#1MAN Energy Solutions Navigating the future-fuel outlook for large G merchant marine vessels Sap bae Cha Head of Marketing Marine Solutions MAN Energy Solutions Korea SB [email protected]#2Alternative fuels: status & outlook Ammonia engine development 3 MAN B&W ME-LGIM methanol engines 4 Summary MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 2#3Alternative fuels: status & outlook MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25/05/2023 3#4We expect the shipping sector to grow 60% over the next 30 years Billion deadweight tonnes 1 5 6 - Primary drivers of growth are foreseen to be increased globalization and elevating standards of living in developing countries which will trigger increased cross- and intracontinental transport Limiting factors are geopolitical uncertainties and increasing nationalism/regionalism 0 2020 2025 2030 2035 2040 2045 2050 Projections are based on MAN ES assessment and OECD, Real GDP long-term forecast, predating war in Ukraine: https://data.oecd.org/gdp/real-gdp-long-term-forecast.htm#indicator-chart MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25/05/2023 4#52 50% of global freight are transported by a MAN ES engine 2 23.000 MAN B&W two-stroke engines. 2 - 12.000 MAN four- stroke propulsion engines. MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25/05/2023 5#6Powering sustainable shipping by opening clear routes MAN Energy Solutions supports all 1700+ 31% 57% LNG/methane 2021 2022 Ethane Methanol LPG ME-GI ME-GA 574 268 engines (=14.7 GW) engines (=3.7 GW) ME-GIE 39 engines (≈0.5 GW) MAN Energy Solutions Public ME-LGIM 110 engines (=3.9 GW) ME-LGIP 149 engines (=2.2 GW) Ammonia SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25.05.2023 6#7100% 90% Two-stroke dual fuel uptake forecast 2022: 57% of contracted two-stroke vessels were dual-fuel. We expect 85% towards end of the decade. DF Two-Stroke Contracting - % of MW Contracted per Year 80% 70% 60% 50% 40% 30% 20% 10% 0% January 2023 2023 MAN Energy Solutions 2024 2025 Public 2026 2027 2028 2029 2030 2031 2032 2033 Product Tankers Bulk Carriers General cargo Crude Tankers Container vessels ⚫LNGC LPGC All others • Total SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25/05/2023 Source: FRD/MAN ES 7#8Dual-fuel two-stroke vessel contracting per yard area 12 Two-Stroke DF contracting by Yard Area Year by Year MAN Energy Solutions GW Contracted 2 10 8 00 MAN Energy Solutions IMAN 0 2015 2016 2017 2018 2019 2020 2021 2022 2023* ■South Korea ■ China ■ Japan 3 Preliminary Year to Date (end Feb 2023) Source: IHS Markit Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25/05/2023 8#9Fuel type distribution in newbuilding project pipeline LPG 2.3% Ethane 0.2% Fuel distribution (GW Qual fuel vessel type distribution (number of ships), Methanol 33% Methane 37% Tankers 49% Fuel oil 27.5% Gen. Cargo 10% Bulk carriers 10% Container vessels 37% MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25/05/2023 9#10Fuel type distribution in newbuilding project pipeline MAN Energy Solutions Public Dual fue essel type distribution Engine porter) Tankers 35% Bulk Gen. Cargo 4% carriers 9% Container vessels 52% SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25/05/2023 10#11Future fuel mix MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25.05.2023 11#12GW fleet 90% 80% Two-stroke fuel mix forecast towards 2050 34% fuel oil, 27% ammonia, 21% methanol, and 15% methane expected in 2050. Remaining share is LPG and ethane. 100% 70% 60% 50% 40% 30% 20% 10% 0% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Public 2025 2026 Assumptions: Scenario is based on known factors such as world trade growth, EEDI, EEXI, expected CO2 regulation (currently unspecified), etc. MAN Energy Solutions 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25.05.2023 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 Ammonia Methanol Methane Fuel oil 12#13Two-stroke dual-fuel mix forecast Share of Fuel based on kW installed 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 10% 86% 1% 2% 6% 16% 29% 40% 40% 40% 40% 35% 35% 38% 42% 45% 42% 38% 35% 35% 35% 35% 55% 55% 51% 50% 46% 39% 30% 23% 23% 23% 23% 0% 2022 2023 2024 2025 January 2023 MAN Energy Solutions Public 2026 2027 2028 2029 2030 2031 2032 LNG LPG Ethane ■ Methanol ■ Ammonia 2033 Source: FRD/MAN ES SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25.05.2023 13#14Ammonia engine development MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25/05/2023 14#152024 The first MAN B&W Ammonia fueled engine will be delivered to a shipyard MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25/05/2023 15#16EMBR FUELTECH Components at RCC for ammonia engine development MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25/05/2023 16#17Ammonia engine development How do we handle potential Nitrous Oxide emissions? N₂O is a very potent GHG with GWP of 298. It will also be accounted for in FUELEU regulation. Nitrous oxide (N2O) will be removed by engine tuning. Ammonia slip and NOx emissions - - - Unburned NH3 and NOx is removed in the SCR reactor. Dosing of additional ammonia to SCR reaction if needed. Known SCR technology is suitable. MAN SCR reactor can be applied. 'dition of reducing agent (Urea, ammonia) (NOX, NH3) SCR MAN SCR (N2, H₂O) MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25/05/2023 17#18Market introduction strategy MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25/05/2023 18#19Ammonia engine market introduction - Delivery of the first ammonia engine to a shipyard ultimo 2024. Available for general ordering after obtaining positive seagoing service experience. Commercial 60 bore Event: engine design tested and verified (FAT). Action: • Delivery of the engine to a shipyard. 2nd bore size announced. Positive seagoing service experience + El obtained. Design available to licensees to • order and produce from. Start of unlimited sales. MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25/05/2023 19#20MAN B&W ME-LGIM methanol engines#21Why select methanol as marine fuel? Proven MAN B&W engine design In operation since 2016. More than 400.000 running hours accumulated on methanol alone since then. Easy storage No cryogenic equipment required and can be stored in atmospheric pressure tanks. Carbon neutral Methanol can be carbon neutral. Simple fuel supply system Only 13 bars required. MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25.05.2023 21#22Methanol - 30% of total newbuilding project pipeline Container Bulk Tank 9% General cargo 8% 15% Newbuilding pipeline fuel distribution based on engine power: 30% methanol, 36% methane, 32.3% fuel oil, 1.5% LPG, and 0.2% ethane. MAN Energy Solutions Public 68% SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25.05.2023 22#23Where will the green methanol supply come from? MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25.05.2023 23#24The demand is here - and the supply is picking up The green methanol demand from upcoming methanol-fueled newbuildings is clearly bigger than the supply of green methanol – as it seems today. Supply Demand 目 Methanol 月儿 Acc MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25.05.2023 24#25Green methanol projects as of Q1 2023 Today, 110 X ME-LGIM engines are in the order book. Green methanol production projects as of Q1 2023: Projected Renewable Methanol Production Capacity 8M Start-up year Product E-methanol Biomethanol - Projects are since Q1 2022 increased as: from around 2.6 million tons a year to upwards of 8 million tons a year in 2027 across more than 80 projects Product Biomethanol E-methanol MAN Energy Solutions Public Running Sum of Capacity (t/y) 7M 6M 5M 4M 3M 2M 1M OM 2020 2021 2022 2023 2024 2025 2026 2027 Source: Methanol Institute Renewable Methanol Database of Current/Announced projects, https://www.methanol.org/renewable/ SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25.05.2023 25#26The trend is clear Production and supply of green methanol Partnerships, Memorandums of Understanding, Letters of Intend and Final Investment Decisions for production plants are clearly increasing in parallel with the ME-LGIM engine order book. - Significant speed up of Final Investment Decisions will happen once the price becomes competitive compared to fossil alternatives: This comes with carbon tax, scale and volume. MAN B&W ME-LGIM can make a scalable transition to green methanol. MAN Energy Solutions foresees a need of 128 million tons by 2040 and 255 million tons by 2050. RENEWABL E ENERGY MAN PTX SO SOLUTIONS MAN Energy Solutions Public HYDROGEN METHANG HANE (SNG POWER METHANOL FEEDSTOCK TRANSPORT AND HEAT SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25.05.2023 26#27Summary#28Both green methanol and ammonia are expected to become very prominent marine fuels However, the current maturity levels of methanol and ammonia as marine fuels are very different. Fuel type Engine technology maturity Engine availability Auximary system complexity Low Toxicity and safety hazard? Greenhouse gas emission reduction Methanol Ammonia High Operational experience since 2016. Low-R&D phase First combustion test first half of 2023. High S50, G50, G80, G95 (committed to G45, G60, S60, G70). Low First bore size will be 60- bore. 2nd bore size TBA in 2024. Simple tanks. Only 13 bar for LFSS. High Additional requirements to double wall ventilation and ammonia catch system. Medium Toxic and can poison onboard personal. Approved as marine fuel. High More toxic & can poison onboard personnel. Currently not approved as marine fuel. High Green methanol is carbon neutral, but rely on bio-genic CO2. High Green ammonia is carbon free. However, N₂O emissions must be avoided. MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25.05.2023 28#29Disclaimer All data provided in this document is non-binding. This data serves informational purposes only and is especially not guaranteed in any way. Depending on the subsequent specific individual projects, the relevant data may be subject to changes and will be assessed and determined individually for each project. This will depend on the particular characteristics of each individual project, especially specific site and operational conditions. MAN Energy Solutions Public SEIZING OPPORTUNITIES FOR GREEN SHIPPING IN ASIA AND THE PACIFIC 25.05.2023 29#30MANI MAN Energy Solutions Future in the making Thank you very much!