Innovation, Technology and Criteria for Green Shipping

Bo Cerup-Simonsen

Vice President, Ph.D.

Maersk Maritime Technology

2

A.P. Moller Maersk A/S

The A.P. Moller - Maersk Group is a diversified conglomerate, founded in 1904 by Mr A.P. Møller

116,000 employees and operations in more than 130 countries

Business segments:

Container shipping, LogisticsTankers, supply, standby RoRo, tugs etc.Shipyards TerminalsOil and gas activitiesRetail activitiesOther companies

The total CO2 emissions of the A.P. Moller – Maersk Group in 2008 were around 48 million tonnes CO2 equivalent, a decrease of over 5 million tonnes CO2 equivalent compared to 2007.

Commercial Operations

Ship owner

Technical management

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WE ARE PART OF THE PROBLEM … AND PART OF THE SOLUTION

The A.P. Moller - Maersk Group reduced the amount of CO2 emissions by 9% in 2008 compared to the previous year

We achieved this primarily through lower fuel consumption on ships and reduced flaring from platforms

We aim to reduce our CO2 emissions across the Group and have set a relative reduction target of 10% from Jan. 2008 to Dec. 2012 with 2007 as reference

“I believe the most responsible businesses today understand that doing business in a way that damages society will not be tolerated in the future and will therefore threaten the existence of the company.”

- Group CEO Nils S. Andersen

Source: The A.P. Moller - Maersk Group’s Health, Safety, Security and Environment Report 2008

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Sustainable environmental solutions – sustainable business -sustainable competitiveness

Green Ship Competitiveness

Standard Ship

2010 2030

New design, Delivered in 10yrs

Increase competitive edge in a decade where:

Customer demands to environmental friendliness will increase

Environmental regulations will tighten (scope, limits, ’Grandfathering’)

Energy cost will increase (?)

New technologies will come into play

Employees will expect environmental behaviour

Etc.

Decade of change

5

Environmental Management on Group Level and Business Unit level.

Monitor, document, set targets, improve

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Public AP Moller Maersk HSSE report

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Eco-ComplianceEcoEco--ComplianceCompliance

� The Group strives to

comply with all evolvingregulatory and key

customers' requirements -these are very likely to be more stringent by 2020

than today (e.g. IMO requiring to switch to lower

sulfur fuel standard)

� BUs strive to monitor

peers' best practices and implement select proven

initiatives relevant to their operations

Eco-EfficiencyEcoEco--EfficiencyEfficiency

� The Group aspires to go

beyond compliance in order to get competitive advantage

through

– a systematic approach to identify potentials for more

efficient use of resources, lower emissions and

optimize cost

– proactive mitigation of environmental risk

� BUs anticipate regulatory changes as well as customers' and competitors' moves

Strategic Level of Environmental Performance for theA.P. Moller Maersk Group

Eco-ResistantEcoEco--ResistantResistant

� Focus on business

strategy only

� Actively seeking arbitrage opportunities

within regulations (e.g. flag registration in

countries with less stringent regulations)

� Significant investment in

lobbying activities to slow or tone down

regulatory changes

Eco-AdvantageEcoEco--AdvantageAdvantage

� The Group aspires to go

beyond Eco-Efficiency in order to create value through cutting-

edge environmental initiatives and leadership

– Build value proposition,

customer loyalty and APMM

corporate brand based on green

attributes

– Actively looking for new eco-

business opportunities

– Fostering the business culture to

grow these opportunities

� The Group aspires to be recognized as a leader in the

green space and to shaperegulatory standards

� BUs strive to reduce the

environmental footprint along their value chain downstream and upstream, helping

customers and suppliers to meet environmental goals

Higher / ProactiveLevel of 'Environmental Leadership'Lower / Reactive

3 41 2

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A.P. Moller Maersk to increase energy efficiency.

Maersk Tankers: Relative CO2 emissions: 15% reduction per TonneKm from 2007 to 2015 for all vessels

Maersk Supply Service: Reduce the relative CO2 emission by 5% by 2012

Maersk Line: reduce our relative CO2 emissions per TEU Km with 20% from 2007 to 2017

Average air emissions from Maersk Line owned

container vessels

60

65

70

75

80

85

90

2001 2003 2005 2007 2009 2011 2013 2015 2017

g CO2/TEU Km

CO2

Maersk Line target

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1

Damco aims to be eco-efficient

Eco-ambition

Strategic pillars

Reduction targets

Green Logistics

� Damco’s ambition is to achieve ECO-EFFICIENCY

� Environmental performance (carbon footprint)� Responsible procurement� Sustainable products and collaboration� Green Logistics

� 30% reduction on a tonne CO2e/TEU basis by 2014*

� Mapping customer’s supply chain carbon footprint� SupplyChainCarbonCheckTM, SupplyChainCarbonDashboard� Since 2007, 50+ projects including Wal-mart and Nike� Methodology validated by MIT

Damco’s main environmental impact is related to our customers’supply chain emissions, thus the main focus is in Green Logistics

* Baseline 2008

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How to Reduce Energy Consumption and CO2 Footprint

Wide and Deep Developments:

Effectiveness: Logistics and networks; optimize networks, capacity and speed.

Efficiency: Optimized operation of vessels (e.g. performance monitoring, economical speed, etc)

Competence and awareness

Technologies: Components and systems

Contracts and collaboration: Newbuilding contracts, charter parties, innovation with suppliers etc

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Who takes care of the TOTALITY, Greening of Supply Chains? Structural Changes for Overall Optimum.

Can consumer drive major changes?

Structural changes: For instance Carbon War Room

Benchmarking: For instance BSR: Clean Cargo Working Group

CCWG average: 90

75.6

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DAMCO Service: Supply Chain Carbon CheckOptimize logistics for carbon (and cost)

Scope of our CO2 calculations

Factory Truck/Rail/ Barge

CFS Facilities

Load Port

Truck Ocean/Air/ Truck

Load Port

Truck DECON/DC

Truck Point of sale

Scope of our CO2 calculations

The project scope can cover the supply chain from factory gate to store door

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5

Case studies: Greener is Cheaper

Greener is usually cheaperSC Efficiency = Lower CO2 = Lower Costs

Good for the environment means good for business!

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Efficiency: Fleet monitoring for continuous improvements of design and operations.

• Performance Monitoring of 300+ vessels

• System based on 40 years of experience

• A decision support service:― Paint type evaluation― Dry-docking intervals― Hull cleaning intervals, hull efficiency

― Propeller polishing intervals ― Evaluation of treatment from dry-dockings, hull cleanings, propeller polishing

― Main & Aux Engine efficiency― Power and fuel consumption as function of speed, draught AND time

― And more…

MonitoringA

naly

sis

Decision

SupportDecision

Action

1513 November 2009PAGE 15

Slow Steaming: Extensive in-house investigations have opened for new industry standard on super slow steaming. BIG savings.

Container vessels have the most economical speed at ~50% speed, which is at ~10% engine load.

To obtain full flexibility of such vessels on any schedule, the vessels must be able to operate from 10% engine load to full load without any restrictions.

Extensive analysis and documentation by APMM has now widened the operational window, resulting in major savings.

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Slow steaming for tankers: Virtual Arrival – The Reality

BP employing Bro Elizabeth from Maersk Tankers

Vessel sailed on 2nd September 2009. WNI to do the virtual arrival analysis .

Bunker Savings

58.83 mts of HFO Saved 24,800 USD split 50/50 between owner and charterer so 12,400 each

Virtual arrival demurrage 18,000 USD

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E-class ship EEOI

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

45,0

1 6 11 16 21 26 31 36 41 46 51

Voyage #

g/t

on

*mil

eIMO Operational Index; Who is measured on theEEOI – who can influence?

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Index ~ Installed power / (speed * load carrying capacity) [g CO2/ton km]Indices calculated for APMM own fleet

Energy Efficiency Design Index - Container vessels

0

5

10

15

20

25

30

0 20000 40000 60000 80000 100000 120000 140000 160000

DWT (tonnes)

Eff. index (g CO2/ton*nm)

CO2 index= 3.16*((190*,75*MCR)+(210*(,025*MCR+250)+((PTI-WHR)*210))/(DWT*speed)

IMO Energy Efficiency Design IndexPotential to become an industry standard for benchmarking

C

B

A

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Energy Efficiency Design Index APMM ships of similar size

Energy Efficiency Design Index - Container vessels abt. 60.000dwt - speed at 75% MCR versus

equal speed

0,00

2,00

4,00

6,00

8,00

10,00

12,00

14,00

16,00

18,00

proj.-WHR project ship 1(1988) ship 2(1995) ship 3(1990) ship 4(1996) ship 5(2006) ship 6(2001)

Eff. index (g CO2/ton*nm)

Speed at 75% MCR 21 knots speed

Baseline

Ship speed

X%

New ships

Note: Even when ships are considered at the same speed, the energy efficiency varies quite a lot. Future: Good design and technology to improve. NOTE: Not most recent EEDI values

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Innovation and Technology Application Ship as a system for environmental performance

Propulsionaux machinery

Aft hull, rudder, propeller

Bow, Bulb

Antifouling, Drag reduction

Emission cleaning

Container cooling

Cargo/portOperations

Operations decisionsupport

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Example: CLT Propeller Project

CLT propulsion principle

– Endplates fitted with minimum resistance

– Modified pressure distribution on suction & downstream sides

– Radial load distribution moved closer to propeller tips

Advantages (expected):

– Higher efficiency (5-8% fuel savings expected)

– Lower vibration & noise levels

– Improved maneuverability

Main objective:

– To confirm performance in full scale on Roy Maersk

– To fit CLT propeller on VLCC newbuilding if performance on Roy is satisfactory

Status:

– Propeller fitted to Roy Maersk late Oct 09.

– First results are promising: lower vibrations and low pressure pulses detected. Efficiency looks promising but more time is needed to conclude.

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Eco-efficient Ship Design: Consider ’all’ available technologies.Max benefit for business and environment

Extra ship cost of extra fuelefficiency

Notional example

0

5

10

15

20

25

30

0 2 4 6 8 10 12 14 16 18 20

% Reduction in fuel consumption and CO2 emissions

Cost/Benefit (PBP, years)

Ex: Hull shape

Ex: Derated ME

Ex: Waste heat r.

A ’standard’ ship A ’green’ ship

Ex: ContrarotatingPropeller

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Eco-efficient ship design: Choose level of fuel efficiency with max Business Value within limits of investment, IRR, ROI.

-60

-40

-20

0

20

40

60

80

0 2 4 6 8 10 12 14 16 18 20

% Reduction in fuel consumption and CO2 emissions

Net Present Value

Eco-efficientShip Design

Notional example

Net Present Value(M$)

’Standard’ ship ’Green’ ship

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From standard ’off-the-shelf’ product to environmental excellence.Optimize fuel efficiency for actual operation.

Typicaldesign point

Design for operation:8% saving

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Combining State-of-the-art Technology. GAIN: 23% fuel efficiency (current NWB project)

Engine & Propulsion

(3+5+?%)

Machinery

(9%)

Hull Shape

(8%)

Extra ship costof extra fuelefficiency

Notional example

0

5

10

15

20

25

30

0 2 4 6 8 10 12 14 16 18 20

% Reduction in fuel consumption and CO2 emissions

Cost/Benefit (PBP, years)

Ex: Antifouling paint

Ex: Cooling pumps

Ex: Waste heat r.

-60

-40

-20

0

20

40

60

80

0 2 4 6 8 10 12 14 16 18 20

% Reduction in fuel consumption and CO2 emissions

Net Present Value

Short (2yr) perspective

Long (20yr) perspective

Eco-efficientShip Design

Notional example

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Energy Efficiency Design Index - Container vessels

0

5

10

15

20

25

30

0 20000 40000 60000 80000 100000 120000 140000 160000

DWT (tonnes)

Eff. index (g CO2/ton*nm)

CO2 index= 3.16*((190*,75*MCR)+(210*(,025*MCR+250)+((PTI-WHR)*210))/(DWT*speed)

… to get environmental performance and an energy-efficient ship prepared for the future

Business and Enviroment Hand-in-Hand. Improvements of 16 ships at DSME:

•Save 180,000 tons of fuel per year

•Save 550,000 tons of CO2 per year

•Save 50.000.000 USD per year

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Copenhagen

Cairo

Rio

Singapore

STX 1407 Series VLCC Project

kW x 76 rpm29,340MCR (De-rated)

STX MAN 6S90ME-C8

mt320,000Deadweight

m22.60Draft

m30.50Depth

m60.00Breadth

m332.00Length

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VLCC: CO2 Reductions of 10+%: Waste Heat Recovery, Propulsion Train, Aux Systems.

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

12,00%

14,00%

16,00%

18,00%

20,00%

10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%

Engine power [% MCR]

Operation time [%]

0

20

40

60

80

100

120

140

160

Operating profile

FOC per day

standard vessel

FOC with WHR +Electronic engine

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CO2 Regulation for Shipping

If it is assumed that shipping will be required to reduce the total CO2 emissions to a Target CO2emission by Rtarget% over a certain time, then how to regulate?

We know that shipping can reduce CO2 emissions cost-effectively by improvement of hardware and operations (better technology, slow steaming etc)

At some level of reduction - varying from ship to ship - it will be more cost-effective to reduce CO2 in other industries, and so a mechanism should allow for that.

Global Shipping:

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Goal Based Regulation for CO2

-40000000

-20000000

0

20000000

40000000

60000000

80000000

-20 0 20 40 60 80 100

Percentage CO2 reduction

Cost for owner

Onlycon

tribution(”tax”)

Only technical

Technical & contribution

Notional Example.

20% 40%

AnnualCostfor Owner

Saving by own

reduction

of

CO2

Let owner choose combination of technical means and contribution fund to reach CO2 reduction target.

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Summary and Conclusions

A.P. Moller - Maersk has environmental strategy of eco-efficiency/advantage and the ambition to be environmental leaders in shipping, with a number of ongoing activities to reduce environmental impact.

Competitive business is (still) key for sustainable environmental impact.

Environment affects costs side:

Cost-effective compliance

Risk of non-compliance (varying local regulations etc)

Energy efficiency (ref 23% saving example)

Environment should affect income side: Benchmarking, differentiation, market preference, green supply chains

Innovation of technology and business models is key to meet ambition level.

Tighter regulations are OK if: International (equal for all), Performance based, Practical, Achievable.

CO2 Regulation: Goal based with strong incentive for innovation in shipping.