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Back to the future: steam turbine to DFDE conversion for LNG carriers

As per maritime common practice, the fuel bill is not included in the charter daily rate and the gas consumption directly affects the charterer’s business. For this reason, steam turbines became obsolete on LNG carriers in early 2000s, when the adoption of DFDE (dual-fuel diesel electric) brought a drastic boost in ship efficiency.

Text: MATTEO NATALI & STEFANO MORI Photo:

As per maritime common practice, the fuel bill is not included in the charter daily rate and the gas consumption directly affects the charterer’s business. For this reason, steam turbines became obsolete on LNG carriers in early 2000s, when the adoption of DFDE (dual-fuel diesel electric) brought a drastic boost in ship efficiency. Existing steam turbine vessels are still accounting for about 60% of the active fleet and are losing competitiveness against more modern technologies. If a charter contract is close to expiring, charterers will simply move to a more efficient propulsion system, while those bound to a several-year residual agreement face a strong challenge. To enable this transition with a limited investment of funds and time, Wärtsilä has developed an integrated, total solution package to convert old, steam turbine LNG carriers into modern DFDEs.

LNG market

World LNG trade volumes have more than tripled over the last 20 years, growing from 70 MTPA (million tons per annum) in 1995 to 250 MTPA in 2015 (Figure 1). Despite slowing down in the last few years, due to the longer-than-expected European economic crisis, it will resume its expansion over the long term. Recently discovered technology will extend the accessible reserves, and new terminals will boost the liquefaction capacity. On the demand side, the growth will be driven by a steadily raising hunger for energy as well as an increasingly stronger focus on reducing emissions.

The LNG carrier building market has evolved accordingly. The newbuilds orderbook amounts to around 170 units (compared to an active fleet of about 450), regardless of the momentary tonnage oversupply. The fact that as much as 20% of the newbuilds consists of vessels commissioned on speculation further highlights a strong and widespread confidence in a steep market ramp-up. 

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Fig. 1 - Global liquefaction capacity build-out, 1990–2020. Sources IHS, Company announcements.

Propulsion systems

The major driver for LNG carrier machinery selection is the need to burn natural boil-off-gas, which shaped a totally diverging trend from the traditional merchant vessel design. Until the early 2000s, as boilers were the only means for consuming natural boil-off-gas, steam turbines were the broadly preferred propulsion system. In 2001, GDF Suez ordered the first two LNG carriers powered by Wärtsilä dual-fuel, medium-speed engines in a diesel electric configuration. The new propulsion system brought major enhancements in terms of operating flexibility and, above all, efficiency, enabling up to 40% fuel savings over the traditional steam turbines. 

Wärtsilä DFDE quickly became the new standard for LNG carriers, equipping 90% of newbuilds in 2014 and boasting almost 200 references. A variety of other new technologies, such as the low pressure slow-speed dual-fuel or the high pressure slow-speed gas-diesel, have recently entered this market claiming a further trimming of operating expenditures. (Figures 2 and 3)

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Fig. 2 - Existing and on order LNG fleet (>100,000 cbm) by propulsion type. Source Clarksons, 2015.
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Fig. 3 - LNG Fleet (> 100,000 cbm) by propulsion type. Source Clarksons, 2015.

Conversion business potential

Wärtsilä realized the opportunity to offer an integrated solution to convert an obsolete steam turbine system into a modern and business-competitive DFDE. When assessing the relevant market, over 150 vessels were identified as potential targets.

Different business scenarios arose (Figure 4), depending on the contract situation between owner and charterer. 

The conversion proved to be particularly attractive when the residual chartering time is long enough to generate buy-in by the charterers and make it convenient for them to contribute to the initial investment. Thanks to the improvement in ship efficiency, some charterers calculated an impressively low payback time, even if they would have to take on the whole conversion cost.

A high level study was presented at GasTech in Singapore in October 2015 and triggered extraordinary interest – to the extent that a conversion specification was commissioned for Wärtsilä. 

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Fig. 4 - Conversion business scenarios.
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Fig. 4 - Conversion business scenarios.
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Fig. 4 - Conversion business scenarios.
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Fig. 4 - Conversion business scenarios.

Conversion in practice 

The specification basically consists of a detailed picture of what the conversion entails, with respect to equipment components, structural impact and system modifications. 

Three propulsion system conversion alternatives have been considered: DFDE 

(2 x Wärtsilä 12V50DF + 2 x Wärtsilä 6L50DF or 4 x Wärtsilä 8L46DF), dual-fuel four-stroke mechanic (2 x Wärtsilä 12V50DF + 2 x PTO + 2 x Wärtsilä 8L34DF) and dual-fuel two-stroke (1 x Wärtsilä 7X82DF + 3 x Wärtsilä 8L34DF). (Figure 5)

In all cases, the existing steam turbine plant has to be removed through openings in the decks. The dual-fuel four-stroke mechanic and the dual-fuel two-stroke alternatives require drastic structural modifications, including hull cropping to fit the main engines. Moreover, for the two-stroke alternative, it is not always viable to keep the existing shaftline, resulting in a possible re-design of the whole vessel aft. In comparison, the impact of a DFDE installation is more limited; the equipment can be fit through the openings created to remove the steam turbine system, and the existing propeller and shaftline potentially can be maintained. (Figure 6)

Available natural boil-off-gas is sufficient for a DFDE system to sail at any vessel speed. So benefits from further paring down gas consumption materialise only in ballast conditions. Therefore, those benefits are too limited to justify a bigger impact conversion than what a mechanical solution entails. 

In cooperation with one of the major ship owners in the LNG market, strategically-located yards were identified worldwide, based on their relevant experience, and asked to provide both a quotation and a time schedule. Some of them proved to have the right skills and expertise to perform the conversion, and their offers matched the budget and time-span upper limits defined in the owner business cases.

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Fig. 5 - Conversion options.
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Fig. 6 - Conversion in brief.

Charterer business case: number crunching

Wärtsilä estimated the potential fuel savings that a DFDE system would enable on a 145,000 cbm steam-turbine-powered LNG carrier built in early 2000s. 

Given a standard operating profile, a DFDE vessel can sail exclusively on natural boil-off-gas in laden conditions. On the other hand, with a steam turbine, it is necessary to force a remarkable quantity of boil-off (e.g. at 17.5 knots the usual forced boil-off-gas demand is in the range of 50 tons per day). 

The calculated savings for reducing the fuel by more than 15,000 tons per year is USD 5.5 million, assuming an average LNG price of USD 350 per ton over the forthcoming period. Financial evaluations based on today’s gas prices are quite limiting, as the conversion benefits materialise over the longer term. (Figure 7)

 In the current market situation, charterers have to pay a USD 2.5 million premium on their yearly rate, if they choose a DFDE over a steam turbine vessel. However, the extra fee does not fully apply if the charterer invests in the conversion: the premium is limited to the maintenance costs coverage, about USD 500,000 per year. 

For the DFDE alternative, the conversion implies an initial investment that ranges between USD 30–40 million and requires about 3 months’ conversion time, depending on the shipyard capabilities and vessel specification. 

Time, in particular, turned out to be a key factor, not only due to the direct costs at the yard, but also because of the need to hire a replacement vessel. Even taking advantage of pre-assembled modules and combined with the extended dry-docking, the vessel off-hire translates into USD 2.5 million additional expenditure. 

All in all, considering direct and indirect initial costs, as well as net operational savings, the payback time does not exceed 7 years. Although very conservative, as based on the assumption that the owner does not contribute to the conversion, the financial outcome suggests an exciting business opportunity for the charterer.

Indeed, the market response has been extremely enthusiastic: Wärtsilä is receiving queries from owners and charterers on a daily basis, and the on-going discussions are becoming more and more concrete. 

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Fig. 7 - No forced boil-off required with DFDE in laden.

DFDE technology

Besides high efficiency, DFDE offers several advantages in terms of ease of installation, reliability, redundancy, performance, flexibility and emissions. 

  • Ease of installation: the conversion to a DFDE has no major impacts on the vessel structure, unlike mechanical configurations. 
  • Reliability: DFDE configuration has by far the most extensive references in the LNG marine business, with more than 1400 engines sold and over 13 million running hours.
  • Redundancy: DFDE is able to sail 24/7/365, even during a sea-going maintenance.
  • Performance: Electrical motors can provide maximum torque at zero speed with any propeller design.
  • Flexibility: The fuel-sharing mode can maximize the use of boil-off gas and reach the highest output with lower gas quality.
  • Emissions: Dual-fuel engines work according to the Otto cycle, which means IMO Tier III compliance in gas mode without any after-treatment, while diesel cycle engines require either EGR (exhaust gas recirculation) or SCR (selective catalytic reduction).

Wärtsilä turnkey total solution

Thanks to its broad product portfolio, the most comprehensive in the marine market, Wärtsilä aims to promote the conversion as a turnkey total solution. All of the needed equipment and engineering can be included in the project scope, ranging from fuel gas system, engines, electrical package, gearbox, IAS (integrated automation system) upgrade, boilers, economizers, and GCU (gas combustion unit) to the class-approved drawings. Opting for a total integrated solution rather than a product bundle can be highly beneficial for the customer from many different perspectives. (Figure 8)

Communication is a good example. The interfaces are drastically simplified and reduced to three main stakeholders: owner, shipyard and Wärtsilä, the one single equipment supplier. 

Project risk mitigation is another important added value. This is guaranteed, for instance, by state-of-the-art integration engineering and is reached thanks to information availability, geared internal synergies and deep knowledge about Wärtsilä’s own product portfolio. 

On top of that, Wärtsilä is able to provide support prior, during and post installation, i.e. by estimating the expected overall efficiency of the system, supervising the building phase (including installation and integration of equipment and auxiliary systems), and training the crew regarding the management of the entire engine room.

Furthermore, a liability cap covering an extended scope, rather than a single product, further limits the customer’s exposure to risks.

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Fig. 8 - Comparison between a total integrated solution and a product bundle.
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Fig. 8 - Comparison between a total integrated solution and a product bundle.
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Fig. 8 - Comparison between a total integrated solution and a product bundle.
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Fig. 8 - Comparison between a total integrated solution and a product bundle.

A glimpse ahead

In an increasingly tough market, owners are facing the need to boost their fleet competitiveness. Improving efficiency by 40% makes vessels remarkably more attractive and ensures fleet employment, also in case of tonnage oversupply, whereas steam turbines are doomed to remain the very last choice. Moreover, the asset lifetime gets longer and can be even further extended through via an FSRU (Floating Storage and Regasification Unit) through the installation of a regasification plant.

Nevertheless, charterers are those who can benefit the most from the conversion, thanks to a terrific abatement of operational expenditures. 

An investment cost-sharing between owner and charterer is therefore a fair compromise, where both parties can significantly enhance their respective business with a limited investment. 

Getting the first project to materialize successfully could pave the way for a new course of action in the LNG shipping industry. Thanks to its unmatched track record as technology pioneer and its unique capacity to provide turnkey solutions for the whole engine room, Wärtsilä is the ideal partner for a successful conversion. 

 

Wärtsilä Oil&Gas

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