PESTEL-analysis - Observatory of European · PDF fileOverview PESTEL-analysis Wattenstart –Quick Scan 62 PESTEL-ANALYSIS Political Economic Social Technological Environmental Legal

PESTEL-analysis

61

Overview PESTEL-analysis

Wattenstart – Quick Scan

62

PESTEL-ANALYSIS

Political

Economic

Social

Technological

Environmental

Legal

INDEX

1. Political

1.1 Incentives

1.2 Subsidies

2. Economic2.1 Demand

2.2 Distribution

2.3 LNG pricing

2.4 Economic impact

3. Social3.1 Drivers/Blockers

4. Technological4.1 Options

4.2 LNG characteristics

5. Environmental5.1 Waddenzee Area

5.2 Impact LNG

6. Legal6.1 Background information

6.2 Future Regulations

7. PESTEL Summary

POLITICAL

The Green Deal LNG incentive’s goal is to implement LNG fuel in inland

and short sea shipping; currently the incentive is in the start-up phase

Energy is one of the nine ‘Topsectoren’ of

the Netherlands

The vision of Topsector Energy is that

energy innovation is essential to meet the

green- and growth-targets. One of the short-

term -2020- goals is to reduce the costs for

reducing CO2-emissions.

Furthermore, the Netherlands is profilating

itself as ‘Gasland’, and the GATE LNG

Terminal Rotterdam is one of its flagships

64

1.1 POLITICAL-INCENTIVES

Source: Rijksoverheid, Energy Valley

In June 2012 the foundation LNG

Tr&D, Deltalinqs, Energy Valley and

the Port of Rotterdam have signed the

Green Deal LNG with minister

Verhagen. Goal is to make inland

shipping, fishery and short-sea

shipping more sustainable by

implementing LNG as fuel

Important aspects in the current

phase of the Green Deal are:

Creating a launching customer

base

Creating a legal framework for

the implementation

Preparation of economic

developments


Both EU-based and national-based subsidies are available for LNG in

shipping and trucking sector

65

1.2 POLITICAL-SUBSIDIES

Source: Port of Rotterdam, Waddenfonds, Dagblad van Transport, Agentschap NL

EU subsidies

The Port of Rotterdam has recently

recieved 2 subsidies: one for building

bunkering facilities (EUR 34,3 million) and

one for doing research concerning LNG

(EUR 40 million, together with project

partners along the Rhine)

Waddenfonds

Waddenfonds is established to give a

sustainable and qualitative impulse to the

ecology and economy of the Wadden area.

Rederij Doeksen has recently done a

subsidy request in vain MIA/Vamil

Agentschap NL and the Ministry of

Economic Affairs have subsidies for

innovative, environment-friendly

investments. Both for trucks and for inland

ships (B1031) are subsidies and regulations

available

CCR

The Central Commision for the Rhine has

recently announced that there will come an

online database for LNG-projects in the

European inland shipping. The Greenrhine

and the Greenstream are two of the four

planned inland LNG ships of Interstream

Barging


ECONOMIC

The global LNG market exists for almost 50 years; Europe currently has

21% percent of the world demand of LNG and the demand is growing

67

2.1.1 ECONOMIC – DEMAND

The world LNG demand in 2012 is estimated at 239

million ton

This demand is estimated to be between 450 - 500

million ton around 2025-2030

Japan has the largest LNG demand, followed by

South Korea & America

Most of Japan’s 87.3 million ton consumption is

used to fuel their power plants

The global LNG market is projected to tighten in the

next years, mainly due to India’s and China’s

increased demand

Japan’s demand has dropped 2,7% over the first

half of 2013, mainly due to new coal-fired power

stations

Source: Ernst & Young, BG-Group, Wall Street Journal, Nippon, RREEF


Global LNG demand 2013 prognoses

23%

1%

50%

9%

17%

Other

Europe

Other Asia

America

Japan, South Korea & Taiwan

Europe has a total LNG import of 69.300.000.000m3 (21% of world

total); the Netherlands only imports 800.000.000m3

68

EU LNG Import Capacity (Total: 69,3 billion m3)

LNG facilities per country

Though number 5 of the LNG importing European countries, the

relative size of the Netherlands is only minor

2.1.2 ECONOMIC - DEMAND

Source: BP Statistical Review of World Energy 2013.

20%

15%

11%

10%

Spain

Turkey

France

United Kingdom

Netherlands1%

Other12%

Italy

31%

1

6Spain

43

UK

Sweden

Portugal

Greece

Netherlands

Belgium

ItalyFrance

2

13%25%

Belgium

Trinidad

Nigeria

Norway

13%

13% 13%

Egypt

13%

Qatar

13%Algeria

NL LNG Import Capacity (Total: 0,8 billion m3), by origin


There are several LNG terminals in Europe; the closest terminal to the

Waddenzee is the GATE terminal in Rotterdam

69

2.2.1 ECONOMIC – DISTRIBUTION

Source: GATE, Other sources

For the Waddenzee region, the nearest LNG terminals are

located in Rotterdam (Netherlands) and Zeebrugge (Belgium)

There have been plans in 2009 to build an LNG terminal in

Eemshaven (Netherlands), this would be ideal for operations in

the Waddenzee

These plans were cancelled due to lack of basis and capacity

growth in other parts of Europe

An increase in demand in the Waddenzee region will initiate

investments thereby lowering the transportation costs

(proposed) LNG terminals in Europe (2011)

Import terminal

Small scale LNG production/

storage accessible for ships

Export terminal


The distribution costs of LNG are high compared to HFO and MGO, but

can be significantly lowered by a higher demand

70

2.2.2 ECONOMIC – DISTRIBUTION

Source: DMA, MAN, YAG-EVI, Jippe van Eynatten

(Expected) Distribution costs LNG against HFO/MGO

[EUR per ton]

LNGHFO/MGO

10

High demand_100

Central_160

Low demand_250

Mainly overhead expenses

The costs strongly depend on the

demanded volume

Large incentives can cluster the

demand, lowering the costs

Hence, “movers” can influence the

business case

Most important costs in the distribution chain

Transport InventoryOperations&

Maintenance

Marketing&

Sales


YAG-analysis has shown that the business case strongly depends on

the fuel prices; however, the prices are very uncertain

71

2.3 ECONOMIC – LNG PRICING

Source: DMA, TNO, MAN, SSPA, EY, PWC, YAG Analysis

Low

Central

High

LNG price expectations (including distribution costs)

DMA

TNO

MAN

SSPA

Ernst&Young

PwC

400 450 500 550 600 650 700 750

The fuel prices are very important in this business case,

unfortunately, the expected price range is wide. The fuel prices

of MGO and LNG are accounting for 77,2% of the total variance

in the IRR of an LNG-adoption Investment

The business case has an good IRR if the

LNG price is between 65 and 70% of MGO

Current MGO prices are expected to follow the

crude oil price

Current MGO prices fluctuate a lot; 75$/ton

price difference within a month


LNG adoption potentially has a major positive impact on the local

economy

72

2.4 ECONOMIC - LNG IMPACT

Source: PWC – Economic impact of small scale LNG

Investment in new ships/retrofits

Investment in LNG-infrastructure

Investments in BIO-LNG

Diverse fuel mix causes

downward pressure on fuel prices

Employment Rate Gross Domestic Product

[# Job Years] [million EUR]

This is the projected impact of LNG adoption on the Dutch economy.

Different price forecast methods result in the Low, Med & High scenario’s;

the “Med” scenario is most likely to occur.

8.000

3.700

Low

11.000

Med High

3,4

2,7

1,1

Low HighMed


SOCIAL

74

There are four major social influences for LNG adoption: Green

image, Dependency, Lack of Knowledge & Innovation Incentives

3.1.1 SOCIAL – DRIVERS/BLOCKERS LNG

Drivers /

Blockers

LNG

GREEN IMAGE

LACK OF KNOWLEDGE

DEPENDENCY

INNOVATION INCENTIVES

The Netherlands is dependent on a

handful of suppliers, with Qatar as

main supplier

Only 34% of Dutch SME’s act conform

Corporate Social Responsibility

principles

The GATE terminal is one of the

flagships of the strategy to promote the

Netherlands as the gas-roundabout of

Europe

Since LNG usage in the maritime

industry is relatively new, shipping

companies might lack the knowledge

for LNG adoption


Dutch entrepreteurs do not strive for CSR as much as they claim to;

the Netherlands are dependent on a small amount of suppliers

75

Energy Dependency

Research shows that 79% of Dutch

entrepreneurs say that in their companies

all possible measures are taken

concerning Corporate Social

Responsibility, while the same research

states that 45% of the companies does

nothing about energy savings, waste

prevention and green power

The European (and Dutch) LNG market is dependent on only a

small amount of supplying countries: mainly Qatar, Algeria and

Russia

GATE terminal has long-term contracts with 5 big European

energy companies: Dong Energy, Econgas, RWE, Eneco and

E.ON


Source: MVO Nederland

Research shows that 68% of Dutch

entrepreneurs have heard of the term

‘Corporate Social Responsibility’

(Maatschappelijk Verantwoord

Ondernemen), while only 34% of the

respondents state they have the feeling

that they act following the CSR principles

Corporate Social Responsibility

34%

68%

45%

79%

34%


Most shipping companies have sufficient knowledge about LNG; there

are innovation incentives

A major social blocker is the fact that companies are

not aware of LNG and its potential or do not possess

sufficient knowledge on the subject

The ship companies of the Waddenzee indicated that

insufficient knowledge is a notable blocker for the

implementation of LNG

This issues needs to be tackled before LNG will be

used on wide-scale, because investments in facilities

will only be made if there is sufficient demand

76

Lack of Knowledge Innovation Incentives

Even though there are initiatives for LNG

adoption, further implementation strongly

depends on the business case.


Source: GATE, Teso, Doeksen, Wagenborg, AG Frisia, AG Ems, Spiekeroog

Operational since September 2011

Capacity of 12 billion m3 per year

Initiated by Gasunie and Vopak


2

2

1

3

2

2

Unclear Regulations5

low

1

Inertia

3

high

Insufficient Knowledge

mid

Pre-financing obstacles

6 Lack of Infrastructure

1 1

3

2

TECHNOLOGICAL

Different methods of powering the ship can be distinguished;

bunkering options differ in capacity and feasibility

4.1.1 TECHNOLOGICAL - OPTIONS

Pilot LNG

This engine can run on both diesel

and LNG. Obviously, these should

be stored in different tanks

When using LNG, a little diesel is

used as ignition since diesel ignites

Dual Fuel

This engine can run on both diesel

and LNG. On average 60-80% LNG

is used

The advantage of pilot LNG/dual fuel

above mono LNG (only LNG) is that

diesel can be used as back-up fuel

Gas - electric

The most recently developed

technique in shipping

One or more gas engines drive

generators which produce electric

power

The electricity is transformed into

motion by electric motors

Bu

nke

rin

g o

pti

on

s

Vessel-to-vessel (>100m3)

Use of feeder vessel, either during

sailing/anchoring or during

(un)loading of the cargo, which is

moored alongside the vessel that

requires the LNG

High loading rates

Restricted by heavy weather and

tides, among others

Truck-to-vessel (<200m3)

Attractive to early adaptors

(infrastructure not developed

sufficiently)

A truck usually carries 40-80m3 of

fuel

If more LNG is required for a vessel,

one of the other options should be

considered

Shore-to-ship

Tailor-made installation (tanks may

vary from 20m3 to 100.000m3) and

suitable for specific situations (e.g.

liner shipping with short turnaround

times)

Restricted in flexibility, i.e. tanks must

be located near berth which is not

always possible due to lack of space

or on-going terminal activities

En

gin

e ty

pes

Capacity Feasibility Capacity Feasibility Capacity Feasibility

78Source: lng24; DMA; PwC


Retrofitting is the operation of adjusting/replacing a ship’s engine,

however, not all ships are suitable for retrofitting

4.1.2 TECHNOLOGICAL - OPTIONS

Retrofitting

Advantages

Other fuel can be used, without

having to purchase a completly new

ship (maximum use of existing

equipment)

Latest technologies can be applied

Cheaper fuel can be used (profitable

in the long-term)

Disadvantages

Not all ships are suitable for

retrofitting

A retrofit ship is often less efficient

than a new-built ship

Not only the engine needs to be

adjusted/replaced, also a new (and

bigger) tank is needed

Options

In some cases the engine needs to

be adjusted or replaced

The operation varies from placing a

tank on top (liquid bulk vessels) to

completely replacing the rear-end of

the ship

Container ship RoRo Coastal tanker79

Source: DMA; PwC


1.400

1.800

1.600

1.000

1.100

1.1001.400

1.800

1.700

+33%

Costs Retrofit[x €1000]

+30%

MGO

+33%

5.100

Surcharge

new build[x €1000]

LNGHFO

700

3.700

LNG

3.2002.300

MGO

500

HFOMGO

600

HFO

3.400

LNG

4.800

LNG has the potential to be a highly efficient fuel; nevertheless,

methane slib can reduce the engine efficiency

4.2 TECHNOLOGICAL - LNG CHARACTERISTICS

Low_40%

High_50%

Low_45

High_55

Calorific value [GJ/ton] Engine efficiency [%]

106%100%

Central_116%

Low_91%

Fuel efficiency [propellent energy

per ton; HFO = 100]

Central_50

Methane slip

What are the risks?

Methade slip in the engine does not

only cause a reduction in efficiency,

but causes polution

Methane is >20 as harmfull than CO2

as Greenhousegas; too much

methane slip can even eliminate the

potential gains of CO2 reduction

How to reduce it?

In high-pressure systems almost no

methane slip occurs

Computer aided design of the

combustion chamber

What is it?

Unburned methane that does not

participate in the combustions

When the pressure in the cylinder is

too low, not all methane in the gas

(LNG) combusts

MGO

Source: gcaptain; glmri; dnv

46% 46%

High_178%

LNG

41

HFO

43

LNGHFO

80


MGO

46%46%41 43

LNGHFO MGO

ENVIRONMENTAL

The Waddenzee Area is a Particularly Sensitive Area, its wide

ecosystem makes it part of the UNESCO World Heritage list

82

5.1 ENVIRONMENTAL – WADDENZEE AREA

Source: common Waddenzee secretariat, Waddenzee World Heritage

More than 10.000 species of plants and animals live in the Waddenzee, from

microscopic organisms to fish, birds and mammals

Waddenzee is a ‘tanking’ station for the 10 – 12 million migratiing birds that

spend a short or longer period in the Waddenzee area

This gives the Waddenzee invaluable importance worldwide, that is one of the

reasons the Waddenzee is part of the UNESCO World heritage list since 2009


The Waddenzee is marked as a Particularly Sensitive Sea Area (PPSA),an area

that needs special protection through action by IMO

At the 2010 Waddenzee Conference an evaluation report was represented to

develop a vision for PSSA

This vision includes key changes with regard to IMO and EU shipping policy,

followed by a review of ‘expert’ opinion focused on the issues relating to PSSAs

For further development of the vision for the Waddenzee PPSA there will be

central input for the next Trilateral Governmental Waddenzee Conference in

2014

LNG can be seen as a ‘bridging’ fuel between conventional

fossil fuels and renewables

83

5.2.1 ENVIRONMENTAL – IMPACT LNG

Source: GasUnie

Conventional

Fossil fuels

Renewables

LNG

LNG can be considered as a ‘’bridging’’ fuel, it is a cleaner fuel than diesel for road freight and shipping, and has strong growth potential

However, it’s not a renewable fuel because it is from a exhaustible source. There are already future plans, Gasunie, Energinet (Denmark)

and Fluxys (Belgium) have set themselves the target of achieving CO2-neutral gas provision in 2050

CleanHeavy Polluting

Exhaustible

Unexhaustible


The combustion of LNG is less harmful to the environment than

conventional fuels

84

5.2.2 ENVIRONMENTAL – IMPACT LNG

Source: Port of Rotterdam, MAN (Diesel&Turbo)

0

10

20

30

40

50

60

70

80

90

100

Short Sea(MDO)

Port Ship(EN590)

Inland Ship(EN590)

NOx

SOx

PM10

Research showed the comparison of annual

air pollutant emission between diesel and LNG

engines for 2011-2015. The burning of LNG

reduces the emission of NOx, SOx and PM10

for inland- and seagoing vessels

A lower carbon content of LNG compared to

traditional ship fuels enables a 20-25%

reduction of CO2 emissions. Any slip of

methane during bunkering or usage needs to

be avoided to maintain this advantage

Reduction with LNG

LNG

rel

ativ

eto

Die

sel

= 100 %


LEGAL

Regularitory institutions - such as CCNR and EBU - are stimulating

LNG implementation

86

6.1.1 LEGAL – BACKGROUND INFORMATION

Source: dagblandtransport, CCR

The Central Commission for Navigation on the Rhine (CCNR, Dutch:

CCR, German: ZKR) is the institution that regulates all Rhine navigation

The CCNR develops the law of inland navigation

CCNR will soon release an online database of the LNG projects for

European inland shipping to stimulate the use of LNG

CCNR has granted permission to operation on the Rhine with eight

vessels using LNG

Their currently focusing on the development of technical and business

requirements for the use of LNG

The European Barge Union (EBU) was founded to deal with all

questions arising out of the development of the inland navigation

industry and inland watertransport

They argue for an enlargement of the LNG ships, which have made use

of the pilot projects described in CCR-ROSR (Reglement Onderzoek

Schepen op de Rijn) and UNECE (United Nations Economic

Commission for Europe).


Legislation on LNG is relatively new; safety laws and guidelines are

currently planned and implemented

87

6.1.2 LEGAL – BACKGROUND INFORMATION

The Netherlands had planned to increase

excise duty for LNG for trucks on 01-01-

2014, but in the recent ‘Energie-akkoord’,

it was agreed this increasing will not apply

in the near future

The tax will rice from 18,6 cents to 31

cents per liter

The cause of this increase is the linked

excise tax from LNG and LPG

Currently this is only for trucks, however,

application on shipping would change the

business case

Source: PwC, GL, Hans Koenders (Dorhout Advocaten), Bas Dijkhuizen

(logistiek.nl)

Increasing Excise TaxesLNG Fueling Stations Guideline International Safety Code

The PGS 33-1 ‘LNG fuelling guideline

exists since June 2013 and describes

the latest technical knowledge on

design, construction and functioning of

fueling stations

PGS is intended for companies

working wit dangerous substances

Implementation of the guidelines is

doubted since it is not an condition for

working with LNG

The IMO Sub-Committee on Bulk and

Liquid Gas (BLG) is working on an

international code of safety for Gas-

Fuel Ships (IGF-Code)

This code is planned to enter into

force at the same times of the 2014

revision of SOLAS (the international

convention for the safety of life on sea)

IGF will be published in time for ships

using LNG as ship fuel to meet the

strict ECA emissions requirements


The new regulations in the ECA’s will restrict SOx and NOx emissions

even further, resulting in a new demand for alternative fuels

88

6.2 LEGAL – FUTURE REGULATIONS

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

1

2

3

4

5

Maximum SOx emission in ECA

Is lowered to 1.0%

Maximum SOx emission in ECA

Is lowered to 0.1% (1 Jan 2015)

MAXIMUM SOx EMISSION Sulphur content [%]

= General maximum

= Maximum in ECA’s

Now

In 2020 the world wide sulphur emission

is further restricted

The ECA’s are already much stricter,

currently there is an maximum of 1.0%.

In 2016 this will become 0.1%

The NOx emissions will also be lowered

Other fuel types such as HFO +

Scrubber or MGO (+scrubber) are most

likely more expensive

Sulphur emission control area (SECA)

Maximum NOx emission in ECA is set

from 14.4 g/kWh to 3.4 g/kWh


The economic issues are subject to the most uncertainty, but are

expected to have the biggest impact on the implementation of LNG

89

PESTEL SUMMARY

Political Economic Social Technologic Environmental Legal

Green Deal

Subsidies

Taxes

LNG Price

MGO Price

Infrastructure

Distribution

costs

CSR

Knowledge

Dependency

Engines

Bunkering

Calorific

Value

SECA

Emissions

National

Regulation

Interational

regulations


* Uncertainty

** Impact

* **

Documents

PESTEL-analysis - Observatory of European · PDF fileOverview PESTEL-analysis Wattenstart –Quick Scan 62 PESTEL-ANALYSIS Political Economic Social Technological Environmental Legal