Vancouver Fraser Port Authority

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Working together for a safer world

VANCOUVER FRASER PORT AUTHORITY

LNG Fuel Demand Forecast and Bunkering Vessel Study

February, 2017 Ref.: OGL/DA/10143

Primary contact

Thanos Koliopulos Global Manager Special Projects Marine and Offshore E [email protected] Page 2

1. Report No. 2. Report date 3. Revision date 4. Type of report

OGL/DA/10143 August 2016 February 2017 Technical Rev. FINAL 5. Title & Subtitle 6. Security classification of this report

Vancouver Fraser Port Authority Commercial in Confidence LNG Fuel Demand Forecast and Bunkering Vessel Study 7. Security classification of this page

Commercial in Confidence

8. Author(s) 9. Authorization

Thanos Koliopulos Bud Streeter Global Special Projects Manager President, Lloyd’s Register Canada Lloyd’s Register EMEA Lloyd’s Register Canada Ltd

Laura Smith Market Intel & Data Analytics Manager Lloyd's Register EMEA

Daryl Anderson Lead Consultant

10. Reporting organization name and address 11. Reporting organization reference(s)

Lloyd’s Register EMEA None 71 Fenchurch Street London 12. This report supersedes EC3M 4BS Technical Rev. 2

13. Sponsoring organization name and address 14. Sponsoring organization reference(s)

Vancouver Fraser Port Authority (VFPA) None

15. No. of pages

108

16. Summary

The study aims to provide input to support Vancouver Fraser Port Authority’s objectives to address market demand and to identify and prioritize appropriate actions in order to establish a liquefied natural gas (LNG) bunkering hub facility.

17. Key words 18. Distribution statement

LNG, Bunkering, Forecasts, STS, berth, anchorage Vancouver Fraser Port Authority Lloyd’s Register EMEA Lloyd’s Register Canada Ltd

i Page 3 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Table of Contents Executive Summary ...... 8 Abbreviations ...... 10 1. Introduction ...... 12 2.1 Methodology ...... 15 2.2 Low LNG‐Fuel Demand Scenario ...... 16 2.3 Base Case LNG‐Fuel Demand Scenario ...... 17 2.4 High Case LNG‐Fuel Demand Scenario ...... 20 2.5 FOBAS‐Based Analysis Estimate ...... 22 3 Vessel Bunkering Study ...... 23 3.1 General ...... 23 3.2 Scope ...... 23 3.3 Methodology ...... 23 3.4 Port LNG Bunkering Workshop ...... 24 3.5 Findings and Recommendations ...... 24 3.5.1 LNG Supply Infrastructure ...... 24 3.5.2 LNG Supply Scenarios to Port of Vancouver ...... 26 3.5.3 LNG Bunkering Operations...... 27 3.5.4 LNG Bunkering Assets ...... 29 3.5.5 LNG Bunkering System ...... 31 3.5.6 LNG Bunker Quantity Measurement ...... 32 3.5.7 Port Control of Operations ...... 32 3.5.8 STS Bunkering Operations at Location ...... 34 4 References ...... 36 4.1 Market Data Sources ...... 36 4.1.1 Maritime Strategies International Ltd ...... 36 4.1.2 IHS ...... 36 4.1.3 Clarkson’s Research ...... 36 4.2 Supporting Documentation ...... 36 Appendix A – LNG Bunkering Demand Drivers ...... 38 A1 LNG‐as‐Marine Fuel Demand Outlook ...... 38 A2 Emission Control Area Compliance ...... 42 A3 LNG Fuel Prices v Traditional Fuels ...... 42

A4 Risk – Availability of LNG Supply ...... 5 43

Page 4 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017 A5 LNG Fuel Enabled Ship Deliveries ...... 44 Appendix B –Port of Vancouver LNG Bunker Demand Estimate ...... 50 B1 Port of Vancouver’s Traffic Profile ...... 50 B2 Trade Routes ‐ Traffic Activity Pre and Post the Port of Vancouver ...... 50 2.1.1 Port of Vancouver Ship Traffic Route Fuel Assumptions ...... 50 2.1.2 ECA Route Assumptions ...... 53 2.1.3 Refueling Frequency and Volume Assumptions ...... 53 B3 The Port Vancouver Historical Fuel Demand Trends ...... 54 3.1.1 Bunkering Suppliers ...... 54 3.1.2 Historical Fuel Consumption Estimates...... 55 B4 Port of Vancouver Fleet: LNG‐as‐Fuel Capability Take Up Assumptions ...... 59 4.1.1 Port of Port of Vancouver Survey 2016 Insights ...... 59 4.1.2 LNG‐As‐Fuel Capability Take‐up Insights ...... 59 B5 Port of Vancouver Activity Forecasts ...... 62 5.1.1 Baseline Date ‐2014 Benchmark Year ...... 62 5.1.2 GDP Growth Rates ...... 62 5.1.3 Container Cargo Demand Forecast ...... 63 5.1.4 General Cargo/ Break‐Bulk Cargo Forecast ...... 63 5.1.5 Bulk Carrier Cargo Demand Forecast ...... 64 5.1.6 Passenger Ship Demand Forecast ...... 64 5.1.7 Tanker Cargo Demand Forecast ...... 65 B6 Forecast Fleet All Fuel Demand Forecast (in Nautical Miles) ...... 66 B7 Fuel Requirements to Meet Current Levels of Demand through 2030 ...... 67 7.1.1 Port of Vancouver Fleet Retirement Forecast ...... 67 7.1.2 Port of Vancouver Replacement Fleet Fuel Demand Forecast ...... 68 7.1.3 Port of Vancouver New build Fuel Demand to Meet Cargo Growth Component ...... 68 7.1.4 Port of Vancouver Total New build Fleet Fuel Demand Forecast ...... 68 B8 LNG Demand Scenarios in Distance to Be Travelled Using LNG‐as‐Fuel ...... 69 B9 Estimation of LNG‐as‐Fuel Consumption per Nautical Mile ...... 70 9.1.1 Estimated Fuel Consumption Rates, By Ship Type ...... 72 9.1.2 Port of Vancouver LNG‐Fuel Demand Forecast Scenario Table ...... 73 B10 Fuel Demand Graphical Representations Global and Port Trends ...... 74 Appendix C – Port Survey ...... 75 C1 Survey Summary ...... 75 C2 Survey Methodology ...... 80

Page 5 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017 C3 Survey Details ...... 80 3.1.1 Vessel Demographics ...... 80 3.1.2 Owner’s Fleet Composition and Intention Towards LNG ...... 83 3.1.3 Importance of Factor Regarding a Decision to Have LNG Capable Ships ...... 84 3.1.4 Time Frame for LNG Capable Vessels ...... 90 3.1.5 Preferred LNG Bunkering Method ...... 92 3.1.6 Factors Influencing Amount of LNG Purchased at Port of Vancouver ...... 92 3.1.7 Importance of Factors to Attract LNG Capable Vessels ...... 97 3.1.8 Customers Interested in Further Discussion ...... 102 Appendix D ‐ Typical Commercial LNG STS Bunkering Systems ...... 103 Appendix E – Bunkering Checklists ...... 104 Appendix F – STS Bunkering Risk Assessment ...... 107 Appendix G – Safety Exclusion Zones ...... 108

Page 6 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017 Executive Summary

The study aims to provide input to support Vancouver Fraser Port Authority’s (VFPA’s) objectives to address market demand and to identify and prioritize appropriate actions in order to establish a liquefied natural gas (LNG) bunkering hub facility able to serve ships operating at the Port and in general ship trade operating through the Pacific NorthWest (PNW). The specific use of LNG as a future marine fuel has been identified not only on its successful adoption by the global marine industry but also because its use reinforces the environmental and social performance supported by VFPA’s Business and Land Use Plans.

During the time in which this report was being prepared, the International Maritime Organization’s MARPOL Convention, Annex VI, 2020 Fuel Regulation was ratified. Under this regulation, January 2020 was agreed as the effective date of global implementation for ships to comply with 0.50% m/m sulphur content of fuel oil. This regulation supports the case that the VFPA needs to provide services to help its clients reduce their emissions.

Based on the findings of the study, the supply infrastructure and the proposed LNG bunkering operations judged not to present any intolerable risks, not any risks greater than those found to be acceptable for conventional fuel bunkering operations at the Port of Vancouver. The potential events of marine failure, LNG bunker transfer failure and LNG/gas release with environmental impact, have been considered in all aspects of the proposed operations and appropriate mitigation measures were identified to reduce any potential occurrence of these risks.

The report findings and recommendations have been organized to provide responses to the following objectives representing also logical steps for the introduction of LNG bunkering at the Port of Vancouver:

 Identification of Port’s service customers likely to incorporate LNG fueled vessels in their fleet

 Development of demand forecast for LNG as a marine fuel for 5-year increments up to year 2030

 Identification of the most appropriate LNG bunkering operations to serve Vancouver Port’s trade, in- line with similar port operations globally

 Identification of the most appropriate infrastructure and procedures to be implemented in order to meet the forecast LNG bunkering demand

 Guidance on the currently accepted engineering Codes and Standards to achieve Regulatory Compliance.

It is noted that results indicate that the demand for LNG bunker fuel will be driven by ship-owners’ compliance with Emission Control Area (ECA) regulations, LNG fuel prices compared to traditional and other marine fuels, the availability of LNG marine fuel supply and the delivery of LNG enabled ships into the market .

Given the complex inter-relationship between factors that will influence the level of demand, three (3) LNG-as-fuel demand scenarios were developed: ‘Low Case’, ‘Base Case’ and ‘High Case’. Each of the scenarios was adjusted to include results of the port survey, to reflect how Vancouver Port’s ship owner attitudes towards LNG-fuel adoption differed from global averages.

Base Case LNG Bunker Fuel Demand Quantity Forecast for Port of Vancouver (m3/yr) Adjusted to Incorporate Port Survey Findings 2015 2020 2025 2030 2035 0 3,415 16,860 47,625 115,000

The most likely scenario appears to be the ‘Base Case’. For this case, established cruise ship operations, mainly within the projected ECA-Alaska route and partial containership trade on the Pacific North West (PNW) route will create a rise in demand. This demand will only see significant further expansion if new-build bulker ships were to adopt LNG fuel technology and operate on LNG fuel on PNW routes.

The Vessel Bunkering study constitutes the second part of this report. The study undertook a stakeholders’ review of numerous LNG supply and bunkering operational scenarios in order to identify potential critical issues affecting Port of Vancouver’s current Master Plan and future operations.

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In line with global operability trends for LNG bunkering operations the study established the preferred method of bunkering for Port of Vancouver to be ship-to-ship (STS), performed by bunker barges. This operation follows the current MDO/MGO bunkering methods without any particular obstruction to Port existing traffic management operations. An initial service should be based on 1+1 bunker barges able to undertake bunkering alongside with ships berthed at their quays or at pre-determined anchorages.

It is noted that LNG cruise bunkering operations are very likely to draw on all available LNG bunkering resources. In order to address availability of LNG service and meet turnaround times, the Port should address practical and high integrity infrastructure solutions. These may include the adoption of a feeder vessel, which can support both STS at port and anchorage, or the adoption of a local LNG storage facility at the identified site east of the Vanterm container terminal. Both options are merited as key to future supply services and should be examined further.

It is important that Vancouver Port address specifically the LNG bunkering permit policy at Roberts Bank/Delta Port Container Terminal. It is noted that the existing policy towards environmental friendly operations and reduction of emissions at Delta Port should indeed, due to the non-pollutant nature of LNG, support future bunkering operations. The T2 terminal expansion should consider adopting similar operations with global container terminals introducing STS LNG bunkering alongside or at a specific quay prior or after loading/offloading operations commence. The proximity to the Tilbury terminal provides certain advantages for bunker barge operations.

Port of Vancouver should update existing Bunkering Operations and Emergency Response Procedures in order to introduce LNG operations. This should effectively establish the Port’s principle safety and operability requirements to be met by any service provider undertaking LNG bunkering operations. It should also, in co-operation with the Coastguard and other agencies, establish the requirements for additional LNG specific safety assets (tugs, firefighting systems, personnel protection equipment) and personnel training.

Page 8 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Abbreviations

AIS – Automated information System ALARP - As Low As Reasonably Practicable BC – British Columbia BOG – Boil Off Gas

CBSA – Canada Border Services Agency

CTS – Custody Transfer System DWT – Dead Weight Tonne ECA – Emission Control Area EEDI – Energy Efficiency Design Index

EER – Escape Evacuation and Rescue ERC – Emergency Release Coupling ERS – Emergency Release System EIA – Environmental Impact Assessment ESD – Emergency Shut Down

FOBAS – Fuel Oil Bunkering Advisory Services FSRU - Floating Storage Regasification Unit GT – Gross Tonnage HAZID – Hazard Identification HAZOP – Hazard Operability HFO – Heavy Fuel Oil IGC – International Code for the Construction & Equipment of Ships carrying Liquefied Gases in Bulk

IGF – International Code of Safety for Ships using Gas or other Low Flash Point Fluid as Fuel (Draft) IMO- International Maritime Organisation ISO – International Organisation for Standardisation

LNG – Liquefied Natural Gas LSFO – Low Sulphur Fuel Oil MCTS – Marine Communications & Traffic Services MDO – Marine Diesel Oil MGO – Marine Gas Oil NG – Natural Gas

OCIMF – Oil Companies International Maritime Forum

PIC – Person in Charge

PPE – Personnel Protective Equipment PSEs – Puget Sound Energy’s

QC/DC – Quick Connect/Disconnect Coupling 10

Page 9 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

QRA – Quantitative Risk Analysis

SIGTTO – Society of International Gas Tanker & Terminal Operations

SIMOPS – Simultaneous Operations

SOLAS – International Convention for the Safety of Life at Sea

STS – Ship to Ship

TOTE – Totem Ocean Trailer Express

TTS – Truck to Ship

VFPA – Vancouver Fraser Port Authority

UCL – University College London

Page 10 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

1. Introduction

Vancouver Fraser Port Authority (VFPA) is responsible for Canada’s largest port, handling a diverse range of cargos including: containers, dry, liquid & break bulk products, vehicles and passengers. VFPA’s corporate vision is to be recognized as a world-class gateway by efficiently and sustainably connecting Canada with the global trade economy, maintaining a high integrity environmental policy and enabling thriving communities.

In support of VFPA’s vision and corresponding sustainability objectives, the organization is exploring alternative energy opportunities that reinforce economic, environmental and social performance. Therefore, the Port’s objective is to better understand opportunities associated with the use of LNG as a marine fuel.

Specifically, the LNG demand study, which constitutes the first part of this report, provides answers and insights into the following research questions:

 Demand forecast for LNG as a marine fuel in 2015, 2020, 2025 and 2030.

 Identification of key sectors and customers thought likely to adopt or plan to incorporate LNG as a fuel into their operations.

 Develop insights to assist VFPA’s understanding of LNG bunkering, taking into account vessel routes.

 Characterize the future need for LNG bunkering services in the Port of Vancouver.

 Estimate a timeline for the provision and scale of marine based LNG bunkering service within the Port of Vancouver, if appropriate given forecasted customer and ship type demand.

In addition, the vessel LNG bunkering study which constitutes the second part of this report provides answers and insights into the following research questions:

 Assess bunkering operations based on fuel capacity requirements identified by demand forecast for current and future trades. Assess types of ships to be bunkered, size and numbers of bunkering barges, ability to be supported by local terminal and/or establishing port’s own LNG storage support facility.

 Assess local LNG supply infrastructure, address port vessels traffic control, quay operations, port support operations, port safety provisions and emergency response.

 Identify appropriate operational procedures for risk reduction. Advise VFPA of required activities/studies to ensure compliance with International Codes and Standards applicable to LNG bunkering operations.

The structure of this report is organized to reflect the research objectives with the answers, analysis and insights to questions asked contained in the main body of the report with background technical information and data used for modelling contained in the Appendices.

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2. Vancouver Fleet Demand Forecast Findings

This section provides insights from developments in the wider shipping market and Port of Vancouver- specific findings from Lloyd’s Register’s research for this project. The findings take into consideration the results of the Port of Vancouver Survey and well as the LNG Fuel demand for the Port of Vancouver based on global demand forecasts.

The results of the research indicate that the demand for LNG bunker fuel will be driven by:  Ship-owners’ compliance with current and expected Emission Control Area (ECA) regulations e.g. the North America Emissions Control Area (0.10%) effective 2015,  Ship-owners’ compliance with the International Maritime Organization’s MARPOL Convention, Annex VI, 2020 Fuel Regulation. Under this regulation, MEPC 70 agreed to “1 January 2020" as the effective date of implementation for ships to comply with 0.50% m/m sulphur content of fuel oil.  LNG fuel prices compared to traditional marine fuel,  the availability and risks associated with LNG marine fuel supply,  the delivery of LNG enabled vessel into the market to replace existing ships, and by  the growth in cargo and passenger traffic.

Given the complex interrelationship between factors that will influence the level of demand, three LNG-as- fuel demand scenarios are presented – Low Case, Base Case and High Case – based on assumptions regarding the share of ECA and non-ECA distances undertaken by LNG-enabled new builds using LNG-as- fuel.

The most important LNG bunker demand forecast finding is that the initial LNG deep-sea-going ships will start using LNG as fuel in the early 2020’s. Thus, the primary ship owner risk associated with early adoption of LNG bunkers is securing the necessary LNG supply. In contrast, the service provider’s risk associated with all three-demand scenarios is whether market demand for LNG fuel is sufficient to warrant the capital investment in infrastructure and equipment to service the early adopters in the market.

Summary of LNG Fuel Demand Forecast

Low Case

On the chart above, the bars represent the LNG Fuel demand for the Port of Vancouver based on global trends and attitudes towards LNG adoption. The black line curves represent LNG demand trends after taking into account the views of ship owners trading in the Port of Vancouver based on the responses given in the Vancouver Port Survey.

Page 12 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017 Vancouver Port LNG Fuel Demand Table Low Case LNG‐Fuel Demand in CuM Based on Global LNG‐Fuel Take‐up Expectations Modified to Account for Vancouver Port Owner Attitudes Ship Type 2015 2020 2025 2030 2035 2015 2020 2025 2030 2035 Cruiseship 0 487 2,219 6,837 22,365 0 487 2,219 6,837 22,365 Roro/Ropax/Ferry 0 84 227 372 525 0 84 227 372 525 Car Carrier 0 120 397 1,019 1,939 0 120 397 1,019 1,939 Gen Cargo/Break Bulk Cargo 0 39 156 255 412 0 39 156 255 412 Crude/Oil Prods Tanker 0 8 215 642 1,118 0 8 215 642 1,118 Containerships 0 1,172 6,047 16,994 38,510 0 586 3,023 8,497 19,255 Dry Bulk Carrier 0 410 2,683 8,510 22,281 0 0 0 0 0 Chemical Tanker 0 262 1,197 2,992 7,230 0 0 0 0 0 Low case LNG-Fuel Demand in CuM 0 2,581 13,141 37,620 94,380 0 1,323 6,238 17,622 45,614

Base Case LNG‐Fuel Demand in CuM Based on Global LNG‐Fuel Take‐up Expectations Modified to Account for Vancouver Port Owner Attitudes Ship Type 2015 2020 2025 2030 2035 2015 2020 2025 2030 2035 Cruiseship 0 850 3,835 11,715 37,807 0 850 3,835 11,715 37,807 Roro/Ropax/Ferry 0 155 401 661 936 0 155 401 661 936 Car Carrier 0 504 1,651 4,190 7,922 0 504 1,651 4,190 7,922 Gen Cargo/Break Bulk Cargo 0 131 531 899 1,457 0 131 531 899 1,457 Crude/Oil Prods Tanker 0 32 871 2,611 4,554 0 32 871 2,611 4,554 Containerships 0 3,484 19,140 55,095 124,646 0 1,742 9,570 27,548 62,323 Dry Bulk Carrier 0 1,563 10,119 32,502 86,603 0 0 0 0 0 Chemical Tanker 0 1,130 5,032 12,416 30,005 0 0 0 0 0 Base case LNG-Fuel Demand in CuM 0 7,850 41,581 120,091 293,931 0 3,415 16,860 47,625 115,000

High Case LNG‐Fuel Demand in CuM Based on Global LNG‐Fuel Take‐up Expectations Modified to Account for Vancouver Port Owner Attitudes Ship Type 2015 2020 2025 2030 2035 2015 2020 2025 2030 2035 Cruiseship 0 1,117 5,007 15,226 48,777 0 1,117 5,007 15,226 48,777 Roro/Ropax/Ferry 0 210 530 875 1,242 0 210 530 875 1,242 Car Carrier 0 863 2,825 7,158 13,518 0 863 2,825 7,158 13,518 Gen Cargo/Break Bulk Cargo 0 215 874 1,492 2,419 0 215 874 1,492 2,419 Crude/Oil Prods Tanker 0 55 1,485 4,453 7,767 0 55 1,485 4,453 7,767 Containerships 0 5,562 31,025 89,797 203,080 0 2,781 15,512 44,899 101,540 Dry Bulk Carrier 0 2,635 17,020 54,793 146,469 0 0 0 0 0 Chemical Tanker 0 1,945 8,627 21,243 51,334 0 0 0 0 0 High case LNG-Fuel Demand in CuM 0 12,603 67,393 195,038 474,606 0 5,241 26,234 74,104 175,263

Further Tables and Charts showing the assumptions behind the demand forecasts are presented throughout Appendix B. The following sections provide the demand forecast methodology and discuss the findings for the Port of Vancouver under each demand scenario.

Page 13 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017 2.1 Methodology

In order to assist the understanding of the fuel demand forecasting process, the step-by-step approach of the adopted methodology with explanatory notes is presented below:

Vessel Traffic Profile

 The traffic profile per vessel type/size was created to determine fleet composition and number of port calls based on Port of Vancouver’s 2010-2014 vessel traffic report. The baseline 2014 year dataset was based on an average of five years of traffic activity. The analyzed data shows average number of port calls by ship type and size.

Vessel Traffic Growth

 Canadian GDP and various cargo growth forecasts were used to estimate demand growth for each ship type/size group (and hence for total voyage distance) through to 2035. Based on this the study applied same annual growth rate in distances by relevant ship type/size

 From the annual growth rate in distances, the study estimated the total annual Emission Control Area (ECA) and non-ECA distances to be covered for each ship type/size by year trading at Port of Vancouver.

Vessel Traffic and Trade Passages

 The study assumed next refueling destination distance for each ship/size type, split into ECA and non-ECA areas, and applied this to each ship in the model.

LNG Marine Fuel Demand Forecast

 Based on the “2016 Port of Vancouver Survey” responses (reference Appendix C), the study assumed that all of Vancouver’s LNG-fueled ships would be new builds. (The survey indicated that ship owners currently using the port generally do not plan to retrofit existing ships with LNG fuel engines).

 Analysis of the age of the global fleet in relation to Vancouver’s 2010-2014 ship type traffic data. The study used Clarkson’s average retirement ages by ship type/ size category, in order to estimate the volume of Vancouver’s existing fleet likely to be retiring and when. It was assumed that retirements would be replaced by new builds except for particular years and ship sectors (e.g. bulk carriers and cargo ships) where demand is forecasted to be low and on these cases it was assumed that no replacement would occur.

 The study assumed that growth in ship demand would be met by ships from elsewhere in the global fleet and from additional new builds. The ratio of new builds to existing fleet for these vessels would match the ratio used in the Clarkson’s forecast of global new builds to existing fleet per ship type/size.

 From the above the study established the total anticipated ECA and non-ECA refueling distance to be covered by each new build ship type/size group through 2030. (Reference Table 5, Appendix B2, Section 2.1.1).

 Based on the findings of Lloyd’s Register and UCL’s “Global Marine Fuel Trends 2030” report, the study assumed various LNG-as-fuel take up rates for the different ship type/size combinations through 2030. (Assumptions shown in Table 7, Appendix B4, Section 4.1.3). This long term fuel trends forecast assumed that further emission-control regulations would emerge over the period to 2030. One of these assumptions was that a global cap of 0.50% m/m Sulphur content would be legislated on fuel oil from 2020.

 Several scenarios were developed based on what share of voyage distances were to be LNG-fueled. Then the study used Lloyd’s Register’s “LNG-as-Fuel Tank Capacity Calculator” to estimate total LNG consumption rates per nautical mile. (Reference Table 8, Appendix B9, Section 9.1.1).

Page 14 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017  LNG fuel demand forecasts were calculated by applying the fuel consumption rates to the nautical miles assumed in each of the scenarios. (Reference Table 9, Appendix B9, Section 9.1.2)

 Finally, the forecast based on global demand trends was adjusted to take into account ship owner responses in the Vancouver Port Survey. In contrast to global averages, the majority of Vancouver’s bulker and chemical tanker owners said that they did not plan to convert to LNG. Similarly, Vancouver’s containership owners were significantly less in favor of adopting LNG-as-a-fuel than the global average. Based on statistical calculation of responds to the survey, the Vancouver 2030 fuel mix could not reach the 11% overall share in the global fuel trends forecast. Refer to Scenario Forecast Combined Graph A (global -trends) and combined Graph B (after Port Survey adjustments) in Appendix B10 and Sections 2.2 to 2.4 below.

2.2 Low LNG-Fuel Demand Scenario

Table1 below summarizes the demand forecast for LNG bunker (Low Scenario). An important assumption in the low demand forecast is that LNG is used by all LNG-capable new build ships but only to fuel 50% of distance travelled in ECA areas, and 0% in non-ECA areas.

Table 1: Low Case LNG Bunker Fuel Demand Quantity Forecast for Port of Vancouver (Cum/yr) Adjusted to Incorporate Port Survey Findings Ship Type 2015 2020 2025 2030 2035 Cruiseship 0 487 2,219 6,837 22,365 Roro/Ropax/Ferry 0 84 227 372 525 Car Carrier 0 120 397 1,019 1,939 Gen Cargo/Break Bulk Cargo 0 39 156 255 412 Crude/Oil Prods Tanker 0 8 215 642 1,118 Containerships 0 586 3,023 8,497 19,255 Dry Bulk Carrier 0 0 0 0 0 Chemical Tanker 0 0 0 0 0 Low case LNG-Fuel Demand in CuM 0 1,323 6,238 17,622 45,614

The low LNG fuel bunker fuel demand uptake is strongly influenced by relative energy prices. The low case forecast could occur when LNG prices are significantly higher than alternative fuel types, and/ or where Vancouver’s LNG prices are significantly higher than nearby competitor ports, so that ship operators switch to other fuel types/ other fuel supply destinations

The future need for LNG bunkering services in the Port of Vancouver can be characterized by the key shipping sectors and customer types that are likely to adopt or plan to incorporate LNG as a fuel into their operations.

The Low Case charts show two LNG-uptake attitudes:

 View based on average global attitude towards LNG-uptake (left hand chart below)

 View based on Vancouver’s ship owner attitude towards LNG uptake (right hand chart), as expressed in the Port Survey. In contrast to global averages, Vancouver Port’s bulk carrier and chemical tanker owners were generally less in favor of LNG fuel take-up. Although containership owners were less risk-averse, they were also less reluctant to adopt LNG-as-fuel than the global average.

The Port Survey-Adjusted Low Case (right hand chart below) shows that LNG as fuel demand will start to emerge in the early 2020’s. By 2025, the port’s LNG-as-fuel demand will have amounted to around 6,200 m3/ year. Demand would be driven largely by cruise and container ships, on an equal basis. Car Carriers represent a very small portion of LNG demand.

By 2035, LNG demand will have risen to over 45,000 m3/year. Cruise ship LNG bunker requirements are

Page 15 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017 expected to outstrip those of containerships – but the two vessel types are still expected to dominate LNG demand. Passenger ships, Crude/Oil tankers and cargo vessels are to generate a smaller, but significant, volume of LNG demand by 2035.

The scenario based on global attitudes towards LNG adoption shows how Vancouver’s demand could change, were bulk carrier, chemical tanker and containership owners to become more in favor of LNG take- up, moving towards average global take-up rates. Were this to happen, even under the Low Case Scenario assumptions, demand could rise to the levels shown by the left hand chart.

The implication for the port and potential LNG fuel service provider is that economies of scale may begin to appear in the provision of LNG fuel supply once a wider range of vessels are equipped to handle LNG as a marine fuel.

An important implication is related to current VFPA policies on the physical location of where conventional bunkering activities can take place and the location within the Port jurisdiction where container traffic growth is expected to occur. Roberts Bank is presently the site of the Port’s largest container terminal as well as the location of the T2 container expansion project. However, Robert’s Bank is currently not a location approved for conventional bunkering activity. Since it is likely that LNG capable vessels will be dual fueled, LNG bunkering should be considered alongside the need for the ship operator to obtain conventional fuel. Should container ship owners choose to use both conventional and LNG-fuel, and need to change locations to complete both bunkering operations, the duration of the refueling process could be longer. If this extension in refueling increases costs substantially, it could cause some operators to avoid refueling at Vancouver Port whenever possible.

The results of the Port Survey provide additional insights that may pertain to a Low Demand scenario. The initial low uptake of LNG as marine fuel is influenced by ship owners existing fleet and technology for ECA compliance. Holland America for example indicated it has no plans to retrofit any of its existing vessels to be LNG capable, nor does it have any plans to order any new buildings to be LNG fuel capable. In contrast, Carnival Cruise Line indicated that it plans to order two new builds with LNG capability that could enter its fleet in the 2021 to 2025 time period.

2.3 Base Case LNG-Fuel Demand Scenario

Table 2 below summarizes the forecasted LNG bunker (Base Case) demand. The Base Case forecast assumes that LNG is used to fuel in 80% of distance travelled by LNG-capable ships in ECA areas, and 10% in non-ECA areas.

Page 16 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017 Table 2: Base Case LNG Bunker Fuel Demand Quantity Forecast for Port of Vancouver (Cum/yr) Adjusted to Incorporate Port Survey Findings Ship Type 2015 2020 2025 2030 2035 Cruiseship 0 850 3,835 11,715 37,807 Roro/Ropax/Ferry 0 155 401 661 936 Car Carrier 0 504 1,651 4,190 7,922 Gen Cargo/Break Bulk Cargo 0 131 531 899 1,457 Crude/Oil Prods Tanker 0 32 871 2,611 4,554 Containerships 0 1,742 9,570 27,548 62,323 Dry Bulk Carrier 0 0 0 0 0 Chemical Tanker 0 0 0 0 0 Base case LNG-Fuel Demand in CuM 0 3,415 16,860 47,625 115,000

The Base Case forecast scenario is possible if LNG and traditional fuels retain their long term price differentials (see Appendix A, Section A3) and that Port of Vancouver’s prices remain competitive with any nearby ports.

As shown in the right hand chart below, The Port Survey-adjusted Base Case suggests that LNG demand is to emerge in the early 2020’s. By 2025, demand is to reach almost 17,000 m3/year. Demand is to be driven primarily by container vessels and cruise ships then, to a much lesser extent, by car carriers. This pattern largely holds during the forecast period except that by 2035, crude/oil product tankers and general cargo vessels begin to enter the LNG marine fuel demand mix. Demand is to reach some 115,000 m3/year LNG by 2035.

Should Vancouver’s bulk carrier, chemical tanker and containership expected take-up of LNG-as-fuel rise towards global averages (in terms of share of total fleet that is LNG fueled), then, under the Base Case scenario assumptions, expected demand would be more in line with the levels presented in the left hand chart below.

Both the Low and Base Cases present a similar LNG demand scenario through 2020. However, thereafter the Base Case predicts a significant rise in the volume of LNG bunker fuel required as more new dual fueled vessels enter the global fleet and begin to operate in trade passages relevant to the Port of Vancouver. The scale and size of LNG bunker solution in terms of equipment etc. is likely to be greater than in earlier time periods as the needs of a wider variety of ship types have to be met. Economies of scale in LNG bunker fuel operations are more likely to emerge after 2025 due to a higher level of demand.

The results of the Port Survey provide additional insights that may pertain to a low demand scenario. For example, responses from separate containership companies showed the following:  One company is considering LNG on core global routes for company owned vessels. The company currently deploys ships that serve the Port of Vancouver on United States West Coast and Panama Canal service strings.  One company plans to order new buildings or charter LNG fuel capable ships 18

Page 17 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017  Another company plans to build ten LNG-fueled ships in the 2021-2025 period, vessels that could possibly become part of the Port of Vancouver’s traffic  One respondent indicated that his company has already decided to construct a LNG bunker vessel and is looking at three new builds for delivery between 2021 and 2025

Outside the containership segments:  One company operating in the liquid bulk tanker and support and work vessel segments said that it plans to order 15 LNG capable new builds. These vessels are expected to enter service in the 2021 to 2025 time period.  In the break-bulk segment of the market, one respondent indicated that his company has an interest in ordering five LNG-capable new build vessels expected to enter the market between 2016 and 2030.

Appendix A, Section A5, provides details of the number of LNG-fueled/ enabled ships currently in service and on order.

Page 18 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

2.4 High Case LNG-Fuel Demand Scenario

Table 3 below summarizes the forecasted LNG bunker (High Case) demand for the respective time period in this study. LNG is used to fuel 100% of distance travelled by LNG-capable ships in ECA areas, and 20% in non-ECA areas.

Unless there is a unexpectedly large structural change in the balance between LNG and distillate fuel prices, it is not expected that LNG will be used to fuel larger shares of non-ECA journeys, even in light of the recent IMO 2020 global Sulphur content fuel legislation. This is because of the trade-off between the size of the LNG-fuel tank and cargo space.

Table 3: High Case LNG Bunker Fuel Demand Quantity Forecast for Port of Vancouver (Cum/yr) Adjusted to Incorporate Port Survey Findings Ship Type 2015 2020 2025 2030 2035 Cruiseship 0 1,117 5,007 15,226 48,777 Roro/Ropax/Ferry 0 210 530 875 1,242 Car Carrier 0 863 2,825 7,158 13,518 Gen Cargo/Break Bulk Cargo 0 215 874 1,492 2,419 Crude/Oil Prods Tanker 0 55 1,485 4,453 7,767 Containerships 0 2,781 15,512 44,899 101,540 Dry Bulk Carrier 0 0 0 0 0 Chemical Tanker 0 0 0 0 0 High case LNG-Fuel Demand in CuM 0 5,241 26,234 74,104 175,263

The High Case forecast scenario could occur if LNG becomes significantly cheaper than traditional fuels and/or if Port of Vancouver’s prices are significantly lower than nearby ports.

The High Case Port Survey-Adjusted scenario again suggests the emergence of LNG demand in the 2020’s. By 2025, Port of Vancouver’s LNG demand will amount to just over 26,200 m3/year fuel. Over half of this is to be from containerships. Most of the remainder is to be from cruise ships, with Car Carriers demanding a small share. This pattern largely holds during the forecast period except that by 2035 passenger ships, Crude/oil tankers and break-bulk cargo vessels also generate a more significant volume of demand. Demand in 2035 is expected to amount to 175,200 m3/year.

As in the other scenario cases, if Port of Vancouver’s bulk carrier, chemical tanker and containership owners held similar LNG adoption attitudes as those across the globe, a much higher demand for LNG fuel would have been expected from these vessel types, as shown by the left hand chart.

Page 19 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

The increased mixture of vessels towards the end of the forecast period introduces a greater possibility of having an LNG bunkering solution that can accommodate demand or seasonal peaks, especially in the cruise ship market.

The results of the Port Survey provide insight into LNG bunkering interest that could arise in a High Demand forecast scenario. For example,  One bulk carrier ship-owner, says that that while it has no present plans to acquire LNG capable vessels, the longer-term perspectives generally held by ship-owners may support going for a LNG solution for company owned vessels. But the company believes LNG capability is less likely to be a decisive factor for chartered tonnage.  In the container ship sector, one company is currently undertaking technical and feasibility studies regarding retrofitting existing vessels but does not currently plan to order new ships that are LNG capable. The company’s LNG marine fuel market knowledge to date is sufficient to suggest that their choice of bunker location could change with from Hong Kong/Busan to Canada, United States and China.  Another container line company indicated that it has one new build vessel that will be LNG capable in the 2021 to 2025 time period.  A second containership company indicated that it was currently uncertain as to the number of LNG capable vessels it would need, but believed that 2021 to 2025 would the earliest time frame a LNG fueled vessel in their fleet could call at the Port of Vancouver.

Page 20 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017 2.5 FOBAS-Based Analysis Estimate

A separate analysis, based on Lloyd’s Register’s Fuel Oil Bunkering Advisory Service (FOBAS) fuel-sampling Division data is contained in Appendix B3 Section 3.1.2. This analysis estimates Port of Vancouver’s 2030 LNG- fuel demand is as being approximately 144,000 m3 LNG per annum.

Although the FOBAS-based analysis is not based on an extensive study, it does give a degree of validity to the study’s scenario forecasts, as it lies between the Base Case and High Case scenarios (before adjusting for the results of the Port Survey).

The Fobas based scenario should be seen as a likely outcome only if both bulker and containership trade were to adopt LNG fuel technology and implement LNG fuel usage for the majority of trade routes out of Port.

VFPA is currently investigating a possible aviation jet fuel development on the Fraser River. Should this project proceed, a dedicated ship is to make the transit for this terminal. This project is unlikely to impact on the LNG- fuel demand forecast, because it is not expected to cause additional new tankers to visit the port.

Page 21 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

3 Vessel Bunkering Study

3.1 General

Port of Vancouver is located on Canada’s west coast in the province of British Columbia. The Port Authority waters jurisdiction extends from Point Roberts at the Canada/U.S border through Burrard inlet to Port Moody and Indian Arm, and from the mouth of the Fraser River, eastward to the Fraser Valley, north along the Pitt River to Pitt Lake, and includes the north and middle arms of the Fraser River.

The Port operates across five main business sectors of cargo and passenger vessels:

. Cruise carriers . Container ships . Car carriers . Breakbulk carriers/ General Cargo Ships . Dry Bulk carriers . Liquids Bulk carriers/Tankers

3.2 Scope

The scope of Port of Vancouver Vessel Bunkering Study included the following aspects:

. Undertake a site survey of the areas within the port where future LNG bunkering operations may take place.

. Assess bunkering operations based on fuel capacity requirements identified by demand forecast for current and future trades. Assess types of ships to be bunkered, size and numbers of bunkering barges, ability to be supported by local terminal and/or establishing port’s own LNG storage support facility.

. Assess local LNG supply infrastructure, address port traffic control, quay operations, port support operations, port safety provisions and emergency response.

. Identify and qualify potential drawbacks associated with any infrastructure options with regards to the LNG replenishment to bunker barge, bunker trucks or a fixed bunkering system through pipeline/LNG storage operating within Port Authority areas.

. Issue appropriate recommendations for risk reduction. Advise Port Authority of required activities/ studies to ensure compliance with International Codes and Standards applicable to LNG operations.

3.3 Methodology

Following the demand forecast study a port site evaluation survey has taken place in order to determine the infrastructure support and operational methodology required to be established or supported by the Port in order to meet the identified LNG bunker demands.

The following methodology applied:

. Stakeholder discussions with potential LNG bunkering suppliers. It involved Lloyd’s Register team members having in person meetings to conduct semi-structured surveys of existing LNG suppliers.

. Review of existing bunker fuel infrastructure in the Port and common bunkering means employed in order to establish a feasibility plan for LNG bunkering service provision and provide knowledge basis for similar operations in other ports.

Page 22 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

. Assess current bunker fuel services in Port of Vancouver and existing LNG providers and natural gas companies in the Lower Mainland to determine interest, and identify obstacles/concerns and any plans for introduction of LNG into their bunkering services.

. Address LNG bunkering service requirements based on existing bunkering provider services in the area. Assess size and numbers of bunkering barges, capability for re- loading LNG cargo locally or at remote location, turn-around time service requirements, identify short-term solutions and long-term solutions involving LNG local storage options or relying on future LNG terminal infrastructure.

3.4 Port LNG Bunkering Workshop

A review workshop took place at the premises of VFPA. The review was led by a Chairman and input was provided by local operating specialists, future stakeholders and other parties.

A number of LNG supply and bunkering operational scenarios were reviewed in turn by the workshop, to identify potential critical issues affecting VFPA’s current Business and Land Use Plans and future operations. Findings were identified, together with critical issues and recommendations to be considered by Port.

3.5 Findings and Recommendations

3.5.1 LNG Supply Infrastructure

Based on existing and future development LNG infrastructure the following terminal facilities are envisaged to provide LNG bunker to support operations in Port of Vancouver:

. FortisBC Tilbury LNG Facility (& Expansion) . Woodfibre Terminal at Squamish . Port of Tacoma . Prince Rupert LNG Facility

The volume of supply is also important as it gives VFPA the ability to keep prices competitive and reduces the commercial risk to ship-owners who are concerned with LNG supply availability.

FortisBC Tilbury LNG Facility Expansion Project

FortisBC Inc. is currently involved in expanding its Tilbury Island LNG storage facility in Delta, BC. It is currently a peak shaving facility. WesPac Midstream LLC is working through the process of obtaining regulatory approval for the construction of a marine berth.

The Tilbury plant is next to a Seaspan ferries facility and FortisBC is supporting current and future LNG bunkering operations to Seaspan Ferries mainly by LNG trucks. The current LNG storage capacity is 7.4 million gallons to be expanded with an addition of a new tank to 18 million gallons. The expansion plans include a jetty loading facility able to load LNG to bunker barges which would support bunkering operations out of the Fraser river area to the Port of Vancouver and other future facilities.

Squamish Marine Terminal LNG Export Facility

Woodfibre LNG in Squamish is in the approval process for a LNG export facility with a potential LNG export of 1 mtpa of LNG for 25 years starting in 2020. Annual capacity is to be approximately 2.1 million tonnes.

Woodfibre is a privately held Canadian company based in Vancouver with a Community Office in Squamish. It is a subsidiary of Pacific Oil & Gas Limited, which is part of the Singapore-based RGE group of companies. RGE, Royal Golden Eagle, focused on resource-based manufacturing industries.

Page 23 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Port of Tacoma LNG Bunkering Developments

The ports of Tacoma and Seattle have formed the “North West Seaport Alliance”, and are making certain decisions around terminal development jointly.

The Port of Tacoma has been planning to build an LNG Bunkering facility, but plans regarding implementation remain uncertain. However, in early August 2016 the Northwest Seaport Alliance moved forward on LNG bunkering granting an approval for easements for a new liquefaction plant and terminal in the Port of Tacoma. The LNG facility's developer, utility company Puget Sound Energy, had asked for easements for a pipeline from its proposed plant to the Blair Waterway, plus an easement for a loading dock on the waterway to provide bunkers to LNG -fueled vessels – principally TOTE Maritime Alaska's two Orca-class ships, which will be converted to LNG fuel.

The facility had a projected daily liquefaction production for 250,000 gallons (1,100m3 approx.) to 500,000 gallons (2,300m3 approx.) of LNG. One of the biggest clients is Totem Ocean Trailer Express (TOTE) at its Port of Tacoma facility. TOTE Maritime Alaska began converting two Alaskan ships, the ‘MV North Star’ and ‘MV Midnight Sun’ to natural gas at the start of 2016. The Orca class vessels are to be the third and fourth cargo ships in the United States (second only to TOTE Maritime Puerto Rico’s Marlin class ships) able to run on LNG fuel.

The plan for Tacoma was to have a single eight-million gallon (36,000m3 approx.), non-pressurized full-containment LNG storage tank of a standard 9% Ni double containment type. In the short to medium term, this is likely to be the only source of realistic US competition for LNG bunkering in the Pacific Northwest and the closest US facility to Port of Vancouver.

Port of Seattle

As mentioned above, the Port of Seattle has joined the “North West Seaport Alliance” with the Port of Tacoma. Seattle Port has not announced any current plans for LNG bunkering services.

Prince Rupert LNG Facility

Prince Rupert Port Authority recently announced that Phase II North of its Fairview container terminal expansion project, launched in the first quarter of 2015, is now more than 75% complete and is on schedule to increase annual capacity at Prince Rupert’s container terminal to over 1.35 million TEUs by the third quarter of 2017. The Port Authority has been also communicating future ability to provide LNG bunkering services via the LNG Terminal facility (under Port’s administration) on the southwestern part of Ridley Island.

The terminal will receive natural gas from northeastern BC transported through a pipeline and will re-liquefy and store LNG for the export market. Latest information stated that Environmental Impact Assessment (EIA) is ongoing as per local Regulatory Requirements.

Page 24 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017 3.5.2 LNG Supply Scenarios to Port of Vancouver

LNG supply scenarios were identified in the port LNG bunkering workshop and are discussed as follows: Supply Scenario 1 . LNG bunker supply from FortisBC Tilbury Site to Port of Vancouver Burrard Inlet. Passage through open sea at Strait of Georgia, passage through English Bay, under Lionsgate Bridge, entering Burrard Inlet where most bunkering operations take place. Distance from Port of Vancouver is 12nm.

Port of Vancouver supply would require the adoption of a new constructed or converted LNG bunkering barge. Based on the base case requirement the proposed LNG barge should be able to provide a LNG capacity able to address bunkering requirements of a cruise passenger vessel operating the projected ECA area passage from Vancouver to Anchorage Alaska (refer to ‘Rydam’ fuel consumption Appendix B9 , Table 8, Section 9.1.1).

Typically, operational constraints for Scenario 1 are inability to operate due to weather impact, high Port traffic restrictions, impact collision incident, loss of maneuverability, maritime incident due to human error/low visibility and other failures resulting in uncontrolled passage.

Currently the Strait of Georgia and English Bay passages are sailed by HFO and MDO/MGO fuel barges undertaking bunkering operations at English bay anchorages (only for very large vessels) and at Burrard Inlet (majority of vessels) alongside or at anchorage. Operations by bunkering providers Marine Petrobulk ltd and ICS Petroleum (Reference Appendix B3, Section 3.1.1) involve barges of typical 4,500m3 capacity (L: 82m, B: 19m, D: 7m) these are capable to undertake operations throughout the year.

Safe traffic control especially during winter low visibility periods is by Marine Communications and Traffic Services (MCTS) and includes real- time monitoring activities of all vessels in operation. Coastguard also monitors ship traffic via ALS system. It is expected that some window of operations limitations will apply during winter passage conditions.

It is noted that Fortis facility has not been provided with an LNG offloading jetty able to support bunkering vessel or LNG feeder vessel operations in the wider area including Port of Vancouver. It is noted that current plans under development have addressed the provision of such a jetty by WesPac Midstream LLC. While the timing of construction of the marine berth may be related to bulk LNG export opportunities for the company it is reasonable to assume that there will be a local supply and a relatively close back- up supply of LNG within the Pacific Northwest.

In order to enable efficient LNG supply to Port of Vancouver and potential LNG bunkering alongside at anchorage, the jetty facility would also need to address capability to accommodate feeder LNG vessels. Navigation Simulation studies would need to be undertaken especially for feeder/large LNG vessels to address approach, berthing and departure operations at Fortis and any potential impact onto existing Fraser River traffic.

Supply Scenario 2

. From Squamish Marine Terminal. Passage through Howe Sound to Horse Shoe Bay entry to Burrard Inlet. From Tacoma Port, to Puget Sound through Salish Sea passage into Burrard inlet.

At Tacoma, Northwest Seaport Alliance approved two developments for Puget Sound Energy’s (PSE's) including one to accommodate pipeline from the company's proposed LNG plant across the peninsula to a proposed Blair Waterway dock, and a second for a loading platform on the Blair Waterway that will be used to bunker two LNG- powered TOTE Maritime (TOTE) vessels.

Woodfibre LNG in Squamish is in the approval process for a LNG export facility with a potential LNG export capacity of 1 mtpa. The current business forecasting is for a life-cycle of 25 years starting in 2020.

Typically, operational constraints are similar with Scenario 1. In addition, it is noted that any supply operations from Tacoma Port would result in importing LNG cargo in Canada and Port of Vancouver and the bunkering provider would need to comply with Canada Border Services Agency (CBSA) or other government agencies conditions.

The distance from Tacoma to the Port of Vancouver is 125nm, whilst the Squamish terminal lays 25nm north of the Port of Vancouver.

Page 25 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Supply Scenario 3

. Local LNG supply storage within Burrard Inlet able to provide a first call facility to address continuity of supply operations.

Scenarios 1 and 2 identified certain limitations on bunker availability and turnaround time requirements. An initial provision of a single bunker barge would limit fuel volume availability of service at port to approximately 2,000 m3 or less based on market typical LNG bunker barge sizes. Based on demand scenarios the LNG capacity of the barge should also be approximately 2,000 m3 in line with Port of Vancouver to Anchorage LNG fuel requirements for a medium size cruise ship. (Refer to Section 4.2 Ref. (4) Financial Considerations study: Section 2)

Bunkering operations turn-around time would be also affected requiring time for the return barge journey to Tilbury or Squamish Terminals. Typically, only by considering the volume of potential cruise ship bunkering operations from April through October without any addressing other potential vessels the ability to maintain on time LNG supply would be highly difficult.

This supply scenario addressed the option of a local storage installation within inner port able to provide LNG fuel to bunker barge(s) operating within the Burrard Inlet and be re-supplied by either barge or feeder LNG vessels from LNG terminals in the region.

It is recommended for the initial LNG bunker fuel requirements that the proposed facility should be able to accommodate at least two LNG bunker barge replenishments. Based on this port should address a local 6,000 m3 storage provision which in the future would be able to operate in conjunction with feeder vessel services (Refer to Section 4.2 Ref. (4) Financial Consideration study: Section 2) . During the workshop, Port identified a most suitable location the available site East of the Vanterm container terminal.

This solution is to be used as a back-up facility to ensure continuation of bunker supply at port. It is also noted that this could also provide an installation able to support local operations of a smaller LNG capacity barge based on a conversion of one of the existing fuel bunker barges currently in operation. In addition to storage, the area needs to include a small jetty which will enable the re-supply of LNG from terminals and the loading of bunker barges operating within port. It is noted that the water depth and the navigational approach to the identified site could easily enable LNG barge and feeder vessels operations.

3.5.3 LNG Bunkering Operations.

The operability trends of LNG bunkering operations taking place globally have established the preferred method of bunkering to be ship-to-ship (STS), performed by bunker barges alongside the receiving ships at various quays or at anchorage. This operation follows the current HFO and MDO/MGO bunkering methods without any particular obstruction to port existing traffic management operations. The second most popular method is truck-to-ship (TTS) where LNG trucks are delivering fuel from the quayside to berthed ships. Due to the small LNG volumes and lower fuel transfer speeds provided by trucks, TTS is only applicable to small LNG capacity ships for short coastal operations like Ro-Pax and High Speed ferries which are outside the Port of Vancouver market.

Based on Port of Vancouver’s current ship types and operating routes, for start –up operations the following services are envisaged:

 Local market – cruise ship operations from Port of Vancouver due to ECA area passage to Alaska (Reference Appendix B2, Section 2.1.2). Current market in Port of Vancouver accounts for approximately 250 cruise vessels per year from April through October.

 Global market – trans-pacific container ship (Panamax) operations typically Port of Vancouver- Busan trade route. Due to the accelerated development of LNG bunkering services in South East Asia the LNG tank capacity for ships operating on this route would be for one way passage with refueling in Asia for the return journey to Vancouver. This is a preferred solution by the owners and would require- at initial bunker market stage- less LNG bunkering capacity operation by Port of Vancouver.

Page 26 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017 In addition to the above, future expansion is expected to involve break bulkers/dry bulkers predominantly small and supramax sizes.

Multiple berth terminals exist within Vancouver’s Burrard Inlet the following also represent the areas of the current and/or future bunkering operations taking place:

 Cruise terminal at Canada place – Bunkering is undertaken by barges alongside by ship-to-ship bunker transfer. Canada Place cruise ships are only at berth between 7am – 4pm following closely weather window clearance. Based on the current cruise ships orders equipped with LNG tanks and the LNG fuel requirement for a return passage to Alaska, ships can be effectively bunkered by LNG bunker barges within the normal time of stay at berth. (Refer to Section 3.5.4)

 Container terminals. Two container terminals Centerm and Vanterm have two berths able to accommodate two container ships at a time, east of cruise terminal. Bunkering operations are not currently allowed to take place at berth.

 Grain terminals. Numerous terminals exist at the north and south sides of the Burrard Inlet. Peak operating period for grain terminals is between Sept-Jan/March. Bunkering takes approximately one (1) day and is by STS at anchorage. It is noted that cargo loading can take up to an extended period at certain times of year due to rain or weather. This situation can impact on the time available for bunkering and how long it takes.

 Roberts Bank/Delta Port Container Terminal and Site of Proposed T2 Container Expansion. The Roberts Bank Terminal 2 Project is a proposed new three-berth container terminal at Roberts Bank in Delta, B.C., on Canada’s west coast. The Project would provide 2.4 million TEUs of container capacity and is needed to meet forecasted demand for trade of goods in containers. Port currently does not provide permit for bunkering operations at Roberts Bank.

 Neptune terminal is undertaking loading of coal, potash and phosphate rock. Bunkering operations take place by STS at anchorage inside Burrard Inlet.

 Kinder Morgan terminal, WWL, Westshore and others. The oil terminals serve Aframax size tankers and barges. Bunkering operations can take place at anchorage.

Based on the established HFO/MDO/MGO fuel bunkering operations, the overall port lay-out and the cargo operations undertaken at the various terminals within port the adoption of LNG STS bunkering operations alongside is clearly recommended for Port of Vancouver. In order to provide safe and efficient operations the adoption of the following methods should apply:

 LNG bunkering services from the nearest available terminal at Tilbury should address receiving ships turnaround time limitations in order to allow for availability of supply. It is noted that the required BOG management and the use of pressurized Type-C tanks in LNG fueled systems have a direct impact on bunker flow transfer rates resulting in longer time required to bunker LNG than what is currently needed for MDO/MGO. An effective initial service should be based on 1+1 bunker barges able to undertake bunkering alongside with ships berthed at their quays or at pre-determined anchorages. Available support option is the adoption of a feeder vessel, which can support both STS at port and anchorage.

 Port of Vancouver should address the bunkering alongside at the two container terminals. Such activities are currently planned at container terminals in Singapore, Busan, Barcelona and Piraeus ports. This would greatly improve the safety management of the operations and substantially reduce operation times especially if a future LNG storage/ barge-loading facility is constructed east of the Vanterm terminal.

 It is important that Port of Vancouver address specifically the LNG bunkering permit policy at Roberts Bank/Delta Port Container Terminal. It is noted that the existing policy towards environmental friendly operations and reduction of emissions at Delta Port should indeed support future LNG fueled operations. The T2 terminal expansion should consider adopting New Busan Port’s similar operations, which envisage bunkering alongside either by STS or by bunkering at a specific quay prior or after loading/offloading operations commence. The proximity to the Tilbury terminal provides certain advantages for bunker barge operations.

 Operations at cruise terminal are greatly influenced by turn-around time related to length of stay, supplies passenger embarkation etc. It is recommended that Port follows bunker barge operations for LNG

Page 27 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017 bunkering in the same way as for currently MDO/MGO. It is noted that based on the LNG capacity for new built cruise ships LNG bunkering operations would need the combined operation of two bunker barges sailing in from a terminal or the support from either an LNG feeder vessel or a localized LNG storage. LNG cruise bunkering operations are very likely to draw on to all available LNG bunkering resources and in order to address availability of LNG service Port should address practical and high integrity infrastructure solutions. In addition, appropriate compliance with safety exclusion zone provision for LNG bunkering needs to be addressed. (Refer to Appendix G)

 Future LNG bunkering operations to bulker vessels should also follow existing operations involving HFO/MDO/MGO bunkering. As these existing operations are well traffic managed by Port, taking place mostly at inner port anchorage areas it is expected that these should also accommodate LNG bunkering alongside. It is noted however, that in line with other port anchorage operations Port of Vancouver should address LNG bunkering, at least at the early stages, to take place only at specifically nominated anchorages in order to provide better operational control, effective crew training and maintain exclusion zone requirements from other simultaneous operations (SIMOPS) onboard other vessels or adjacent quays areas (Reference Appendix G)

 Port of Vancouver should update existing Bunkering Operating and Emergency Response Procedures in order to introduce LNG operations. This should effectively establish the Port’s principal safety and operability requirements to be met by any service provider undertaking LNG bunkering operations. It would also in co-operation with the Coastguard and other agencies, establish the requirements for additional LNG specific safety assets (tugs, firefighting systems, personnel protection equipment) and personnel training.

3.5.4 LNG Bunkering Assets

With reference to recent LNG fuel market forecasts, the LNG fueled expansion of the coastal passenger vessel market which requires relatively small volumes of LNG fuel has identified the typical LNG bunker barge for in -port service to be a 1,000 - 2,000m3 LNG capacity vessel of approximately 70m length, 18m breadth and 4-5m draught. The type is currently under construction and also conversions of existing fuel barges of similar size are considered by various ports.

Due to the current drop of bulker market rates the expected adoption of LNG fuel by bulkers has not yet taken place. However, in addition to the dominant RoPax and ferry market, the cruise ship, the containership and more recently the car carrier markets have been active in adopting LNG as fuel. The following typical operating examples apply:

 RoPax vessels are equipped with Type-C tanks, sizes 100 m3 – 400 m3 with bunkering operations performed either STS or TTS via cryogenic hoses. A 6 inch cryogenic hose is able to load a 100 m3 (at 4 barg without vapor return) at approximate 30 mins at Port of Stockholm (Viking Grace)

 Containerships like TOTE’s Marlin class (3,100 TEUs) are equipped with Type-C tanks with 900 m3 total capacity. Due to TOTE’s truck ownership, bunkering at Jacksonville Port U.S. used 12 truck ISO containers utilizing a loading skid system through 6 inch cryogenic hoses. Although this first operation took longer time it is noted that 6 inch cryogenic hoses with vapor return are able to bunker LNG at approximately700 m3/hour.

 New generation of Korean developed large containerships (14,000 TEU) for transatlantic and transpacific routes would require LNG capacity of approximately 9,000 m3 (one way passage). These are all expected to be bunkered at port alongside by 8 inch cryogenic hose or bunkering arm systems which are currently in operation and able to deliver approximate 1,000 m3/hour per hose.

 Cruise ships operating deep-sea service require like Carnival’s ‘Aida’ (Meyer Werft yard under construction) are equipped with Type-C tanks with 3,500m3 total capacity. These vessels will be bunkered STS from Shell’s contracted feeder vessel equipped with FMC’s ‘BOA’ 8 inch rigid pipe bunkering system with 6 inch vapor return, able to bunker LNG at 1,100 m3/hour.

Page 28 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Ports currently addressing LNG bunkering of deep-sea operating vessels with the provision of feeder LNG vessels, which with an LNG storage capacity up to 10,000m3 can directly either undertake STS bunkering or replenish LNG bunker barges at port by lightering operations. These larger vessels over 110m length up to 8m draught should also be able to use the jetty facility of a small storage terminal. Shell’s 6,500 m3 LNG bunker feeder project under construction at Korea’s STX shipyard and BMT TITRON’s 7,500m3 LNG bunker feeder under construction in Korea are typical examples of such vessels able also to provide direct STS bunkering. (Refer to Section 4.2 Ref.(4) Financial Considerations study).

Based on the above the adoption of assets able to undertake LNG STS bunkering operations is essential for the development of a future LNG bunker hub at Port of Vancouver. Future Port policy should address, but not limited, to introducing Business & Land Use Plans, which include or support the development of the following:

 LNG bunker barge able to serve LNG bunkering activities at Port and perform round the year passage operations from Tilbury. Based on Port of Vancouver demand scenarios the capacity of the barge should be 2,000m3 based on Port of Vancouver to Anchorage LNG fuel requirements (refer to Appendix B.2 Section 2.1.1 Trade Route) for a medium size cruise ship. There are a number of new construction LNG barges at this capacity and the majority are equipped with Type-C LNG tanks. Tote is planning to use a 2,200m3 bunkering barge which is based on membrane technology and not Type C tanks. The barge is complete and will come into service in 2016/2017. Based on the current size/capacity barges operating at Port of Vancouver (typically 4,500 ton/2,500 ton HFO/MGO combination) converting an existing banker barge to incorporate LNG should be a feasible option. There are a number of conceptual designs considered by the market which typically incorporate LNG fuel in additional C-type tanks onboard the deck. However due to the size limitations imposed by LNG tanks conversions of existing barges are likely to be able to accommodate less than 1,000m3 onboard at some loss of existing MGO/MDO containment capacity. It is however, recommended that Port of Vancouver start-up operations should be based on 1+1 barges new construction (large capacity) and conversion (smaller capacity).

 LNG feeder vessel new construction. It has been clearly identified that a single LNG bunker barge would not be able to satisfy continuous availability of service requirements and capacity to address requirements of large cruise vessels (e.g. Star Princes) and deep-sea service vessels like containerships and bulkers. Also at similar ports to Port of Vancouver where for operational reasons a large percentage of bunkering takes place at anchorages, feeder vessel operations provide clear advantages. Feeder vessels due to their size/stability provide an all- weather able bunkering system, which can either directly bunker at anchorage or replenish LNG bunker barges to continue operations at other port locations. Such an vessel with a capacity up-to 8,000m3 would provide long term ability to support LNG bunkering operations (or directly bunker) at all anchorage areas within Port of Vancouver Authority’s waters.

 Local LNG storage facility. Supply Scenario 3 (reference Section 3.5.2) identified the availability of suitable site East of the Vanterm container terminal able to support the installation of a LNG storage facility. A typical 5,000 m3 – 6,000 m3 storage provision would be able to be provide continuity of bunkering operations up to the LNG tank sizes currently incorporated by some cruise owners and also enable bunkering LNG fuel for vessels (e.g. JPO Vela) trading on the Pacific North West. Poseidon MED II project is currently addressing port supply operations for key eastern Mediterranean ports supporting the busy ferry routes between Italy-Greece-Cyprus by provision of key ports with bunkering storage facilities based on a number of 500m3 C-type LNG tanks. The ports of Venice, La Spezia and Koper (GAINN4MOS project) are installing LNG storage facilities dedicated to bunkering support operations. This approach is also similar with LNG port bunkering operations in Norway and the Baltic and depending on market fuel demand such a facility can be incrementally enlarged to reach a capacity over 5,000m3. This size of C-type tanks are easy to be constructed, can be transported by road or sea and modularly installed allowing for a low cost, flexible, with a small foot print and low height (less intrusive) installation. Port of Vancouver should examine the development of such an option as a cost effective alternative to the feeder vessel.

 It is noted that both the STS barge bunkering at berth and also a bunker barge operating full time within the terminal (linked to infrastructure support) attracted the highest demand at the Port survey questionnaire (Reference Appendix C, Section 3.1.7) 30

Page 29 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

3.5.5 LNG Bunkering System

The selection of transfer equipment to be employed in bunkering operations requires considerable care. Prior to the equipment being deployed, all elements of the bunkering system including the loadings imposed on manifold working platforms, presentation flange, hoses and their support arrangements, wye reducers and any emergency release couplings and their associated operating systems must be fully evaluated, certified and shown to be fit for purpose for this application.

To achieve this technology qualification undertaken by Classification/Certification should be used for the approval of the bunkering system and its integration on-board a bunker barge.

Where bunkering marine offloading arms or hoses are utilized, these may be supplied by the manufacturer and be fitted on-board the bunker barge by the bunkering service provider. Continuous control and monitoring of the integrity and safety of the bunkering system in operation is essential and it is considered the prime responsibility of the service provider.

The proposed bunkering system to be installed onboard the bunker barge/feeder should be capable for the connection and safe transfer of LNG at a range of defined flow rates, within a set of pressures and temperatures criteria without any adverse effects or leakage.

The specification of the proposed bunkering system should take into account the following:

 System compatibility between the barge/receiving vessel (provider and receiver).

 LNG receiving manifold design including removable spool pieces and connections.

 Safety systems compatibility between provider and receiver

 Impact of ship motions and environmental conditions (swell, wind speed, sea state, etc.)

 Pre-bunkering cool-down, post bunkering purging and inerting process.

 LNG bunker transfer rate during bunker start-up, full load and topping-off operations.

 LNG fuel tank pressure and level control

 Maximum operational pressure and temperature range allowed during the bunkering operation.

Bunkering operations should be capable of being controlled from the bunker barge where fuel tank pressures, temperature indicators and level indicators are provided. Overfill alarm, automatic shutdown and other emergency alarms and shutdown functions are to be indicated at this location.

The bunkering system should be designed, arranged and operated to prevent uncontrolled venting of gas to the atmosphere during normal transfer procedures such as; start-up, filling and topping-off the bunkering tanks.

Based on the above for the selection of an appropriate bunkering system future studies would need to consider the following critical issues:

 Size compatibility of the bunkering arms coupling and emergency release system with the receiving manifolds on-board the barge/feeder vessel and receiving deep-sea service vessels.

 Placement of the bunkering system onto a deck area where the system can line-up and connect with receiving manifolds for a range of ships and receiving bunkering station heights without exceeding its safe operating envelope.

 Ability of the system to load effectively at very slow rate to ensure efficient pre-cooling operations in small and medium piping systems and at higher loading rates in order to meet short turn-around time requirements for bunkering imposed by owners.

LNG fueled commercial ships; bunkering manifolds are constructed to 6” and 8” diameter (dia.) with some future deep-sea service vessels proposed with manifold of 10” maximum dia. These manifolds provide also compatibility

Page 30 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017 with the predominant market size for LNG bunkering hoses which is 8” dia. with some ships providing a smaller 6” dia. manifold connection for boil-off gas (BOG) return. Currently composite cryogenic hoses for bunkering/cargo transfer are marketed up to a maximum of 10” dia. and up to a maximum length of 15 m (Gutteling). It is noted that LNG carriers have been using 8” dia, hoses for STS LNG cargo transfer operations at ports and at anchorages, very successfully for the last 8 years with no operational limitations due to hose specification or length. Mostly these operations involve full cargo transfers from LNG carriers to Floating Storage Regasification Units (FSRUs)

A Typical LNG bunkering system for STS Service may be configured as follows:

 A rigid articulating loading arm system incorporating quick connect/disconnect coupler (QC/DC), emergency shut-down (ESD) and emergency release system (ERS)

 A rigid articulating loading arm supporting a cryogenic hose system with ESD link, QC/DC and ERS. A dry break away coupling combining the functions of a QC/DC and ERS or any similar connection and safe release devices will be acceptable

 An arm/hose arrangement enabling vapour return to the bunker barge in order to ensure that boil-off gas (BOG) management takes place and maintaining the rate of bunker transfer with minimum impact on fuel tank pressure

Some typical bunkering systems in operation or manufacturing phase are shown in Appendix D.

3.5.6 LNG Bunker Quantity Measurement

The LNG bunker quality assurance which refers to LNG density, heat value/calorific value and Wobbe Index is relatively straight forward, as these values will be provided by the Certificate issued by the LNG terminal to the LNG bunker barge/feeder during loading operations.

VFPL should address as part of the principal requirements to be met by service providers an effective method of quantity measurement applicable to LNG bunkers.

Currently there is no standard approach for proving LNG mass flow meter applications. This would probably need to be further addressed by the Port of Vancouver wishing to develop an LNG bunkering hub.

The majority of the Custody Transfer Systems (CTS) in use today for LNG cargo trade require that the vessel is upright, on an even keel and stationary as it would be expected with bunkering operations alongside with the receiving vessel berthed ( but not during STS operations at anchorage). However, the use of Coriolis mass flow meters would be a desirable option to consider as these measurement devices can be used accurately under any rolling or pitching conditions to determine the mass of LNG transferred. Suitable Coriolis meters for LNG mass measurement transfer are in existence in Northern Europe today. Coriolis mass flow meters have an acceptable industry cited accuracy of < 0.50% and measurement uncertainty of < 0.34%. Coriolis technology measures directly mass and density and hence in combination with calorific value of LNG the energy value received/delivered can be calculated for custody transfer billing purposes. Coriolis mass flow metering of LNG is deemed to present lower risk of measurement uncertainty compared to volume based quantity determinations. Mass flow measurement eliminates the separate LNG density computation required as with traditional volumetric measurement to derive at energy loaded/unloaded of LNG.

It is noted that some international ports (Singapore MPA) provide guidance requiring that bunker b arges need to be provided with both LNG meter and a chromatographer, which will be able to measure BOG return during LNG bunkering operations. It is also noted that chromatography is the means of providing quality assurance of fuel specification requirements.

3.5.7 Port Control of Operations

LNG Bunkering operations will place additional demands on ships’ crews, as personnel are not only required for the fuel transfer operations, but also to keep a safe navigational or anchor watch and also manage other cargo related 32

Page 31 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017 activities throughout the operation.

Where bunkering is to be undertaken within port waters, Port Authority consultation should always take place as appropriate. An operational plan should detail the specific location (berth or anchorage), approach phase for receiving ship and bunker barge, operations for mooring and safe connection and operations for safe disconnection, unmooring and departure.

Bunkering operations should be under the advisory control of one individual, the Person in Charge (PIC) (see Section 4.2. Ref.(3) - Table 6 Section 3.1.1). The PIC will be responsible for pre-bunkering preparation and will be in attendance throughout the LNG bunkering operation. It is noted that the vessel’s Master will maintain sole responsibility for the overall safety of the vessel and its crew.

Due to the potential variety of receiving ships and bunker barges participating in operations it is considered that Checklists provide the single important risk management tool ensuring that operations are conducted safely.

Port of Vancouver should update the existing port operating procedures in order to incorporate requirements related to LNG bunkering operations within Port Authority’s waters. Similar activities have been undertaken or are ongoing by numerous ports worldwide. For some ports, the aim is to establish an LNG Bunkering Standard document (Operating Protocol) which should be used as a reference standard which needs to be complied by bunkering service providers wishing to operate within port.

Typical contents of the Protocol are as follows:

 completion of the receiving ship/terminal safety checklist (SIGTTO, ISO Guidelines)

 emergency procedures and contingency arrangements;

 communication protocols and responsibilities;

Page 32 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

 agreed cargo transfer rates and maximum manifold pressure;

 procedures for commencing and for completion of LNG transfer;

 cool-down procedures;

 custody transfer and quantities;

 bunkering and storing;

 ballasting and draught management;

A compatibility assessment of the bunker barge and receiving ship should be undertaken prior to commercially confirming the bunkering operation, the purpose being the identification of any aspects that require particular management. The compatibility assessment will be undertaken by the issue of an appropriate Checklist to the receiving ship to be completed and agreed by Masters and PIC prior to contract placement. In general compatibility assessments should include but not limited to the following:

 Vessel characteristics, bunker station position

 Bunker equipment supports, handling arrangement

 Mooring arrangements and provisions

 Fuel transfer/pumping/receiving rates

 Bunker manifold and bunkering system arrangements

 Safety, ERS, ESD and BOG management systems

 Contingency planning and emergency procedures

 LNG bunker CTS

It is expected that after long term operations within the port the bunkering service provider will be able to establish a list of gas fueled ships that it can safely bunker. The different types of ships should form part of the LNG bunker provider’s risk assessment process which needs to be regularly updated to address future operations.

A typical checklist for LNG bunkering operations is detailed in Appendix E of this report, and should be regularly reviewed/updated and used for each phase of the operation.

3.5.8 STS Bunkering Operations at Location

Prior to undertaking, any STS bunkering operations Port of Vancouver and service providers should ensure that a risk assessment is undertaken of each proposed STS location. The scope of the risk assessment should include typically a STS/bunker barge HAZOP (reference Appendix F Risk Assessment) but should also be extended to address marine operations associated with the approach and STS operation and Port Authority and National Regulatory requirements.

The purpose of the risk assessment should be to provide input into the development of Operational Procedures and Emergency Response specific to the bunkering operations location, which include implementation of appropriate safeguards to ensure that identified risks are managed to be As Low As Reasonably Practicable (ALARP).

Due to the novelty and complexity of LNG STS bunkering operations, it is essential that the unique elements of the receiving ships and locations are recognised and that a full and through risk assessment is performed as part of the initial planning of LNG bunkering.

Page 33 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

STS bunkering risk assessment at a location should include but not limited to the following:

 Local Legislative requirements

 Selection of location for STS bunkering, prevailing environmental conditions, navigational hazards and operability window

 Requirement for pilot service operations

 Integrity of navaids, use of laser berthing aid, traffic control in the vicinity of the location including the presence of other STS activities

 Approach, maneuvering, berthing and mooring for both receiving ship and bunker barge at anchorage or port jetty location

 Operational and resource integrity of any support, fire-fighting, stand-by tugs, or other elements provided by local sub-contractors or Port Authority on site

 Integrity of STS fendering, mooring line, fairleads, winches, hooks provisions to allow for double banked arrangement and ensure integrity under maximum environmental loads.

 Impact of potential LNG liquid/vapour release on to operations, third parties and the environment

 Determination of a Safety Exclusion Zone around STS bunkering operation

 Receiving ship’s combined operations with bunkering

 Escape Evacuation and Rescue (EER) provisions and Personnel Protective Equipment (PPE)

 Emergency Response requirements including checklists.

 Exposure of location to security criteria

Based on ISO and SIGTTO recommendations (see Section 4.2 Ref.(3) – Section 2.4) a determination of Safety Zone, around the defined STS system and transfer connection, should take place in order to provide mitigation especially from uncontrolled ignition hazards associated to third party activities (hot works, public activities, car engines, other ignition sources). Based on typical Safety Zones around bunkering manifolds (25m – 30m) this is not expected to pose a serious impact on STS LNG bunkering at anchorage or at STS alongside at berth where the bulk of the receiving vessel provide isolation from the quay. However, a specific area requiring evaluation due to its exposure to public activities would be LNG bunkering at Canada Place. A typical methodology for establishing Safety Zones is included in Appendix G.

To ensure that the risk assessment remains fit for purpose, it should be reviewed periodically. When any key condition relating to identified hazards changes or a new hazard identified, or a new receiving type of ship is to be bunkered the risk assessment should be formally revised.

The level of complexity required will depend on the type of operation. Once a particular transfer area has been established with operations undertaken by the same service provider utilizing a Class approved bunker barge and bunkering system equipment involving similarly approved receiving ships, a generic risk assessment might be appropriate.

Page 34 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

4 References

4.1 Market Data Sources

4.1.1 Maritime Strategies International Ltd Maritime Strategies International (MSI) is an independent consultancy company offering independent market forecasting and business advisory services for shipping and allied industries.

For over 30 years, MSI has supported and developed integrated relationships with a diverse global client base of financial institutions, ship owners, shipyards, brokers, investors, insurers and equipment and service providers.

MSI's expertise covers the full range of shipping and offshore sectors from Tanker, Dry Bulk and Containerships to more specialist sectors such as Gas and Chemical tankers, PCTC and Cruise ships. MSI offers strategic consultancy, sector reports, forecasting models and ship valuations.

4.1.2 IHS IHS is a global source of critical information and insight, with experts in aerospace, defense and security, automotive, chemicals, energy, economics, geopolitical risk, maritime, sustainability, supply chain management and technology. It employs more than 8,800 people in more than 32 countries.

It’s Maritime and Trade Division specializes in providing intelligence to help maritime professionals make operating and investment decisions. Evolving from the Lloyd’s Register of Ships and with a legacy of over 250 years, IHS offers maritime intelligence and insight across the complex environment surrounding seaborne trade.

4.1.3 Clarkson’s Research Clarkson’s is a world-leading provider of integrated shipping services, bringing its connections and experience to an international client base. With more than 70 full-time researchers, it collects, validates, analyses and manages data to guide its clients’ business decisions.

4.2 Supporting Documentation

1. Global Marine Fuel Trends to 2030’ by Lloyd’s Register and UCL Energy Institute, 2014

2. Port of Vancouver Liquefied Natural Gas (LNG) Bunkering Survey by Lloyd’s Register, 2016

3. Port of Vancouver LNG Regulations Codes and Standards Review by Lloyd’s Register, 2016

4. Port of Vancouver LNG Bunkering Financial Considerations by Lloyd’s Register, 2016

5. IMO IGF Code - International Code of Safety for Ships using Gases or other Low-Flashing Fuels Adopted Resolution MSC 391(95)

6. Lloyd’s Register Rules for the Classification of Natural Gas Fueled Ships, January 2016

7. Lloyd’s Register ShipRight - Assessment of Risk Based Designs (ARBD) Application Note –Designs and Arrangements for the Use of Low Flash Point Fuels

8. ESD Arrangements & Linked Ship/Shore Systems for LNG Carriers, SIGTTO

9. Ship to Ship Transfer Guide for Petroleum, Chemicals and Liquefied Gases, SIGTTO 36

Page 35 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

10. EN 1474 (Pt 2 & 3) LNG Transfer Arms, Hoses & Offshore Transfer Systems

11. EN 16904 – Petroleum and Natural Gas Industries - Design and Testing of LNG Marine Transfer Arms for Conventional Onshore Terminals - 2016

12. EN 1532 Installation and Equipment for LNG - Ship to Shore Interface

13. ISO 28460:2010 Petroleum & Natural Gas Industries – Installation & Equipment for LNG – Ship to shore interface and port operations

14. ISO 18683:2015 Guidelines for systems and installations for supply of LNG as fuels to ships

15. Houlder Limited, TRAV&L Bunkering System Specification

16. FMC Technologies S.A., LNG Bunkering System Market Data

Page 36 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Appendix A – LNG Bunkering Demand Drivers

A1 LNG-as-Marine Fuel Demand Outlook

Lloyd’s Register and the UCL Energy Institute are part of a research-led consortium which has undertaken a significant amount of research into sustainable shipping, particularly on “Low Carbon Shipping and Shipping in Changing Climates.”

Lloyd’s Register and UCL went on to produce the “Global Marine Fuel Trends 2030 Report”, a copy of which has been supplied to the Port of Vancouver. In this report, sophisticated models and data were developed to look into LNG-as a fuel.

Source: Global Marine Fuel Trends, Lloyd’s Register, UCL, 2014

The study covered deep-sea shipping only – did not cover coastal shipping. It covered only four ship segments - segments that accounted for around 70% of global marine fuel demand in 2007:

 Containerships,

 Bulk carrier,

 General cargo ships (Break-Bulk ships) and

 Tankers.

The “Global Marine Fuel Trends 2030” report looked at the multiple dimensions of future demand. It took into account the fact that fuel needs to be available, cost-effective, compatible with existing and future technology and compliant with current and future environmental requirements. Demand for marine fuel is dependent on the future of the marine industry, which itself is linked to the global economic, social and political landscape.

The report presented three scenarios:

1. Status Quo: business carries on as usual

2. Global Commons: More economic growth, more international co-operation

3. Competing Nations: Dogmatic approaches and regulatory fragmentation

The assumptions for each of these scenarios were fed into probably the most sophisticated scenario- planning model that exists for global shipping, GloTraM. The model analyzed how the global fleet evolves in response to external drivers, such as fuel prices, transport demand, and technology availability, cost and technical compatibility. Tonnage replacement and design/ operational speeds were adjusted to ensure a balance between transport demand and supply. The decision-making algorithms and the model were based

Page 37 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

in the principles of Regulatory Compliance and ship-owner profit-maximization, very much aligned to the dimensions of the future fuel challenge.

The study included fuels ranging from liquid fuels used today (HFO, MDO/MGO) to their bio-alternatives (bio-diesel, straight vegetable oil) and from LNG and biogas to methanol and hydrogen (derived from both methane and wood biomass). Engine technology included two or four stroke diesels, diesel-electric, gas engines and fuel cell technology.

A wide range of energy efficiency technologies and abatement solutions (including Sulphur scrubbers and Selective Catalytic Reduction for NOx emissions abatement) compatible with the examined ship types were included in the modelling. The uptake of these technologies influences the uptake of different fuels.

Regulations were aligned with each of the three overarching scenarios to reflect business-as-usual, globalization or localization trends. They included current and future emission control areas (ECAs), energy efficiency design index (EEDI) and carbon policies (carbon tax). Oil, gas and hydrogen fuel prices were also linked to the Status Quo, Global Commons and Competing Nations scenarios.

The study did uncover some unexpected conclusions, as explained in the infographic below.

Source: Global Marine Fuel Trends, Lloyd’s Register, UCL, 2014

The chart below compares the expected volume of fuel demand in 2030 to that of 2010. Overall, the fuel demand is to double by 2030 across all scenarios, mainly due to the increase in transport demand (and subsequently energy demand) requirements. The study shows that relative to this underlying growth in demand, reductions in energy demand due to energy efficiency improvements and speed reductions are small.

Individually, demand for HFO is to increase in all scenarios until 2025, and, only in Status Quo is this ultimately drops to its 2010 levels by 2030. Although demand for other alternatives would generally increase, it is interesting to see that even in the extreme case (MDO/MGO in Competing Nations), single alternative fuel was to reach 50% of the total demand compared to 2010 levels.

Page 38 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Evolution of Marine Fuel Demand, Relative to the 2010 Baseline for Each Fuel

Source: Global Marine Fuel Trends, Lloyd’s Register, UCL, 2014

The main Status Quo scenario conclusions on deep-sea (only) shipping are:

 By 2030, 11% of the deep-sea fuel mix is likely to be LNG. The coastal fleet is expected to hold a higher share.

 Ship segments with the highest proportion of small ships are likely to see the highest LNG take-up.

 Containerships are not likely to be the segment with the highest share of LNG

 LNG will be adopted gradually and more profoundly in the product/chemical segment, followed by the bulk carrier/general cargo segment. Outside coastal shipping, Chemical product tankers have the highest share – with LNG making up to 31% of the segment’s fuel mix by 2030.

 HFO will still be around in 2030, taking 47-66% of the deep-sea fuel mix. HFO combined with abatement technology (e.g. scrubbers) is still considered the most cost-effective option for the majority of the fleet and especially the crude tanker segment.

 A considerable proportion of the fleet, mainly older tonnage, will rely on MDO/MGO for ECA compliance.

The scenario fuel mix combinations presented below result from fuels used by the existing fleet, the fuel changes that occur as a result of arising regulation (e.g. Sulphur emissions regulation), as well as fuels adopted by new tonnage.

Page 39 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Fuel Mix for Containership, Bulk Carrier/ General Cargo, Crude Oil Tanker and Product/Chemical Tanker Fleet (%)

Source: Global Marine Fuel Trends, Lloyd’s Register, UCL, 2014

Under the Status Quo scenario, there was a noticeable reduction in the use of HFO across all ship types. Since, in Status Quo, it was assumed that the 0.50% Sulphur limit enters into force in 2025, this decline was not very profound and, by 2030, HFO was still to account almost half of the fuel share. In other words, by 2030, HFO combined with abatement technology (e.g. scrubbers) is still considered the most cost-effective option for the majority of the fleet and especially the crude tanker segment. A considerable proportion of the fleet, mainly older tonnage, will rely on MDO/MGO for ECA compliance. It may not be the most cost-effective overall option, but it remains the only technically viable option for some ships. This is reflected in the fuel mix.

Equally, LSFO is to see a step uptake between 2020 and 2025, taking a significant proportion of the fuel mix in 2030. LNG will be adopted gradually and more profoundly in the product/chemical segment, followed by the bulk carrier/general cargo segment.

The chemical/product tanker segment is to have a 30% share in 2030, higher than any other combination. The uptake of LNG is more significant in the smaller ship size categories due to the capital and storage cost implications associated with the fuel’s adoption.

All ship types have smaller ship sizes, but it is these two segments that have a greater share of fuel used in the small size categories. The smaller ships see earlier take-up because of the way installed power influences capital cost and DWT impacts the size of the LNG tank, and the smaller ships have higher kWh/t than the larger ships.

This also explains why the containership segment has the least penetration of LNG. The existing fleet is relatively new and the tonnage renewal focuses on fewer, larger ships. Despite some high profile cases of LNG-ready containerships, they only represent a small proportion of the total tonnage and associated fuel demands.

The LNG bunker fuel demand estimates for Port of Vancouver relied on the insights and assumptions inherent in the Lloyd’s Register/ UCL “Global Marine Fuel Trends to 2030”report (Reference Appendix B4, Section 4.1.1)

Page 40 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

In addition the overall findings of the “Global Marine Fuel Trends” have been used together with the FOBAS survey results to provide a validation check of Lloyd’s Register’s demand forecast scenarios to establish close estimates for the LNG fuel consumption at the Port of Vancouver (Reference Appendix B3, Section 3.1.2).

A2 Emission Control Area Compliance

Marine demand for LNG-as-a-fuel is largely driven by operators’ need to comply with a growing number of environmental emission control regulations. Several Emission Control Areas (ECA’s) are already in operation. More ECA zones are expected to follow, as shown below.

LNG is significantly cleaner than traditional fuel types and helps operators decrease their global em issions. LNG’s Sulphur dioxide (SOx) and particle emission content is practically zero. Its nitrogen oxide emissions amount to 85%-90% of traditional fuel levels. Subject to technologies employed, LNG-as-fuel can help decrease NOx emissions to meet IMO Tier III and EPA Tier IV requirements without the need to install NOx abatement equipment onboard.

A3 LNG Fuel Prices v Traditional Fuels

Another key driver of LNG-as-fuel demand is the comparative economics of using traditional fuels such as MGO versus LNG. Historically, the price of LNG has been significantly and consistently cheaper than other fuel types. However, the recent decline in the oil price has decreased the competitive advantage of LNG over other fuels.

Therefore, in the short term, the economic argument for using LNG-as-a-fuel has been significantly weakened. However, regardless of the oil price, LNG’s carbon-reduction capabilities are likely to sustain its demand in the longer term. Expert opinions differ on if/when the oil price will recover. It is for this reason, that this study presents LNG demand scenarios, not LNG demand forecasts.

Page 41 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Source: Clarkson’s Research, March 2016

Source: MSI Forecast, April 2016

A4 Risk – Availability of LNG Supply

One of the greatest risks faced by ship-owners seeking to use LNG-as-fuel, is the availability of supply. Global ports are reducing this risk by investing in LNG storage and bunkering solutions.

Page 42 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Based on third party forecasts, this study assumes that sufficient LNG will be produced to meet LNG demand.

The main objective of this study’s fuel demand forecast is to assist the Port of Vancouver estimate what volume of marine-fuel LNG storage and bunkering facilities could be required in the Port of Vancouver area through 2030.

A5 LNG Fuel Enabled Ship Deliveries

This section looks at LNG-as-fuel ship delivery trends, to give some insight as to expected future demand. The first LNG-as-fuel enabled ship was delivered in 1972. Take-up was very low until 2002 – after which demand has grown quite rapidly. Whilst these ships are LNG-as-fuel enabled (i.e. were built to be able to use LNG-as-fuel) the majority do not yet use LNG as fuel.

Source: Clarkson’s World Fleet Register, June 2016

As gas-carrying ships are likely to source fuel from their own tanks, and not from bunkering facilities, they have been excluded from the chart below, which looks at deliveries in the period from 2012 plus publicly announced future delivery plans to date. The drop in the number of ships per year after 2016 does not necessarily mean that the number of deliveries will decline year-on-year. It is more likely to be because 44

Page 43 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017 orders for these years have just not been placed yet.

Source: Clarkson’s World Fleet Register, June 2016

Looking at recent deliveries and current plans for the period 2002-2020:

 Passenger ships (Ro-ro, Ro-pax and other passenger ships, excl. cruise ships) dominate (40%)

 Tugs take a large share (13%)

 Tankers account for 8%

 Cruise ship and containerships each take 4%.



Looking at the fuel-choice flexibility in that LNG-as-fuel enabled fleet:

 30% of the fleet are solely LNG-fueled

 34% are dual LNG-MDO enabled

 18% are dual LNG-MGO

 17% are LNG-HFO and only

 1% is LNG-MDO-HFO

Source: Clarkson’s World Fleet Register, June 2016

Page 44 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Future demand for LNG-as-fuel will be highly influenced by the fleet’s ability to switch between LNG and other fuels, to take advantage of relative differences between alternative fuel prices. The study looked at the differences between the various ship types, so that it could incorporate this into the demand scenarios.

 Passenger ships (Ro-Ro/ RoPax, excl. cruise ships) was the ship sector with the highest share (55%) of solely LNG-fueled ships

 Tugs were slightly behind them, with 53% solely LNG-fueled.

 Some 20% of general cargo ships were solely LNG fueled (Note: this is a result from a sample of only five ships so it carries some risk).

 None of the other ship categories had solely LNG-fueled capabilities.

Page 45 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Source: Clarkson’s World Fleet Register, June 2016

To validate the estimate of LNG-as-fuel take-up, the study analyzed LNG-take-up across all marine fleet deliveries and number of vessels currently on order. To allow a like-for-like comparison, the study also excluded gas ships. (The study’s definition of ‘marine vessel’ excludes ships <100GT, non-self-propelled ships, non-ship shaped vessels, non-oceangoing ships and non-merchant ships).

The chart below shows the total non-gas marine fleet’s actual/committed deliveries, whilst the Table 4 below shows the % shares that were LNG-enabled from all marine ships delivered.

Source: IHS database, March 2016

Page 46 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Looking at deliveries and current (March 2016) commitments for the 2014-2018 period:

 6.9% of passenger ships (ro-ro/ropax) deliveries are LNG-as-fuel enabled, as are

 7.7% of cruise ships

 3.4% of bunkering vessels

 1.5% of specialized/pure car-carriers

 All other vessel types had a take up rates of 0.5-1%

Table 4:

LNG‐As‐Fuel Vessels as % of All Marine Ships Delivered Measured as share total no. marine vessels deliveries currently visible Ship Type 2015 2016 2017 2018 2019 2020 2002‐2020 2014‐2018 Passenger ship/RoRo/Ropax 5.6% 8.6% 13.3% 35.7% 100.0% NA 2.9% 6.9% Cruiseship Car 0.0% 6.3% 8.3% 0.0% 30.0% 14.3% 2.6% 3.7% Carrier 0.0% 6.5% 0.0% 0.0% 0.0% NA 0.3% 1.5% Containership 0.5% 0.5% 0.5% 1.8% 0.0% 0.0% 0.1% 0.5% Gen Cargo 0.6% 1.0% 0.0% 0.0% 0.0% NA 0.1% 0.5% Bulk Carrier 0.0% 0.0% 0.0% 2.0% 0.0% 0.0% 0.0% 0.1% Tanker 0.0% 0.6% 0.0% 0.6% 5.8% 0.0% 0.1% 0.3% Tug/Other 0.8% 0.3% 2.8% 5.0% 0.0% NA 0.2% 0.7% Bunkering Vessel 0.0% 4.0% 100.0% NA NA NA 1.5% 3.4% Vancouver's Key Ship Types 0.6% 0.8% 1.1% 2.4% 5.1% 2.8% 0.3% 0.7%

Source: Clarkson’s World Fleet Register, June 2016, IHS Fleet Database, March 2016

Although the LNG-capable vessels do not currently work at Port of Vancouver, many of the owners of the LNG-enabled ships also have ships trading through Vancouver – MOL, Seaspan, to name a few.

Source: Clarkson’s World Fleet Register, June 2016

Page 47 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017 Global Number of LNG‐Fueled/Partially LNG‐Fueled/ LNG‐Ready Ships In‐Service or On Order Excluding Gas Vessels (Ethylene/ LPG/FPSO/FSRU/LNGC/LPGCs) Source: Clarksons, Dec 2016 Type Owner In Service On Order All Asphalt & Bitumen Carrier Groupe Desgagnes 4 4 Bulk Carrier ESL Shipping Oy 2 2 Cement Carrier JT Cement AS 2 2 Chem Parcel Tanker Bergen Tankers A/S 1 1 Chemical Bulk Tanker Alvtank AB 2 2 Erik Thun AB 1 1 Furetank Rederi A/B 1 3 4 Tarbit Shpg. AB 1 1 Terntank Rederi A/S 3 1 4 Chemical Unknown Carrier Erik Thun AB 4 4 Cruise Vessel Aida Cruises 1 3 4 Costa Crociere 2 2 Dredgers (Stone Dumping, Fallpipe) Tideway 1 1 Fully Cellular Container Brodosplit Plovidba 1 1 Containerships Ltd 4 4 Matson Inc 2 2 Totem Ocean Trailer 2 2 Wessels Reederei 1 1 General Cargo Nordnorsk Shipping 1 1 Heavy Lift/Crane Ship Heerema Marine 1 1 Icebreaker Arctia Shipping 1 1 LNG Bunkering Vessel Anthony Veder 1 1 Nippon Yusen Kaisha 1 1 Shell 1 1 Multi‐Purpose Nanjing ChunYuan 1 1 Pass./Car Catamaran Vessel Los Cipreses S.A. 1 1 Rederij G. Doeksen 2 2 Pass./Car Ferry BC Ferries 1 2 3 Boreal Transport 2 2 Caledonian Maritime 2 2 Caronte & Tourist 2 2 EMS AG 1 1 Eurolineas Maritimas 1 1 Fjord Line AS 2 2 Fjord1 AS 16 16 FosenNamsos Sjo 1 1 Norled A/S 5 5 Rederi AB Gotland 2 2 Samsoe Kommune 1 1 Seaspan Marine 1 1 2 Tallink Group 1 1 Torghatten Nord AS 4 4 Traversiers Quebec 1 2 3 Viking Line Abp 1 1 Passenger Catamaran Vessel SETRANS 1 1 Passenger Vessel EMS AG 1 1 Unknown 1 1 PSV/Supply 4,000 DWT+ DOF Management 1 1 Eidesvik Offshore 5 5 Harvey Gulf Intl 3 3 6 Island Offshore Mngt 2 2 Mokster Shipping 2 2 Olympic Shipping 1 1 REM Maritime 1 1 Remoy Shipping 1 1 Siem Offshore 3 2 5 Solstad Offshore 1 1 Pure Car Carrier UECC 2 2 Ro‐Ro SeaRoad Shipping 1 1 Totem Ocean Trailer 2 2 Ro‐Ro/Container Crowley Maritime 2 2 Trailing Suction Hopper Dredger DEME Building 2 2 Dredging Intl NV 1 1 Van der Kamp BV 1 1 Tug Bukser og Berging 2 2 CNOOC 2 2 CNOOC EnerTech 2 2 Nippon Yusen Kaisha 1 1 Total Excl. Gas Carrying Ships 86 61 147 Source: Clarkson’s World Fleet Register, December 2016

Page 48 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Appendix B –Port of Vancouver LNG Bunker Demand Estimate

B1 Port of Vancouver’s Traffic Profile

Lloyd’s Register undertook a significant amount of analysis of the 2010-2014 Vancouver Port Traffic data, as this provided insight for many of the assumptions behind the model – showing the port’s fleet composition by vessel type and age, and the volume of port calls by vessel and vessel type, and the seasonality thereof. A copy of the analysis document is available upon request, but it is not included here, as the analysis in itself does not directly answer any questions about the likely LNG-as-fuel demand.

B2 Trade Routes - Traffic Activity Pre and Post the Port of Vancouver

To determine the volume of LNG-fuel required by the Port of Vancouver, the study estimated the length of ship passage between Vancouver and the next refueling stop.

2.1.1 Port of Vancouver Ship Traffic Route Fuel Assumptions

1) Distance from Last/Next Refueling Stop

Note: The routes reflect the distance from Vancouver to the next refueling port – not the entire voyage. This is because ship-owners have to allocate space on a cost/benefit basis: the larger the fuel tank, the smaller the remaining cargo space available. Hence it is assumed that owners would choose to refuel at each LNG-bunkering facility, rather than to have huge tanks to fuel entire voyages, if this could be avoided. It should also be noted that tugs, small ships and BC Ferry traffic and fuel demand requirements fall outside the scope of this study.

Port of Vancouver’s traffic was split into the following:

 Transpacific routes one-way (e.g. Vancouver - Busan 3,349.8 nautical miles) – vessels may stop at other Canadian/ American ports en-route, but not for refueling.

 Short-haul routes return (e.g. Port of Vancouver to Vancouver Island 69.9 nautical miles x 2 = 139.8 nautical miles)

 Medium-haul routes return (e.g. Port of Vancouver – Alaska and back - 1151 nautical miles x 2 = 2,303 nautical miles); May call at ports along the way, but not for refueling

 Medium-haul routes one-way (e.g. Port of Vancouver - San Diego – 1025 nautical miles); May call at ports along the way, but not for refueling – ships may continue to other global destinations –, but the voyage pertinent to this study is the first leg, to the next refueling stop only.

Caveat: These assumptions are estimates and are not based on empirical data. However, they are sufficient to provide robust insights for use in a scenario demand based forecast.

Assumptions:

. Cruise trips: Various journeys were considered to/from: Alaska, California & Hawaii. Although Vancouver’s cruise ships currently do not sail to Asia on a regular basis, this is expected to change due to the expected growth in Asian passenger numbers in the years through 2035.

Page 49 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017 . Containerships: Less than 1% of the 551 containership fleet visiting the port (in the five years for which we have port traffic data) did so 4 or more times per year - suggesting a small locally trading fleet.

. Dry-bulk carriers: Around 1% of the 3,400 bulk carrier fleet visiting the port in the five year period did so over 20 times per year. We assume that: . All of the big bulk carriers are Transpacific.  That for bulker handymax vessels, 5 out of every 100 ships visiting the port are return short haul, 95 out of every hundred are Transpacific. . For the even smaller bulkers, 10 out of every 100 ships visiting the port are return short haul, 90 out of every hundred are Transpacific. . General Cargo/ Break-bulk Cargo Ships  Around 4% of the 397 break-bulk cargo fleet visiting the port in the five year period did so over 4 times per year - suggesting a very small local fleet.  So again we assume that all of the big ships are Transpacific.  That for cargo ships 40-49k DWT, 5 out of every 100 ships visiting the port are return short haul, 95 out of every hundred are Transpacific.  For the ships <40DWT, 10 out of every 100 ships visiting the port are return short haul, 90 out of every hundred are Transpacific. . Tankers/ Liquid-bulk Carriers  Assume that all of the oil tankers operate on the Transpacific route. All may be Aframax after 3 yrs. Port is seeking approval to get another 400 Aframax tankers going to N. Asia from 2019/2020.  Port Traffic data shows that some 8% of chemical ships call over 4 times/yr, and 2% call between 10 and 25 times/year, suggesting a small local trade fleet. So we have assumed that 10% of visits are Short haul Returns.  There were no oil products tankers calling over 4 times/year, suggesting no local trade in this vessel class.

Once the voyage route assumptions were applied, an estimate how many nautical miles within each trip were undertaken within ECA zones was calculated as presented in Table 5.

Page 50 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Table 5: Model’s Assumptions on Voyage Routes by Vessel Type/Size

Page 51 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

2.1.2 ECA Route Assumptions

For the purposes of this study, the entire route between the Port of Vancouver and Alaska inclusive has been assumed to be an ECA zone. South Korea is currently without an ECA zone, but we expect this to change within a decade.

The latest ECA zones are shown below: Emission Control Areas

Source: Clarkson’s Research, September 2016

Distances within Routes that are within ECA Areas

 Transpacific routes one-way – An ECA zone already runs up the East coast of Canada. It extends to 200 nautical miles from shore. The study assumed that a similar ECA zone will emerge on the Asian side within a decade. This Asian ECA zone has been estimated at a conservative 50 nautical miles, and ships could take action to avoid the ECA if it is necessary

 Short-haul routes return – all are in an ECA

 Medium-haul routes return – all are in an ECA area

 Medium-haul routes one-way – all are in an ECA area

2.1.3 Refueling Frequency and Volume Assumptions

Percentage of Port-calls that will result in LNG-Refueling

The study assumption was that all LNG-fueled ships (excluding tugs) will be refueled with LNG at every Port of Vancouver-call.

The assumption is supported by the fact that LNG fuel tanks are some three times bigger than traditional tanks for the same volume of energy. This means that the tanks take up valuable cargo- carrying space. Ship operators thus want to match the size of their LNG tanks to the routes undertaken, such that cargo storage space, and hence revenue, is maximized.

Page 52 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Timing of LNG-as-Fuel Start-up

Demand for LNG-as-fuel obviously cannot emerge in the Port of Vancouver until LNG enabled ships are delivered, crew and port staff trained, and most important if sufficient infrastructure has been put in place in Port of Vancouver to efficiently satisfy the rise in demand (Reference Section 3.5.4). The rise in demand would also depend on whether there are sufficient LNG-suppliers along the entire trade route to support LNG bunkering ports.

In early June 2016, South Korea’s Ministry of Transportation announced that it is accelerating the plan to offer LNG bunkering facilities at the port of Busan. Although timings have not been officially declared, a start-up date of 2020/2022 seems possible. This would suggest that a similar start-up date for the Port of Vancouver would be possible.

It is noted that in the 2016 Port of Vancouver Survey (undertaken by Lloyd’s Register), the majority of port’s clients (64%) indicated that they see a first LNG capable fueled ship operational in the 2021-2025 period, following by a smaller number of clients (27%) which they see LNG ships operational in the 2026-2030 period.

B3 The Port Vancouver Historical Fuel Demand Trends

3.1.1 Bunkering Suppliers

The Port of Port of Vancouver Authority customers currently have a number of conventional marine fuel bunkering providers. The following illustrates the options and typical equipment. The results indicate that currently Port of Vancouver bunkering providers rely on bunker barges to provide service.

Marine Petrobulk Ltd. operates a fleet of three double-hulled bunker barges. Each barge has a 4,500 metric tonne capacity. Marine Petrobulk is a subsidiary of Seaspan Marine Corporation.

 Vessel 1: Petrobulker

Length: 271', Breadth: 62', Draft: 22', Tonnage: 2710 (gross) Max Capacity: 32,000 bbls (1,3400,000 gallons)

 Vessel 2: PB 32

Length: 261' ,Breadth: 62' , Draft: 22', Tonnage: 2710 (gross) Max Capacity: 32,000 bbls (1,3400,000 gallons)

 Vessel 3: PB 34

Length: 271', Breadth: 62', Draft: 22', Tonnage: 2710 (gross) Max Capacity: 32,000 bbls (1,3400,000 gallons)

 Vessel : 827

Marine Petrobulk’s parent company, Seaspan, owns this clean product liquid bulk barge Length: 245’, Breadth: 64’, Draft: 20’, Barrels Capacity 27,000 (refined)

Aegean Marine Petroleum SA focuses on petroleum refining and trading. Aegean Marine Petroleum is one of the largest independent fuel suppliers in the world.

ICS Petroleum Ltd. operates as a supplier, trader and broker of marine fuels to deep-sea vessels through its own fleet of bunker barges and chartered trucks in Canada and Mexico. It offers services and products in

Page 53 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

the Port of Montreal, as well as to vessels in the St. Lawrence Seaway/Great Lakes, Lower St. Lawrence, and the Eastern Canadian ports. The company also provides shipments to Japan, China, Korea, and Taiwan. The company serves cargo and passenger operating companies, as well as other bunker traders and brokerage houses. ICS Petroleum Ltd. Is a subsidiary of Aegean Marine Petroleum Network, Inc.

Imperial Oil Ltd. is Canada’s second largest integrated oil company, largely owned by Exxon Mobil Corp. It is a significant producer of crude oil, diluted bitumen and natural gas. It is Canada’s major petroleum refiner, a key petrochemical producer and a national marketer with national supply and retail networks, with large holdings in the Alberta Oil Sands.

Island Tug and Barge is involved in the coastal movement of fuel and some bunkering

 Vessel: ITB Pioneer

60m long x 15.2m wide Coastal bulk fuel barge used along the BC coast

3.1.2 Historical Fuel Consumption Estimates

Estimate Based on Lloyd’s Register’s FOBAS Statistics

The most reliable data source for estimating the existing level of conventional bunker fuel sold in the Port of Vancouver marketplace is the Lloyd’s Register’s Fuel Oil Bunkering Advisory Service (FOBAS) fuel- sampling Division data.

The data indicates that over the five-year period, 2010-2014, Lloyd’s Register’s FOBAS sampled around 377,000 Tonnes of marine fuel (75,400 Tonnes/yr) – both HFO and MGO – in the Port of Vancouver. FOBAS estimates that this is equivalent to around 16% of the port’s total marine requirements in the period, making the port’s estimated annual marine fuel demand around 471,000 tonnes/year. This 471,000tonnes/year estimate is generally consistent with a ballpark conventional fuel demand quantity estimated at a stakeholder session.

Summary data is shown in the charts below:

Page 54 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Source: Lloyd’s Register’s FOBAS Division

It is noted that FOBAS data are not associated with what voyage distances this fuel was used for. It is assumed that only part of this fuel demand was applicable for the ship route scenarios established by this LNG bunker demand study.

The “Global Marine Fuel Trends to 2030” report predicts that around 11% of deep sea shipping fuel mix will be fueled by LNG by 2030. Purely as a method for deriving a benchmark to validate our three scenarios, let us see what 11% of Vancouver Port’s estimated total fuel mix amounts to, in LNG terms.

11% of 471,000 tonnes/year HFO/MGO amounts to around 51,800 tonnes/year HFO/MGO. Based on Lloyd’s Register’s calculations, 51,800 tonnes/year HFO/MGO convert to approximate 98,840 m3/year LNG.

Lloyd’s Register’s calculation derived this ratio by converting the total fuel mass into energy units, then associating it with a similar mass of LNG ( assuming +/- 5% error), given that the published energy values (calorific values) are always an average. In terms of mass, the LNG equivalent would be 42,500 tonnes. In terms of volume it would be 98,837.21 m3 (assuming a LNG density of 430kg/m3). While LNG has more energy than the equivalent mass of fuel oil, its density is about half of fuel oil, requiring twice the volume.

When comparing the scenario forecast to the Fobas-based estimate, it is important to note that:

 The 11% share predicted by the fuel trends study, refers to global deep sea shipping only. It is expected coastal shipping to have a much higher share.

 The FOBAS-based estimate of Port of Vancouver total fuel demand was an average of the years 2010-2014 only. It is expected total fuel demand to be significantly higher in future years – purely because of trade growth. Accordingly, the LNG-fuel element would also be higher.

Using this 98,840 m3/year as a theoretical 2014 LNG demand (based on an 11% fuel mix assumption) then we can predict the 2030 demand. To do this, we assume that:

 LNG demand grows at the same rate as Canada’s GDP – to account for growth in cargo trade and LNG’s share of Port of Vancouver’s total fuel mix is 5% higher than the 11% assumed for deep sea, because Port of Vancouver is in a coastal area.

Under these assumptions, predicted 2030 port demand for LNG would amount to 143,538 m3.

Page 55 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017 It is noted that the above amount although an approximation, does give validity to this study’s scenario forecasts, as its value lies between the Base Case and High scenarios (before adjusting for the results of the Port Survey).

Washington State 2014 Data

The study considered the possibility that the demand for conventional bunker fuel at the Port of Vancouver may not be provided by local sources only and may need to be moved or imported into the local marketplace. Since Washington State is the closest jurisdiction with refining capacity the relevant data sources were analyzed. Based on the chart below, bunker fuel movement from Washington State to BC ports amounted to some 118-130 mgallons (minimum) fuel per year in the 2010-2013 period.

Source: “Washington State 2014 Marine and Rail Oil Transportation Study”

IEA’s Canadian National Bunker Statistics

Finally, a third set of data that could possibly providing insight into Port of Vancouver’s fuel consumption is presented in Table 6 below. It shows that Canada total bunkering fuel demand amounted to some 2,200- 2,740kt shipping fuel per year in the 2010-2012 period. This is equivalent to some 70-87m gallons fuel/year, representing the total Canadian market. This is significantly below the numbers cited by Washington State above and thus this was considered the least applicable data to use in the study’s model.

Page 56 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Table 6: Canadian Bunker Statistics

Canadian National Bunker Statistics Measures 2010 2011 2012 2013 Fuel oil (kt) 660 491 488 505 Gas/diesel oil excl. biofuels (kt) 45 27 23 24 Total Canadian International Shipping Fuel Demand 705 518 511 529

Fuel oil (kt) 1,271 881 992 NA Gas/diesel oil excl. biofuels (kt) 766 811 689 NA Total Canadian Domestic Shipping Fuel Demand 2,037 1,692 1,681 NA

Fuel oil (kt) 1,931 1,372 1,480 NA Gas/diesel oil excl. biofuels (kt) 811 838 712 NA Total Canadian Bunker Shipping Fuel Demand 2,742 2,210 2,192 NA

Source: IEA, World Energy Statistics

Page 57 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017 B4 Port of Vancouver Fleet: LNG-as-Fuel Capability Take Up Assumptions

4.1.1 Port of Port of Vancouver Survey 2016 Insights

To reflect the Port of Vancouver specific traffic, Lloyd’s Register adjusted the modelling data from the more general fleet characteristics and findings in the Lloyd’s Register/ UCL “Global Marine Fuel Trends to 2030” report’s Status Quo scenario (Reference Appendix A1). The results of the 2016 Port of Vancouver Survey provided a number of additional insights based on the port’s existing customer mix:

 Port of Vancouver LNG-fueled ships will be predominately new builds.

 5% of survey respondents said they would consider retrofitting existing vessels to make them LNG fueled.

 All transpacific vessels that are LNG fueled will be also dual-fueled.

 100% of respondents said it was important/most important to have flexibility of using dual fuel LNG as fuel engines.

 First Port of Vancouver LNG-fueled ship will come into operation in 2021-2025

Survey respondents gave the following timeframes for first LNG-fueled ship to be operational in Port of Vancouver:

 9% respondents said first ship would be operational in 2016,  0% said in 2017-2020,  64% said in 2015- 2021  27% said 2026-2030

33% of respondents indicated (predominantly container ships) that if their company were to operate LNG-fueled vessels depending on their trading route, alternative bunkering locations could be selected. It is noted that if the preferential location was changed from Vancouver, this would have a significant impact onto fuel demand

4.1.2 LNG-As-Fuel Capability Take-up Insights

Table 7 below shows the shares of new builds assumed to be LNG-capable. Future demand is likely to be highly influenced by the success of Carnival’s LNG-fueled new builds currently under construction and expected to become operational in 2017/2018.

Page 58 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Table 7: Predicted Share of LNG Fuel Enabled Ships at Port of Vancouver

Ship Type LNG‐as‐Fuel Design Capability on Vessels Expected to Serve Resulting Fleet Fuel Mix by 2030 Vancouver Port (Does not Refer to the Actual Use of LNG‐as‐Fuel) Containerships 10% of 2020 larger newbuilds will be LNG‐enabled, 15% of To have lower LNG fuel mix than chemical/product smaller newbuilds … share rises to 15% & 20% by 2030. tankers and gen cargo and bulk carriers.

Cruise Ships 60% of all newbuilds will be LNG‐enabled by 2025, 80% by 2030.

Ro‐ros/ Ropax/ 80% of all newbuilds will be LNG‐enabled by 2025, 90% by 2030. To be higher than the 11% LNG share held by the Other Passenger deepsea fleet. Car Carriers 20% of 2020 larger newbuilds will be LNG‐enabled, 30% of smaller newbuilds; rising to 30% and 40% in 2030 General Cargo 20% of 2020 larger newbuilds will be LNG‐enabled, 30% of To have LNG fuel mix higher than 11% (deepsea avg) Vessels smaller vessels; rising to 30% and 40% in 2030 but less than 30% (chem fleet avg). Bulk Carriers 20% of 2020 larger newbuilds will be LNG‐enabled, 30% of To have LNG fuel mix higher than 11% (deepsea avg) smaller vessels; rising to 30% and 40% in 2030 but less than 30% (chem fleet avg). Crude Oil Tankers 5% of 2020 larger newbuilds will be LNG‐enabled, 10% of two Suggest should have the lowest LNG take up than smaller size classes newbuilds … share rises to 10% & 15% by other vessel classes. 2030. Oil Products 30% of 2020 larger newbuilds will be LNG‐enabled, 40% of To be higher than the 11% LNG share held by the Tankers smaller vessels; rising to 40% and 50% in 2030 deepsea fleet, especially amongst smaller vessels. Chemical Tankers 30% of 2020 larger newbuilds will be LNG‐enabled, 40% of LNG to be around 31% of fuel mix, with higher share smaller vessels; rising to 40% and 50% in 2030 amongst smaller vessels. Tugs/Unknown 100% of Vancouver's newbuilds will be LNG‐as‐fuel enabled To be higher than the 11% LNG share held by the deepsea fleet.

A multitude of ships has been built as capable of being used with LNG fuel. This gives the owners more flexibility in chartering their ships – but does not necessarily means that the ships will operate in LNG-as- fuel mode.

Page 59 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

The charts above show the voyage journey undertaken by vessels with LNG-as-fuel capabilities. Theoretically, LNG could be used to fuel this entire distance. This is, however, unlikely because larger fuel-tanks will be needed to power longer deep-sea voyages, and this may not be cost-effective, given the tank size vs cargo space trade-off.

Page 60 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017 B5 Port of Vancouver Activity Forecasts

5.1.1 Baseline Date -2014 Benchmark Year

In order to assess future fuel requirements by year, a forecast of the distances to be travelled by the port’s ships types was required. As the driver for fuel demand is the distance to be travelled from the Port of Vancouver before next refueling, the unit for the forecast is nautical miles, split between ECA areas and non-ECA areas.

The 2010-2014 Port Traffic Activity report gave the number of port calls by ship type and size. To this Lloyd’s Register’s study applied assumed distances to be travelled by port call by ship type/ size bands. As a result a modelled estimate was established of the total 2010-2014 Port of Vancouver Vessel traffic (until next refueling), divided between ECA and non-ECA areas.

To produce an annualized forecast, a benchmark year was required. So for each ship size/type, the study created “Modelled 2014 Vancouver Vessel Voyage Distance to next Refueling”. In order to exclude any single-year anomalies this was based on the 2010-2014 average, rather than the 2014 actual data.

The next step was to generate nautical distance forecasts for each of the future years. This was done by looking at the expected growth in Pacific North West trade by main cargo type and applying the same annual growth rates to the appropriate ship type’s creating “Modelled 2014 Vancouver Vessel Voyage Distance”.

5.1.2 GDP Growth Rates

Canada’s economy is forecast to grow every year through 2035. The annual rate of GDP growth varies between 1.7%pa and 2.5% pa, slightly lower than the global average.

The rate of growth in Asia is slowing – but the growth rate is to remain positive throughout the forecast period.

Source: MSI, April 2016

Page 61 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

5.1.3 Container Cargo Demand Forecast

Port of Vancouver’s containership demand is largely driven by the volume of containers traded on the transpacific trade route. It has been assumed that the port’s ship activity will grow at the same rate as eastbound Transpacific container trade (as forecast by MSI, April 2016). Because the port is building a second terminal, it may win work from nearby ports, so this forecast might be on a slightly conservative side.

5.1.4 General Cargo/ Break-Bulk Cargo Forecast

Pacific North West and Port of Vancouver general cargo demand is estimated to grow each year at the average of the change in:

 The annual change in global general cargo demand (as predicted by MSI, April 2016.)

 The annual change in the Canadian GDP growth rate. The results are shown below.

Page 62 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Again, this forecast is considered to be conservative, as it does not take into account the fact that if Port of Vancouver does offer LNG-bunkering facilities, it may win some additional work from LNG-fueled vessels calling at Puget Sound.

5.1.5 Bulk Carrier Cargo Demand Forecast

The recent decline in Canada’s coal and ore exports is expected to continue in the near future, due to the slowing rate of growth in China. However, MSI predicts that bulk carrier cargo exports are to pick up again from 2019 through 2035.

Based on the knowledge that the bulk grain trade forecast will increase, the study anticipates that Pacific North West and Port of Vancouver bulk will grow at a higher rate as MSI’s forecast of Canadian bulk carrier cargo exports.

Source: MSI, April 2016

5.1.6 Passenger Ship Demand Forecast

Cruise ship activity growth is expressed as an index where year 2010 demand was set at 100. On the chart below, Lloyd’s Register’s study has set Port of Vancouver’s possible growth against MSI’s forecast of global cruise-ship demand (April 2016), for validation purposes, but Port of Vancouver’s cruise ship demand was assumed to grow at the same rate as Canada’s forecast GDP growth.

Page 63 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

The study also took MSI’s April-2016 global specialized car carrier vessel demand forecast. (Expressed in million units of seaborne cargo), and set it against an index of Port of Vancouver’s car-carrier fleet growth (using expected Canadian GDP growth rates and where 2010 was set to 100).

5.1.7 Tanker Cargo Demand Forecast

MSI does not forecast any significant trade of crude oil or oil products to or from Canada. For this reason, the study assumed that without project expansion Crude Oil Tanker and Oil Products Tanker demand in Canada (and Vancouver) will remain at their 2010 levels. However, it was clearly acknowledged that the Kinder Morgan expansion project could result in significantly more tanker traffic.

Canada’s chemical tanker cargo demand is assumed to grow at the same rate as Canada’s GDP growth, as shown in the chart below.

Page 64 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

One possible factor that could cause an increase in Port of Vancouver’s chemical tanker traffic is the Vancouver Airport Fuel Facilities Project. This includes a new marine terminal able to handle both barges and receiving ships based on projected YVR fuel demand.

B6 Forecast Fleet All Fuel Demand Forecast (in Nautical Miles)

The Port of Vancouver fleet fuel demand forecast is expressed in nautical miles to be travelled by ships departing Port of Vancouver, where distance is that voyage until the next refueling port – not entire route distances. The study’s demand forecast in 2014 was based on the average of 2010-2014 port calls and the assumptions in Appendix B4.

The cargo/unit growth forecasts were applied to the distances in each ship type/size, to obtain a fuel demand forecast (in nautical miles per ship type/size). The following graphs show the result per ship type (excluding tugs/ small ships) and for ECA and non-ECA passages. This demand is to be met by vessels using all fuel types.

Page 65 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

The incidence of LNG-fuel is likely to be higher in the ECA areas than in the non-ECA areas. However, based on the responses from the Port of Vancouver Survey, new builds will be the predominant way of introducing LNG fuel from current port customers.

B7 Fuel Requirements to Meet Current Levels of Demand through 2030

7.1.1 Port of Vancouver Fleet Retirement Forecast

The study’s model started with base line data (the average annual 2010-2014 fleet) of Port of Vancouver vessels still in-service in March 2016 – amounting to the 5,100 vessels shown in the first bar-chart column in the graph below. The model was then adjusted based on the anticipated vessels of each type/size that would be retired at the average age suggested by Clarkson’s date set as of March 2016. The data ranged from 21-24yrs for container ships up to 40+years for cruise ships.

The solid bars in the other graph columns show the number of ships expected to retire in the given periods. The hatched bars show the cumulative effect of expected retirements. The results show that almost all of the existing fleet is likely to be replaced by the end of 2040.

Page 66 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

The study’s modelling approach assumes that each ship retirement will be replaced by a new build – unless demand for any ship type is to decline, in such cases the model assumes zero new builds. Although vessels may be replaced by vessels from other regions, some existing vessels may relocate elsewhere. Hence, it can be safely assumed that the two movements will balance out.

7.1.2 Port of Vancouver Replacement Fleet Fuel Demand Forecast

The estimated assumed voyage lengths was applied to the new build fleet, to derive the new build fleet’s share of fuel demand to meet ship 2014 levels activity. To this the demand from new builds coming to Canada was estimated to meet the region’s growing cargo trading requirements.

7.1.3 Port of Vancouver New build Fuel Demand to Meet Cargo Growth Component

Vessels employed to transport the growth in cargo trade would comprise both existing vessels from other regions and new builds.

MSI’s April 2016 forecast of global new build deliveries per ship type/size was used to calculate the volume of new build vessels (delivered 2016 or later) in the fleet each year as a percentage of the forecast total fleet in each type/size band per year. The study then applied these shares to the fuel demand (in nautical miles per ship type/size), to estimate what share of fuel demand would be generated by new builds.

7.1.4 Port of Vancouver Total New build Fleet Fuel Demand Forecast

New build shipping activity expected in the port through 2030, to meet existing demand and to meet increased trade requirements was reviewed in order to refine the LNG demand forecast. The following graphs were developed:

Page 67 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

The share of such new build vessels likely to be LNG-capable was estimated. This is distinct from vessels having engine equipment installed and operating in LNG fueled only mode.

B8 LNG Demand Scenarios in Distance to Be Travelled Using LNG-as-Fuel

The study adopted the “Global Marine Fuel Trends 2030”methodology and established the following LNG demand scenarios for Port of Vancouver:

 Low Case LNG Demand Scenario: Assumes that LNG is used by all LNG-capable new builds, but only to fuel 50% of distance travelled in ECA areas, and 0% in non-ECA areas.

 Base Case LNG Demand Scenario: Assumes that LNG is used to fuel in 80% of distance travelled by LNG-capable ships in ECA areas, and 10% in non-ECA areas.

 High Case LNG Demand Scenario: Assumes LNG is used to fuel 100% of distance travelled by LNG-capable ships in ECA areas, and 20% in non-ECA areas.

The following graphs represent the demand forecasted results prior of any adjustments taking place to reflect Port of Vancouver’s Survey findings :

Page 68 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Prior to Port Survey Adjustment

B9 Estimation of LNG-as-Fuel Consumption per Nautical Mile

A typical ship in each ship type/size band in the Port of Vancouver’s fleet was identified from the IHS data set with respect to:

 Main Engine Power (kW)

 Typical Speed (knots) Key modelling assumptions:  An MCR % of 85%

Page 69 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

 An LNG density of 423 kg/m3. The typical global range is between 420– 465 kg/m3 depending on the source. Based on Lloyd’s Register’s FOBAS data the study assumed that LNG will be supplied by local terminals, at the appropriate lower density.

 Estimated an NG consumption of 175g/kWH

Lloyd’s Register’s “LNG-as-Fuel Tank Capacity Calculator” was used for each of the estimated voyage distances for each ship type. For example, the “Regatta” cruise ship profile was entered into the calculator. It is a 4-50k GT vessel, with an 18,600 MW engine, and is assumed to travel at 18 knots. Using “Methodology 2” in the calculator below, if the vessel travels 250 nautical miles in LNG-mode for example purposes, it would need 90.84m3 of LNG, which averages out at 0.36336m3/nautical mile. This consumption rate is applied to the portions of voyages assumed to be fueled by LNG.

One prototype ship of each vessel type/size trading at Port of Vancouver was estimated using the average nautical mile fuel consumption rates. Based on this the Port of Vancouver Trading Vessels LNG Fuel Consumption Rates were developed and presented in Section 9.1.1, Table 8.

Next the average LNG consumption rate was applied to the per vessel type/size band to the LNG-fueled nautical miles forecast above, to generate the LNG-fuel demand forecast in cubic meters (m3) results presented in the Section 9.1.2, Table 9.

Page 70 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

9.1.1 Estimated Fuel Consumption Rates, By Ship Type

Table 8: Port of Vancouver Trading Vessels LNG Fuel Consumption Rates

Assumed LNG Consumption per Nautical Mile (CuM/Nautical Mile) Ship Type Vessel Name Ship Type/Size Band Main Engine Service CuM LNG to CuM LNG & Generators Speed Complete 250 per (KW) (knots) Nautical Miles Nautical Bulk Carrier AZUL CHALLENGE Bulker VLOC (200k+ DWT) 16,861 14.5 102.23 0.40892 CAPE AUSTRALIA Bulker Capesize (120‐199k DWT) 12,431 13.9 78.62 0.31448 Spring Samcheonpo Bulker Post‐Panamax (85‐119k DWT) 13,560 14.5 82.21 0.32884 THEARESTON Bulker Panamax (65‐84k DWT) 8,905 14 55.92 0.22368 EVER RELIANCE Bulker Supramax (50‐64k DWT) 8,400 14.5 50.93 0.20372 GLORIOUS PEONY Bulker Handymax (40‐49k DWT) 7,545 14.1 47.04 0.18816 PACIFIC ID Bulker Small BC & Handymax (<40k DWT) 5,149 13.5 33.53 0.13412 Passenger/Cruise/ STAR PRINCESS Cruise 100k GT+ 63,365 22 253.21 1.01284 Ro‐Ro/Car Carriers RYNDAM Cruise (51‐99k GT) 34,561 20 88.3 0.3532 REGATTA Cruise (4‐50k GT) 18,600 18 90.84 0.36336 Coastal Inspiration Ro‐Ro/ Ropax (21k+ GT) 15,999 21 66.98 0.26792 Queen Of Coquitlam Ro‐Ro/ Ropax (8‐20k GT) 8,606 19 39.82 0.15928 Queen Of Nanaimo Ro‐Ro/ Ropax (<=7 GT) 4,414 18 21.56 0.08624 BRUSSEL Car Carriers (27‐49k GT) 7,921 17.5 39.79 0.15916 GRAND QUEST Car Carriers (50‐67k GT) 12,358 19.2 56.59 0.22636 Container Ship MAERSK ALFIRK Containership ‐ Super Post‐Panamax (10‐14.9k TEU) 61,780 25.5 212.99 0.85196

MAERSK KARLSKRONA Containership ‐ Post Panamaz (5.5‐9.9k TEU) 54,843 24.6 195.99 0.78396 JPO VELA Containership ‐ Panamax (3.5‐5.49k TEU) 36,562 24.5 131.2 0.5248 HANSA RENDSBURG Containership ‐ Large Feeder (1.3‐3.49k TEU) 14,325 19.5 64.58 0.25832 CNP ILO Containership ‐ Small Feeder(<1.29k TEU) 10,920 19 50.53 0.20212 Tankers SEAKAY SPIRIT Crude Tanker ‐ Suezmax (120‐199k DWT) 22,066 17 114.11 0.45644 Eagle Phoenix Crude Tanker Aframax (80‐199k DWT) 11,549 14 72.52 0.29008 AFRA OAK Crude Tanker Aframax (80‐199k DWT) 12,241 15.15 71.03 0.28412 OVERSEAS PEARLMAR Crude Tanker Panamax (60‐79k DWT) 10,217 14.6 61.52 0.24608 EAGLE Crude Tanker Handy (10‐59k DWT) 7,679 14.15 47.71 0.19084 EL JUNIOR PNT Oil Products Tanker Panamax (60‐79k DWT) 10,002 14.5 60.64 0.24256 MAPLE EXPRESS Oil Products Tanker Handy (10‐59k DWT) 8,561 14.5 51.91 0.20764 BREEZY NAVIGATOR Oil Prods Tanker Small (2‐9k DWT) 4,049 14.1 25.25 0.101 MINDORO STAR Chem Tanker Panamax (60‐79k DWT) 11,300 14.5 68.51 0.27404 CHAMPION Chem Tanker Handy (10‐59k DWT) 7,830 14 49.17 0.19668 Fairchem Blade Chem Tanker Small (2‐9k DWT) 5,000 14.5 30.32 0.12128 Cargo Ships Raven Arrow KITE Gen Cargo Panamax (65‐84k DWT) 9,450 14.5 57.3 0.2292 ARROW Gen Cargo Supramax (50‐64k DWT) 11,521 14.5 69.85 0.2794 SAVANNAH PEARL Gen Cargo Handymax (40‐49k DWT) 6,055 13.1 40.63 0.16252 FENELLA Gen Cargo Handymax (<40k DWT) 4,781 14 30.02 0.12008

Source: Lloyd’s Register’s Fuel Calculator and IHS Vessel Specifications, March 2016

Page 71 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

9.1.2 Port of Vancouver LNG-Fuel Demand Forecast Scenario Table

Table 9: Low , Base and High Cases LNG Fuel Demand Per Ship Type Trading in Vancouver Port

Page 72 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017 B10 Fuel Demand Graphical Representations Global and Port Trends

The graphical presentation of the LNG demand for Low Case, Base Case and High Case scenarios calculated in Table 9 above per vessel type are presented graphically in the combined Chart A below. This chart is based on the expected global LNG fuel demand trends (m3).

Chart B presents the adjustment of the LNG demand trends after taking into account the views of ship owners trading in the Port of Vancouver based on responses given in the Vancouver Port Survey. The Base Case scenario considered as predominant by the study is also identified.

The LNG demand forecast findings are discussed in detail in Section 2 of this report.

Chart A

Chart B Vancouver Port LNG Demand Scenarios

Page 73 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Appendix C – Port Survey

C1 Survey Summary

Lloyd’s Register was requested by the Port of Vancouver to implement an on-line survey and undertake a detailed questionnaire to the majority of marine operations stakeholders and Port clients in order to better understand opportunities associated with the use of LNG as a marine fuel and the potential to establish a future LNG bunkering hub at BC and the Pacific North West shipping trade route. A summary of the main survey findings is as follows:

 Ninety percent of the survey respondents were not planning to retrofit any existing vessel to be LNG capable.

 Forty-five percent did plan to utilize ships that were LNG capable in their new building or charter programs.

 The majority of survey respondents indicated that liquefied natural gas capable ships that may visit the Port of Vancouver would likely do so in the time period 2021 to 2025.

 Representatives from a cruise, break-bulk, container and liquid bulk tanker sectors indicated that the 2021 to 2025 period was the most likely time frame for LNG-capable vessels to be deployed on trade routes serving Port of Vancouver.

 Most notably the dry bulk carrier segment of the market did not indicate any firm intention to LNG fueled vessel.

 Two-thirds of the respondents indicated that they preferred the barge LNG fueling while at berth. Only seventeen percent preferred the barge at port anchorage option.

 Two-thirds of survey respondents indicated that if their company had LNG capable vessels their most important bunkering locations would not be different then their present locations.

Importance of Factors Regarding a Decision to have a LNG Capable Ship.

Survey respondents were asked to rate the importance of a number of factors regrading a decision to have a liquefied natural gas capable ship in their company’s fleet. Only respondents who indicated that they planned to use LNG were given the opportunity to express their thoughts on the questions. The responses to the six point Likert scale are displayed in the chart and table below. Answers with the lowest total scores were rated as the most important factors.

The results of the overall analysis indicate that the top three most important factors in making a decision to have a LNG capable ship in their fleet were the availability of LNG fuel supplies along the trade routes; the price of LNG bunker fuel; and the costs for the whole operational life cycle of the vessel and the accompany return on investment.

Page 74 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

In interpreting the survey results it is important to note that respondents were provided choices ranging from most important to neutral to least important or not applicable. If the respondent, answered most important it received a numerical ranking of 1, a neutral reply 3 and not applicable answer a numerical score of 6.

It is also important to note that in the context of the commercialization of a new marine fuel in the shipping sector that no price, investment or technical factors were rated as not being important. Not even the soft attribute factors such as public image and the ability to differentiate the firm from other competing operators on the route received even a natural ranking from the survey respondents. The results of the survey question confirm the fact that a number of factors or issues need to be addressed simultaneously for a LNG capable ship to be considered. However, the range of answers suggest that if satisfactory answers to these issues can be addressed then the uptake on LNG capable fueled vessels may rise at a rate than if there was a single most important factor influencing a demand decision by ship-owners.

Question Count Score Availability of LNG fuel supplies along the trade routes. 11 1.455 The price of LNG bunker fuel. 11 1.545 OPEX - Costs for the whole operational life cycle and ROI. 11 1.636 CAPEX - Initial investment cost for technology procurement/installation. 11 1.727

Efficiency and Flexibility - Ability to use dual fuel engines. 11 1.818 Competency of the crew and shore-based staff during LNG bunkering 11 2.000 operation. Public Image - Retain / develop a positive public perception of the organization. 11 2.364

Competition - Differentiation with other competing operators along the trade 11 2.455 route.

Page 75 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Factors that Would Influence the Amount of LNG Fuel Purchased at the Port of Vancouver Using a Bunkering Barge.

Survey respondents were asked to rate the importance of a number of factors that would influence the amount of fuel purchases at the Port of Vancouver from a bunkering barge. Only respondents who indicated that they planned to use LNG were given the opportunity to express their thoughts on this question. The responses to the five point Likert scale are displayed in the chart and table below. Answers with the lowest total scores were rated as the most important factors.

In interpreting the survey results it is important to note that respondents were provided choices ranging from most important to neutral to least important or not applicable. If the respondent, answered most important it received a numerical ranking of 1 and a least important reply received a numerical score of 5.

The respondents indicated that the top three most important factors that would influence the amount of LNG purchases were the price, the availability of LNG fuel on trade routes and the LNG fuel quality assurance and quantity measurement criteria that were to be used in the Port of Vancouver (Reference Section 3.5.6). The data in the table below also suggests that survey respondents were also sensitive to the total time of LNG bunkering operations, the location of the bunkering barge, the extra time required for LNG bunkering ships in ports where there is no service all on the trade route serving Port of Vancouver and the amount of time allocated to a port call in Port of Vancouver.(Reference Sections 3.5.3 and 3.5.4)

Question Count Score Price competitiveness of LNG fuel at PMV. 10 1.500 The availability of LNG fuel on trades routes that serve PMV. 10 1.700 LNG fuel quality assurance and quantity measurement criteria used 10 1.800 at PMV. Total time of LNG bunkering barge operations at PMV. 10 2.000 Location of LNG bunkering barge operations within Port Metro 10 2.100 Vancouver. The extra time required for LNG bunkering ship in ports where there 10 2.100 is no service call on the trade route serving PMV. The total amount of time allocated to port call at PMV. 10 2.200

Page 76 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Important Factors in Attract Liquefied Natural Gas (LNG) Fueled Capable Vessels

In interpreting the survey results it is important to note that respondents were provided choices ranging from most important to neutral to least important or not applicable. If the respondent, answered most important it received a numerical ranking of 1 and a least important reply received a numerical score of 5.

Survey respondents indicated that the most important factor in attracting liquefied natural gas capable vessels to the Port of Vancouver was the presence and availability of LNG bunker locations along the trade routes used to service Vancouver. Thus, the survey respondents confirm existing Lloyd’s Register Marine research about the increasing importance of infrastructure (Reference Section 3).

The table below suggests that the port should develop safe and efficient LNG bunkering b arge procedures to provide clear operating guidance to ship-owners along with providing a financial benefit in the port tariff for LNG-powered ships to attract vessels.

The survey results also demonstrated the importance of ensuring ports provide timely LNG bunker operations to coincide with marine carrier investments in LNG fueled vessels. This factor was equal in importance to the air emission requirements that arise from implementing International Maritime Organization conventions.

Page 77 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Question Count Score Availability of LNG bunkering locations along the trade route serving Port of 19 1.421 Vancouver. Development of safe and efficient LNG bunkering barge procedures (including 19 1.684 checklists with standard operating procedures) to provide clear operating guidance to ship's crew and vessel managers. Providing a financial benefit in the port tariff for LNG-powered ships, such as 19 1.789 reduced Harbour dues. Ensuring timely provision of LNG bunkering barge services to coincide with marine 19 1.947 carrier investments in LNG fueled vessels. Air emission requirements of the International Maritime Organization regulations. 19 1.947 Collaboration with other LNG bunkering barge ports to coordinate standard 19 2.368 operating practices. Creation of an LNG bunkering barge investment policy so ship owners can assess 19 2.368 commercial potential and implications for fuel supply at PMV. Facilitating the bunkering barge permitting process, so timely investment by an LNG 19 2.263 Service provider occurs.

Page 78 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

C2 Survey Methodology

To conduct the stakeholder consultations with Port of Vancouver existing shipping line customers, Lloyd’s Register implemented an on-line survey using the Cloud based tool called QuestionPro. The Survey ran from X to Y. The table below shows the highest level survey response statistics. The response rate for individual questions may vary because the entire sets of questions were not made mandatory.

Port of Vancouver officials provided the study team with a priority customer list of firms representing the ports business lines. The table below shows the distribution of companies.

Port of Vancouver Shipping Sectors Breakbulk 4% Bulker/Tanker 4% Container lines 63% Cruise 11% Dry Cargo / Bulker 4% Heavy Lift 4% Ro-Ro/Bulker 4% Tug 7% Grand Total 100%

The statistics below provide a summary of the survey response.

Viewed Started Completed Completion Drop Outs Average Time to Rate (After Starting) Complete Survey 70 32 19 59.38% 13 8 minutes

C3 Survey Details

3.1.1 Vessel Demographics

The Primary Type of Ship your Firm Uses on Trips Involving a Call at the Port of Vancouver.

The chart below shows that distribution of survey responses was generally consistent with the Port of Vancouver’s priority customer list provided to the study team. The container sector accounted for 61% of the vessel types and 63% of the survey population. However, the harbor towage and workboat sector was under represented since they accounted for seven percent of the target firms, and yet few survey respondents indicated that this segment of the market represented their primary vessel type. In question 5, the study team received a singular response from the tug sector of the market.

Page 79 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Primary type of ship your firm uses on trips involving a call to the Port of Vancouver. 100.00%

80.00% 60.87% 60.00% 40.00%

20.00% 8.70% 8.70% 13.04% 0.00% 4.35% 4.35% 0.00% 0.00% Cruise. Container ship. Harbour towage, Roll-on / Roll-off support and work(including Ferry). vessel.

What is/are the Ship Size(s) of the Cruise / Roll-on Roll-of Ships (including Ferry) that Visit the Port of Vancouver?

Data from the table below reveals that there were a range of cruise ship sizes that visited the Port of Vancouver with vessels sizes of between 51 to 99 GT and ships over 100 GT accounting each for a third of the survey respondent’s answers. The Port of Vancouver also received visits from smaller cruise ships in the 5 to 50 GT range. The range of Roll-on, Roll-off ships size was consistently in the range of less than 7 GT.

What is/are the ship size(s) of the Cruise / Roll-on Roll-of Ships

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Cruise (5 Cruise Cruise Ro-Ro Ro-Ro (8 Ro-Ro Car Other - 50k (51 - 99k (100k+ (<7k - 20k (21k+ Carriers (please GT). GT). GT). GT). GT). GT). (all specify). sizes).

What is/are the Ship Size(s) of the Break Bulk and Dry Bulk Carriers that Visit Port of Vancouver?

The Port of Vancouver’s break-bulk and dry bulk shipping segments of the market had the widest distribution of ship sizes according to the data in the chart below provided by the survey respondents. The four largest vessel sizes accounted for forty percent of the survey respondents and the three smallest vessel sizes accounted for sixty percent.

Page 80 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

What is/are the ship size(s) of the Break Bulk and Dry Bulk Carriers

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Small Bulk Carrier Supramax (50 - Post-Panamax (85 VLOC (200k+ &; Handysize 64k DWT). - 119k DWT). DWT). (<39k DWT).

What is/are the Ship Size(s) of the Container Ships that visit Port of Vancouver?

What is/are the ship size(s) of the Container Ships

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Small Feeder Panamax (3,500 - Super Post- Mega - Ultra (<1,299 TEU). 5,499 TEU). Panamax (10 - Large Container 14.9k TEU). Ships (18k+ TEU).

What is the Ship Sizes(s) of the Harbour Towage, Support and Work Vessel that visit Port of Vancouver?

One firm responded to the survey and indicated that a tug> 150 GT was used in their visits to the Port of Vancouver.

What is/are the Ship Size(s) of the Liquid Bulk Tankers that visit Port Metro Vancouver?

No vessel owners from the liquid bulk sector completed this survey question. This, response level is not surprising given the fact that this segment of the market represented approximately four percent of the priority firms the study team were to target.

Page 81 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

3.1.2 Owner’s Fleet Composition and Intention Towards LNG

Does Your Organization Plan to Retrofit/Refit any of your Existing Vessels to be Liquefied Natural Gas (LNG) Capable?

The data in the chart below clearly shows that ninety percent of the survey respondents were not planning to retrofit any existing vessel to be LNG capable. The exception was that one firm was engaged in ongoing technical and economic feasibility studies for existing vessels.

Does your organization plan to retrofit/refit any of your existing vessels your existing vessels to be…

100.00% 80.00% 60.00% 40.00%

20.00%

0.00% Yes. No.

Do you Believe that your Organization's Approach to Vessel Ownership Will play an Important Factor in Whether Liquefied Natural Gas (LNG) is used as a Marine Fuel in Your Fleet?

Seventy percent (70%) of survey respondents indicated that their organization’s approach to vessel ownership would not play an important factor in their decision to use LNG as a marine fuel in their fleet. However, the chart below reveals that thirty percent (30%) of the respondents indicated that it would play an important factor.

Do you believe that your organization's approach to vessel

ownership, (i.e. chartered versus owned) will play an important factor

100.00%

80.00% 70.00%

60.00%

40.00% 30.00%

20.00%

0.00% Yes. No.

A review of the survey data for respondents answering yes revealed a variety of reasons driving the decision to use LNG as a marine fuel:

Page 82 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

 We own our whole fleet and operate 100% in ECA zone. We also see a cost advantage to working with LNG as fuel.  LNG will be included on core global routes of owned vessels,  An Owner will normally have a longer-term perspective, which might justify going for a LNG solution. For chartered tonnage, this is less likely to be a deceive factor.  For owning the LNG fuel vessel, we need to train the crews but the resource is not enough so far. We have only choice to reduce the owned vessel and increase chartered vessel.  Already decide to construct LNG bunkering vessel.

Does Your Organization Plan to Order Any New Buildings or Charter Liquefied Natural Gas Fuel Capable Ships?

Fifty-five percent (55%) of Port of Vancouver customers indicated that they did plan to order new build vessels or charter liquefied natural gas capable ships. While the data in the chart below indicates that forty-five percent (45%) did plan to utilize ships that were LNG capable in their new building or charter programs.

Does your organization plan to order any new buildings or charter

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Yes. No.

3.1.3 Importance of Factor Regarding a Decision to Have LNG Capable Ships

The charts and tables on the following pages related to question ten illustrate the range of answers pertinent to each individual factor being assessed. Since the descriptive data in the charts and tables are accompanied with the requisite labels and scales to assist in interpretation not further explanation of the information is considered necessary.

Page 83 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Availability of LNG Fuel Supply Along the Trade Routes.

Availability of LNG fuel supplies along the trade routes.

100.00% 80.00% 60.00% 40.00%

20.00%

0.00% Most Important Neutral Not so Least Not important important important applicable

Answer Count Percent 1. Most important 6 54.55% 2. Important 5 45.45% 3. Neutral 0 0.00% 4. Not so important 0 0.00% 5. Least important 0 0.00% 6. Not applicable 0 0.00% Total 11 100%

CAPEX - Initial Investment Cost for Technology Procurement/Installation.

CAPEX - Initial investment cost

100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Most important Neutral Least important

Series1

Page 84 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Answer Count Percent 1. Most important 4 36.36% 2. Important 6 54.55% 3. Neutral 1 9.09% 4. Not so important 0 0.00% 5. Least important 0 0.00% 6. Not applicable 0 0.00% Total 11 100%

Competition – Differentiation with Other Competing Operators Along the Trade Route.

Differentiation with other

competing operators

100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Most Important Neutral Not so Least Not important important important applicable

Answer Count Percent 1. Most important 4 36.36% 2. Important 1 9.09% 3. Neutral 4 36.36% 4. Not so important 1 9.09% 5. Least important 1 9.09% 6. Not applicable 0 0.00% Total 11 100%

Page 85 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Competency of the Crew and Shore-Based Staff During LNG Bunkering Operation.

Competency of the crew and shore-based staff during LNG bunkering operation.

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Most Important Neutral Not so Least Not important important important applicable

Answer Count Percent 1. Most important 2 18.18% 2. Important 7 63.64% 3. Neutral 2 18.18% Not so 4. 0 0.00% important 5. Least important 0 0.00% 6. Not applicable 0 0.00% Total 11 100%

OPEX - Costs for The Whole Operational Life Cycle and ROI.

OPEX - Costs for the whole operational life cycle and ROI.

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Most Important Neutral Not so Least Not important important important applicable

Page 86 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Answer Count Percent 1. Most important 5 45.45% 2. Important 5 45.45% 3. Neutral 1 9.09% 4. Not so important 0 0.00% 5. Least important 0 0.00% 6. Not applicable 0 0.00% Total 11 100%

Efficiency and Flexibility - Ability to Use Dual Fuel Engines.

Efficiency and Flexibility - Ability to use dual fuel engines.

100.00% 80.00%

60.00%

40.00%

20.00%

0.00% Most Important Neutral Not so Least Not important important important applicable

Answer Count Percent 1. Most important 2 18.18% 2. Important 9 81.82% 3. Neutral 0 0.00% Not so 4. 0 0.00% important 5. Least important 0 0.00% 6. Not applicable 0 0.00% Total 11 100%

Page 87 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Public Image - Retain / Develop A Positive Public Perception of the Organization.

Public Image

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Most Important Neutral Not so Least Not important important important applicable

Answer Count Percent 1. Most important 0 0.00% 2. Important 8 72.73% 3. Neutral 2 18.18% 4. Not so important 1 9.09% 5. Least important 0 0.00% 6. Not applicable 0 0.00% Total 11 100%

The Price of LNG Bunker Fuel.

The price of LNG bunker fuel

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Most Important Neutral Not so Least Not important important important applicable

Page 88 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Answer Count Percent 1. Most important 5 45.45% 2. Important 6 54.55% 3. Neutral 0 0.00% 4. Not so important 0 0.00% 5. Least important 0 0.00% 6. Not applicable 0 0.00% Total 11 100%

If Your Company Has an Interest in Liquefied Natural Gas (LNG) Capable Ships Approximately How Many of Your Organization's New Vessels or Chartered Vessels Could Include LNG as A Fuel Type Over the Next Ten Years?

Survey respondents indicated that it would primarily be new build vessels that would be liquefied natural gas capable ships.

Answer Count Percent

1. New build ships. 11 100.00% 2. Chartered vessels. 0 0.00% Total 11 100%

Insights from the survey respondents who answered yes regarding their new build vessels intentions provided the following range of answers in terms of the number of vessels:  Two,  Three,  Four,  Five,  Five,  Six,  Ten,  Fifteen,  indeterminate  Not certain at this stage.

3.1.4 Time Frame for LNG Capable Vessels

What Do You Believe Is the Nearest Approximate Time-Frame That Your Organization's Liquefied Natural Gas Fuel Capable Ship May Visit Port Metro Vancouver in Canada?

The majority of survey respondents indicated that liquefied natural gas capable ships that may visit the Port of Vancouver would likely do so in the time period 2021 to 2025 as indicates in the chart below. One firm indicated that they were going to introduce a ship in 2016 and the balance of the respondents indicates a longer term time horizon than the majority of respondents.

Page 89 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

What do you believe is the nearest approximate time-frame

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% by 2016. 2017 - 2020. 2021 - 2025. 2026 - 2030.

Answer Count Percent 1. by 2016. 1 9.09% 2. 2017 - 2020. 0 0.00% 3. 2021 - 2025. 7 63.64% 4. 2026 - 2030. 3 27.27% Total 11 100%

The results of a cross tabulation analysis shown below revealed that the roll-on roll-off (including ferry) sector was the segment of the market that planned to introduce an LNG-fueled vessel in 2016. Representatives from a cruise, break-bulk, container and liquid bulk tanker sectors indicated that the 2021 to 2025 period was the most likely time frame for LNG-capable vessels to be deployed on trade routes serving Port of Vancouver. The number of LNG-capable vessels was expected to increase in the container and break-bulk segments over the extended period 2026 to 2030. Most notably the dry bulk carrier segment of the market did not indicate any firm intention to LNG fueled vessel. The dry bulk tramp market represents a significant portion of existing Port of Vancouver shipping traffic and hence demand for marine bunkering service. However, caution in interpreting the results of this survey to the market requirements for LNG fuel for the entire dry bulk fleet that visits Port of Vancouver must be exercised due to the relatively small number of companies that were included as priority firms to include in the survey.

Timeline for Introduction of LNG Capable Vessels That Could Visit the Port of Vancouver

Cruise.

Break-bulk.

2026 - 2030. Container ship. 2021 - 2025.

2017 - 2020. Dry bulk carrier.

by 2016. Harbour towage, support and work vessel. Overall Liquid bulk tanker. 0% 20% 40% 60% 80% 100%

Page 90 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

3.1.5 Preferred LNG Bunkering Method

Respondents’ answers to their preferred bunkering method is important for determining the Port of Vancouver’s operating policies and infrastructure requirements for liquefied natural gas as a marine fuel. Two thirds of the respondents indicated that they preferred the barge LNG fueling while at berth. Only seventeen percent preferred the barge at port anchorage option. One respondent indicated that they preferred that a tanker truck be driven onboard the vessel. Results of a cross tab analysis revealed that respondents from the cruise, break-bulk, container and liquid-bulk tanker segments of the Port of Vancouver’s current customer based preferred the bunkering while at berth option. A few respondents in the container sector indicated a preference for bunkering while at port anchorage. The response received from the roll-on, roll-off sector indicated a bunkering preference by truck.

What is your preferred bunkering method for LNG

100.00% 80.00%

60.00% 40.00%

20.00% 0.00% By barge at By barge at No preference. Other methods cargo loading / port (please specify) unloading anchorage. berth.

Answer Count Percent 1. By barge at cargo loading / unloading berth. 8 66.67% 2. By barge at port anchorage. 2 16.67% 3. No preference. 1 8.33% 4. Other methods (please specify) 1 8.33% Total 12 100%

3.1.6 Factors Influencing Amount of LNG Purchased at Port of Vancouver

Page 91 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

LNG Fuel Quality Assurance and Quantity Measurement Criteria Used.

LNG fuel quality assurance and quantity measurement criteria

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Most Important Neutral Not so Least important important important

Location of LNG Bunkering Barge Operations Within Port of Vancouver.

Location of LNG bunkering barge operations within Port

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Most important Important Neutral Not so Least important important

Answer Count Percent 1. Most important 1 10.00% 2. Important 8 80.00% 3. Neutral 0 0.00% 4. Not so important 1 10.00% 5. Least important 0 0.00% Total 10 100%

Page 92 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Price Competitiveness of LNG Fuel at the Port of Vancouver

Price competitiveness of LNG fuel

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Most Important Neutral Not so Least important important important

Answer Count Percent 1. Most important 5 50.00% 2. Important 5 50.00% 3. Neutral 0 0.00% 4. Not so important 0 0.00% 5. Least important 0 0.00% Total 10 100%

The Availability of LNG Fuel On Trades Routes That Serve Port of Vancouver

The availability of LNG fuel on trades routes

100.00% 80.00% 60.00% 40.00%

20.00%

0.00% Most Important Neutral Not so Least important important important

Answer Count Percent 1. Most important 5 50.00% 2. Important 3 30.00% 3. Neutral 2 20.00% 4. Not so important 0 0.00% 5. Least important 0 0.00% Total 10 100%

Page 93 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

The Extra Time Required for LNG Bunkering Ship in Ports Where There Is No Service Call On the Trade Route Serving Port of Vancouver

The extra time required for LNG

bunkering ship in ports where there is no service call

100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Most Important Neutral Not so Least important important important

Answer Count Percent 1. Most important 1 10.00% 2. Important 8 80.00% 3. Neutral 0 0.00% 4. Not so important 1 10.00% 5. Least important 0 0.00% Total 10 100%

The Total Amount of Time Allocated to Port Call at the Port of Vancouver

The total amount of time allocated to port call

100.00% 80.00%

60.00%

40.00%

20.00%

0.00% Most Important Neutral Not so Least important important important

Answer Count Percent 1. Most important 0 0.00% 2. Important 8 80.00% 3. Neutral 2 20.00% 4. Not so important 0 0.00% 5. Least important 0 0.00% Total 10 100%

Page 94 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Total Time of LNG Bunkering Barge Operations at The Port of Vancouver

Total time of LNG bunkering barge operations

100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Most Important Neutral Not so Least important important important

Answer Count Percent 1. Most important 1 10.00% 2. Important 8 80.00% 3. Neutral 1 10.00% 4. Not so important 0 0.00% 5. Least important 0 0.00% Total 10 100%

For Trade Routes That Make a Call to Port of Vancouver Where Is the Most Significant Bunkering Location(s) For Your Vessel?

Pacific Region – North America Pacific Region – Asia Other Regions  Vancouver  East Russia  Antwerp  Vancouver  Busan  Europe  Delta  Pusan  Sines  USWC,  Japan  Balboa  Long Beach  Hong Kong Panama  Los Angeles or Oakland  Singapore  Panama  Los Angeles  Long Beach

A survey respondent also included the answer “cargo operation terminal” in their replies.

If Your Company Had Liquefied Natural Gas (LNG) Capable Vessels, Do You Believe That Your Most Important Bunkering Location(S) Would Be Different?

Two-thirds of survey respondents indicated that if their company had LNG capable vessels their most important bunkering locations would not be different then their present locations. However, data in the chart below shows that for one-third of the respondents the answer was yes it would change.

Page 95 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Do you believe that your most important bunkering location(s) would be different?

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Yes. No.

Answer Count Percent 1. Yes. 6 33.33% 2. No. 12 66.67% Total 18 100%

Detailed analysis of the survey responses who answered yes revealed the following information:  It would depend the Safety standards, quality of supply and Price,  It depends on availability,  Canada, US, China,  Only very few LNG bunker locations available worldwide, thus will have to follow what's on offer,  On a general basis (not specifically PM Vancouver), we see limitations on LNG bunkering e.g. in cargo terminals where HFO of MGO is accepted.

3.1.7 Importance of Factors to Attract LNG Capable Vessels

The charts and tables on the following pages related to question ten (10) illustrate the range of answers pertinent to each individual factor being assessed. Since the descriptive data in the charts and tables are accompanied with the requisite labels and scales to assist in interpretation not further explanation of the information is considered necessary.

Page 96 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Air Emission Requirements of the International Maritime Organization Regulations.

Air emission requirements of the IMO regulations.

100.00% 80.00% 60.00% 40.00%

20.00%

0.00% Most Important Neutral Not so Least important important important

Answer Count Percent 1. Most important 5 26.32% 2. Important 10 52.63% 3. Neutral 4 21.05% 4. Not so important 0 0.00% 5. Least important 0 0.00% Total 19 100%

Availability of LNG Bunkering Locations Along the Trade Route Serving Port of Vancouver.

Availability of LNG bunkering locations along the trade route serving

100.00% 80.00% 60.00%

40.00%

20.00%

0.00% Most Important Neutral Not so Least important important important

Answer Count Percent 1. Most important 12 63.16% 2. Important 6 31.58% 3. Neutral 1 5.26% 4. Not so important 0 0.00% 5. Least important 0 0.00% Total 19 100%

Page 97 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Collaboration with Other LNG Bunkering Barge Ports to Coordinate Standard Operating Practices.

Collaboration with other LNG bunkering

barge ports to coordinate standard operating practices.

100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Most Important Neutral Not so Least important important important

Answer Count Percent 1. Most important 1 5.26% 2. Important 10 52.63% 3. Neutral 8 42.11% 4. Not so important 0 0.00% 5. Least important 0 0.00% Total 19 100%

Creation of an LNG Bunkering Barge Investment Policy So Ship Owners Can Assess Commercial Potential and Implications for Fuel Supply at the Port of Vancouver.

Creation of an LNG bunkering barge investment policy

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Most Important Neutral Not so Least important important important

Page 98 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Development of Safe and Efficient LNG Bunkering Barge Procedures (Including Checklists with Standard Operating Procedures) To Provide Clear Operating Guidance to Ship's Crew and Vessel Managers.

Development of safe and efficient LNG bunkering barge procedures

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Most Important Neutral Not so Least important important important

Answer Count Percent 1. Most important 7 36.84% 2. Important 11 57.89% 3. Neutral 1 5.26% 4. Not so important 0 0.00% 5. Least important 0 0.00% Total 19 100%

Ensuring Timely Provision of LNG Bunkering Barge Services to Coincide with Marine Carrier Investments in LNG Fueled Vessels.

Ensuring timely provision of LNG bunkering

barge services to coincide with marine carrier investment

100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Most Important Neutral Not so Least important important important

Page 99 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February, 2017

Answer Count Percent 1. Most important 4 21.05% 2. Important 12 63.16% 3. Neutral 3 15.79% 4. Not so important 0 0.00% 5. Least important 0 0.00% Total 19 100%

Facilitating The Bunkering Barge Permitting Process, So Timely Investment by an LNG Service Provider Occurs.

Facilitating the bunkering barge permitting process

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Most Important Neutral Not so Least important important important

Answer Count Percent 1. Most important 0 0.00% 2. Important 14 73.68% 3. Neutral 5 26.32% 4. Not so important 0 0.00% 5. Least important 0 0.00% Total 19 100%

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Page 100 Port of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Providing a Financial Benefit in The Port Tariff for LNG-Powered Ships, Such as Reduced Harbour Dues.

Providing a financial benefit in the port tariff

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Most Important Neutral Not so Least important important important

Answer Count Percent 1. Most important 8 42.11% 2. Important 8 42.11% 3. Neutral 2 10.53% 4. Not so important 1 5.26% 5. Least important 0 0.00% Total 19 100%

3.1.8 Customers Interested in Further Discussion

Would you be open to participating in a twenty-minute telephone call to discuss further

100.00%

80.00%

60.00%

40.00%

20.00%

0.00% Yes. No.

PagePort 101 of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Appendix D - Typical Commercial LNG STS Bunkering Systems

Houlder TRAV&L Bunker Transfer System(8”hoses)

FMC Bunkering rigid arm for marine applications

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Appendix E – Bunkering Checklists

Due to the variety of receiving ships and bunker barges participating in operations it is considered that checklists provide the single important risk management tool ensuring that operations are conducted safely.

A typical example of a checklist for LNG bunkering operations is presented below. Checklists should be regularly reviewed/updated and used for each phase of the operation by the bunkering provider. The following generic checklists may be used:

Prior Bunkering

Checklist 1: Pre Fixture Information (For Bunker barge and Receiving Vessel) - Planning phase

Checklist 2: Pre- bunkering

Checklist 3: Before Run In and Mooring

Checklist 4: Before Bunker Transfer

Checklist 5: Post Bunkering (Before Unmooring) Checklist 6: Custody Transfer (Typical)

During Bunkering

Operations mainly consisting of keeping a watch and ensuring that the bunkering progresses as planned.

On completion of Bunkering

Checklist 5: Post –bunkering (before unmooring)

It is advised that controlled copies of these checklists should be available as a minimum in the bunker control stations and the bridge.

Ship to Ship Transfer (LNG)

Check List Number 4 - Before LNG Bunker Transfer

Ships Name Company Call Sign Date of Transfer

IMO Number Location Tanker Receiving Bunker Receiving Remarks Barge Ship (Delete as appropriate) Checked Checked

1) Procedures for transfer of PIC and other personnel have been agreed?

10 PagePort 103 of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

2) Emergency signals and shut down procedures agreed? 3) A deck watch is established to pay particular attention to moorings, fenders, hoses, and manifold observations. All personnel involved wearing appropriate PPE.

4) Bunker specifications and any requirements for inerting, heating, reactivity and inhibitors have been exchanged. 5) The use of vapour return is applicable? Procedures reviewed and agreed?

6) Tank high-level alarms and overfill alarms have been tested? 7) Fuel tank pressure and vacuum relief settings are established? 8) Initial bunker transfer rate (m³/hr)

9) Maximum bunker transfer rate (m³/hr) 10) Fuel tank pressure range to be maintained (psi) 11) Fuel tank pressure alarm set points: High alarm (psi) Low alarm (psi)

12) IG main pressure alarm set points: High alarm (psi) Low alarm (psi) 13) Vapour emission control system pressure alarm set points: High alarm (psi) Low alarm (psi)

14) Agreement on the following sequences and procedures have been established:

Normal start up Increasing / reducing fuel transfer rates Normal shut down Low vapour pressure alarm High vapour pressure alarm 15) Ballasting and de-ballasting arrangements in place? 16) Has the loading curve been established for the receiving ship?

17) Cargo hoses are well supported by a fixed point on-board the receiving ship. Hose release area is clear of obstructions / snagging points?

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18) ESD I and II systems arrangements in place and tested

19) ESD I warm test

20) ESD I Cold test

21) ESD II release mechanism tested only (i.e. no coupling breakaway) systems arrangements in place and tested? 22) PIC aware of location and activation method of ESD systems on deck? 23) Bunker safety and monitoring systems operating?

24) Bunker system purged with Nitrogen to below 2% O2? 25) Bunker system connections confirmed tight? 26) Nitrogen supplier operational throughout transfer?

27) Confirm water spray system operational? 28) Confirmed weather condition acceptable 29) Confirmed light condition adequate

30) Confirmed communication system in order 31) Confirmed fire-fighting equipment ready to use 32) Confirmed hose/arm, manifold and tank pressure and temperature satisfactory 33) Return the checklist to bunker barge and to be signed by bunker barge operator before commencing bunker operation

Remarks Master of Bunker Barge:

Signature: Date/time: PIC of Bunker Barge: Signature: Date/time:

Master of Receiving ship: Signature: Date/time:

10 PagePort 105 of Vancouver LNG Fuel Demand Forecast and Bunkering Vessel Study February 2017

Appendix F – STS Bunkering Risk Assessment

The purpose of the risk assessment is to apply a rigorous examination on all the identified hazards related to the design and operability of the bunkering system in order to demonstrate that all credible accidental events have been considered and recommend appropriate mitigation actions for risk reduction. The risk assessment may identify the requirement for safety operational measures in addition to those specifically stated in Regulations.

In demonstrating that an appropriate level of safety has been achieved, an inherently safer design should be sought in preference to operational/procedural controls.

The risk assessment should be undertaken by suitably qualified and experienced individuals to a recognised standard (e.g. as outlined in ISO 31010, Risk management - Risk assessment techniques).

As a minimum the overall scope of work for the risk assessment should cover the following:

 LNG bunker station on board the receiving ship

 Bunkering system and offloading station on board the bunker barge

 STS bunkering operations at location

 Critical review of Operation Manuals

It is recommended for the bunker barge the HAZOP study to be undertaken as part of the STS bunkering operations and should as a minimum include the following:

 Undertake a general examination of the LNG bunkering system during transfer operations, using a typical P&ID of the system connected with the receiving vessel’s manifold and identify all consequences of potential upset conditions (flow/pressure/temperature) during:

- Connection, cool down and start-up

- Normal Disconnection, drain, purge

- Emergency Disconnection, relief, purge

- Utilities provisions

 Assess the adequacy of the existing isolation, control and operating procedures to prevent or control the hazards and establish additional measures to enable safe operations at all times.

The above process should identify for both ships mechanical, electrical and operating failures as a result of: over- filling; high/low pressure; high/low temperature; high/low/no flow; electrical interference; loss of utilities; loss of controls; blackout; collision/impact; vibration; sloshing; wave and wind impacts; green sea; lightning; corrosion/erosion; inerting; external fire/explosion; rollover; and operation outside of designed operating parameters.

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Appendix G – Safety Exclusion Zones

A safety exclusion zone should be established in order to enable safe control within a defined area of operations and provide mitigation from potential hazards originated from:

 LNG bunkering operations alongside or at anchorage having an impact on to third (3rd ) parties and passing or moored vessels at location.

 Potential impact on to the bunkering operations by passing ship traffic, or accident hazard originated from third (3rd ) party operations at a near location.

The purpose of safety zones is to reduce the frequency of ignition by excluding uncontrolled and controlled ignition sources from the zone (except those necessary and related to the bunkering operation).

It is normally the case that hazard exposure and maritime control should define the extent of protection required and the area where Emergency Response activities should apply.

It is recommended that the extent of the safety zone be established by a risk based methodology which includes the explicit consideration of the likelihood of events. Such a methodology is based on establishing the consequence of release and the probabilities for quantity of release, location of release and potential of ignition under the predominant environment in the area of operations.

The assessment should encompass the following steps:

a) Hazard Identification

It is noted that the identification of potential sources of release will be the result of the HAZID and HAZOP Studies.

The purpose of the hazard identification step is to identify all of the relevant hazards which generate risks during bunkering, together with the way in which the hazards could be realized. It is recommended that at this stage a risk screening step be employed in order to review the list of hazards obtained at the hazard identification stage and remove those which are not relevant to the bunkering operations. A risk screening process (i.e. a coarse, initial assessment of the risk) can be used to decide which scenarios should be subject to more detailed analysis at later stages.

b) Scenario Definition

Having determined which hazards will be included in the analysis, and the level of detail that should be applied, it is then necessary to develop the list of hazards into modelling scenarios. This involves describing the scenario in sufficient detail to proceed with the modelling. For example, the hazard identification may identify the following hazard:

‘Leak of LNG from bunkering pipe due to impact by object.’

The scenario definition step should add further detail to this, including:

 The process conditions (temperature, pressure) within the pipe;

 The LNG composition;

 The size(s) of the leak that may occur;

 The location(s) at which the leak might occur;

 The volume of LNG available to feed the leak; and,

 The likely duration of the leak, given the volume of LNG and any action that might be possible to isolate the leak.

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c) Consequence Analysis

The purpose of consequence analysis is to determine the potential outcome (or outcomes) of the various scenarios comprising the event. Consequence analysis may be broken down into the following steps:

 Source term modelling which determines the behavior of the material upon leakage (liquid, gas / vapour or two-phase);

 Physical effects modelling which considers the effects of gas or liquid dispersion and in the case of ignition, the potential fire and explosion loads (heat, visibility, toxic components in smoke and pressure).

 Impact modelling which determines the potential impact of the event upon identified areas (i.e. people on berth or assets, depending on Port Authority’s established requirements).

d) Frequency Analysis

In general terms, frequency analysis is used to calculate:

The likelihood of a given release of LNG/gas occurring – this is usually expressed as a frequency (e.g. 1 x 10 -3 per year, or once in a thousand years);

Given that a release has occurred, the probability that a given type of physical effect follows – for example, for releases of flammable material, the type of effect may depend on whether the material is ignited soon after the release begins, or at some time later; and,

Given that a certain type of physical effects results, the probability of an undesired outcome – this may depend on the wind direction, the probability that operating personnel are present within the hazard range, and the probability of successful emergency action.

Frequency analysis approaches fall into three categories:

 Use of relevant historical data;

 Use of analytical or simulation techniques (such as fault tree analysis or event tree analysis); and,

 Use of expert judgment.

Historical data may relate to the frequency of releases of varying sizes from different types of equipment (e.g. the frequency of small leaks from flanges), or to the frequency of accidents on systems of interest (e.g. the frequency of spills during STS LNG transfer by hoses or by arms).

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