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Maritime Clusters and SSS. Merenduskonverents 2010. 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)

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maritime clusters and sss

Maritime Clusters and SSS

Merenduskonverents 2010

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

Presentation Overview
highly skilled people across the world
Highly skilled people across the world

300

offices

100

countries

9,000

employees, of which 82% have university degree

a trusted player in shipping
A trusted player in shipping

130

Authorised by 130 national maritime authorities

17%

DNV classed 17% of the world fleet orderbook in 2009 (in Gross Tonnes)

15.5%

15.5% of the world’s sailing fleet is to DNV Class (in Gross Tonnes)

summary
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
typical players
The maritime industry consists of

The ship industry that produces and repair ships.

The shipping industryproviding 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

Typical players
maritime cluster a definition

Company

Competitiveness

Long term

industry

performance

Country

Attractiveness

Maritime cluster – a definition

R&D & innovation

Competence & HR strategy

Public Policy

Cluster dynamics

Cluster dynamics

Tax & subsidies

Innovation pressure

Knowledge sharing

Financial Policy

Knowledge diffusion

Complementarity

Complementarity

Regulations

Labour market

Price & quality of resources

Satisfaction with location

public policies are the catalyst of the cluster

2

3

1

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

the country s ability to keep and attract world class companies determines its competitiveness
Primary characteristics

Regional legal-regulatory framework

Sustainable local economy

Stable political environment

Secondary characteristics

Highly developed infrastructure

Strategic geographic location

Company

Competitiveness

Internationalization

R&D and innovation

Competence and HR strategy

Public Policy

Long term

Cluster dynamics

Cluster dynamics

relative

Tax & subsidies

Innovation pressure

Innovation pressure

Financial Policy

industry

Knowledge diffusion

Knowledge diffusion

Regulations

performance

Complementarity

Complementarity

Labour market

Education

R&D

Country

Attractiveness

Price, quality, mobility & relevance of resources

Satisfaction with domestic location &

foreign attractiveness

The country’s ability to keep and attract world class companies, determines its competitiveness
attracting the most competitive companies

Company

Competitiveness

Internationalization

R&D and innovation

Competence and HR strategy

Public Policy

Long term

Cluster dynamics

Cluster dynamics

Tax & subsidies

relative

Innovation pressure

Innovation pressure

Financial Policy

industry

Knowledge diffusion

Knowledge diffusion

Regulations

performance

Complementarity

Complementarity

Labour market

Education

R&D

Country

Attractiveness

Price, quality, mobility & relevance of resources

Satisfaction with domestic location &

foreign attractiveness

…influence how countries compete..

Industrial regions of the world compete to attract international business companies by

  • Excellent infrastructure
  • Attractive tax regimes
Attracting the most competitive companies

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

…with different results

What companies want

  • Manufacturing moves to low cost locations
  • Leading companies attract other companies from the same industry
  • Increasing industrial clustering

Companies want to locate in attractive markets

european ecas a real challenge
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)

New ECA?

ECA

ECA

New ECA?

the baltic sea is slowly dying shipping partly to blame

Primorsk and

St.Petersburg (RUS)

Kilpilahti (FIN)

Tallinn (EST)

Gothenburg, SWE

Klaipeda (LIT)

Kaliningrad

Gdansk and Gdynia (POL)

Lübeck and Rostock (GER)

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
short sea shipping
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)
eca compliance is a ticket to trade
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
what are the options
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?
the sulphur leap in european ecas

1,5%

Now

1%

July ’10

0,1%

January ’15

The sulphur leap in European ECAs
low sulphur fuel
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)
regular fuel exhaust cleaning scrubber
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)
lng technically no obstacles and it is safe
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…?
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

LNG – The only solution for both SOx and NOx demands

547 TEU container vessel (5000 GT) Propulsion power 3960 kW

nox reduction equals taking 22 000 cars off the road
NOx reduction equals taking 22,000 cars off the road!

LNG fuel

Diesel fuel

Viking Lady’s reduction in NOx emissions compared to diesel operation

return on investment
Return on Investment
  • Applies for a typical general cargo ship
  • Assumes 2m Euro investment
  • LNG=450 USD in 10 years

Among the three choices LNG has the lowest life cycle costs for ECA operation

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

Conclusion … short sea shipping is the obvious start
slide31
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  • Ongoing research and development

Thank you