A crazy idea?

DNV GL has recenlty issued a new report to evaluate the possibility of retrofitting existing cruise ships to run on LNG as fuel. Considering the cost of investments and fuel prices, LNG may, in the author's view, be a cost- beneficial solution that meets the challenge for reducing air emissions. The report is written by Alexandros Chiotopoulos (Consultant), Gerd-Michael Würsig (Segment Director),Atle Ellefsen (Chief Naval Architect), Helge Hermundsgård (District Manager).

A large number of cruise ships currently sailing to popular destinations will soon need to comply with stricterenvironmental regulations - requiring the installation of scrubbers, the use of LNG as fuel, or a changeover fromheavy fuel oil (HFO) to marine gas oil (MGO) or a combination of these two. Compliance with regulations and thestrongly fluctuating fuel prices have made cruise operators sceptical about the success of their future business.

The difference in price between MGO and the HFO currently used can increase operational expenses by up to 40%. Making ships more energy efficient and using distillate fuels in order to comply with the forthcoming regulations is an option, but the financial attractiveness needs to be investigated for every ship on a case-by-case basis. A conversion to LNG might, under certain circumastances, be an attractive alternative solution that eliminates the complexities of fitting scrubbers and the high cost of burning distillate fuel.

Converting an existing ship to run on LNG can in principle be done by:

1. Taking the ship out of operation and installing the LNG tanks and fuel handling systems in the existinghull. Such a retrofit will reduce the number of cabins and will involve technical complications as the LNGtanks require more space than HFO or MGO fuel tanks and such free space is not available on the ship. Inaddition, this is time-consuming and thus represents a loss of revenue due to the lengthy off-hire.

2. Inserting a new "LNG-ready" prefabricated mid-body section containing all the LNG systems, additionalcabins and public spaces into the ship. Such a retrofit can be done in a few weeks, the ship does not needto go on a lengthy off-hire and the passenger capacity will increase by approximately 10%. The investmentis limited to approx. 10% to 12% of newbuilding costs.

In this DNV Report, the authors focus on the second option which is proven to be the most feasible solution from a technical and financial perspective.

Technical Considerations

The 'crazy idea' involves the conversion of a cruise ship to run on LNG by lengthening it (please see DNV GL Figure below).A new prefabricated part, containing LNG tanks and all the required LNG systems, is added to the ship.

Elongation-concept-with-prefabricated-LNG-tanks

A real life example is the ENCHANTMENT OF THE SEAS (please view DNV GL figures below), lengthened in 2005 by adding a 22m-longmid-body section in order to increase the number of cabins. The conversion itself was completed in one month.

Enchantment-of-the-seas-lengthening

Benefits of elongation and use of LNG as a fuel

  • Most likely improved revenue
  • Increased number of passenger and crew cabins
  • Improved environmental footprint
  • Energy efficiency may be increased by installingflow-improving appendages during dry-docking
  • Additional public space and retail capacity
  • Additional open deck spaces
  • Reduction of main engine maintenance hours
  • Less engine crew required
  • Cheaper lubricants
  • Cleaner engine room
  • No soot on decks - less cleaning and wash waterneeded
  • No need for exhaust cleaning devices or catalyticreactors
  • Slightly lower noise level in engine room

Current Challenges of elongation and use of LNG as a fuel

  • Design & retrofit cost compared to switching todistillates
  • Time required for ship to be taken out of service forthe retrofit operations
  • Elongation may reduce the range of ports of call
  • Bunkering challenges
  • Statutory challenges
  • LNG fuel cost pricing challenges
  • LNG infrastructure challenges
  • More tank space required to accommodate enough LNG to cover all the itineraries
  • Onshore bunkering logistics are still under development
  • Rules still under development
  • More sophisticated fuel equipment is required
  • Public perception not fully known

Financial Assessment

The investment cost required for such a conversion can be broken down into different categories. In addition tothe cost of the systems outlined below, the cost of having the ship off-hire needs to be taken into consideration.On the other hand, there is a reduction in the yearly operational expenses outlined below and an additionalincrease in revenue and profit from the larger number of cabins.

In order to examine the financial attractiveness of this ''crazy idea'', the authors performed a high-level study and mapped the required investment for the LNG system. Then, they compared the LNG system to MGO propulsion and to HFO with a scrubber, which is considered to be the next best alternative

For the high-level simulation exercise, a ship with the following characteristics was assumed:

New mid-body section length 23m
New LOA of ship 300m
Beam of ship 32m
Ship GT 75,000
Added staterooms with new mid-body section 120
Total staterooms after elongation 1,120
Engines before retrofit 4x MAN 12V48/60 at 12,600kW
Engines after retrofit 4x MAN 12V51/60 DF at 11,700kW

The high- level cost estimate

The total weight was assumed to be 5,000 mt and the required steel was assumed to be 3,000 mt, which includes the outfitting, hull structure and required reinforcement.

The LNG system includes all the necessary equipment from the bunker station to the engine.

For the scrubber system cost estimate, a hybrid system with 4 scrubbers, one per engine, has been used.

DNG-GL

The scrubber and fuel switch case do not provide additional cabins and therefore no additional revenue fromincreased number of passengers. Four scenarios have been developed to calculate the payback time for theLNG option.

The difference in the scenarios is the percentage of profit on the yearly revenue generated from thenew mid-body section. A spread of 0% - 50% profit on the revenue has been applied to represent the potentialeconomic gains of the elongation.

The additional running costs generated by the passengers on-board the newmid-body section are covered by the extra revenue. By switching to MGO or installing a scrubber system thereare no additional cabins and therefore no additional income

DNV-GL

Conclusion

In the authors' view, retrofitting an existing cruise ship so that it can use LNG fuel is a feasible option for a numberof existing cruise ships. The study shows that every ship needs to be considered separatelyas each ship has unique design characteristics and limitations for the integration of a new section.

The retrofitpotential depends on the design and structural characteristics of each cruise ship and, based on that, technicalshowstoppers might arise. Another challenge the industry is facing at the moment is the size and location of theLNG tank due to the ship's structural limitations and the rules and regulations currently governing the specifictopic.

The IMO rules have not yet been confirmed. The strictest set of rules currently under discussion limits themaximum allowable tanks size. The fuel that can be stored in the new mid-body section of a typical cruise ship isapproximately 1,500 m3 which is equal to the energy of about 800 m3 of MGO.This study has shown that retrofitting cruise ships to run on LNG - authors' ''crazy idea'' - is not only technically but alsofinancially feasible if an attractive LNG price can be achieved. The calculated payback time is 4-8 years comparedto MGO.

LNG propulsion is a unique solution in that the ship achieves compliance, saves money on fuel, andgenerates extra revenue from additional passenger capacity. Certain ships now have a window of opportunityto take advantage of the potential financial benefits of LNG propulsion.

More information may be found by reading DNV GL study '' Retrofitting cruise ships to LNG by elongation - A Crazy Idea? ''


Authors of the DNV GL Report

Alexandros Chiotopoulos (Consultant) [email protected]

Gerd-Michael Würsig (Segment Director) [email protected]

Atle Ellefsen (Chief Naval Architect)

Helge Hermundsgård (District Manager)