Environmental threats as a business opportunity' Environmental challenges for the maritime industry

1
Environmental threats as a business
opportunity.Environmental challenges for the
maritime industry

• Maritime Partenairiate, Sandefjord 8 October
• Hanna Lee Behrens
• Director, DNV Maritime Solutions

2
Content

• Environmental challenges environmental aspects
• Challenges on environmental performance
  expectations
• How to reduce costs / increase value

3
What is DNV Maritime Solutions?

• DNV Maritime Solutions is a leading management
  technology consultancy to the maritime industry
• DNV MS assists clients on all levels of
  operation from the engine to the board room -
  anywhere in the world
• DNV MS works with the worlds leading ship
  owners, charterers, financial institutions and
  other key maritime players

• Key competency areas are strategy business
  development, operational improvement,
  environmental and technical issues
• DNV MS currently have offices in Oslo, London,
  and Singapore
• DNV MS currently employs around 85 professionals
  worldwide, but is continuously looking to recruit
  talent

4
DNV Maritime Solutions What we do
5
and how we do it
6
Shipping is the primary means of global
transportation

• Over 90 of world trade is carried by the
  international shipping industry
• The world economy would come to a grinding halt
  without shipping
• Seaborne trade continues to expand, bringing
  benefits for consumers across the world through
  low and decreasing freight costs
• Shipping is the least environmentally damaging
  mode of commercial transportation today
• It is relatively small contributor to marine
  pollution if compared to land-based activities
• Shipping is more energy efficient than other
  forms of transport

7
Yet the potential for reducing environmental
effects from shipping is substantial

• The industry realises the need to take a
  pro-active part in addressing global
  environmental concerns
• If industry does not act, regulators outside
  shipping may set the shipping scene
• There is a growing expectation that shipping will
  contribute significantly to emission reductions
  per ship and from industry as a whole
• Related issues include fuels quality and energy
  efficiency of the ships
• Ship ballast water is one of the major threats to
  the worlds oceans
• Hazardous materials on board potentially present
  an environmental risk and occupational hazard to
  seafarers

8
Environmental management
9
Regulatory requirements to protect marine
environment are on the increase
FURTHER REDUCTION OF EMISSIONS, PARTICULARLY CO2
SHIPS-IN-OPERATION
EFFICIENT BALLAST WATER MANAGEMENT - TREATMENT
PERMITTING
ENERGY EFFICIENCY FUEL CONSUMPTION MANAGEMENT
GREEN PASSPORTS ENVIRONMENTALLY SOUND RECYCLING
ENVIRONMENTAL MANAGEMENT SYSTEMS (INCL. CSR AND
MARINE STEWARDSHIP)
NEW MATERIALS MODULAR DESIGN
NO BALLAST
NEW BUILDS
GAS FUELS RENEWABLE ENERGY SOURCES
NEW POWER SYSTEMS ENERGY EFFICIENCY INDEXING
ENVIRONMENTAL MANAGEMENT SYSTEMS (INCL. CSR AND
MARINE STEWARDSHIP)
2030
2040
2050
2010
2020
10
Client requirements coming up
11
The Global Picture Growth in shipping increases
the environmental impact
12
Environmental challenges are many
Noise
CO2, NOx, SOx, PM.
VOC
CFC
Recycling
Waste/Garbage
Sewage
Antifouling
Ballast water
Cargo oil / chemicals
13
Decisions made during the vessels design stage
can have significant implications for the
operations
Issue An exhaust sea-water cooling system was
introduced on four sister vessel without
assessment of environmental consequences at the
design stage. Cooling system scrubbed pollutants
from the exhaust gas resulting in a sooty
discharge. Although not toxic per se, it had a
potential to result in a notable impact on
recreational and amenity value of the receiving
waters due to its visibility and persistency.

• Impact
• Client was facing a ban from operating in the
  most sensitive areas
• Potential fines for incidental discharge were in
  the range of 150,000-1,500,000
• Costs for researching the issue and producing EIA
  documentation were in the range of 100,000
• Further cost of re-adjusting the system was
  estimated to be in the range of
  300,000-1,000,000 per vessel

14
Hazardous materials in vessels asbestos

• Issue
• Asbestos is identified on almost every vessel
  visited by DNV as part of Green Passport
  inventories and related services, even if not
  originally installed.
• Even if asbestos can be found onboard any vessel
  today, the most significant occurrences is most
  likely found on vessels built before mid
  eighties.
• Asbestos material seams to be used regularly
  during repair.
• Asbestos free certificate is no warranty.
• Asbestos has proven to cause asbestosis and is
  not possible to identify visually.

• Impact
• Clients are facing requirements from Australian
  authorities with regard to asbestos
  documentation. Without such documentation it
  might be difficult to operate in Australian
  waters.
• An Australian operator has been fined 180,000
  for failure to maintain a safe workplace by not
  properly managing the presence of asbestos on the
  ship.
• Some charters include asbestos free as part of
  charter party requirements. Off hire costs when
  asbestos is found on board after contract has
  started may be significant.

15
Reducing emissions to air SOx

• Issue
• SOx results from burning of sulphur-containing
  fuel and is causing smog and acidification
• The implementation of Sulphur Emission Control
  Areas restricts the burning of HFO and sets the
  sulphur limit to 1.5 or 6.0 g SOx/kWh
• Future SECAs will restrict the fuel sulphur
  content down to as low as 0.1

• Impact
• Changing fuel can be costly and fuel-switch
  systems are complicated to maintain
• Changing from HFO to MDO will result in a major
  fuel price increase
• Installing a scrubber can potentially remove 99
  of the exhaust SOx together with 80 of the PM
• - The capital cost for a retrofit scrubber is
  roughly 2.5 M per 10 MW
• - The operational costs are mainly due to the 1.5
  3 fuel penalty together with maintenance costs

16
Reducing the emissions to air NOx

• Issue
• NOx results from burning of fuel in contact with
  ambient air and is causing smog, acidification
  and eutrophication
• The implementation of NOx taxes (Norway 15 NOK/kg
  NOx) and NOx restrictions are resulting in a
  severe increase of annual costs for a ship owner
• With implementation of reduction technologies and
  reduction measures, the NOx emissions can be
  significantly reduced

• Impact
• Altering fuel injection and injection timing will
  slightly reduce the NOx
• Selective Catalytic Reduction (SCR) can
  potentially reduce the NOx emissions with 85 99
  
• Capital costs for an SCR varies between 45 and
  120/ kW, urea consumption is around 16 g /kWh
  (40 ) and the price (in Norway) varies between
  0.2 - 1.3 / L
• 30 70 NOx reduction is possible for wet
  solutions (Water fuel emulsion, Humid Air Motor,
  Wetpac)
• Capital costs for wet solutions varies between
  100 and 150 / kW

17
Alien species in ballast water discharge

• Issue
• The introduction of alien species through
  discharge of ballast water has been identified as
  on of the four greatest threats to the Worlds
  oceans
• All ocean going vessels need to have a Ballast
  Water Management System (BWMS) implemented
  onboard not later than 2016 if entry into force
  of IMO ballast water Convention.

• Impact
• BWMS manufacturers race to receive a Type
  Approval to get to the market
• The applicability of the different BWMS varies
  with type of vessel
• Without an approved Ballast Water Management Plan
  you might be rejected to enter a harbour, with
  adjacent costly delays
• The capital cost of a BWMS is depending on the
  ballast tank volume and the installation
  complexity and is estimated to
• Small (200 m3/h) 135 000 - 650 000
• Medium (2 000 m3/h) 250 000 - 2 300 000

18
Environmental management Risk or opportunity
Survey in December 2007, responses from 2,192
executives around the world27 CEOs or other
C-level executives.
19
The competitiveness of ship can be influenced by
several factors

• In general, vessel (or fleet) competitiveness is
  a measure of the ability to provide above average
  profits relative to comparable vessels (or
  fleets)
• The competitiveness of a vessel can be measured
  on a number of aspects, depending on your
  perspective.
• Examples of how competitiveness can be measured
  include
• Periodic operating costs
• Profits generated by the vessel
• Second hand value development
• Compliance with vetting requirements (current and
  future)
• Upgrading costs
• Operational characteristics (turnaround time,
  flexibility, loading/discharging efficiency, etc)
• Level of offhire
• Charter rates

20
The future of industry will be shaped by better
understanding of risks and opportunities
DO NOTHING SCENARIO
POTENTIAL COMPETITIVE LOSSES
POTENTIAL COMPETITIVE GAINS
STRATEGIC APPROACH
2020
2025
2030
2010
2015
21
Environmental excellence how to get there.
22
EnvEx helps you decide where you want to be
and how to get there
formulate where you want to be
understand where you are
decide how you want to get there
23
The drivers may differ with time and space, the
key success factors always remain the same
KEY DRIVERS
KEY ENABLERS
STRATEGY POLICIES
24
How to ensure a viable process ?
The EnvEx approach includes three main phases
POLICY
PLANNING
MANAGEMENT REVIEW
SOLUTIONS
CHECKING CORRECTIVE ACTIONS
IMPLEMENTATION
25
1) Tanker company Benefit Approach to support
Leadership objective

• Background
• Large international corporation providing crude
  oil and petroleum product transportation services
  had set an ambitious goal of becoming
  environmental leader in maritime industry.
• Corporate HSE-Q Department was in the process of
  preparing a position paper for the Board of
  Directors meeting to discuss the strategy and
  action plan for companys Environmental
  Leadership Programme.
• DNV was asked to provide specialist support in
  identifying available solutions and evaluating
  the options.

• Facts
• Largest operator of medium-sized tankers and
  offshore shuttle tankers
• Ships crude oil, petroleum products, and
  liquefied natural gas internationally
• fleet of 170 vessels with 29 new ships on order

26
1) Tanker company Benefit Approach to support
Leadership objective (continued)

• Impact
• Allowed client to draw on DNVs extensive
  knowledge and insight into the industry best
  practices, which include technical and
  management solutions for reducing impacts of the
  key operational aspects
• Provided client with a structured methodology to
  evaluate environmental benefits and
  implementation challenges of the potential
  preventive and mitigation measures
• The workshop approach chosen by DNV team ensured
  the sense of ownership by all participants for
  the environmental options/initiatives proposed to
  the Board of Directors discussion

27
2) Container company Energy Management
translated into environmental benefits (CO2)

• Background
• The Company was recently acquired by a third
  party and a series of projects have been
  initiated in order to look at potential
  improvements of the operations
• The discussions with DNV were centred around
  possible cost reducing activities, such as Energy
  Management
• DNV Maritime Solutions has carried out a number
  of EM projects in recent years for major
  international ship-owners where the principal
  goal is to help the client to save fuel and as
  such reduce both their cost base as well as their
  environmental footprint
• The approach involved interviews with
  stakeholders, ship visits and high level data
  analysis to capture and anchor key findings

• Facts
• 32 vessels currently under charter, down from 42
  in autumn 2007
• Around 2,000 round trips performed in 2007,
  transporting 1.5 million TEU
• Total volume of bunker used in 2007 almost
  200,000 tons totalling 80 M
• Bunkers constituted about 40 of the direct
  vessel costs

28
2) Container company Energy Management
translated into environmental benefits (CO2)
29
3) Tanker Risk approach to identify prioritize
environmental aspects
For each environmental aspect
Prioritization of environmental aspects
30
3) Tanker Risk approach to identify prioritize
environmental aspects
Ballast water
31
4) Tanker owner/operator Defining Strategy to
Reduce CO2 Emissions

• Conclusions
• There are no viable alternatives with the
  potential to replace petroleum based fuels nor to
  eliminate CO2 emissions from shipping in the
  short or medium term
• There is potential to significantly reduce
  emissions
• Energy Management is most attractive and least
  costly option in short term
• Out of alternative fuels the most attractive is
  natural gas option, however, retrofitting remains
  a challenge most suitable for new buildings
• Switch to MDO provides low CO2 reduction and
  very costly. Therefore it is a short-term
  solution rather than a long-term strategic
  decision
• Low biofiuel blends (5 or 20) provide low CO2
  reduction and will require a strong economic
  incentive to make this option feasible
• Complementing petroleum fuels with alternative
  sources of energy (solar, wind, hydrogen fuel
  cell) requires immediate and substantial
  investment into RD, but can potentially provide
  a significant contribution (particularly wind
  power at over 20) to reducing fuel consumption
  and CO2 emissions.

32
4) Tanker owner/operator Defining Strategy to
Reduce CO2 Emissions
Facts Major international oil and gas producer
with marine transportation and shipping
division Regular Fleet 144 oil tankers and 31
gas carriers of various size Total fuel
consumption of 1,300,000 Mt (including HFO, MDO
and LNG) per annum Spot Chartered Fleet 5300
individual charter voyages or approximately 1100
vessels of various size Estimated annual fuel
consumption of 4,200,000 Mt

• Background
• DNV Maritime Solutions was asked to provide
  assessment of available options in support of CO2
  Emissions Reduction Strategy development.
• Climate Change and GHG emissions are high
  priority issues for the Company with an overall
  target of 5 reduction of 1990 levels by 2010
• Understanding the current CO2 emissions reduction
  potential for marine transportation and shipping
  operations is essential
• Potential challenges requiring consideration
  include
• varied levels of control due to mixed fleet
  (owned, managed, chartered)
• broad range of alternative control options with
  different benefits and complexities of
  implementation
• need to establish approach that allows reduction
  of CO2 emissions without resulting in a
  commercial disadvantage.

33
Business potential and risk management
POLICY
PLANNING
MANAGEMENT REVIEW
SOLUTIONS
CHECKING CORRECTIVE ACTIONS
IMPLEMENTATION
34
Thank you for the attentionQuestions ?
35
(No Transcript)