SHIP POWER: RESILIENCE IN DEMANDING MARKETS
Transcript of SHIP POWER: RESILIENCE IN DEMANDING MARKETS
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SHIP POWER:RESILIENCE IN DEMANDING MARKETSJaakko Eskola, President, Ship Power &Senior Executive Vice President
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The most complete marine offering on earth
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Efficiency Gas and dual-fuelsolutions
Environmentalsolutions
Strategic focus
To be recognised as the leading provider of innovative products and integrated solutions in the marine and offshore oil & gas industry.
Ship Power’s strategic goal
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• Lifecycle solutions for ship owners and operators• Integrated solutions for the shipbuilding industry, owners and operators• The most competitive products and delivery process for the marine industryTH
ROUG
HO
FFER
ING
LEAD
ER IN
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Continued innovations
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Propulsion Engines
BWMS
EGC
Pumps & Valves
Gas
E&A
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Market environment
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Ship Power operates in two industries
The marine industry• Merchant, Cruise & Ferry, Navy and
Special vessels
The Oil and Gas industry• Newbuild vessels and rigs for exploration
and production in offshore fields• Gas distribution chain equipment and
infrastructure (e.g. for liquefaction and regasification)
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• Cautious outlook given increased uncertainty over developments in global economy and oil prices• Environmental regulations, increased safety requirements, fuel costs and efficiency requirements
continue to support investments
Developments in the global economy drive demand for: • Seaborne cargo transportation• Cruise and ferry services• Navy vessels
Global demand and price level for oil and gas are crucial for:• Investment into offshore oil and gas exploration
and production (including support vessels)• Investment into development of gas distribution
chains
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The marine industry: fundamentals in place despite a challenging 2014
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Source: Clarkson Research Services, IMF 26.01.2015
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Seaborne trade growth GDP growth
Fundamentals supporting growth in seaborne trade:• Growth in oil products
trade to Asia and OECD countries
• Recovery in global container trade
• Continued consumer demand growth in developing economies
World seaborne trade and GDP development% Yr/Yr
Fleet growth bottoming out:• Slower pace of
deliveries• Removals rate
expected to stay high in the medium-term
Deliveries, removals, and fleet growth# vessels
0500
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Deliveries Removals Net fleet growth
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Oil & Gas: supply grows, offshore remains important
Long-term oil production Long-term gas production
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IEA estimates:• Investment of some $900 billion/year in upstream oil and gas development is needed by 2030 to meet projected demand• Gas production increases almost everywhere, and unconventional gas accounts for almost 60% of global supply growth
Source: Clarkson Research (Sep 2014). IEA World Economic Outlook 2014
Mbpd Bn cfd
86 90 94 98 02 06 10 14 18 22
1009080706050403020100
40%38%36%34%32%30%28%26%24%22%20%
Offshore Onshore % Offshore
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38%36%34%32%30%28%26%24%22%20%
86 90 94 98 02 06 10 14 18 22
Offshore Onshore % Offshore
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EPCI32%
Drilling20%
Topside and Processing Equipment
10%
Seismic7%
Offshore oil companies reduce investment in the near term
Exploration & Production Offshore CAPEX E&P CAPEX change 2014 vs 2015 100% = -38,2 billion USD
Source: Rystad Energy dated 13.03.2015. E&P data modeled at 60 USD/bbl 2015-2017
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• 2015 total offshore E&P CAPEX foreseen to decline by 13% compared to 2014. EPCI, Drilling, and Well+ Maintenance Services segments expected to face the biggest decline
• Investments reduced across the board, with independents and small-cap companies decreasing the most• Wärtsilä supplies mainly two segments: Drilling and Transportation and Logistics
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billion USDTransportation and Logistics
5%Subsea Equipment
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Other 4%
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EPCI Well+Maintenance ServicesTransportation and Logistics Seismic
DrillingSubsea Equipment
Topside and Processing Equipment Other
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Shipbuilding market
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Specialised segment activity still resilient
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Source: Clarkson Research Services, excluding contracts reported out of period
Number of vessels contracted
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Offshore Cruise and Ferry Special vessels LNG carriers LPG carriers
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Shipbuilding volume China continues to dominate
Merchant + Specials order book, 4,083 vessels Offshore order book, 965 vessels
Source: Clarksons World Shipyard Monitor March 2015
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Total order book: 5,048 vessels
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China Japan South KoreaBrazil Rest of world
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Shipbuilding value A more diversified picture
Merchant + Specials order book,USD 204 billion
Offshore order bookUSD 101 billion
Source: Clarksons World Shipyard Monitor March 2015
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Total order book value: USD 305 billion
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South Korea Brazil China Norway
US Netherlands RoW
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China South Korea JapanBrazil Rest of world
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Overall cautious sentiment, segments uneven
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Note: Other marine = MPP, general cargo, RoRo, vehicle carriers and miscellaneous.Source: Clarksons Marine and Offshore reports
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Number of vessels contracted2014A Short term outlook Typical Wärtsilä product offering
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Offshore
Gas carriers
Cruise & Ferry
Containerships
Tankers
Bulk carriers
Other marine
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Main engines, auxiliary engines, E&A, propulsors, solutions, BWMS, waste water systems, pumps and valves, ship design, gas systems
Order potential challenging
Market normalising
Cruise majors expanding to Far East, LNG gaining traction
Positive outlook for large and med. sized containers
Active sector, expected to continue short-term
Limited activity; Baltic Dry Index at its lowest
RoRos positive
Main engines, auxiliary gensets, propulsors, gas systems, BWMS, pumps and valves
Main engines, auxiliary engines, E&A, gas systems, scrubbers, propulsors, BWMS, pumps and valves, waste water systems
Main engines, auxiliary engines, propulsors, BWMSship design, waste water systems, pumps and valves
Main engines, auxiliary engines, propulsors, BWMS, pumps and valves, inert gas systems, ship design
Main engines, auxiliary engines, propulsors, BWMS, pumps and valves
Main engines, auxiliary engines, propulsors, pumps and valves, E&A, BWMS, water systems
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We believe that gas, efficiency and environmental solutions are the future
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LNG supply (Bcm / y) LNG trade share of total gas consumption (%)
LNG poised for long term growth
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Source: BP Energy Outlook 2035
Billion cubic meters / year % of total consumption
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Increasing number of LNG trading countries
Number of LNG importing and exporting countries, volume of LNG trade
Source: International Gas Union: World LNG Report 2014
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Significant growth in number of importing countries increases demand for small and medium scale receiving terminals and gas carriers
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MTPA No. of countries
Volume of LNG tradeNo. of LNG importing countries
Global regasification capacity No. of LNG exporting countries
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LNG Carriers Other vessels
LNG as ship fuel gaining ground
LNG fuelled fleetNumber of vessels
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Fleet growth based on current order book only
DNV estimate(excluding LNGC)
Clarkson estimate(including LNGC)
Source: DNV GL gas report Sept 2014. LNGC order book data and LNGC estimate: Clarkson Research Services 12.03.2015, LNG Trade and Transport study 2014
*LNGC: LNG Carriers
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Our offering to the gas value chain
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• Fuel gas handling for OSVs
• On- & Offshore small scale liquefaction
• Antiflaring• VOC • Gas reformer• Oil separation
• Jetty and Floating regasification
• Bunkering and barges
• Receiving terminals
• Loading stations
• Fuel gas handling• LPG, LEG, Ethane
and LNG cargo handling
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Lower oil prices mean cheaper bunkers
* Bunker costs are paid by the chartererSource: Clarkson Research Services (basis 3500 TEU ship, speed 22.5k on consumption of 105 tpd).
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Bunker $/day Charter rate $/day
Daily rate and bunker costs*, 3,500 TEU containershipThousand USD
Jan 201580%
Jan 201292%
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...however bunker share of daily costs is still very high (now at 80%):1. Efficiency gains have big impact on bottom lines2. Slow steaming expected to remain in the picture
Bunker as a % of daily costs (Daily costs = Charter rate $/day + Bunkers $/day)
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Introduction of environmental legislation continues
Efficient environmental products key for customers to fully comply with IMO legislation• Finnlines selects Wärtsilä scrubber
systems for six of its vessels to reduce Baltic Sea environmental impact
• Royal Caribbean will retrofit nearly half of its fleet (19 ships), with advanced emissions purification systems
• Singapore based Pioneer Marine orders 44 Wärtsilä ballast water management systems to 22 of its bulk carriers
• HHI selects Wärtsilä exhaust gas cleaning systems for 10 new large gas carrier vessels
Source: Trade Winds, Sustainable Shipping, Bunkerworld, Dow Jones & Company Inc. March 2015
“US EPA steps up ECA sulphur enforcement efforts”
“Hong Kong; Shipmasters could face jail for breaching sulphur rules”
“U.K. port authorities plan to check fuel records of ships calling on British ports”
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Ballast Water Management awaits ratification
Review of introduction of 0.5% S global limit
2016 Tier III limit (North America ECA)
0,1%SEU in ports
Europe ECA1% SOx
North America ECA1% SOx All ECA
0,1% S
Global cap 0,5% S
Global cap 3,5%S
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Competitive landscape
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Our competitors
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Note: Converteam is a part of GEAllweiler is a Colfax business unit
E&A Propulsion Gas systems
2-stroke
Flow systems
4-strokemedium speed
Ship design
Environ-mental solutions
Ship Power
EGCS
BWMS
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Strong market position in key offerings
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Offering Our market position Wärtsilä key strengthsEngines:4-stroke
• Main engines: market leader • Auxiliary generating sets:
market challenger
• Fuel flexibility and efficiency• Environmental footprint
Propulsion • CPP, FPP & STT: among the top players
• TT: market challenger
• Well-engineered, efficient products• Operational efficiency for dynamic
positioning• Multi-segment presence
Electrical & Automation (excl. L-3 MSI)
• Established position in offshore, otherwise market challenger
• Low loss concept, efficiency and space savings
• Track record in demanding applications, performance and safety
Ship Design • Among the leading ship design houses
• Frontrunner in fuel flexible, energy efficient and LNG powered ship designs
• Experience: over 4,000 vessels built in offshore, specials and merchant segments
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Strong market position in key offerings
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Offering Our market position Wärtsilä key strengthsOil & Gas systems
• Among the top players • Strong LNG and LPG process technology know-how
• Complete end-to-end gas cargo handling offering for a broad range of gas carriers
Pumps & Valves
• Among the top players • High efficiency with electric prime movers
• Sophisticated material choices, durability• Flexible design
Environmental Solutions
• Among the top players • Leader in technical performance and compliance
• Choice of technology for customers • Partnership approach throughout the
lifecycle• Full turnkey capability, also for retrofits
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Concluding remarks
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Our broad portfolio gives us a resilient position
• First signs of recovery in the global economy, supports trade and shipping
• Lower oil prices: – Increases pressure in offshore markets– Presents opportunities in other marine
markets– Efficiency remains a priority
• Fundamentals in gas and other specialised segments remain positive
• Regulatory pressures still in play, will attract investments (also for retrofits)
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The most complete marine offering on earthgot even more complete
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www.wartsila.com
Thank you!
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