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B - The Economics and Rationale for the Shipowner - ANL, Australia

B - The Economics and Rationale for the Shipowner - ANL, Australia

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Published by CoalFiredShipTech
Before considering the economics for coal firing of steam ships it may be advisable to start by placing the general argument in the broader context of the world energy utilization during the next 20-25 years and to examine the underlying means for turning back to coal.
Before considering the economics for coal firing of steam ships it may be advisable to start by placing the general argument in the broader context of the world energy utilization during the next 20-25 years and to examine the underlying means for turning back to coal.

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Published by: CoalFiredShipTech on Jul 19, 2012
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07/19/2012

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THEECONOMICS
AND,RATIONALEFORTHESHIPOWNER.Dr.FredTaylor
ANL,
Australia
BEFOREconsideringtheeconomicsforcoalfiringofsteamshipsitmaybeadvisabletostartbyplacingthegeneralargumentinthebroadercontextoftheworldenergyutilizationduringthenext20-25yearsandtoexaminetheunderlyingreasonsforturningbacktocoal.Manypredictionshavebeenmadeconcerningthesupplyanddemandpositionofliquidfuelsandthesearetoofamiliartowarrantrepetitionhere.Theyalladduptothesimpleforecastthatweshallnothaveasmuchasweneedby
1990
orthereaboutsandthatthoseofusthatareinapositiontodososhouldseekalternativeenergysources.AlternativeenergysourcesWithinthetimescalethatweareconcernedwith,letussay20-25years(since
it
isfruitlesstoattemptpredictionsfurtherintothefuture)wemaydiscountnuclearenergyasapracticalsolutionforcommercialshippropulsion.Itisnotexpectedthateconomicnuclearpropulsionmachinerywillbedevelopedinthisperiodalthoughitispossibleitmay
be
introducedduringthenextcentury.Inadditiontothetechnicalandeconomicproblemsassociatedwithnuclearpropulsionformerchantshipstherearetheenvironmentalissuesassociatedwithitsuse.Commercialshipownerscannotexpecttogainanysignificantbenefitfromwindorsolarenergyexceptforanoccasionalsailingshipdevelopedasaspecialprojecttosuitaparticulartradingrequirement.Somewindassistedshipsmaybeintroducedduringthenextfewyears,especiallyforcoastalandfishingdutiesbutthegeneralemploymentofsailingshipsininter-nationalcargotradescannotsensiblyberelatedtotheeconomicandcommercialneedsofthenext20years.Othermoreexoticfuelssuchashydrogenarefartooexpensiveforcommercialuseandwillremainso.Thisprocessofeliminationleavescoal-eitherinitsdrystateorasafeedstockforliquidfuelderivatives-astheonlypracticalalternativetooil.
As
liquidderivativesofcoalareunlikelytobecommerciallyattractivetoshipownersforatleastthenext10-15years,duringthisperiodtheuseofdrycoalappearsthebestpracticalalternativeavailable.Itisrelativelyabundantandisusableafteronlyminorprocessing.
DayOne-PaperNo.1
 
Off-settingallthecostpenaltiesisthesinglefactorofcheaperfuel.AnAustralianownermayreasonablyexpecttoobtainthecoalforbunkersataboutonesixthofthecostpertonneofbunkerfueloil,perhapsevenless.ThisbeingsoandassumingthattheshipinquestionspendsacommerciallyadvantageousamountoftimeatseaastraightforwardcalculationwillshowthatoncurrentpricesamodestsizedcoalfiredbulkcarriercanyieldsavingsinfuelcostsofaroundUSS1.5millionperannum.
The
basiceconomicfactorsClearlytheattractivenessofcoalasamarinefueldependscriticallvonvesseltypeandthetradeinquestion.Thefinaldecisionbetweencoalandoilfiringwillbedeterminedbycom-paringtheextracostofthecoal-firedvesselwiththepresentvalueofitsanticipatednetsavingsinoperatingcostsoveragivennumberofyears.Foragivendeadweight,thecapitalcostofacoalfiredvesselwillexceedthatofadieseldrivenvessel.Themacfiinerysystemisinherentlymoreexpensiveandthehullmustbeslightlylargertoaccommodatetheincreasedbunkercapacity.Estimatesoftheextracostrangebetween5and25percent,however,itistheAN
L
viewthatintermsofvesselconstructioncosts-andallowingareasonablecontingencyfactor-thedifferentialwouldnotexceed10percent.Indrawingasimplegeneralcostcomparisononemayconsiderthelossofcargodeadweightasanadditionalcapacitycostinordertoachievethesamelift.Iftheship'sdimensionsarefixedbylimitationsimposedbyitstradingpatternthenanallowancemustbemadeforthelossofpayloadcapacityduetotheincreasedweightofbunkers.Certainoperatingcostsarelikelytobehigherforcoalburningships.Thecoalbunkers,coalhandlingequipmentandashdisposalequipmentallrepresentitemsrequiringmaintenancethatareeitheradditionaltoexistingshipborneequipmentorwhichreplacelessmaintenanceintensivesystems.Whilstitmaybeprudenttoallowforamodestincreaseincrewcostssincethemanningscalesacceptedforthenewgenerationsofcoalburnerswillnotinallcasesmatchthescalesbeingintroducedindieseldrivenvessels,theautomaticandremotecontrolsystemsavailableforinstallationincoal-firedshipsaresuchthatsubstantialincreasesinmanningcannotbejustifiedonthebasisofagreatlyincreasedmanualworkload.Inadditiontothemajorcostfactorsthereareanumberofminorpenaltiesto
be
borne.Mostshipownersnolongerhaveavailabletothemlargenumbersofoperatingstaffwhoarefamiliarwiththetechniquesofoperatingcoal-firedinstallations,andanallowanceshouldbemadeinthepreliminaryestimatestocoverthecostofadditionalspecializedtraining;thereareotherminorextrasbetweenthecoal-firedshipanditsalternative.Whilsteconomicfactorsmustprovidethedominantinfluenceindeterminingbetweencoalandoilthereareotherconsiderationswhichshouldnotbeignored.Firstly,thereistherelatedissueofthecontinuedavailabilityofthefuelsupply.CoalisabundantinseveralpoliticallystableareasofthewesternworldanditisinconceivableduringthelifespanofshipsbeingorderedtodaythatthereshouldbeanyproLongedinterruptionofsupplyduetolocalpoliticalupheavals.Thesameviewcannolongerbeheldaboutmanyofthemajorsourcesofsupplyofliquidbunkerfuels.
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Withtheexceptionoffuelcoststhevariablecostsofcoalburninganddieseldrivenshipsshouldescalateatanevenrateforbothvesseltypes.Therealimpetusforre-adoptingcoalasamarinefuelcomesfromtheexpectedincreasesinthepricedifferentialbetweencoalandoil.Whilstcoalwillriseinpricejustlikeanyotherenergysourceitismostunlikelythatthecoalproducedinthepoliticallystableareasofthewesternworldwillescalateatarateapproachingthatofliquidfuels.InthecaseofAustralianbunkercoalitmay
be
predictedwithreasonablecertaintythatthecostwillescalateatanannualratewellbelowthatofoil.
 
Australiaisthereforeparticularlywellplacedtoderivesubstantialeconomicbenefitsfromthegrowthintheinternationalcoaltradeandfromtheintroductionofcoalfiredsteamships.Secondly,weshouldrecognisethatwehavenowreachedastageatwhichtheworld'sdwindlingresourcesofliquidfuelsshouldprudentlybeallocatedtothoseconsumerstowhomnopracticalalternativecanbeofferedandthatconsumerscapableofutilizingcoalshould
be
encouragedtodoso.Suchencouragementisalreadybeingofferedbymanygovernmentstotheproducersofelectricalpowerandcouldwellbeextendedtoshipownerswithaviewtoensuringthattheenergyresourcesavailabletousareallocatedinthebestcollectiveinterestsofallusers.AustraliaandfuturecoaltradesHavingstatedingeneraltermsthebroadcaseforutilizingcoalasaships'fuelitisofinteresttoconsiderbrieflythelikelydevelopmentininternationalcoaltradesduringthenext20years,ascoalcarryingvesselsthemselvesarewellsuitedtocoal-firing.Theinternationalcoaltradewillgrowquitesubstantially.Evenmoderateassumptionsofanticipatedenergygrowthindicatethatcoalwillhavetosupplymorethan50percentoftheadditionalenergyneedsoftheworldduringthenext20years.Inordertosatisfythisdemandworldcoalproductionwillhavetomorethandoubleandtheworldtradeinsteamingcoalwillhavetogrowfrom10to15times.Whilsttherearemanycountrieswithhugerecoverablereservesofcoal,suchasChina,U.S.S.RandIndia,mostofthemwillconsumeintheirownindustriesthegreaterpartoftheextracoaltheyproduceandthemajorcoalexportingcountriesareexpectedtobetheU.S.A.,Australia,RepublicofSouthAfricanandCanada.OftheseAustraliapossessesabout5percentoftheworld'srecoverablecoal-farinexcessofitsownrequirements-anditiswellplacedtosatisfyasubstantialgrowthindemandforcoal.Australiancoalfieldsaregenerallylocatedclosetoportsonitseasternseaboardandthesewillsoonbecapableofacceptingbulkcarriersofupto150,000deadweighttonnes.Bytheyear2000itisanticipatedthatAustraliancoalexportswillhavereachedatotalof200milliontonnesayear-about4Y2timesthepresentlevel.AlargeproportionofAustralia'sexportsarebulkcargoesintradesforwhichcoalfiredshipscanbeprofitablyemployed.Inadditiontothereadyavailabilityofsteamingcoalatanumberofmajorports,thefeederservicesforbunkercoalmayeasilyandeconomicallybeprovidedtootherportswhenthedemandarises.CoaltradesandbunkeringoptionsTypicalbulkvesselsinAustralia'sexporttradearefromPanamaxsizeuptoabout150,000tonnesdeadweight.A.N.L.'sinvestigationsrevealthatlargebulkcarriersof120,000deadweightandupwardsemployedinthecoaltradefromeasternAustraliatoJapanorKoreacouldtakecoalbunkersinAustraliaforthefullroundvoyageand,despitelossofcargodead-weightcouldbeoperatedmoreprofitablythanequivalentdiesel-poweredtonnage.Similarly,abulkcarrierofcomparablesizetradingbetweenAustraliaandEuropecouldbeprovidedwithsufficientbunkercapacityfortheentireoutwardvoyagewithoutthereductionincargodead-weightbeingeconomicallyprohibitive.Whereoperatingrequirementsofaparticulartradearesuchthatexcessivebunkerspaceimpingestoogreatlyuponthecargocarryingcapacity
I
theownermaychoosetohavethemail)boilersdesignedfordualfiringutilizingfueloilforpartofthevoyage,butgainingthecostsavingsfromburningcoalfortheremainder.Ifafteranumberofyearsinservice,additionalintermediatecoalbunkeringstationsaremadeavailableonthetraderouteinquestion,dualfiringcouldbediscountedandanadditionalcallmadeenroutetotakeoncoal.
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