Forum 2-2015

Page 1


OCTOBER 02 2015






04 Editorial 06 News 10 Deepwater projects face up to cost challenge 14 New drive to trim newbuild costs 16 Countering the hacker threat 20 The next wave in fleet performance 22 Kuwait Oil Tanker Company goes beyond compliance 24 Broadband connections signal new era in shipping 26 Safeti vital in securing future of Danish plant 28 Enabling clean power in Kenya 30 Green energy for black gold 32 Can hydrogen harvested from seawater secure Japan’s energy future? 36 Climate Technology Centre and Network driving technology transfer 40 Vestre Viken: The green hospital 42 Last Word: Financing retrofits

EDITORIAL CONTRIBUTORS Etienne te Brake, Joacim Vestvik-Lunde, Nikos Späth, Svein Inge Leirgulen, Emily Woodgate, Torsten Büssow, Kaia Means, Chris Hopson, Robert Stokes, Alexander Wardwell, Alison Cowie

FORUM 02.2015 Published by DNV GL AS NO-1322 Høvik, Norway Tel: +47 6757 9900 Fax: +47 6757 9160

EDITOR Stuart D. Brewer Tel: +47 91522360 Stuart.D.Brewer@ DNV GL Group Communications


COVER PHOTO © Arild Danielsen and Statoil

© DNV GL AS 2015

10 Deepwater solutions FORUM 3



Remi Eriksen has, since the announcement of his appointment as Group President and CEO of DNV GL in May, emphasized the need for collaborative innovation within and across industries. He believes that in some cases the challenges faced by one industry cannot be solved by the competence and experience from that industry alone, “so we must tap into the expertise from many industries”. While some markets are currently developing fast, others are facing slowdowns and contraction. What they hold in common is that their future will be complex and dynamic.

LEADING TOWARDS A DIGITAL, AGILE AND EFFICIENT FUTURE Compared to the past decade, the world is likely to see lower economic growth over the next few years. Despite slower growth, we can expect a faster pace of change and more complexity. Most of what DNV GL does is related to the maritime and energy space, and within sectors that will change noticeably over the coming decade. For the maritime and oil & gas industries there will be at least two tough years before we see significant improvements. I see a future where the global economy will still depend on shipping to move goods and raw material around, but with increasing expectations to improve safety and operational efficiency, and to reduce the environmental footprint. I also see a future where oil and gas still play an important role, probably in a different way than what we see today. It will be a future in which the increasing costs of extracting difficult and remote resources will create a wave towards more efficient resource utilization. The demand for energy is expected to increase by almost 50% over the next 35 years. At the same time, society at large expects energy to be greener, more reliable and more affordable. This ‘trilemma’ of affordability, availability and reduced emissions to air will force us to change the way we generate, transmit, distribute and use energy. Cleaner energy technologies will continue to gain market share, both on the generation side and the usage side. We will see an uptake of low carbon fuels in combination with battery hybrid solutions, like we now see in the maritime industry, offering reduced emissions to air, reduced operating costs, and improved functionality. In this context, DNV GL is adapting to the market situation. I firmly believe we can play a role in moving the industries we serve forward. In spite of the chal-


lenging market conditions for some of them, this does not mean that there are no new opportunities. We see increased demand for services that can help improve efficiency, qualify new cost-effective technologies, and standardize specifications and work processes – just to mention a few. Now it is all about bringing on smarter and more efficient solutions, not bigger and more complex ones. DNV GL’s cross-disciplinary expertise comes to play here. Another area of positive change I foresee is that businesses, authorities and other stakeholders must collaborate, contribute and innovate in new ways. This fits perfectly with DNV GL’s 151-year-long track record as a ‘standard setter’ and as an initiator, driver and facilitator of joint industry collaborations. The world is in the midst of a digital revolution where sensors, connectivity and data storage are central technologies surrounded and enabled by software and data analytics. It is all about using data in smarter ways to gain insight for better decisions. However, taking into consideration that we will add 2 billion internet users over the next 5 years and that cyberwar will be added as the fifth battle front, we must think carefully through how we design, build and operate future systems. Responding to these drivers and trends, we have developed a new strategy that takes advantage of the opportunities in possible future developments and defend against threats. A key principle has been not to spend our time predicting uncertain things, but rather

“We will continue to support, innovate and collaborate with our customers in adapting to change and realizing cost efficiencies, while improving safety and reliability in operations”

spend it thinking about how to react to different futures. As we go forward, it’s important to know what could change, but it is more important to be able to adapt to those changes that come. The new strategy builds on DNV GL’s combined expertise within the Maritime, Oil & Gas, Energy, Business Assurance and Software sectors and it explores new services, industries and geographical presence. We will continue with the activities that form the source of our competitive advantage today, such as investing 5% of our revenue in R&D and innovation, providing standards and driving industry development through joint industry projects.

analyses and interprets performance data to unlock economic potential for customers through the performance management portal ECO Insight.

At the same time, we will be making changes. We will increase our use of digital solutions to offer better services, enable new services, and streamline our own processes to be even more efficient. We will strive to serve customers with a higher degree of pro-activeness, responsiveness and efficiency, to name but a few planned focus areas.

I hope you enjoy this issue of FORUM, and that its contents may inspire you in addressing the challenges and opportunities that lie ahead.

In summary, the business environment remains tough in some sectors and prosperous in others. This duality of fostering growth while facing contraction in other sectors is challenging, but also represents a big opportunity. We will continue to support, innovate and collaborate with our customers in adapting to change and realizing cost efficiencies, while improving safety and reliability in operations.

Indeed, at this time of rapid change, it is appropriate for the content of this issue of FORUM to reflect how DNV GL - together with our customers and partners innovates and applies new solutions and processes to help advance safer, more efficient and more sustainable business. As an example, in this issue you can read about how Shell, BP and FMC Technologies are looking to improve efficiency through standardization and collaboration when planning capital-intensive projects in the deep water sector. Also, South Korea’s leading shipyards explain why they believe a new joint industry project led by DNV GL will lead to cost savings through international engineering and construction standards for floating offshore units. Meanwhile, in a smarter world, global networks and big data are transforming the way the industry works, helping for instance shipowners and operators improve fleet performance, increase vessel safety and cut operating costs. We show how DNV GL collects,

Remi Eriksen DNV GL Group President & CEO




COMMITMENT TO SUSTAINABILITY Sustainability is now firmly on the global business agenda, but there is an urgent need to turn words into action. This is a key conclusion in the independent report; Impact – Transforming Business, Changing the World prepared by DNV GL on behalf of the United Nations Global Compact.


• Leading companies are also beginning to turn sustainability risks into new business opportunities. • The jury is still out on whether a sustainable and inclusive economy will be achieved. But the UN Global Compact has undoubtedly helped change the understanding of corporate responsibility.

Former DNV GL President and CEO Dr Henrik O. Madsen presents the Impact – Transforming Business, Changing the World report to UN Secretary-General Ban Ki-moon and Sir Mark ­ Moody-Stuart, Chairman, Foundation for the Global Compact in the UN General Assembly.

The report concludes that the UN Global Compact, as the world’s largest corporate sustainability initiative, and the business community have had an impact on the development of sustainability since 2000. “This report confirms that the tide is turning in corporate practices,” said Georg Kell, former UN Global Compact Executive Director. “Over the past 15 years, companies around the world have been awakening to their role in society and starting to make important strides to operate more responsibly and innovate for a greener, more sustainable future.” Significant changes over the past 15 years: • Sustainability is permeating deeper into markets and sectors worldwide. Global Compact signatories are present in 156 countries, and 25% of the world’s largest companies have joined. • A deeper understanding of the complexity and interdependence of global challenges has emerged. Partnership and collaboration are the new norm.


• Equality, climate change and corruption are now on the corporate sustainability agenda because they impact performance. • Business has become more strategic, systematic, integrated, transparent and collaborative regarding sustainability. • Leading companies are ahead of regulation and drive the debate to make regulation smarter. Yet less progressive companies are blocking positive change. • Positive financial sector developments include support for the Principles for Responsible Investment, rapid development of green bonds and Sustainable Stock Exchanges Initiative. • The local Global Compact networks are very effective in engaging local businesses around the important issues for that particular country or region. • Some companies have established concrete goals for reaching zero footprint levels in terms of carbon, water and waste.

Key measures for further mobilization over the next 15 years: The assessment concludes that, while many business leaders now have sustainability on the agenda, there is still concern over whether corporate mobilization is moving quickly and broadly enough. The current rate of progress will not be sufficient to achieve the necessary transformative change. Sustainability must be embedded in our business models and long-term goals. We must enable conditions to speed up change through smarter governance and regulations, and inspire change by showcasing new business opportunities and sustainable solutions. To demonstrate true business statesmanship, the report recommends:

• The business sector harnesses its unique position to contribute to human and financial capacity, technology and innovation. • Progressive companies must continue urging governments to enact policies that support sustainable business practices. • Increasing responsible investment and removing subsidies that hinder progress. • Investing in women’s education and economic empowerment and in securing women’s rights. • Leaders across all domains must take responsibility for steering the world towards a resilient, stable and equitable future.



The pilot projects include several different ship types and infrastructure, with an emphasis on alternative fuel concepts. “When we launched the Green Coastal Shipping Programme, we said we wanted to make Norway a world showcase for green coastal shipping. With these five pioneering pilot projects we are well on our way,” says programme director Narve Mjøs. The projects selected are: CargoFerry plug-in hybrid led by shipping company Nor Lines; Next-generation green shut-


DNV GL and 25 partners from the Norwegian authorities and maritime industry have presented five pilot projects selected for Norway’s Green Coastal Shipping Programme. The programme aims to encourage the research and implementation of green technology in the shipping sector.

CargoFerry plug-in hybrid led by shipping company Nor Lines.

tle tanker led by Teekay Tankers; Hybrid ocean farming vessel led by ABB and the Cargo Freighters’ Association; Conversion of cargo carrier into battery-hybrid LNG

carrier led by Øytank Bunkerservice and the Norwegian Gas Association; and Pioneering green port project led by Risavika Harbour in Stavanger.

© DNV GL/Vivian Jacobsen


Oil spill clean-up work.

The recently implemented EU Offshore Safety Directive is now mandatory and requires identification of major environmental incidents (MEIs) and the associated safety and environmental critical elements (SECEs). However, to date there has not been a common approach within

the industry to determine what SECEs and environmental critical elements (ECEs) are, or for developing their corresponding performance standards. DNV GL has published a new Recommended Practice (RP) to address this issue.

The DNVGL-RP-G104 “Identification and management of environmental barriers” is based on the barrier management concept, which applies to knowledge, communication and management of major accidents. It provides guidelines and recommendations for the processes required to identify MEIs, SECEs and ECEs for offshore installations and operations. It establishes related performance standards in line with regulations, industry practice for managing safety hazards, and barrier management best practices. The RP also provides guidance to implement assurance and verification processes to demonstrate that the required level of performance of the SECEs and ECEs is being achieved.





Hong Kong’s Wah Kwong is a leading provider of maritime transport in the bulk carrier, tanker and LPG segments, operating a current fleet of 26 vessels, with nine more newbuilds on the way. Wah Kwong’s implementation of ShipManager supports its strategy of offering the highest standards of safety and quality of operations. In the face of increasing compliance requirements and a growing fleet, a new, integrated and professional fleet management software system is essential. The implementation of ShipManager will simplify and optimize the ship management by allowing extensive fleet-wide data collection and analysis. “We aim to continually improve efficiency and safety and strive to be ‘best in class’ when it comes to operating our fleet,” says


Wah Kwong Ship Management (HK) Limited will adopt DNV GL’s ShipManager integrated fleet management software suite to further improve operational efficiency, data transparency and safety reporting.

Senior management from Wah Kwong Ship Management, Wah Kwong Maritime Transport Holdings Limited and DNV GL marked the official start of this project at a recent signing ceremony in Hong Kong. L-r: Hao Huang, Yiu Fai Patrick Fong, and Leng Poh Eric Tan from DNV GL; with Tim Huxley, Capt Zhou Jian Feng, and Capt Sanjeev Verma from Wah Kwong Ship Management.

Tim Huxley, CEO Wah Kwong Maritime Transport Holdings. “By streamlining our processes across all ship management functions, we will relieve the documentation burden, particularly for those at sea, whilst better monitoring and improved data quality will assist in all key decisions we make.”

Wah Kwong will implement the entire integrated ShipManager suite over the next 18 months. They spent one year evaluating more than ten different fleet management systems.


© BP

DNV GL will support the operator in assuring the project equipment transportation and installation is conducted to recognized guidelines, standards and internal requirements.

DNV GL has been awarded a contract for the provision of marine warranty, operations and consultancy services for the Shah Deniz 2 project operated by BP Exploration (Shah Deniz) Limited.


Shah Deniz stage 2, one of the largest gas developments in the world, will help increase European energy security by bringing Caspian gas resources to markets in Europe for the very first time. The project will add a further 16 billion cubic metres per year (bcma) to the current 9 bcma produced by Shah Deniz stage 1.

The work will involve DNV GL’s marine, engineering, dynamic positioning, metocean and geotechnical teams. A key area of focus for DNV GL has been the development and training of local personnel to maintain skills and support long-term cost reduction and sustainability for the local industry and community. DNV GL has been providing integrity management on Shah Deniz 1 for the past ten years.



The quality of fish oil varies, and not all products provide health benefits. Until now, consumers have had limited means of distinguishing first-class fish oil from lesser ones. Möller’s, the omega-3 brand from Orkla Health, has provided fish oil to consumers

© DNV GL/ Damir Cvetojevic

Möller’s has introduced a new standard for fish oil capsules, developed and certified by DNV GL. Consumers can now rely on third party assurance that the fish oil is of high quality and controlled for environmental toxins.

DNV GL - Business Assurance CEO Luca Crisciotti hands over the certificate to COO in Orkla Health Shaher Yar Khan and Group Commercial Director in Orkla Health Tine Hammernes Leopold.

since 1854. The company has now taken another step to demonstrate the quality of its products through the launch of a new comprehensive quality standard, which is also available for other producers. “We see an increasing number of requests from consumers about the traceability of the products, its origin and quality. Through the new product certification mark from DNV GL, consumers can be confident of the high quality,” says Henning Søgaard, CEO of Orkla Health.

LNGREEN PROJECT DNV GL’s LNGreen joint industry project has been completed, successfully developing a state-of-the-art next-generation LNG carrier together with industry specialists from GTT, Hyundai Heavy Industries, and shipowner GasLog. The vessel concept has a significantly improved environmental footprint and a higher level of energy efficiency, as well as an improved boil-off rate and cargo capac-

ity, making it much better suited to future trading patterns than existing vessels. LNGreen investigated efficiency and performance improvements of LNG carriers by considering actual operational conditions and optimisation in terms of hydrodynamics, machinery and system configuration. These developments were based on DNV GL’s integrated systems engineering approach COSSMOS, state-of-the-art

computational fluid dynamics calculations (CFD), and a containment system design, tailored to a specific operational profile and anticipated trades. Martin Davies, the project manager at DNV GL stated that “using enabling computer tools, we managed to develop a vessel which is approximately 8% more energy efficient and has increased its cargo volume capacity by 5%.”


The turbine design is at the leading edge of advanced tidal technology, being an evolution of the 500kW and 1MW demonstrators that both completed DNV GL Design Assessment. DNV GL is using the industry recognized DNV-OSS-312 to certify the tidal turbine, with the first stage in the process

involving a full risk assessment and agreeing actions to mitigate the risk of failure. DNV GL will now work with Alstom to review and approve design documents before heading towards the fabrication stage, including manufacturing quality and equipment testing and surveillance of the installation and commissioning. Final Prototype Certification of the turbine will follow the successful close out of the actions agreed during the statement of feasibility stage.

©Alstom - Alstom Oceade™ 18-1.4 MW.

DNV GL has issued a statement of feasibility for Alstom’s 1.4-MW Oceade 18 tidal power turbine. The statement of feasibility is the first milestone in the process of certification.



DEEPWATER PROJECTS FACE UP TO COST CHALLENGE Collaboration, standardization and technology are long-term responses to lower oil prices Deepwater mega projects typically cost billions (bn) of US dollars each, and their risk grading is the highest for all field development types. So it is no surprise that lower oil prices have caused industry commentators to ask whether companies will press ahead with active and planned deepwater projects. There are also question marks over future development and deployment of new enabling technologies such as subsea compression. “A reduction in operators’ willingness to engage in capital expenditure (capex) intensive projects will limit further field trials and severely impact the spread of relatively unproven technologies,” according to analysts Douglas-Westwood.1 While cost cutting by operators has slowed some deepwater mega projects, the majority remain on track, according to Norway’s INTSOK, an offshore industry and government networking and knowledge exchange. Even as oil prices slumped, US operator Hess confirmed that it would proceed with the USD6bn development of a deepwater field in the Gulf of Mexico alongside Chevron, Statoil and Nexen.2 Shell has operations in 14 deepwater basins including the Gulf of Mexico. It remains “positive about finding the right mix of synergies to develop such projects cost effectively”, according to Dr Ajay Mehta, technology delivery manager - deepwater projects, Shell International Exploration and Production. Mehta was speaking at INTSOK’s deepwater mega projects conference3 in Houston, US, an event that provided a timely indicator of industry thinking on this theme.

“We need to turn the industry’s creativity and energy towards more cost-efficient and reliable solutions” Dr Kevin Kennelley, Vice President – Facilities Technology, BP

“Oil prices will remain a significant factor in future project economics and final investment decisions (FIDs),” Graeme Pirie, vice president, business development, North America at DNV GL - Oil & Gas, told the conference. “However, we feel the greater challenge is cost efficiency.” Compared with capex eventually authorised, original FIDs underestimated costs for deepwater projects by 45% on average between 2009 and 2014.4 “What has made the industry successful in the past two decades is not enough,” Mehta said. “Rapid cost escalation is a problem that developed before the current drop in oil prices, and it has to be solved no matter what the oil price is. Our projects need to be credible, competitive and affordable.”

1 Douglas-Westwood research note, December 2014 2 ‘Hess announces plan to develop stampede field in the deepwater Gulf of Mexico’, Hess, 28 October 2014 3 Deepwater mega projects: INTSOK US-Norway Technology Conference, February 2015 4 ‘380 projects to change the world – top 380 trip highlights a disconnect in two supply chains,’ Goldman Sachs, May 2013



Standardized subsea interfaces are a boon to equipment makers such as FMC Technologies. The company’s deepwater riserless light well intervention stack, pictured aboard an intervention vessel, boosts production from seabed wells.

Collaboration and standardization From an original equipment maker’s (OEM) perspective, Brad Beitler, vice president, technology at FMC Technologies said his company wanted to work closely with customers to reduce costs per well, keep deepwater development sustainable, and draw on economics of scale together.

Speakers from two oil supermajors signalled willingness to collaborate on cost challenges. “We have to work more with our suppliers in the early stages, not just hand specifications to them,” Shell’s Mehta said. Similarly, Kevin Kennelley, vice president - facilities technology, BP, commented: “We need to work much



Shell’s Ajay Mehta (l), FMC Technologies’ Brad Beitler, and Caroline Marie Alting (r), Maersk Drilling, discuss ways to improve the economics of deepwater projects.

more closely with OEMs, yards and others, and at much earlier stages, to identify savings and things that can be done just a little differently yet still yield great savings. There is a lot of potential here.” Turning to the key topic of standardization, Mehta said: “We have to be less accommodating to one-offs and to tweaks that may seem innocent enough by themselves, but which destroy any standardization achieved up to the point where that tweak is made.” The potential value of standardization was quantified by FMC Technologies’ Beitler. He said that, generally speaking, the cost reduction delivered by making something more than once is roughly 20%. “There are so many other benefits, including indirect cost reductions such as safety through familiarization,” he added. Deepwater operators are aware of these potential benefits. For example, US oil company Anadarko’s offshore deepwater platforms in the Gulf of Mexico demonstrate greater standardization in practice, with an existing design concept being reused.5 DNV GL’s Pirie indicated that standardization underpins “the most important” cost reduction initiatives being launched, or underway, and of relevance to deepwater mega projects. He cited Statoil’s standardization of subsea factory interfaces; FMC Technologies’ ‘benefits from subsea standardization’ initiative; the Society of Petroleum Engineers’ subsea standardization

initiative; the Norwegian Oil & Gas Association (NOGA) report on subsea standardization; and DNV GL’s joint industry projects and standards. “We would like to see the ‘plan one, build many’ concept re-evaluated to determine how it could work in our industry where nearly every facility is unique,” Pirie added. Beitler suggested one way in which it could work: A modular approach involving custom configuration of standardised modules can address most needs, he said. BP’s Kennelley expressed optimism about achieving agreement around standards despite the increasing complexity of projects and the growing number of people involved. “It is possible to take a group of, say, metallurgists into a room and not come out until they have agreed on an acceptable standard. I have seen it happen.” Managing technology Technology in general, and subsea in particular, is a great enabler for deepwater projects. But while making full use of innovative technology can do “wonderful things” in deepwater, the management of its deployment needs to be more refined, suggested Caroline Marie Alting, team lead in Maersk Drilling’s technical organization. She explained: “It needs to be evaluated more thoroughly, not just from a cost-benefit perspective, but also from the likelihood of it actually being used, and

5 ‘A Balancing Act: The outlook for the oil and gas industry in 2015’, DNV GL. Download at:



Subsea standardization widens the applicability of tools on remotely operated underwater vehicles.

the associated training and familiarization needs, as well as the buy-in of personnel that may or may not use the technology. There is probably a lot of waste in this area.” Aside from big themes such as collaboration, standardization and technology, there is scope for cost reduction in many individual ways, Kennelley stressed. “We need to chip away at the elephant one piece at a time and to have our eyes on total cost of ownership,” he said. “For instance, running offshore supply vessels at three-quarters throttle usually results in at least 50% savings in fuel costs.” Maybe the best efficiency that can be realised is related to regulation, he suggested: “Global standardization and the use of internationally-recognized standards could be based on a common global regulatory framework.” The ‘take home’ message from Kennelley was that the industry is creative and asks for much more than it needs for field developments, including deepwater mega projects. “That time is now over and we need to turn the industry’s creativity and energy towards more cost-efficient and reliable solutions,” he urged.

INDEPENDENT THIRD-PARTY VERIFICATION FMC Technologies has chosen DNV GL to perform independent third-party verification of a 20,000 pounds per square inch (psi) high pressure, high temperature (HPHT) subsea completion, production and workover system for the Gulf of Mexico. FMC Technologies is coordinating this as a joint development agreement (JDA) with international oil companies Anadarko, BP, ConocoPhillips and Shell. Its aims are product standardization and greater cost efficiency. Breaking the 20,000psi HPHT barrier at extreme depths has for years been the objective of taskforce groups of the best and brightest engineers within many of the oil majors. It is seen as a vital long-term capability for maximising development of deepwater and ultra-deepwater resources. The establishment of the JDA led by FMC Technologies shows an industry that is now pragmatically collaborating as a response to increasing costs and a falling oil price. DNV GL is involved in several HPHT projects in the US.

Long-term collaboration with pump makers such as Sulzer Pumps assists development of highperformance, reliable and cost-effective solutions, such as this multiphase subsea boosting system for FMC Technologies’ customers



NEW DRIVE TO TRIM NEWBUILD COSTS Korean shipyards support a project to promote standardization in engineering and construction of offshore oil and gas installations.

South Korean shipyards are market leaders in the construction of floating and fixed offshore oil and gas installations. They are world-class competitively, but even greater savings could result from addressing variations in owner, operator and regulatory requirements during engineering and construction for such projects. Less familiar specifications and processes result in “reworking, delays and misunderstandings in yards worldwide”, observes Hans Petter Ellingsen, Group Leader of Offshore Risk Advisory, DNV GL.

Offshore & Engineering Division. “Other potential benefits include reduced material costs resulting from decreased expenses for materials purchasing, manufacturing and testing. A shortening of materials purchasing lead-time would be expected as more could be held in stock. Surplus materials could be used in other construction projects.”

Operators address this through on-site teams of up to 300 people, and sometimes move units from Asian yards for completion closer to the final destination or offshore. Overcoming complexity DNV GL has initiated a joint industry project (JIP) to establish a new international industry standard for offshore oil and gas projects. The current JIP constellation includes Hyundai Heavy Industries (HHI), Samsung Heavy Industries (SHI), Daewoo Shipbuilding and Marine Engineering Company (DSME), Korea Offshore and Shipbuilding Association (KOSHIPA) and the Korea Marine Equipment Research Institute (KOMERI). “We hope that it will lead to standardization that helps to reduce design periods and minimize design changes,” says Jong Bong Park, Senior Executive Vice President (SEVP) and Chief Operating Officer of HHI’s


Future newbuild FPSOs could be among offshore oil and gas projects to benefit cost-wise if a new international standard for engineering and construction can be agreed.


“Using international standards more widely has potential to significantly reduce delays and the general cost level without compromising on quality and safety.” Hans Petter Ellingsen, Group Leader of Offshore Risk Advisory, DNV GL

“The complexity and range of standards, regulations and requirements create a big challenge for contractors,” observes Dr Younsang Won, SEVP and Head of Offshore Production Operations, SHI, and Chairman of DNV GL’s Korea technical committee. “It takes much effort to clarify and implement these requirements, and there are sometimes omissions, inconsistencies and misinterpretations. This can generate a lot of changes and revisions, even when the design has already been frozen and fabrication or installation has started.” “Using international standards more widely in offshore oil and gas projects has potential to significantly reduce delays and the general cost level without compromising on quality and safety,” Ellingsen stresses. A maritime approach The DNV GL study “Use of DNV GL Classified Units on Norwegian Continental Shelf: The Maritime Approach” published in May 2014 shows how maritime rules issued by classification societies and maritime flag authorities can save costs in offshore projects.

This “maritime approach”, accepted for certain floating offshore units in Norway, has allowed hulls and/or marine systems to be governed by a maritime classification regime rather than the country’s Petroleum Safety Authority (PSA) regulations. Maritime class rules exist for many types of floating units. Shelf-state legislation will normally accept use of a flag/class approach for areas of a maritime character. “The approach has been shown to save cost through all phases of a newbuild project right through to operation. Designers, yards and suppliers work more efficiently when projects apply standards familiar to all players,” Ellingsen explains. “One example of such standards is class rules. We would like to establish a standard for oil and gas projects that builds on the well-established approaches of classification. Industry estimates for potential cost savings on construction of installations range well into double-digit percentages. This approach is highly relevant in current market conditions.” Sung-Geun Lee, EVP, Chief Strategy Officer, DSME, agrees that applying maritime regulations to floating units simplifies engineering, procurement and construction procedures: “A maritime approach to standardization is welcome but should be implemented with caution,” he advises. “Individual operators and companies have varying regulations, specifications and operating philosophies which may not be fully satisfied by maritime standards.” The risk is that a common standard developed on the basis of harsh environments, such as the North Sea, could end up raising the requirements for “more benign” seas, he adds. “We must also account for local content regulation in various regions.” That said, he hopes that the JIP will provide “the initiative for the standardization movement in the offshore industry”.



COUNTERING THE HACKER THREAT A systematic approach to cyber security can help to avoid costly attacks on critical oil and gas installations.

Cyber attacks are growing in scale and complexity, becoming more difficult to detect and defend against, and costing companies increasing sums of money to recover from. The energy and utilities industry, including oil and gas, suffers average annualized losses from cyber crime of USD13.2 million per sampled organization, according to a 2014 survey for Hewlett-Packard.1 This figure, 24% higher than the 2013 findings, represents the highest for all industries included in the IT company’s research. One incident by unknown hackers in 2014 affected around 300 energy companies in Norway, the country’s biggest such ­attack.2

IOGP defines three key threats: theft of core intellectual property; disruption or destruction of a physical plant and other points of capital investment; and compromise of executives’ communications about key business decisions. “Within this context, cyber is now part of a holistic approach to security for the industry,” Reither commented.

“Consensus exists that cyber attacks are growing more significant and serious”

“Tactics can include ‘social enginering’, psychological online manipulation to trigger damaging actions or obtain confidential information,” he added. “Cyber is not a threat in itself, but an increasingly effective means to carry out threats.”

Paul Reither, Vice Chair, Security Committee, International Association of Oil & Gas Producers

Upstream Oil & Gas responds “Consensus exists that cyber attacks are growing more significant and serious,” said Paul Reither, vice chair of the Security Committee of the International Association of Oil & Gas Producers (IOGP), the voice of the global upstream industry. “Furthermore, attacks against computer systems can produce a physical outcome that cannot be ignored.”

Principles developed in international standards such as ISO, IEC or NIST should be sufficient to tackle overall IT security risks and protect against homogenous IT/ cyber threats not specific to the upstream industry,

1 ‘2014 Global report on the cost of cyber crime’, Ponemon Institute research for HP Enterprise Security, October 2014 2 ‘300 oil companies hacked in Norway’,, 27 August 2014


Direct threats can, he explained, be either heterogeneous or advanced persistent threats; a combination of malware and hacker tools; or attacks from organized crime, rogue states and/or terrorist groups.


Reither suggested. “However, IOGP will support efforts to improve standards coordination and learning,” he added. “Member companies should develop mitigation based on risk assessment, and adopt international standards in line with the level of threat.” IOGP sees a “very low” probability of a massive cyber attack disabling production, refining or distribution infrastructure. “It is very difficult to attack complete infrastructure by the means through which Shamoon malware hit Saudi Aramco in 2012,”3 Reither commented. “That compromised many homogenous computer systems designed to run a fairly broad set of applications. Luckily, it did not cross over to computers involved in oil and gas production.” It is, however, suspected that hackers injected malicious software into the control network of the Baku-TbilisiCeyhan pipeline, Turkey, in 2008, causing a huge explosion.4

Connectivity raises risk Headline incidents are rare, but many lesser attacks go undetected or unreported. “Many organizations do not know that someone has broken into their systems,” said Pål Børre Kristoffersen, principal consultant, DNV GL - Oil & Gas. “The first line of attack is often an office, business or enterprise IT environment, which could help hackers to access more critical production networks, process control and safety systems.” While office IT is segregated from industrial systems, separation mechanisms between a company’s internal networks are often weaker than against external networks, he explained. Hackers may also use social engineering attempts on office domains to harvest passwords and other ways to access production networks. Increased exposure of critical systems to external networks is a key reason for heightened digital vulnerability,

3 ‘Exclusive: insiders suspected in Saudi cyber attack’, Reuters, 7 September 2012 4 ‘Mysterious ’08 Turkey pipeline blast opened new cyberwar’, Bloomberg, 10 December 2014



Interconnected IT infrastructures and technologies have modernized management of oil and gas operations, but increase the risk exposure of critical cyber structures.

according to DNV GL’s analysis of Norway’s maritime and oil and gas sectors (figure 1, page 19). This reflects trends towards remote operation and maintenance, and management systems that transport large volumes of process data to the office domain. Due to limited fibre capacity and redundancy, networks are shared, introducing vulnerabilities. Supplying offshore power from onshore facilities introduces risk as electricity grids are digitally vulnerable. DNV GL found that few Norwegian maritime and offshore oil and gas organizations use systematic approaches to preventing, detecting and protecting against cyber security challenges, whether sophisticated attacks or accidental breaches. “Operators perhaps tend to think that cyber security is for technical devices and that firewall protection, virus security and passwords suffice; but eliminating cyber risks requires a defence-in-depth strategy beyond basic measures,” Kristoffersen said. “Countermeasures can be established using a barrier management approach familiar from managing health, safety and environmental risks (page 19). Cyber security requires the same vigour as barrier management of HSE risks.”


Case study: Martin Linge DNV GL is assisting Total E&P Norge with cyber security risk management for the Martin Linge field development and associated operations offshore Norway. DNV GL’s scope of work includes day-to-day coordination of cyber security during preparations for operation, with a specific focus on integrated control and safety systems. The initiative also aims to raise awareness of cyber security risks and to train personnel to take simple preventative measures. “DNV GL’s experience has been a key contributor to identifying and defining cyber security risk,” said TorErik Hansen, technical manager for the Martin Linge project, Total E&P Norge. “Supervisory control and data acquisition software and other control systems are main targets. These normally originate externally from the business network, so it is equally important to prevent and stop attacks through this route.” Internal attacks by malware planted in vendor-supplied software are another important risk that requires procedures for checking all such software, he added. Total’s approach is to assure compliance with company rules for IT system architecture and firewall implementation. Links between industrial and business networks are avoided if possible. A systematic approach is taken to implementing and monitoring the effect of cyber security barriers. For Martin Linge, remote access will be allowed


Figure 1: The top 10 digital vulnerabilities of the Norwegian oil and gas industry

Figure 2: Cyber security version of bow-tie model used in managing safety risks

1. Lack of cyber security awareness and training among employees 2. Remote work during operations and maintenance 3. Using standard IT products with known vulnerabilities in the production environment 4. A limited cyber security culture among vendors, suppliers and contractors 5. Insufficient separation of data networks 6. The use of mobile devices and storage units including smartphones 7. Data networks between on- and offshore facilities 8. Insufficient physical security of data rooms, cabinets, etc. 9. Vulnerable software 10. Outdated and ageing control systems in facilities. Source: DNV GL assessment for Norwegian Ministry of Justice and Public Security, April 2015

Source: DNV GL

Cyber security vulnerabilities (figure 1) can be addressed through a risk based approach based on the bow-tie model familiar in barrier management (figure 2).

only from the onshore operation centre, where access to the hub management interface is strictly controlled. SECURITY BARRIERS

“We feel we are a front-runner in Norway, and maybe worldwide, in having an onshore control room from day one of this project’s operation,” Hansen said. “We have taken a large technological step in pulling all networks to shore for Martin Linge. This creates risks. However, we believe that, on completion, we will have established a way of working that could guide others.” Total E&P Norge has strong links to Total headquarters in Paris for business and industrial cyber security ­issues. The cyber security team in France has contacts in all other major oil companies so that information and alerts can be shared rapidly. Separate personnel are responsible for cyber security of the industrial and business domains at Total E&P Norge, and for maintaining direct communication with their counterparts. “We also intend to set up systems to receive alerts from Norwegian cyber security authorities as rapidly as possible,” Hansen said.

By using a bow-tie model for security barrier management (figure 2), companies can identify threats to operations, and plan barriers to prevent incidents and mitigate consequences. This includes procedures to maintain barrier quality documented in performance standards. Bow-ties and performance standards for security management are just two tools that DNV GL applies in its independent, risk-based approach to designing, implementing, testing and maintaining cyber security countermeasures for customers worldwide. The company’s software tool, SynergiTM Life – Risk Management Module, is used to establish a live asset and risk registry. The tool enables the assessment of vulnerabilities and threats, as well as mitigation follow-up. DNV GL’s approach is founded on broad industry expertise and experience in implementing relevant national and international security standards, best practices and tools. It is also investing in initiatives to develop pan-industry best practice in identifying, preventing and responding to cyber security threats.

He expects that it will become a default position for relevant authorities worldwide to insist that, like Total, the oil and gas industry handles cyber security issues seriously and systematically.



It pays to drill down into ship performance data to uncover hidden savings potential.

THE NEXT WAVE Imagine six bulk carriers, technically identical sister vessels, sailing fully laden from the ore mining country to China. Yet their fuel consumption differs. Fleet performance management can tell you why. Even at their current low level, fuel costs are the biggest cost item of ship operation – one that can be influenced significantly, however. Market-leading shipping companies have cut their fuel consumption by 50 per cent over the last six years, and only half of this effect can be attributed to slow steaming. The remaining 25 per cent are achieved by a well-orchestrated bundle of technical and operational measures. While many shipping companies have implemented some isolated technical measures in the past, such as trim optimization or weather routing, they have only recently begun to look into the potential benefits of taking a coordinated approach and addressing the behavioural aspect. Moving beyond Fleet performance management is the next wave in energy management. It achieves a number of key objectives: it sets a performance baseline, enables performance reviews and helps decide what measures should be applied to what part of the fleet. Furthermore, it induces an immediate change of behaviour among the onshore and on-board teams towards more efficient operation, sometimes even going against “seafarer tradition”. And finally, it demonstrates good governance and transparency vis-à-vis customers and other stakeholders.


The benefits are significant. Anybody interested in finding out why comparable vessels of the same fleet perform differently, as illustrated in the bulker example above, should opt for a fleet performance management system. To understand the causes of performance differences, shipowners need a comprehensive overview of vessel-specific voyage, engine and system conditions, hull and propeller resistance, and the contribution of fuel quality to any performance gap. Having studied the performance of countless ships, DNV GL has drawn a number of conclusions. Speed is an important lever; however after most of the industry has adopted slow steaming, there is little savings potential left. Nevertheless, speed management along the voyage may still yield some benefits. On the other hand, weather conditions have only limited influence on fuel consumption differences over a typical review period (for example one month). Many companies do not collect engine performance data systematically enough. A meaningful assessment requires taking simultaneous “snapshot” readings of engine data and ambient conditions. Two factors that are often underestimated by shipping companies are hull degradation and bunker quality. Computing hull degradation is complex, and coating chemistry is not a ship engineer’s home turf, but the


rewards of investigating this matter could be substantial. The same goes for bunker quality; owners and managers who subcontract their bunkering should obtain reliable fuel quality data to improve vessel performance by technical means. Getting the facts A meaningful analysis requires two things: high-quality data and strong references or baselines. • Good data can be obtained from autologging key parameters on board. Filtered for sensor errors, this data can then be sent to shore at certain time intervals. There are software solutions available, but the cost, implementation and maintenance effort is significant. For most analyses associated with regular performance management reviews, the existing ship-to-shore reporting patterns will be sufficient for performance data reporting as long as technical plausibility checks are performed in between. • While high-quality statistics and colourful graphs are nice to look at, they may not express much

more than the fact that the vessel is moving. What is often forgotten in performance management is the need for high-quality reference or baseline data. Insightful decisions can only be made if the data captured can be viewed in relation to suitable reference values. A vessel comes with a few performance patterns from the towing tank test; all other data needed to arrive at a proper speed-versuspower (speed-versus-consumption) curve at a certain draft, trim and weather are commonly based on assumptions. The only way to obtain good baselines for vessels in operation is CFD simulation, i.e. hundreds of computer-based virtual towing tank tests, including low speeds and a variety of draft and trim assumptions. Additional useful references might include benchmarks from similar vessels or satellite-based weather data. In general, establishing reliable reference values is much less costly than the implementation of autologging solutions.

ABOUT ECO INSIGHT The DNV GL performance management portal ECO Insight offers a comprehensive and easily accessible way to manage the performance of a fleet, including: ■■ Voyage performance ■■ Hull and propeller performance ■■ Engine and systems performance ■■ Fuel performance ECO Insight supplements fleet reports with industry data, such as Automatic Identification System (AIS), satellite weather and fuel quality information, providing unique benchmarking capabilities. Advanced engineering methods, such as hull fouling prediction and CFD-based vessel baseline normalization, are also available on the portal.

Navigator Insight, the preferred recording tool for ECO Insight, delivers extensive reporting and analytics functionality: ■■ High-quality data collection on board ■■ Smart plausibility checks against specific vessel particulars ■■ Connects to existing on-board data collection processes ■■ No change in procedures needed ■■ No hardware investment required ■■ Efficient fleetwide implementation within eight to twelve weeks ■■ Optionally covers all applicable environmental reporting standards such as CCWG, ESI, CSI and the upcoming MRV




The Kuwait Oil Tanker Company works with a broad range of suppliers, including DNV GL, to build and operate one of the most advanced, fuel-efficient tanker fleets in the world. As a subsidiary of the Kuwait Petroleum Corporation (KPC), the Kuwait Oil Tanker Company (KOTC) is committed to provide safe and efficient transportation for Kuwait’s leading export (petroleum), and which is in line with KPC’s strategic vision. Recently KOTC completed a nine-vessel newbuilding programme, where they worked with different suppliers to implement new systems to operate a cleaner, safer, and more fuel-efficient fleet. Ali A. Shehab, KOTC’s Deputy CEO (Fleet Operations), says that unlike most shipowners, whose approach to operations has been driven by new regulations and bunkering costs, the company goes much further and consciously travels the extra mile. “Rather than wait for new regulations or react to changes in bunker prices, we actively seek new ways to improve our overall performance,” he says. “As a state-owned entity, KOTC not only has an obligation to provide KPC with excellent and cost-effective transportation services, we also


represent the State of Kuwait, which has very specific policies on how we behave as a company.” Revamping the fleet In 2014, KOTC completed Phase III of its ambitious newbuilding programme, which included four VLCCs, four medium range (MR) product tankers, and one long-range Aframax petroleum product and crude oil tanker. The nine vessels were built at two separate yards and involved multiple suppliers. “From engine manufacturers to bridge control, classification to marine coatings suppliers, we worked with different industry leaders,” says Jamil Al Ali, Manager Fleet Newbuilding Projects Group at KOTC. “Most owners tend to stick to the same suppliers, but we believe a more diversified approach helps us achieve better results.” Mr. Al Ali says that using multiple suppliers not only allows KOTC to test different systems, it also helps


with regulations and gain a competitive advantage,” he says. “But KOTC is an early adopter, and the work they do is not only effective, but also serves as a model for other shipping companies.” Indeed, KOTC’s newbuildings include a number of innovations, amongst others the latest generation Tier II energy saving engines to reduce SOx, NOx and CO2 emissions and hull forms designed to optimize the water flow to the propeller, Ali A. Shehab, KOTC’s Deputy Jamil Al Ali, KOTC Manager, Fleet reducing hydrodynamic resistance during CEO (Fleet Operations) Newbuilding Projects Group vessel transit. Furthermore, the four VLCCs and the Aframax are also equipped with volatile organic compounds (VOC) reduction systems deepen the technical know-how of the organization. (De-VOC) which work by controlling and maintaining “KOTC is part of a larger, state-sponsored effort to recruit and train the next generation of Kuwaiti seafarers, the pressure in the cargo loading drop lines above and we gain more expertise by working with different ambient pressure, minimizing the generation of VOCs, suppliers,” he explains. “This strategy has also helped especially at the initial stages of cargo loading. us build a strong international network – we have friends everywhere!” Proven results Shehab acknowledges that there are risks in being an KOTC takes the same approach to classification socieearly adopter, but says the results speak for themties. “Different classification societies have different selves. “Measured against the voluntary targets set by strengths and we have worked with many of the leadthe IMO’s Energy Efficiency Design Index (EEDI), our ing classes across our fleet. However, we have enjoyed initial analysis shows that we have achieved around 12 a strong, long-term relationship with DNV GL for many per cent below the benchmark for the VLCC and 20 years,” says Shehab. “Their unrivalled technical experper cent below on our MR tankers,” he says. “What we learn from this newbuilding programme will optimize tise, especially in fuel efficiency, noise and vibration, our decisions for the next phase of our fleet renewal.” crew comfort and ship safety has been very useful. Their quick response to our requests is also commendable.” Earlier this year, KOTC announced plans to add eight more vessels to its growing fleet – a mix of very large gas carriers (VLGCs), liquefied petroleum gas (LPG) Early adopter and MR tankers – scheduled to be delivered in 2016 Ralph Becker, Regional Business Development Manager in the Middle East & India at DNV GL, notes that and 2017. “As always, we welcome new ideas to help KOTC’s approach to shipping shares much in common us achieve a cleaner, more fuel efficient fleet,” Shehab says. “In fact, we are already in discussions with a with DNV GL’s mission to help the industry become number of suppliers who we believe will help us safer, smarter and greener. “All shipowners are looking for affordable ways to lower bunkering costs, comply achieve our goals.”

GROUND-BREAKING STUDY In February 2015, KOTC signed an agreement with a leading Danish environmental protection system manufacturer, PresVac Engineering, to measure and minimize the emissions of volatile organic compounds (VOC) from oil tankers during transit in local and international waters. This “first of its kind” study is sponsored in part by the Danish Maritime Authority and will include the installation of specialized equipment to monitor emissions on KOTC vessels.



BROADBAND CONNECTIONS SIGNAL NEW ERA IN SHIPPING The impact of connectivity can already be seen in the maritime industry. But as a boom in the number of ships with high-speed broadband connections gathers pace, the greatest opportunities are still ahead of us.

Traditionally, when sailors set sail, they did so in the knowledge that they would have no contact with the outside world until they returned or arrived at their destination. Herman Melville beautifully captures this sentiment in Moby Dick:

“…we gave three heavy-hearted cheers, and blindly plunged like fate into the lone Atlantic.” And so it was until the advent of radio in the early 1900s, enabling vessels to send distress messages, something that has saved thousands of lives at sea. Driven by regulations, safety continued to be the primary driver for communication between ship and shore throughout the 20th century. Market driven demands In recent years, however, market-driven demands have converged to create a boom in more advanced maritime communication technologies. Shipowners want technologies that help optimise their operations, and provide entertainment for passengers and crew. Typical operational applications include cargo logistics and monitoring, route planning and


energy efficiency applications. Meanwhile, the importance of broadband connections to crew and passengers cannot be overstated. To attract passengers and retain the best crew, television and reliable internet are essential. The commercial potential of these applications provides shipowners with a strong incentive to invest in onboard broadband connections, capable of handling the bandwidth these new applications require. A surge in VSAT installations A VSAT, or very small aperture terminal, is a two-way satellite antenna dish that can be installed on board a ship. VSATs typically offer greater data speeds at lower prices, compared with legacy satellite systems. The demand for onboard internet and broadbanddependent operations has seen a recent surge in VSAT installations. Figures from COMSYS show that the number of maritime VSAT installations almost quadrupled from 6,000 in 2008 to 22,000 in 2014. As this growth is predicted to continue, we should expect most classified vessels in the world to be broadband-capable within few years.


ReVolt is an unmanned, battery-powered concept vessel that relies on connectivity for remote control.

Soaring adoption rates are attracting technology suppliers, whose new broadband offerings deliver greater network capacity, higher speeds and lower prices per transferred bit. New applications Increased broadband capabilities are already enabling real-time transfer of large amounts of data between ship and shore. The implications of sharing data are profound and will spawn numerous new applications, including: • • • • • •

Remote diagnostics and maintenance Risk based classification & surveys Autonomy and Remote control Energy efficiency optimisation Environmental monitoring Safety applications

Proactive maintenance To illustrate the game-changing power of such applications, consider how remote diagnostics and maintenance can save owners time and cost, while improving safety. Sensors capable of warning about potential failures would be fixed to the various components of a ship. The sensor readings would be collected and stored on board and also shared with an onshore data centre for further analysis and long-term storage. Such systems, known as condition monitoring (CM), would allow owners to perform maintenance on systems and components before errors occurred, saving money, reducing downtime and ensuring safer operations.

Shared benefits It is not just owners that will benefit. These new applications will offer enormous opportunities for all market participants including crew, yards, insurers, classification societies, and of course new players that will undoubtedly emerge as the ship connectivity revolution takes hold. As more ships are connected, concepts like Big Data and Internet of Things will impact the maritime business just as they will across all sectors of the economy. Standards lagging Ship connectivity will undoubtedly make shipping safer, greener and smarter, but this dynamic field is not without its issues. While capacity has increased it is still not infinite and new, smarter ways of managing it need to be found. There’s also the threat of cyber security, currently a hot topic even at the very highest level of global politics. This is particularly a concern in relation to the sever consequences of autonomous vessels being hacked. DNV GL believes that in order to realise the great potential of shipping connectivity, regulators and standard setters need to define requirements and standards. The focus should be on ensuring that availability and reliability are sufficient and to define service architectures and interfaces to allow quality verifications and to stimulate a competitive vendor market.



SAFETI VITAL IN SECURING FUTURE OF DANISH PLANT Denmark has some of the world’s strictest regulations regarding ammonia storage. Local Danish authorities were in dialogue with the owners of a process plant concerning regulations that could have been so costly as to permanently shut the workplace down. Their consulting company, COWI, used Safeti software from DNV GL to perform a quantitative risk analysis.

When consulting company COWI was approached by a meat processing plant located next to a densely populated area, the first step was a detailed risk analysis using DNV GL’s Safeti software. COWI have used Phast and Safeti software for many projects, especially for small and midsized facilities, and for a wide range of different clients – for ammonia to fertilizer storage facilities to oil depots.

COWI’s consulting project concerning the meat processing plant is now in the final phase, after most of the recommended safety measures were implemented in 2014 and the remaining measures are being implemented in 2015. The plant is located in an urban area and approximately 10,000 people live or work within the area that might be affected in the event of an ammonia release.

Finn Pedersen, Chief Market Manager at COWI, was project manager for the safety study. He says the requirements from the authorities “seemed rather heavy, almost impossible.” They were considering closing the plant. “We took the challenge and developed some advanced and novel technical solutions,” he says.

The plant was not previously covered by the European Seveso regulations and there was no requirement to carry out risk analysis, which is generally necessary for ammonia storage of more than 50 tons. Due to changes in Danish administration practice, bringing the level from above 50 tons to above 5 tons, the plant is now covered by the Seveso directive.

The authorities and meat processing plant owners were able to agree on, plan and implement measures that reduced risk in the ammonia cooling system used for refrigeration, allowing operations to continue. Implementation of safety measures COWI is an international consulting company headquartered in Denmark, with 6,200 employees worldwide, providing consultancy services within the fields of engineering, environmental science and economics. COWI’s Environment, Health and Safety department has been using Phast software for risk analysis for over a decade.


“Safeti’s extended risk reporting tool helped identify the scenarios that would contribute most to the risk, at different distances from the plant. This made it possible to focus on where safety measures could be introduced in order to provide the greatest risk reduction around the plant,” says Jan Boier Pedersen, specialist at COWI. Novel technical solutions During the process COWI conducted many sensitivity analyses using Safeti software and looked at the risk reduction effect of different solutions. COWI ultimately


advised the operator of the plant to introduce fastacting automatic shut-off valves at selected points in the process and to install a water curtain to absorb ammonia released between the plant and the adjacent buildings. The effect of the measures was assessed using Safeti. Safeti was an important tool used to establish acceptable risk reduction measures. Danish authorities knew that DNV GL was a trusted name in safety. Breakdown of risk picture “I really like the breakdown of the risk picture with risk ranking points in Safeti,” says Jan Boier Pedersen. “It’s a way to see where more detailed calculations are needed, and specifically where safety measures are needed to prevent a scenario.” Finn Pedersen says his clients have been very satisfied. “They see the final results,” he says. “They like the risk contours, and the results that are drawn from the

program. The authorities and customers can see where the risk is coming from. We suggest technical solutions and right away they can see the effect this will have on the risk contours.” “Previously we had been using in-house models,” says Jan Boier Pedersen. “It was difficult to maintain the models, and often we had to modify the code, which meant we often had to redo calculations. Also it was difficult to explain the results to the authorities. With a third-party application created by DNV GL, the software is verified,” he says. “Phast and Safeti are very versatile tools due to the wide range of possible loss of containment conditions and consequences that can be modelled. They are very valuable when communicating a picture of the risk, to clients and public authorities,” says Jan Boier Pedersen.



ENABLING CLEAN POWER IN KENYA Wind power generated at Lake Turkana Wind Power plant in Kenya will be fed into the national grid through high voltage transmission lines, responding to the power consumption needs of Nairobi following the economic boom.


DNV GL is demonstrating its commitment to modernising and developing power in Africa by advising on the construction of a 400 kilo-volt (kV) overhead transmission line and substations in Kenya. Designed to strengthen the Kenyan grid and build a connection between the capital, Nairobi, and one of the largest wind farms in Africa, Lake Turkana Wind Power, the 426km 420kV AC transmission line runs from the national grid at Suswa (80km northwest of Nairobi) to Loiyangalani (southeast of Lake Turkana).

days per year. With reliable access to electricity 365 days a year, businesses in the sub-Saharan region could avoid losses of up to 20% in sales revenue, which is a relatively significant amount for any business.

Africa’s economy is booming. Seven out of the 10 fastest growing economies in the world are in sub-Saharan Africa. However this explosive economic growth has created a severe electricity shortage in countries across eastern and western Africa, such as Kenya, which is hindering further commercial developments. In fact, according to The World Bank, African manufacturing enterprises experience power outages on average 56

The 400kV transmission line is supporting the government initiative to harness the country’s rich renewable resources to boost the economy and respond to consumption needs in the capital. Without such transmission lines, the future development of reliable wind and geothermal sources will be limited and Kenya will be forced to rely on more expensive fossil fuels serving power plants in the coastal region.

Therefore, there is an urgent need to develop energy infrastructure across Africa in order to provide the continent with wider reaching and more reliable power, and support future economic growth and prosperity for the African society.


School children look out at the central business district of Nairobi, Kenya. Explosive economic growth has created electricity shortages in countries across eastern and western Africa. Photo: Joe Penney/Reuters

DNV GL was selected to advise on the transmission line by Kenya Electricity Transmission Company Limited (KETRACO), a government owned organization established to develop new high voltage electricity transmission infrastructure, in line with the country’s development programme, Kenya Vision 2030. DNV GL provides in-depth technical expertise and critical insights to KETRACO, in addition to developing the specification for the project, supervising construction work and providing training on asset management. DNV GL will continue to support the project throughout the operational phase up to financial close. The project also involves advice for the construction of a power transmission substation at the Loiyangalani project site and a terminal substation at Suswa. Suswa substation will also be connected to the Olkaria geothermal generation power stations, Nairobi North substation, Ngong substation and Isinya substation. The development is currently in its early stages. John Mativo, chief manager planning and development at KETRACO said: “Improving the quality and reliability of electricity supply throughout Kenya is crucial to the continued growth of our economy. The 400kV transmission line project plays a critical role in

this and will help to develop a new and robust national grid system. “DNV GL’s in-depth technical expertise and leading global advisory services have proven invaluable to the success of this project, which is paving the way for Kenya to produce clean, reliable power and transmit electricity to areas that are currently not supplied.” David Walker, CEO of DNV GL - Energy commented: “The 400kV transmission line will be an important part of the country’s electricity generation infrastructure, allowing the 300MW Lake Turkana Wind Power plant and planned future geothermal plants to deliver low cost, renewable power to the nation. This line demonstrates Africa’s commitment to continued development and modernisation. DNV GL was chosen based on our deep technical expertise, expansive services capabilities and our demonstrated reputation for delivering objective and independent technical and business insights. The project also marks another significant expansion of DNV GL’s commitment to, and involvement with, Africa. We are pleased to strengthen our relationships in the continent and support Kenyan economic growth through the provision of power infrastructure.”




Floating wind turbines to power offshore oil platforms in a DNV GL-led joint industry project.

For some supporters of wind energy, the very idea of a floating turbine being used to help bring out oil from offshore fields may seem like arming the enemy — putting off the day when clean energy finally takes over from fossil fuels.

“The beauty of this project, I would say, is that it is a win-win-win (situation) — it is a win for the environment, it is a win on cost and it is a win for maturing technology,” says Remi Eriksen, DNV GL President and Chief Executive Officer.

Yet for DNV GL the whole concept of retrofittable wind-powered injection systems being used to replace gas turbines on oil platforms will offer the wind industry a major new business opportunity.

Eriksen, who describes Win-Win as “probably our number-one priority in energy right now”, says DNV GL “wants to make sure the JIP becomes successful and that we will eventually end up with a real application and not just a pilot project.”

Earlier this year, DNV GL launched Win Win - Windpowered Water Injection, a joint industry project (JIP) with seven of the biggest names from the wind and oil and gas industries signing up.


DNV GL studies show that the Win-Win concept will help reduce the cost of water injection on oil platforms as it would avoid the need to build an expensive gas-


Rendering of a floating wind turbine connected to an oil platform.

fired power plant extension on the platform, while it would also reduce greenhouse gas emissions. “We wanted to find an application where wind technology could be used for good commercial reasons, with not necessarily a green reason being the primary driver,” says Eriksen. “The starting point was that we were looking at how offshore wind could be fully competitive and better than all alternative methods of providing power to offshore installations. “And we found that this could well be a good case for offshore wind, because you are not competing with a price in an existing grid. An oil and gas platform really is an isolated island out there with its own power generation plant. He continues, “I think the value for the wind industry is that you will get new applications tested early on. Here is a new playground where we can deploy the most up-to-date wind technology with the best functionality, and at the same time get the experience from a real case. Also, during the construction phase, we can see how we get costs down.” DNV GL says the JIP will consider two possible technology solutions, explains Johan Sandberg, segment leader for floating offshore wind and sponsor of the project. “After discussions with the oil industry, we expanded the original scope for the JIP, which is now to look at both autonomous systems — with an integrated water injection system in the turbine structure itself — and a direct connection to the (oil) platform,” he says.

“It is Win-Win because the oil industry reduces its costs, and the wind industry gets a market for floating turbines that is commercially driven without the need for subsidies or hard-to-get research money”, points out Sandberg. The fact that we also reduce CO2 emissions is an extra benefit, he says. Christian Markussen, DNV GL Oil & Gas subsea business development leader, explains: “Our studies show that such a stand-alone system can quickly become cost-competitive to traditional solutions for injection wells far from the platform, and even more when one considers retrofitting water injection equipment into an existing facility and coping with the disruptions that this modification can have on production.” Sandberg believes the concept might also help change the public perception of wind power as green but expensive, “because they will suddenly see the conservative oil and gas industry using these huge wind turbines”. He continues, “I think that image of oil and gas using wind will show it really is a technology that is very large-scale, it is reliable and is a preferred alternative, even for the oil and gas industry. “What excites me the most is the enthusiasm of the oil and gas engineers from the oil companies when we see the results from our analysis” says Sandberg and concludes, “they immediately see new applications for floating wind turbines in the offshore market, which are outside the scope of the JIP. This is very promising for new phases of this project, as well as an even bigger market for floating wind turbine technology. “

“This is a fantastic opportunity for floating wind. We have British, Norwegian, Italian, German, French and American oil and wind companies and equipment suppliers on board in the JIP.



CAN HYDROGEN HARVESTED FROM SEAWATER SECURE JAPAN’S ENERGY FUTURE? There is growing demand and political will to develop commercial-scale hydrogen infrastructure in Japan and a group of students may have discovered a way to make this a reality.

Japan has a vision of becoming a carbon-neutral, hydrogen-fuelled society by 2040 - one of the most ambitious hydrogen energy plans in the world. How could an efficient hydrogen energy plant work in reality, given Japan’s limited, densely populated area? Over the summer, a team of international students descended on DNV GL’s Oslo headquarters to develop an innovative solution: harvesting hydrogen from seawater in the windy waters north of Japan, using floating offshore wind turbines. Hydrogen is the most abundant element in the universe. As an energy carrier, it’s a zero emission fuel from creation to consumption. But until now, the infrastructure has not existed to produce and store hydrogen at scale, making it too expensive to be a viable option. With Japan’s commitment to integrate hydrogen as a


key fuel, there’s growing demand and political will to develop commercial-scale hydrogen infrastructure. The timing was perfect for the summer students to investigate more efficient ways to source hydrogen. Jidai: a new era The students’ solution - presented to Japan’s ambassador to Norway, new DNV GL President and CEO Remi Eriksen, DNV GL staff and industry representatives at the company’s Oslo headquarters in August - is called Jidai: Japanese for “new era”. Jidai offers a smart way of harvesting abundant offshore resources and facilitates a complete value chain of clean energy. Floating turbines in the deep waters off northern Japan take advantage of strong and stable winds. It creates the energy needed to purify seawater, which goes through a process of electrolysis, extracting


Overview of the Jidai system, which offers a smart way of harvesting abundant offshore resources.

hydrogen and oxygen from the water. The extracted hydrogen is then compressed, keeping the energy loss close to zero. Finally, the hydrogen is stored, waiting to be transported by tanker to land.

Although designed for Japan, Jidai is not limited by geography or market. As a standardised system the concept can easily be installed in other areas and be adapted to specific local conditions.

The students found benefits including reduced need for electrical infrastructure, freeing up of land area, less exposure to earthquakes, reduced dependency on imported fossil fuels, reduced CO2 emissions, improved air quality, and new work opportunities. Jidai also addresses the intermittency problems wind and solar can experience: the hydrogen-harvesting process is more flexible in handling fluctuating power supply. Rather than integrating the energy directly into power grids, the hydrogen “stores” the energy, which is then transported to consistently meet energy demand.

Furthermore, at scale the fuel produced would be cheap: Jidai is designed to produce 42,000 tonnes of hydrogen a year. This equates to 400,000 commuters traveling 30km per day in fuel cell vehicles (which have already entered the Japanese market). It’s the equivalent cost of €1.17 per litre of petrol. Feasible within 15 years The Jidai concept combines and uses existing technology in new ways. Global installed offshore wind energy capacity has doubled from 2011 to 2014. The floating processing platform is based on existing oil



and gas industry technology. And the transport of the hydrogen uses standard tankers and compressed gas handling methods. If the technology of these components continues to develop at the current rate, the Jidai concept could be feasible within 15 years. “I would like to congratulate the summer project team for an excellent presentation,” says CEO Remi Eriksen. “The world is facing an energy shift and global energy demand will rise by more than 50% by 2050. We need this energy to be greener, more reliable and affordable. To achieve that, we need to change the way we generate, transmit, distribute and use energy.” He continues, “Innovation is not always about inventing new things or new technologies. It’s about combining and using existing technologies in new ways. One thing


that caught my attention is that the Jidai concept, the new era concept, can actually allow for implementation of a hydrogen-based economy in Japan, already by 2030. “Of course the concept relies on further cost compression of offshore floating wind, but I really believe the level we are talking about here is possible within the next 15 years,” says Eriksen and concludes, “We have already had numerous requests from industry parties who would like to learn more about this project.” Projects to improve efficiency and cut the costs of floating offshore wind are already underway at DNV GL.


Students in a group work session.

About the team The DNV GL summer project was first introduced in 2008, and has since been very popular to students all over the world. This year, 13 students have come from Norway, Denmark, Sweden, Japan and China to participate in the renowned project. They were picked from approximately 500 applicants. “The chosen students have to have strong academic results, be able to work in a group and fit the DNV GL values well,” says the DNV GL project manager, Are Kaspersen. “To come up with a renewable energy solution for Japan is the coolest thing that I have ever heard of among all the summer projects provided by different companies,” says, Zhenying Wu, summer student from China. “I chose to attend this year’s summer project because it offered a great opportunity to work with a challenging project in a multinational team,” says Norwegian student Morten Aslesen. “To actually be able to make an impact and to be able to look back at this summer with proudness is a great inspiration for my work. It is also a great opportunity to work with some of the brightest minds of the future and to make new friends.”



DRIVING TECHNOLOGY TRANSFER United Nations Climate Technology Centre and Network (CTCN) Director Jukka Uosukainen calls for more collaboration between governments and the private sector to speed technology transfer to developing countries.

Governments play a critical role in developing policies and creating conducive environments to address climate change. It is clear, however, that without the private sector, we cannot hope to achieve the level of action that scientists now say are needed. Civil society consistently calls for increased efforts in investment, and in the development and transfer of needed technologies particularly to developing countries, according to CTCN Director Jukka Uosukainen. “To sustain growth for all, we must change the way we think about energy. We urgently need to address the way we produce and consume it. This brings along with it economic, social and environmental opportunities and challenges,” says Uosukainen. “There are no quick fixes, but solutions definitely exist. They are out there and need to be brought to those in need. It requires strong government leadership and commitment as well as private sector actions on a large scale. Climate-friendly policies and practices must be accelerated well beyond business as usual.” Facilitating action The CTCN was established by the Conference of Parties (COP) as part of the Technology Mechanism of the UN Framework Convention on Climate Change


(UNFCCC). Its mission is to stimulate technology cooperation, enhance the development and transfer of technologies, and assist developing countries with technology related requests. The CTCN works through a global network of partners dedicated to transforming societies into resilient and low-carbon, sustainable economies. “The CTCN is built on the foundation that civil society and the private sector must be active partners in facilitating action on climate technology transfer for energyefficient, low-carbon and climate-resilient development,” says Uosukainen and adds, “With this in mind, we facilitate the building of bridges between governments, businesses and climate technology developers, including SMEs (Small and Medium Enterprises). In particular local SMEs are key agents of change and fundamental in developing climate-resilient, lowcarbon societies, as well as developing and retaining locally adapted technologies.” Uosukainen, who became Director of the CTCN in 2013, believes effective rollout of cleaner, low-carbon technologies and the associated research and development is a vital part of tackling the causes and effects of climate change. “The CTCN, supported by DNV GL,


CTCN Director Jukka Uosukainen (second from left), here with (from left) Bente Pretlove, programme director climate change in DNV GL’s Strategic Research and Innovation department, Karina Larsen, CTCN knowledge and communications manager; Edwin Aalders, project manager for the DNV GL & CTCN strategic partnership; Bjørn K. Haugland, DNV GL chief sustainability officer, and Asun St. Clair, senior principal scientist in DNV GL Strategic Research and Innovation and manager for CTCN private sector engagement.

“I see partnerships as a mutual growth process in our respective roles, where we bring an active contribution to the achievement of the UN’s Sustainable Development Goals by putting in place partnerships that can bring an innovative approach and a real concrete impact.” CTCN Director Jukka Uosukainen

plays a vital role in this acceleration which results in improving the lives and livelihoods of millions of people in developing countries, who are dealing with the impacts of climate change on a daily basis.” One of the key features of the CTCN’s work is to build sustainable capacity at local levels through knowledge sharing and responsive learning systems. “The CTCN, at the request of developing countries, looks at understanding barriers to technology transfer and consequently helps create a supportive environment

for the development and implementation of climate technologies. The CTCN assists the countries in reducing or removing barriers, while helping build needed infrastructure, enabling new technologies to flourish,” says Uosukainen. Focal points Since its launch in late 2013, over 125 countries have established national CTCN focal points, known as National Designated Entities. These Entities collaborate with their country stakeholders, including the local



private sector, to develop and relay requests to the CTCN’s network of regional and sectorial experts which come from academia, civil society, the private sector, and public and research institutions. Representatives from over 100 countries have been trained by the CTCN through regional training initiatives across Africa, Asia, Eastern Europe, Latin America, the Middle East and small island developing states in the Caribbean and Pacific Region. Uosukainen points out that as a global mechanism, the CTCN provides private sector actors with a transparent and accountable platform to operate in new markets and to showcase successes. Further, the CTCN can provide insights into emerging national and local regulations and policies for the establishment of new markets, in addition to providing an arena for multistakeholder cooperation on innovation. Growing markets Although the focus in the past has been on mitigation actions, adaptation and resilience are increasingly recognized as growing markets. This is a trend the CTCN sees in the requests it receives from developing countries, and Uosukainen highlights the work the CTCN is now doing in the agriculture and forestry sectors in Mali as an example. “In Mali, the CTCN assists the government in identifying appropriate strategies to obtaining financial support (either via private investment or other regional/ multilateral funding sources) for the implementation of programmes that ultimately will improve the wellbeing and climate resilience of rural agro-ecosystems and communities, in particular those of marginalized groups such as youth, women and migrants”, explains Uosukainen. He continues, “The Colombia government, with technical support from the CTCN, recently reformed its renewable energy regulations to enable the use of alternative technologies. The government is also

“Addressing climate change takes leadership and action. Governments, the private sector and civil society all need to act, hand in hand, if we are to make a difference. The CTCN was established, in part, to build these partnerships; to boost cooperation on technology and help drive the transfer of climate friendly technologies. The private sector plays a critical role in achieving this.” CTCN Director Jukka Uosukainen



implementing pilot projects and testing new technologies to process waste in Cali that produce commodities such as recyclables, compost and refuse-derived fuel while diversifying away from landfills.” Uosukainen says that, through the support of the CTCN, these projects enable local governments to promote private investment in alternative treatment methods and, in doing so, strengthen national confidence, create jobs and make the waste sector more efficient. “The experience built in Colombia provides a model for the region, and through the CTCN enhances South-South cooperation and learning,” he says. Major milestone In November, governments will get together in Paris for COP21. The talks will address climate change as a key challenge for a sustainable future. Asked about his thoughts on the possible outcome, Uosukainen says, “With the failed negotiations in Copenhagen in 2009 and subsequent COP talks in mind, I think delegates at COP21 cannot afford to fail again. It has to be a success this time,” he stresses. “I believe there is huge potential for governments and the private sector to join forces to combat the global climate change issue. For this to happen, there is a need for the right framework conditions that allow for a bottom up approach: finances to flow, and more capacity building and technology transfer.” Positive signs The signs are positive. According to Christiana Figueres, Executive Secretary of the UNFCCC Secretariat, countries are on track in negotiating a landmark global agreement on curbing greenhouse gases that can be adopted at the Paris summit.

“We’re in a very different position to Copenhagen, not just from a procedural point of view, but from other points of view,” said Figueres in a statement earlier this year. “Technological advances were the first of several factors that have created a changed political environment. The number of laws and regulations around renewable energy and climate change has, in general, increased 20-fold since Copenhagen, indicating that the world’s regulatory framework is heading toward a cleaner energy mix,” she said. The U.N. talks also got a boost last year when China and the U.S. jointly announced emissions-limiting pledges for the Paris deal. Enhancing engagement “We are cautiously optimistic that the Paris summit will bring positive outcomes. We are extremely encouraged by the efforts of the French Presidency to enhance the engagement of private sector actors in the overall process, as well as the growing commitments made by the private sector in the lead-up to Paris,” says Bente Pretlove, Programme Director Climate Change in DNV GL’s Strategic Research and Innovation department. “At DNV GL, we fully support the CTCN’s vision to lead the world towards a low-carbon and climate-resilient future. Indeed, it is closely linked to DNV GL’s own vision of creating a safe and sustainable future through safer, greener and smarter growth,” says Pretlove, who also leads the DNV GL strategic partnership with CTCN. She concludes, “We will continue to focus our efforts on the CTCN to help meet the technology needs of developing countries to adapt to and mitigate climate change through our private sector and other stakeholder engagement activities. We believe close collaboration with the private sector is essential to fully address the challenges posed by climate change. We cannot do it alone or in isolation. Partnerships between all stakeholders are the key to success.”

CTCN IN BRIEF: Headquartered in Copenhagen, Denmark, the CTCN facilitates the transfer of climate technologies by providing technical assistance, improving access to technology knowledge, and fostering collaboration among climate technology stakeholders. The CTCN is the operational arm of the UNFCCC Technology Mechanism and is hosted by United Nations Environment Programme (UNEP) in collaboration with the United Nations Industrial Organization (UNIDO) and independent organizations around the world with expertise in climate technologies. DNV GL is a strategic partner and supports CTCN operations through its technical capabilities and global networks. For more information, visit the CTCN website and



THE GREEN HOSPITAL With its 9,300 employees in five hospitals, Vestre Viken Hospital Trust is the largest ­organization to be certified to the ISO 14001 standard in Norway. The hospitals have ­already achieved great environmental gains and the strong management support, ­improvements in competence and broad environmental focus are pointed out as being important to this success.

In February 2015, Vestre Viken’s CEO Nils F. Wisløff was awarded a certificate showing that the organization he leads actively strives to reduce its environmental impact to a minimum and complies with the requirements of the internationally recognized ISO 14001 environmental standard.

support in the organization and rapid progress in the work of implementing the management system. “The fact that this has been anchored with the senior management has been very important in our environmental work,” says Wisløff. “Each year, we agree on binding environmental goals with all the clinic directors, and they then work closely with their departments on improvement measures.”

“We’ve put considerable efforts into getting the control systems in place and I’m pleased that we’ve finished the first stage of this work. I’m sure that we Nils F. Wisløff, CEO Vestre VIken at Vestre Viken will manage to prevent The organization has a wide range and reduce our impact on the external of measures and all parts of it work environment through our day-to-day work and efforts,” systematically to address environmental risks. commented Wisløff when he accepted the certificate on behalf of Vestre Viken. “We focus on increasing our employees’ environmental awareness through training, information and measures All hospitals have activities that considerably affect the in the organization. We have ensured that environmenexternal environment, and the Ministry of Health and tal aspects are taken into account in established course Care Services in Norway has stipulated that all Norweprogrammes, e-learning modules are provided to gian hospital trusts are to be certified to the ISO 14001 strengthen the employees’ expertise and awareness, environmental standard. the environment is expected to be on the agenda at meetings, information and reports on the topic are provided on intranet channels and there is a contact Strong management focus person for employees’ improvement proposals,” says A considerable senior-management focus has been a key factor in Vestre Viken being able to ensure broad Wisløff.



Major gains One key goal is to reduce emissions from business trips, among other sources. There is a great focus on electronic meetings and co-driving. As a result, Vestre Viken reduced its business trips by 1.1% and increased its use of electric cars five-fold in 2014 compared to the year before.

Its actual energy consumption in 2014 was 81GWh, 6GWh less than forecast. Its oil consumption fell from 680,000 litres to 220,000 litres, a huge 68% reduction. All purchases are assessed from a green perspective to reduce the environmental impact and amount of waste. The hospital also has a special programme to reduce the amount of food waste and increase the use of locally produced, ecological food.

The hospital has also focused on improving energy efficiency and appointed an in-house energy advisor.

ABOUT VESTRE VIKEN Vestre Viken Hospital Trust provides hospital and specialist medical services to around 470,000 people in 26 Norwegian municipalities. It has 9,300 employees in Bærum Hospital, Drammen Hospital, Kongsberg Hospital, Ringerike Hospital, Hallingdal Medical Centre, psychiatric departments at Lier and Blakstad and a number of regional psychiatric centres. Some of the hospital trust has also previously been certified to the ISO 9001 quality management standard. GAINS ACHIEVED BY HAVING THE ENVIRONMENTAL MANAGEMENT SYSTEM (FROM 2013 TO 2014) The number of kilometres driven on business trips fell by 18,000. The use of electric cars increased five-fold. Now comprises 5.8% of the overall car usage. ■■ The estimated energy consumption decreased by 6 GWh – from 87 GWh to 81 GWh. ■■ Oil consumption dropped by 460,000 litres – from 680,000 to 220,000 litres. ■■ The number of employee inquiries about environmental issues and improvement suggestions tripled. ■■ ■■




FINANCING RETROFITS To improve the energy efficiency of their fleet an increasing number of shipowners are ­investing in hull optimization and retrofitting. Dr Carsten Wiebers, Global Head of ­Maritime Industries at KfW IPEX-Bank, explains the available financial tools.

How relevant is energy efficiency for you as a maritime financier? Carsten Wiebers: We are observing a twotier shipping market development: ECOvessels with lower fuel consumption are more competitive than vessels which are not state of the art in terms of energy efficiency and regulatory compliance. ECO-vessels have enhanced marketability, higher revenue potential and thus a more favourable risk profile for financiers as well as for shipowners. This trend is largely driven by intensified competition due to the persistently low charter rates and tightening environmental regulations. How do you as a financier assess the energy efficiency of vessels? Wiebers: We took the above-mentioned trend into account as early as 2011, asking DNV GL to develop a “CO2 evaluation tool” for the purpose of analyzing the energy efficiency of our maritime loan portfolio, which comprises over 800 vessels, and to benchmark individual ships against the portfolio average as well as world fleet averages. Based on over 50 characteristic traffic patterns, the CO2 tool not only allows us to benchmark vessels but also calculates actual energy and bunker cost savings compared to the portfolio and/or world fleet average. Assessing ship design and energy efficiency based on the results of the CO2 tool is today an integral element of financial project due diligence, which is why we favour shipowners who order energy-efficient vessels.


In early 2014, we asked DNV GL for an extension to the CO2 evaluation tool, which now also compares costs and savings of specific retrofitting measures such as bow, propeller and trim optimization for a specific vessel. This helps us and our customers work jointly on the improvement of fleets and allows us to proactively initiate discussions with shipowners regarding retrofitting. Do you see a growing demand among shipowners for retrofits increasing energy efficiency and reducing fuel consumption? Wiebers: We have been seeing a growing interest and are in the advanced negotiation stages with a number of major shipowners about financing for retrofitting measures, especially propellers, bow optimization, scrubber installation and LNG-fuelled propulsion systems. Many shipowners had delayed their investment decisions until the end of last year because of rumours that the tightening of emission regulations would be postponed. Since 1 January 2015, vessels operating in Emission Control Areas (North Sea, Baltic Sea, North American coastline and US Caribbean) are now required to burn bunker with a maximum sulphur content of 0.1 per cent. Operators who fail to comply could face penalties and detention by neighbouring states. The regulation is now in effect, and shipowners can choose between burning low-sulphur fuel oil – at a significantly higher cost compared to heavy fuel – and installing emission reduction technologies such as scrubbers, or making the switch to burning LNG. The price spread between low-sulphur fuel, LNG and heavy fuel is actually regarded by some shipowners as an opportunity to build competitive advantage through retrofitting, rather than a threat.


Generally speaking, how difficult is it to receive loans for this purpose in the seventh year of the shipping crisis? What are your prerequisites for financing? Wiebers: All in all, the conditions for shipowners and financiers have improved in recent years. The world economy is recovering slowly. Many banks have cleaned up their balance sheets and are lending again. Today, well-positioned shipowners have sufficient access to financing. However, banks today differentiate more between risk categories than before 2009 while applying tougher loan requirements such as higher equity contributions by owners, corporate guarantees/ structures etc. Apart from classic vessel financing, we are observing a trend towards alternative financing sources such as equipment-based financing for retrofits and newbuildings. This approach allows shipowners to access financing from countries where they source major equipment. KfW IPEX-Bank can provide long-term ship financing of up to 80 per cent of the purchase price for a tenor of up to twelve years. The minimum financing volume should be around 30 million US dollars, which can be easily reached when ordering a specialized vessel or if shipowners consider retrofitting an entire fleet. Our financing contribution is not limited to German equipment, but it is based on European content. However, German maritime suppliers in particular are in a leading position internationally, in an industry which is strongly driven by innovation. Some leading suppliers have teamed up in the German Maritime Export Initiative (GeMaX) to provide shipowners with a more focused means of sourcing maritime equipment, which we support by financing their vessels. What are typical retrofitting measures you have financed? Wiebers: Our responsibilities mainly comprise the financing of scrubbers and propeller replacements. Some initial commitments have been made in this segment. As a consequence of the new, stricter emission limits in ECAs, we did not see an increased demand for financing until a few months ago. We are in the advanced negotiation stages with a number of major shipowners about financing fleet-wide retrofits (in particular propellers, bows and trim optimization) as well as LNGfuelled vessels. For the latter in particular, and despite the currently low bunker prices, we expect a growing demand from liner companies whose vessels operate

on predetermined routes where LNG bunkering facilities can be secured. We teamed up with an engineering office offering LNG propulsion packages to cargo shipowners which could be financed by KfW IPEX-Bank. Will we see more liner shipping companies getting involved in joint retrofitting projects with tramp owners in the future? Wiebers: The longer a charter tenure, the more willing the charterer will be to participate in ship upgrading costs. Since tenures are usually longer for larger vessels, charterers are likely to reward higher energy efficiency and lower bunker costs. As for trading routes within ECAs (especially in the North and Baltic Seas), we expect emissions-compliant vessels to be rewarded since bunker cost savings are significant. The current low bunker prices may delay some of these measures, but in the long run efficiency is relevant at lower fuel costs as well, and competition will drive the market in this direction. In which shipping segments and markets are you doing most of your business at the moment? Wiebers: We are an active lender to all major maritime markets and segments, including shipping, offshore and cruise. In 2015, our commitments will exceed last year’s and will go to customers in Germany, Europe, the Americas, Asia/Pacific and West Africa. We finance specialized and standard vessels being built both inside and outside of Europe. While the situation in cargo shipping remains tense due to low freight rates, we did provide financing to well-established liner operators and shipowners for retrofits and newbuilds in 2014 and 2015. In view of the large order book, we do not expect a rapid recovery of freight rates so we are quite selective in our financing of cargo vessels. But since the competitive environment also drives technology, as outlined above, there is an opportunity for shipowners to strengthen their market position by increasing fuel efficiency and lowering their transport costs. Every maritime market has corporations strong enough to gain market share in today’s market and invest at low prices. As a reliable financier with a long term view, we continue to support our existing and new customers and develop customized solutions, such as retrofit financing.