New Americas era For LNG Fuel VesselsNew Americas era For LNG Fuel Vessels Green Tech Conference...

New Americas era For

LNG Fuel Vessels

Green Tech Conference

Hyatt Regency

Vancouver, BC

29 - 31 May 2013

John Hatley PE

LNG Initiatives

Americas VP Ship Power

Wartsila North America

Cell 281 221 4209

john.hatley@wartsila.com

Agenda

What ?

Why ?

Compelling Economic Savings

5 Drivers set Investment Clock

How ?

Integrated Gas Solutions

LNG Availability

Conclusions

Recent Market Signals

The Future Decade for Gas

The Opportunities

Target Markets

Agenda

What ?

Why ?

Compelling Economic Savings

5 Drivers set Investment Clock

How ?

Integrated Gas Solutions

LNG Availability

Conclusions

Recent Market Signals

The Future Decade for Gas

The Opportunities

Target Markets

Transportation Fuels

4 © Wärtsilä

Source: Wall Street Journal, Wednesday March 6, 2013 page B1

@ 0.2% …Natural gas has most growth potential

Annual Fuel Use : Gasoline Gallon Equivalents

5 © Wärtsilä

0 20 40 60 80 100 120 140 160

Thousands

Scale thousands gallons… where’s marine?

Sources: Clean Energy, Annual Report 2011, and AARR adapted by JFH

Marine Market Development Target

Scalability

a large number of small lot consumers ...

Prefer a small number of large lot consumers

Harbor Tug

7 © Wärtsilä

Annual 268,600

Gasoline Gallon Equivalent GGE

Ferryboat

8 © Wärtsilä

Annual 664,000

Gasoline Gallon Equivalent GGE

Offshore Supply

9 © Wärtsilä

Annual 1,072,000

Gasoline Gallon Equivalent GGE

Mississippi Towboat

10 © Wärtsilä LDC

Gas Forum LA CA

October 2010 John

Hatley Americas VP Ship

Power

Annual 2,058,000

Gasoline Gallon Equivalent GGE

Great Lakes Bulker

11 © Wärtsilä LDC

Gas Forum LA CA

October 2010 John

Hatley Americas VP Ship

Power

Annual 2,866,000

Gasoline Gallon Equivalent GGE

Coastal Cruise

12 © Wärtsilä LDC

Gas Forum LA CA

October 2010 John

Hatley Americas VP Ship

Power

Annual 6,801,000

Gasoline Gallon Equivalent GGE

Container Ship

13 © Wärtsilä LDC

Gas Forum LA CA

October 2010 John

Hatley Americas VP Ship

Power

Annual 28,090,000

Gasoline Gallon Equivalent GGE

Annual Fuel Use : Gasoline Gallon Equivalents

14 © Wärtsilä

Marine… scale millions… not thousands !

0 5 10 15 20 25 30

Millions

Sources: Industry sources, adapted by JFH

Annual Fuel Use : Gasoline Gallon Equivalents

15 © Wärtsilä

Marine… scale millions… not thousands !

0 5 10 15 20 25 30

Millions

Sources: Industry sources, adapted by JFH

Agenda

What ?

Why ?

Compelling Economic Savings

5 Drivers set Investment Clock

How ?

Integrated Gas Solutions

LNG Availability

Conclusions

Recent Market Signals

The Future Decade for Gas

The Opportunities

Target Markets

Logic… Economics !

03/06/2013

LNG Logic… Economics !

LNG provides compelling savings…

Business Cases demonstrate

Payback screen 2… 4+ years...

Strong cash flows… Higher ROA, ROE

Natural Gas Henry Price Forecasts

18 © Wärtsilä

EIA forecasts … prices recede… = gas bargain …

What’s Natural Gas ?

Methane has the highest hydrogen to carbon ratio = lowest CO2.

Butane

[C4H10]

10:4

(250%)

Propane

[C3H8]

8:3

(267%)

Ethane

[C2H6]

6:2

(300%)

Methane

[CH4]

4:1

(400%)

Natural gas a mixture of hydrocarbon gases associated with

petroleum deposits, principally methane.

MGO 1.86:1 (186%)

Gas Training Merchant / Mika Ojutkangas 19

How clean ?

CO2

NOx

SOx

Particulates DF Natural Gas

Engine

Diesel

Engine

0

20

40

60

80

100

Emission

values [%] -25%

-85%

-99%

-99%

LNG

provides

significant

emission

reductions

versus

traditional

diesel

engines

5 US Game Changers

Source:http://www.google.com/imgres?imgurl=http://www.canadiansailings.ca/canadiansailings/portals/0/April_13/emissions_area_map.jpg&imgrefurl=http://

EIA March 2010 Shale Gas Plays Lower 48 States

www.lngoneworld.com, www.bunkerworld.com, LR Fairplay

US centuries shale gas supply

Natural Gas bargain

Emissions Control

Area 2012

EPA Engine Emissions

EPA Fuel Standards

5 gas drivers …shale supply + bargain prices + 3

EPA mandates = set Investment Clock

Agenda

What ?

Why ?

Compelling Economic Savings

5 Drivers set Investment Clock

How ?

Integrated Gas Solutions

LNG Availability

Conclusions

Recent Market Signals

The Future Decade for Gas

The Opportunities

Target Markets

C. Dual-Fuel Main engine

A. Storage tanks

B. Evaporators

C B

A

D. Dual-Fuel Aux engines

D

E. Bunkering station(s)

F. Integrated control system

E

F

Go For Gas - G. Tirelli,

Wärtsilä

23 © Wärtsilä

LNGPac

Wartsila single source…complete engineered

package solutions minimize installation and

operational risk for assured performance

LNGPac

Bunkering procedure

8

5

2

1. Collapse the gas pressure in the tank

Ba

r(g

)

Time

Glycol/water

mixture

To engines

2. Open the main filling line

3. Inert the piping with N2 (NOT shown)

4. Close the filling line valves

Bunkering

Station

24 © Wärtsilä LNGPac Customers Presentation

Tank pressure increase

8

5

2

1. Open pressure control valve

Ba

r(g

)

Time

Glycol/water

mixture

To engines

2. LNG flow by the hydrostatic pressure

into the vaporizer

3. LNG is vaporized and gas is returned to

the tank

PBU

25 © Wärtsilä LNGPac Customers Presentation

Normal operation 1. The “stop valve” and “master valve are

opened (double block valves with bleed

in between)

Glycol/water

mixture

G1

M2

M1

2. LNG is forced by the tank pressure

through the product evaporator and

instantly evaporated. Gas flows to the

GVU

Product

evaporator

Stop valve and master valve

26 © Wärtsilä LNGPac Customers Presentation

5 March 2013

03/06/2013

3 LNG plants each at 250K tons/yr

Geismar, Jumping Pond, & Sarnia…Online 2015

Source: http://www.bizjournals.com/houston/news/2013/03/05/shell-planning-lng-units-in-us-canada.html

Supply security and price stability = certainty

…certainty breeds investment

Geismar LNG Small Scale Facility

03 June 2013 28 © Wärtsilä

Geismar … Online 2015… LNG @ 250K tons/yr

Sarnia LNG Small Scale Facility

03 June 2013 29 © Wärtsilä

Sarnia…Online 2015… LNG @ 250K tons/yr

Jumping Pound LNG Small Scale Facility

03 June 2013 30 © Wärtsilä

Jumping Pound…Online 2015… LNG @ 250K tons/yr

Agenda

What ?

Why ?

Compelling Economic Savings

5 Drivers set Investment Clock

How ?

History Adoption

Integrated Gas Solutions

Conclusions

Recent Market Signals

The Future Decade for Gas

The Opportunities

Target Markets

CNOOC July 2012

6500 HP Tugs

2 @ 6L34DF LNG engines

Mechanical Drive

Twin Z Props

LNG Fuel ~ 50 m3

03 June 2013 32 © Wärtsilä

2 LNG tugs ordered June 2012... to work LNG Terminal

Guangdong Province... Delivery 1st tug August 2013

12 November 2012

25 Year Milestone with 2,000 gas Engines…

Millions Operating Hours…Tens Millions Horsepower

= proven gas technology & LNG system

3 December 2012

03/06/2013 34

Americas early adapter… CAPEX $180 Million + 2 options

First LNG fuel ferry for Americas

4 December 2012

03/06/2013 35

Americas early adopter … CAPEX $380 Million + 3 Options

6 December 2012

03/06/2013 36

Harvey Gulf were 4 LNG fueled supply boats … now 5…

CAPEX $290 Million + options

4 + 1

15 January 2013 Viking Grace …

3 June 2013 37 © Wärtsilä

Length: 214.0 m

Breadth: 31.8 m

Speed 22 knots

Passengers: 2800

Cabins: 880

In service: 2013

Shipyard: STX Finland Oy

Ship Owner: Viking Line

LNGpac Tanks

2 @ 200m3 each

Safe, Clean, LNG Cruise Ship … CAPEX $320 Million

16 May 2013

03 June 2013 38 © Wärtsilä

STQ orders 2 Dual Fuel LNG ferries at Davies... Joins earlier larger

DF ferry ordered at Fincantierri ... #2, #3 LNG ferry for No Am.

Keeping Count ?

THE NUMBERS

39 © Wärtsilä

1st Week December + prior during 2012…

Americas marine segment committed to LNG fuel …

the early adopters initiated a new gas ERA

Over $ 1 Billion CAPEX

24 May 2013

03 June 2013 40 © Wärtsilä

Confirmation... poised for early transition to LNG fuel...

availability supply meets owner demand

28 May 2013

03 June 2013 41 © Wärtsilä

17 May Houston... Wartsila introduced LNG early adopters as

interested guests for pre-launch....largest SIGTTO meeting ever !

42 12.3.2012 LNG_related_traini

ng_02en / Turku

Training Centre

Gas safety training

Engine training

LNGPac training

Engine training course as

with “normal” Ship power

project

New LNGPac course

New Gas safety

training course

Wartsila LNG Training Fort Lauderdale

LNG as Marine Fuel New LNG

training course

Target group:

Shipping company

management

Ship

management Ship crew Engine

crew

Deck crew

Gas Engine References

Land & Sea segments…hundreds installations…

CAPEX $30 Billion… it’s real & proven gas technology

Power

Plants

52 sites

155+

engines

Began

1997

Merchant

LNGC

•92 Vessels

•370+

engines

Conversion

s

Offshore

PSVs/FPSOs

•19

vessels

•93+

engines

•Began

1994

Cruise

and Ferry

LNG ferries

•1+1

vessels

•8 engines

•Began

2013

Navy

Coastal Patrol

•Coming…

Drivers = Decade Shift to Gas

03 June 2013

Mid decade market tipping point

Source: US EPA web sites, Hatley capture various sources

Geographic emissions bubble encapsulates US/Canada

Tight sulfur limits stress supply

After treatment burdens diesels

Paradigm shift to gas 1st on economics 2nd on emissions

Early adopters moving ahead… soon early followers !

Mandated Emissions & Fuel Restrictions

Agenda

What ?

Why ?

Compelling Economic Savings

5 Drivers set Investment Clock

How ?

Integrated Gas Solutions

LNG Availability

Conclusions

Recent Market Signals

The Future Decade for Gas

The Opportunities

Target Markets