INTERTANKO Asian Panel Tokyo 18 September 2007 AIR EMISSIONS INTERTANKO Asian Panel Tokyo 18 September 2007

KEY DATES 1997: MARPOL Annex VI adopted May 2005: Enters into force July 2005: IMO/MEPC decides for revision March 2006: MEPC delegates the revision to BLG April 2006: BLG 10 establishes a W.G. November 2006: W.G. intersessional meeting April 2007: BLG 11 no agreements MEPC 2007: IMO S.G. Group of Experts is established

OUTCOME FROM IMO/BLG 11 SOx & PM A. Base Line - No change in SOx regulations B. Global & Regional (SECA): Global S cap & lower S cap in SECAs USA – [0.1%] S cap up to [200] nm from shore BIMCO proposal – 3% global S cap; 1% 0.5% MDO in SECAs or scrubbers C. GLOBAL S CAP (no SECA) : Mandate 1% 0.5% MDO for all ships Global S cap or emissions limit but leave the industry to choose compliance method

OUTCOME FROM IMO/BLG 11 - NOx Tier I – to apply to pre-2000 engines Tier II - from 2011 a reduction by 12% - 20% for slow speed engines (n < 130 rpm) 20% to 35% for rapid engines (n > 2000 rpm) Tier III as from 2015/2016 reductions Option A - 80% for all engines when in all sea waters within 50 nautical miles from each coast line Option B - 83% - 85% - for large engines only in NECAs Option C - 30% - 50% with in engine modification and connected to the use of MDO only

The IMO Group of Experts Evaluate the different fuel options’ effects on: Reducing SOx & PM emissions and The consequential impact fuel options could have on NOx emissions Impact on the environment, on human health, on the shipping industry and the petroleum industries

The IMO Group of Experts Data collection by mid September Meetings – September, November & December Final Report – December Funding – IMO, Administrations & NGOs

The IMO Group of Experts ASSESSMENTS The impact on SOx and PM emissions from ships and consequential impact on other emissions, such as nitrogen-oxides (NOx); The waste associated with production and operation of abatement technologies; The consequential impact on CO2 emissions from ships and refineries taking into account the availability of CO2 abatement technologies

The IMO Group of Experts WORK METHOD 4 sub-groups: Shipping group Fuel group Environmental/health group Software/methodology group INTERTANKO – Assessment of: Total # of ships (12 type categories) Total fuel consumption (HFO + MDO) Emissions: SOx, NOx, PMs & CO2 BIMCO – Suggested method for fuel consumption forecast until 2020

The IMO Group of Experts INTERTANKO FINDINGS Ships 400 GT and above: 59,859 Fuel Consumption: HFO consumption: 350 MT MDO consumption: 60 MT CO2 Emissions: 1,246 MT (if only HFO used) 1,214 MT (if only MDO used) - 32 MT (if only MDO used) SOx emissions: 20.1 MT SOx savings from current SECAs: 2.5% reduction of the total

INTERTANKO ASSESSMENTS ON CO2 Use of MDO as fuel saves 32 MT of CO2 Low S content MDO means less ”buffering” and release of CO2 from the Oceans – potential saving of 27 MT of CO2 Further CO2 emissions reductions by use of MDO: Less sludge to burn 2 - 5 MT Less heating & onboard treatment 2 MT Project to recover CO2 by tankers with zero “footprint” – potential saving 1.5 MT TOTAL CO2 reduciton > 65 MT/year

CO2 FROM REFINERIES Total HFO for replacement to MDO: 250 MT Refinery fuel used for crude oil processing – average 6 tonnes per 100 tonnes processed Carbon to CO2 factor: 3.14 Thus: 250 MT * 0.06 * 3.14 = 47.1 MT CO2 Use of MDO only: expected CO2 reduction by some 20 MT

MDO AVAILABILITY - 63% - 65% - 61% 250 MT means a further reduction by 6.5%

MDO AVAILABILITY THE PROBLEM IS NOT SUPPLY OF MDO ”Marine Fuel Oils are the last major outlet for residual fuels although this may in time be affected by legislation to reduce the sulphur content in such fuels” (CONCAWE report 1/07)

HISTORICAL AND FORECAST PRODUCT DEMAND (EU-25 + 2)

COSTS ESTIMATED ON A SCR* Urea consumption ≈ 25 l / MWh NOx reduction ≥90% @ ≤2 g/kWh Investment costs 40,000-60,000 USD / MW Running costs (urea) ≈ 3.75 USD / MWh Maintenance costs ≈ 0.9 USD / MWh For a 7 MW onboard installed power, the costs will be Investment 280,000 - 420,000 USD** Running costs 630 USD/day for 50 days/year 31,500 USD/year Maintenance 151 USD/day 7,560 USD/year TOTAL 39,060 USD/year * Data provided by WÄRTSILÄ for Sulzer 6RTA52U with SCR system ** 280,000 USD x 60,000 ships = 17 billion USD in capital cost *** Some 2 billion USD running cost/year for the entire fleet

What’s next? IMO Study: July – December Intersessional meeting Berlin: 29 October – 2 November 2007 BLG 12: January 2008 MEPC 57: March/April 2008 MEPC 58: October/November 2008

Questions? dragos.rauta@intertanko.com

INTERTANKO Asian Panel Tokyo 18 September 2007 KEY ITEMS FROM ISTEC INTERTANKO Asian Panel Tokyo 18 September 2007

ISTEC Agenda (selection) ENVIRONMENT Ship recycling – Ship Recycling Guidance Port Reception Facilities TANKER STRUCTURES IACS CSR - Proposed Rule Changes Performance Standards for Seawater Ballast Tanks Coatings - Industry Best Practice Guide Performance Standards for Cargo Tank Coating Coating Maintenance and Repair Goal Based Standards Maintenance standard – Owner’s manual

ISTEC Agenda (selection) MARINE, SAFETY AND SECURITY Maritime Security Pilotage Lifeboats Marine Instruction/Operation Manuals Material Safety Data Sheets (MSDS) ENGINEERING AND RELATED MATTERS Revision of MARPOL Annex VI Reduction of GHG emissions from ships Experience with trading in SECA IMO Working Group on revision of design and standards of Shipboard Waste Management handling equipment OTHER MATTERS Results of INTERTANKO Human Element in Shipping Committee: Cadet Berth Survey 2007 Main Engine Bearing Condition Monitoring Load Line Zones off South Africa

GHG Redcution Minimise the energy used by ships Reduce the heat losses from all onboard installations Minimise onboard operations that are not necessary like tank cleaning Maximising the cargo onboard ships Minimise onboard operations that could be more efficiently done at shore (the HFO treatment should be done before delivery to ships; instead of 50,000 ships treating the amount of residual fuel onboard, the treatment should be done onshore in larger installations with a smaller energy consumption; use of MDO: no need for onboard treatment and waste handling; no need for onboard incineration Alternative fuels – (biodiesel, fuel cells, solar panels) - save/minimise energy from burning fuel oil Carbon capture - methodology to capture CO2 from the exhaust gas form the ship's funnel and re-used it as methane in auxiliaries

GHG Redcution Maximise the fuel efficiency Larger ships More efficient engines Smoother hull surfaces - (silica/nano-technology, air skirts; seachests shape; hull weld protrusions, other protrusions) Reduced wave resistance Reduced hull resistance (slime is bacterial fouling; non biocidal AF paints are proposed - they slime bad; the cost of slime in terms of drag is under researched: we do not have hard numbers; hard hull cleaning versus soft slime brushing ... benefits, cost and drawbacks .. )

GHG Redcution Maximise the fuel efficiency Improved propulsive efficiency (propellers, smoothness, cleaning ... position ; rudders, shape ... position .... relation to position of propeller ..) Composite materials "Air friction" to reduce drag - WAIP (Wing Air Induction Pipe) technology (would the degree of drag reduction due to air bubbles be sufficient to overcome the increase of drag by injectors/protrusions of such a system?)

Questions? dragos.rauta@intertanko.com