissions from Anthropogenic Sources

Shipping

Source: IMO Third GHG StudySource(s): Clean Carriers.

15

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


The Human Cost of Local Pollutants

01

23

4

56

7

89

Sing

apor

e

Denm

ark

Neth

erlan

ds UK

Belg

ium

Irelan

d

Mal

aysia

Japa

n

Mau

ritiu

s

Port

ugal

Top 10 Countries by Early Deaths from Shipping Emissions per 100,000 population

Source(s): Clean Carriers, Corbett, (1) FT/Nature Communications. International Council on Clean Transportation

© GeoNames, HERE, MSFT, Microsoft, NavInfo, Thinkware Extract, WikipediaPowered by Bing

Share of Global Mortality from Shipping Emissions

37%

7%

6%

5%

3%

2%

400,000 mortalitiesEstimated per annum(1)

16

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Recent Air Pollution Fines & Lawsuits

Defendant Case Pollutants (SOx, NOx, PM) Result

China Navigation Co. Pte (2016) Violating US ECA (Non-compliant fuel) Ordered to pay $129,500

Volkswagen Emissions scandal -- Draft settlement with US $4.3bn Total costs estimate $20.10 bn

Exxon Mobil (2017) Violating Clean Air Act (US) 4464 tonnes Ordered to pay $20 million

Petrobras (2018) Violating Clean Air Act (US) 41.6 tonnes Ordered to pay $3.5 million

MSC (2018) Violating US ECA (Non-compliant fuel) Ordered to pay $350,000

Ionian Shipping & Trading Corp., Lily Shipping Ltd (2019) Violating US Caribbean ECA (Non-compliant fuel) Ordered to pay $3 million

Valero Energy (2019) Violating Clean Air Act (US) 491 tonnes Case on-going

Houston Refining (2019) Violating Clean Air Act (US) 140 tonnes Case-on going

Joko Widodo – President of Jakarta (2019) Coalition from Legal Aid 231 AQI* Case on-going

Source(s): industry sources

17

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Appendix: Bio LNG

18

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Production of Bio-LNG


19

0 104 146 220 230 242 149 179 215 0 176 240 191 191 191 152 148 130 219 230 196


Low RiskInfrastructure and Regional Pricing Dynamics Allow Effective Bunker Price Optimization

< LNG is a simple homogeneous product(1) and as a marine fuel provides no co-mingling contamination risk between suppliers as compared to different supplies of low sulphur compliant fuels

< Biodiesel can be used as a primary or secondary drop-in fuel to minimise GHG emissions from pilot fuel consumption (2), as available in the market

< Bunkering operations can be based on transparent operational and price optimization

< 20 bunker vessels are due for delivery by 2021. The projected further requirement of 10 more vessels by 2024 will be supported by CC

Location Index Hub Price

TTF (Netherland/Europe) HH (Henry Hub)

JKM (Japan/Korea) ME Pricing

Colombo2022-5Importer

Source(s): Affinity, Maersk Broker, (1)Thinkstep, (2)IEA

Documents

Pathway to Carbon Neutrality in Marine FuelsSecure Site Ful… · LSMGO (low sulfur marine gas oil) to comply with new environmental regulations Saudi Arabia #10 Germany #7 Circle