November, 20 th 2019 Technical study and CBA for LNG as marine fuel in Malta Meeting with Stakeholders The sole responsibility of this publication lies with the author. The European Union is not responsible for any use that may be made of the information contained therein
INTRODUCTION AND OBJECTIVE In view of the requirements of EU AFID Directive 2014/94/EU for the development of an LNG bunkering infrastructure for Malta’s TEN-T core ports from 2025, the study identifies the optimal infrastructure solutions in synergy with PCI Phase 1 and Phase 2. Results will be used to assist the Government of Malta in the adoption of a national policy for the implementation of the required LNG bunkering facilities in Malta, thus stimulating the LNG uptake as a marine fuel and attract potential investors in this sector. Activities covered in the study: Detailed Option Analysis & CBA Risk Assessment Study Legislative/Regulatory Analysis Training Needs Analysis Project Management, dissemination and public awareness - CEF Grant Agreement obligation. Study is 60% funded under CEF-Synergy ; Partners – TM Contractor: Tractebel Consortium : PWC, Strategy&, Elengy & MamoTCV
A consortium of advisors has worked in four work-packages 1 Detailed Option Analysis & CBA A LNG Bunkering Market Study C CBA and sensitivity scenarios B Technical and Option Analysis 2 Risk Assessment A B Role requirements & Preliminary risk reporting assessment 3 Legislative / Regulatory Analysis A D B C Identification of leg., Gap Proposal of Recommended policy regulator, codes & st. analysis Amendments measures 4 Training Needs Analysis A B Training Curriculum identification proposal Tractebel - Strategy& | PwC 2
The starting point The case of LNG for bunkering Competitive landscape Results of the CBA analysis Appendix - Projected LNG for bunkering future demand in Malta Tractebel - Strategy& | PwC 3
Total bunkering activities in Malta have grown in the last years (up to ~1.9 Mton in 2016) Total bunkers handled in Malta – kton/year 1,912 +15.5% Focus of next slide HFO MGO 1,597 1,270 1,240 1,521 (79.6%) Growth driven by 1,302 competitive (81.5%) 1,053 1,060 prices (82.9%) (85.5%) 390 296 217 180 (20.4%) (18.5%) (17.1%) (14.5%) 2013 2014 2015 2016 Likely increasing due # of calls 4383 4321 4559 4596 to bunkering Avg ton/ # competiveness 283 294 350 416 of calls Sources: Transport Malta; Strategy& analysis Tractebel - Strategy& | PwC 4
Going forward, bunkering activities in Malta will likely grow in line with GDP, potentially reaching 3.7 Mton in 2056 Bunkering volume projections in Malta based on EU GDP growth – Mton/year of HFO/MGO SSS+LSS Average EU GDP growth p.a. – data in % 2017 - 2020 2021 - 2025 2026 - 2030 2031 - 2056 1.97% 1.91% 1.90% 1.50% Average EU GDP growth for 2017-2056 is ~1.7% p.a. Based on forecasted by OECD of EU GDP long-term growth, without considering any 3.7 efficiency gains CAGR +1.7% p.a. 2.5 2.3 2.1 1.9 2016 2021 2026 2031 2056 Sources: OECD long-term forecast; Transport Malta; Strategy& analysis. Tractebel - Strategy& | PwC 5
Malta is also strategically positioned to become a LNG bunkering hub, especially for LSS ships coming from Suez Canal Number of vessels entering in Med. Sea from Suez Canal - 2016 North Mediterranean East , S.E. Mediterranean; 1,659 Black sea 1,005 2,343 West, S.W. Total number of Mediterranean vessels passing through Suez Canal is 16,833 (8,703 South/North and 8,130 North/South) 3,696 8,703 Malta N.W. Europe; UK; Baltic sea; America; Others Suez Canal North Mediterranean, West, S.W. Malta has a STRONG geographical advantage as potential hub for long vessels Mediterranean Potential competition from Suez Canal, Crete and Sicily North West Europe, U.K., Baltic Sea, Potentially will pass close to North African coast to avoid ECA zone (from Suez to Gibraltar) America, Others To be considered only in case of Mediterranean as full-ECA scenario (IMO) Malta has NO geographical advantage as potential hub for long vessels East , S.E. Mediterranean, Black Sea Potential competition from Suez Canal, Turkey, Crete and other Greek ports Sources: www.suezcanal.gov.eg, Strategy& Analysis Tractebel - Strategy& | PwC 6
The starting point The case of LNG for bunkering Competitive landscape Results of the CBA analysis Appendix - Projected LNG for bunkering future demand in Malta Tractebel - Strategy& | PwC 7
LNG as fuel for ships is emerging as an attractive and growing alternative Worldwide LNG ships – 2009-2026E Typical end-users Regular, repetitive, stable and fuel LNG ships Forecast intensive engine utilization vessels 400 • Passenger Ships LNG ready ships 355 355 355 355 355 355 LNG ships on order 341 350 328 LNG ships in operation 309 295 300 114 114 114 114 114 114 100 87 • Cruise Ships 68 54 250 2 3 7 16 32 Out of the 123 ships on 66 order at 2017, 8 are 200 • Service & Supply Vessels planned to be built in 2017 115 150 132 241 241 241 238 239 234 35 225 209 100 80 175 4 56 126 • Container, Ro-Ro & cargo Ships 46 50 97 35 25 76 21 5 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 • Tankers & Bulkers Note: LNG carriers not included Sources: DNV-GL LNG Status Update 2017; LNG World Shipping, Strategy& analysis Tractebel - Strategy& | PwC 8
1 In particular, cruise companies are starting to invest in new LNG-fuelled cruise vessels Number of LNG-fuelled cruise ships on order – delivery dates 17 Represents ~ 1 25% of all 73 1 cruise tonnage 2 on order in 2017 1 4 4 2 1 1 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total Sources: Public articles and news, Strategy& analysis Tractebel - Strategy& | PwC 9
The LNG market has mainly developed in the North/ Baltic Sea region, with Wärtsilä as leading engine maker LNG-fuelled ships by region in 2017 LNG-fuelled ships by engine maker 79 77 75 68 8 35 52 55 59 32 37 28 60 4 22 44 17 15 14 13 15 28 10 22 7 2 16 15 2 13 1 6 7 7 0 2 Norway America Asia Europe Middle Oceania Other East global Others Unnamed On order In operation On order In operation Note: LNG carriers not included Sources: DNV-GL LNGi Status Update 2017; LNG World Shipping, Strategy& analysis Tractebel - Strategy& | PwC 10
In fact, an LNG bunkering market has first emerged in Norway, also supported by Governments’ incentive scheme Norway’s NOx Fund Background Results • • One of the most effective NOx-reduction An LNG bunkering market has emerged in the last measures for ships is switching to LNG fuel , year in Nordics, after the Baltic and North Sea which reduces the NOx emissions by 85-90% became an ECA • • The Norwegian NOx Fund was established in There are 60 ships operating on LNG fuel in Norway (+8 in order) 2008 with the objective of reducing Norwegian NOx emissions by financing concrete measures for • ships, offshore installations and land-based industry The NOx Fund has granted support to over 60 ships converted to LNG or new ships (in • The fund is financed by its members operation and on order) ‒ Ferries and cargo vessels pay on the one hand • The total funding to LNG projects amounts to 0.5 € per kilo NOx (1) to the fund, and … more than 110M€ in the last three years ‒ … in return, they can receive support for investments aimed to reduce NOx • LNG-fuelled ships are eligible for 19€ per kg NOx yearly emission reductions, limited to 75% of the additional cost (e.g. CAPEX) of LNG propulsion 1) 57 gr NOx per kg HFO Sources: Internet research, LNG as a ship fuel report (DNV-GL), Norwegian NOx Fund as a driving force for LNG use (Viking Line Seminar), Strategy& analysis Tractebel - Strategy& | PwC 11
Norway is pioneer in LNG for bunkering (68 vessels by 2018) Norway case – LNG ships evolution LNG infrastructure # new LNG # new New LNG ships New ships (all types) ships ships 100 20 84 Most LNG Vessels 74 80 72 72 are operated on 70 69 69 15 68 68 68 65 fixed routes, in 63 12 relative close range 60 of home (availability 10 of LNG) 10 8 8 40 6 6 5 5 4 5 3 20 1 0 0 Total LNG fleet by type Existing plus on-order until 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total 68 ships 24 20 1.4% 9.5% 8.6% 4.4% 15.4% 7.2% 14.3% 7,2% 5,8% 11% 11% 11 7 % of penetration 4 2 Car/passenger General PSV RoPax Ro-Ro Other ferry Cargo 1) Penetration rate is obtained dividing new LNG ships by total new ships every year Note: average registration from 2013 to 2016 are used to compute the penetration rate from 2017, which is assumed constant Sources: DNV-GL LNGi Status Update 2017 ; LNG as a ship fuel report (DNV-GL), GIE Small Scale LNG Map, World Shipping Register, Strategy& analysis Tractebel - Strategy& | PwC 12
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