Potential Growth Markets for LNG LNG for Transportation

Transcription

1 17 th INTERNATIONAL CONFERENCE & EXHIBITION ON LIQUEFIED NATURAL GAS (LNG 17) 17 th INTERNATIONAL CONFERENCE & EXHIBITION ON LIQUEFIED NATURAL GAS (LNG 17) Potential Growth Markets for LNG LNG for Transportation <Title <Title of of Presentation> By: By: <Author John Name>, Hatley <Organization> PE Americas <Date> VP Ship Power Wartsila North America 19 April 2013

2 Agenda What? The Opportunities Target Markets Why? Compelling Economic Savings 5 Drivers set Investment Clock How? History Adoption Integrated Gas Solutions Conclusions Recent Market Signals The Future Decade for Gas

3 Agenda What? The Opportunities Target Markets Why? Compelling Economic Savings 5 Drivers set Investment Clock How? History Adoption Integrated Gas Solutions Conclusions Recent Market Signals The Future Decade for Gas

4 Transportation Fuels Source: Wall Street Journal, Wednesday March 6, 2013 page 0.2% Natural gas has most growth potential 4 Wärtsilä

5 Annual Fuel Use : Gasoline Gallon Equivalents Sources: Clean Energy, Annual Report 2011, and AARR adapted by JFH 5 Wärtsilä Thousands Scale thousands gallons where s marine?

6 New Market Development Target Scalability a large number of small lot consumers... Prefer a small number of large lot consumers 6 Wärtsilä LDC Gas Forum LA CA October 2010 John Hatley Americas VP Ship Power

7 Harbor Tug Annual 268,600 Gasoline Gallon Equivalent GGE 7 Wärtsilä

8 Ferryboat Annual 664,000 Gasoline Gallon Equivalent GGE 8 Wärtsilä

9 Offshore Supply Annual 1,072,000 Gasoline Gallon Equivalent GGE 9 Wärtsilä

10 Mississippi Towboat Annual 2,058,000 Gasoline Gallon Equivalent GGE 10 Wärtsilä LDC Gas Forum LA CA October 2010 John Hatley Americas VP Ship Power

11 Great Lakes Bulker Annual 2,866,000 Gasoline Gallon Equivalent GGE 11 Wärtsilä LDC Gas Forum LA CA October 2010 John Hatley Americas VP Ship Power

12 Coastal Cruise Annual 6,801,000 Gasoline Gallon Equivalent GGE 12 Wärtsilä LDC Gas Forum LA CA October 2010 John Hatley Americas VP Ship Power

13 Container Ship Annual 28,090,000 Gasoline Gallon Equivalent GGE 13 Wärtsilä LDC Gas Forum LA CA October 2010 John Hatley Americas VP Ship Power

14 Annual Fuel Use : Gasoline Gallon Equivalents Sources: Industry sources, adapted by JFH Marine scale millions not thousands! 14 Wärtsilä Millions

15 Annual Fuel Use : Gasoline Gallon Equivalents Sources: Industry sources, adapted by JFH Marine scale millions not thousands! 15 Wärtsilä Millions

16 Agenda What? The Opportunities Target Markets Why? Compelling Economic Savings 5 Drivers set Investment Clock How? History Adoption Integrated Gas Solutions Conclusions Recent Market Signals The Future Decade for Gas

17 LNG Logic Logic Economics Economics!! LNG provides compelling savings Business Cases demonstrate Payback screen 2 4+ years... Strong cash flows Higher ROA, ROE 03/05/2013

18 Natural Gas Henry Price Forecasts EIA forecasts prices recede = gas bargain 18 Wärtsilä

19 How clean? LNG provides significant emission reductions versus traditional diesel engines -25% -85% -99% Emission values [%] CO 2 NO x SO x Particulates -99% DF Natural Gas Engine Diesel Engine 0

20 5 US Game Changers EPA Engine Emissions US centuries shale gas supply Emissions Control Area 2012 Natural Gas bargain EPA Fuel Standards 5 gas drivers shale supply + bargain prices + 3 EPA mandates = set Investment Clock Source: EIA March 2010 Shale Gas Plays Lower 48 States LR Fairplay

21 Agenda What? The Opportunities Target Markets Why? Compelling Economic Savings 5 Drivers set Investment Clock How? History Adoption Integrated Gas Solutions Conclusions Recent Market Signals The Future Decade for Gas

22 Mark Twain History does not repeat itself, but it does rhyme

23 US Railroad Substitution Steam to Diesel Percent 13 Year Adoption Rate Year Sources: Cowles Foundation for Research in Economics, Yale, Intrafirm Rates of Diffusion of an Innovation, Mansfield, 24 May 1962: adapted by JFH Diesel 10%... 90% dominant 23 Wärtsilä

24 Marine Substitution Percent Sail to Steam? Year Sources: Challenging the S Curve: Patterns of Technological Substitution, Brice Dattee, Copenhagen, Denmark 18 June 2007 adapted by JFH Steam 10%... Why delay? 24 Wärtsilä

25 Clipper Ship Era 1840 s Large Sails Remarkable Speed ( 18 mph ) Good Cargo Capacity Smaller Crew ( reduced cost ) Sail defensive performance brief 3 decade surge 25 Wärtsilä

26 Marine Substitution Sail to Steam Percent 3 Decades 85 Year Adoption Rate Year Sources: Challenging the S Curve: Patterns of Technological Substitution, Brice Dattee, Copenhagen, Denmark 18 June 2007 adapted by JFH Steam 10% 90% dominant 26 Wärtsilä

27 Agenda What? The Opportunities Target Markets Why? Compelling Economic Savings 5 Drivers set Investment Clock How? History Adoption Integrated Gas Solutions Conclusions Recent Market Signals The Future Decade for Gas

28 12 November Year Milestone with 2,000 gas Engines Millions Operating Hours Tens Millions Horsepower = proven gas technology & LNG system

29 3 December 2012 Americas early adapter CAPEX $180 Million + 2 options 03/05/2013

30 4 December 2012 Americas early adopter CAPEX $380 Million + 3 Options 03/05/2013

31 6 December Harvey Gulf were 4 LNG fueled supply boats now 5 CAPEX $290 Million + options 03/05/2013

32 Keeping Count? THE NUMBERS Over $ 1 Billion CAPEX more than 50 Million GGE 1 st Week December + prior during 2012 Americas marine segment committed to LNG fuel the early adopters iniated a new gas ERA 32 Wärtsilä

33 Keeping Count? THE UNIT EQUIVALENTS 313 2,315 2,772 4,171 6,173 9,260 77, Wärtsilä

34 15 January 2013 Viking Grace LNGpac Tanks 200m3 each Length: m Breadth: 31.8 m Speed 22 knots Passengers: 2800 Cabins: 880 In service: 2013 Shipyard: STX Finland Oy Ship Owner: Viking Line Safe, Clean, LNG Cruise Ship CAPEX $320 Million 34 Wärtsilä 3 May 2013

35 5 March LNG plants each at 250K tons/yr Geismar, Jumping Pond, & Sarnia Online 2015 Supply security and price stability = certainty certainty breeds investment 03/05/2013 Source:

36 Gas Engine References Power Plants Merchant Offshore Cruise and Ferry Navy 52 sites 155+ engines Began 1997 LNGC 92 Vessels 370+ engines Conversions PSVs/FPSOs 19 vessels 93+ engines Began 1994 LNG ferries 1+1 vessels 8 engines Began 2013 Coastal Patrol Coming Land & Sea segments hundreds installations CAPEX $30 Billion it s real & proven gas technology

37 Drivers = Decade Shift to Gas Mandated Emissions & Fuel Restrictions Geographic emissions bubble encapsulates US/Canada Tight sulfur limits stress supply After treatment burdens diesels Source: US EPA web sites, Hatley capture various sources Paradigm shift to gas 1 st on economics 2 nd on emissions Early adopters moving ahead soon early followers! Mid decade market tipping point 03 May 2013

38 Agenda What? The Opportunities Target Markets Why? Compelling Economic Savings 5 Drivers set Investment Clock How? History Adoption Integrated Gas Solutions Conclusions Recent Market Signals The Future Decade for Gas