LNG

Mathematical Solution for Selection of

LNG Carrier Propulsion Systems

MAN
B&W
MAN
B&WDiesel
Diesel AG

Introduction

The multi-billion dollar investment intensive LNG business is

With its new 51/ 60 DF engine MAN B&W Diesel is the only

generally governed by risk sharing consortia as well as by

company now which can provide all types of modern diesel

2030 years long-term supply and ship charter contracts.

propulsion systems for LNG carriers. The customers can

A predictable and stable LNG supply from producing to con-

be given expert advice in finding the most suitable transport

suming country is an essential requirement in this business

solution for their project specific needs.

but also the strive for increased profitability in the transport

chain. A variety of modern propulsion technologies for LNG
carriers with potential for increased profits have emerged
recently and are offered in the market today (see fig. 1).

Category I: GAS / HFO fuel flexibility

Natural Boil-Off Gas

(NBOG)

>> 51/60DF diesel-electric system

>> slow-speed dual-fuel diesel engines
>> steam turbine system

Category II: Pure HFO Burning System

>> slow-speed diesel engines with
NBOG reliquefaction on board

Category III: Pure GAS Burning System*

>> gas turbine combined cycle electric

* expensive marine gas oil (MGO) as backup fuel only

Figure 1: Overview LNG Carrier Propulsion Systems

A lot of studies on the economical benefits of modern LNG

To better support its customers in their investment decision,

carrier propulsion systems have already been published.

MAN B&W Diesel has developed a method, which permits

Their results, however, are usually based on certain assump-

to compare the profitability of two different LNG propulsion

tions regarding oil and gas prices (HFO, LNG purchasing

systems A and B for all possible oil- & gas price combina-

and selling price). In fact, by an appropriate choice of oil-

tions in just one chart. A method, which reduces an appar-

and gas price combination one can produce almost any

ently complex problem to its main parameters of influence

result needed either in favour towards the one or the other

and illustrates the basic trends in a simple and accessible

propulsion solution. It is not without any reason, therefore,

way the charterer nomogram.

that such kind of studies are acknowledged with reservations and caution by the specialized readers.
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MAN B&W Diesel LNG

This nomogram answers the question under which conditions

Abbreviations

an LNG carrier propulsion system A is more profitable then

another LNG carrier propulsion system B from the charterers view, who plays a decisive role in the LNG transport

C1, C2

Constants

chain. It will be shown that the solution to this question can

CIFLNG

CIF Price of LNG at Discharge Terminal

be derived by a purely mathematical consideration. The re-

CRE

Charter Rate Expenses

the bottom of fig. 3 and was described for the first time in a

FOBHFO

HFO Price

MAN B&W Diesel document [1]. The equation is of a very

FOBLNG

FOB Price of LNG at Loading Terminal

general form and can be used for profit comparison of all

FOE

Fuel Oil Expenses (HFO, MDO)

The quantitative results of the analytical formula comparing

FVG

Forced Vaporized Gas

two modern propulsion concepts for a 200,000 m3 LNG

HFO

Heavy Fuel Oil

carrier class are visualized in fig. 4 and fig. 5. These charterer

HFOBurnt

Amount of HFO Consumed

developed MAN B&W Diesel 3P analysis tool (3P = Propulsion

LNG

Liquefied Natural Gas

Profit Performance) based on purely technical input data

LNGBurnt

Amount of LNG Consumed

LNGDel

Delivered Quantity of LNG

With the nomogram the charterer then can decide on his

LNGLoad

Loaded Quantity of LNG

own which propulsion solution will be the more profitable

NBOG

Natural Boil Off Gas

option for his business depending on the oil & gas prices

PPF

Port & Passage Fees

sulting formula (Charterer Profit Criterion) is represented at

kind of LNG carrier propulsion systems.

nomograms can be calculated by means of the specifically

from the customer.

that he assumes or expects for his individual LNG project

in the future.

The Business Model for LNG Transport

The ship charterer (mostly oil & gas or energy companies)

With the charter rate the shipowner has to cover all his

plays a key role in the LNG supply chain. He buys the LNG

expenses related to the purchase, operation, maintenance,

cargo at the export terminal at a certain FOB price (or pro-

and manning of an LNG carrier.

duces the LNG at certain FOB costs) and sells the LNG at
the import terminal at a higher CIF price. Furthermore, the

Since the charterer owns the cargo and has to pay for the

charterer pays for the fuel costs of the ship and compen-

fuel costs, the correct selection of propulsion system can

sates the shipowner according to a contractually agreed

generate significant additional profits in his favour. By the

charter rate (see fig. 2).

choice of his preferred fuel(s) the charterer indirectly (or very

often even directly) specifies the type of LNG carrier propulsion concept that has to be used.

Expenses:

Income:

Loaded LNG (= LNGDelivered + LNGFuel ) @ FOB price

Delivered LNG @ CIF price

Natural Boil-Off Gas

(NBOG)

+ Fuel Oil Expenses (HFO, MDO)

+ Charter Rate Expenses
+ Port & Passage Fees

HFO Fuel

LNG Fuel

PROFIT = INCOME minus EXPENSES

Figure 2: Charterers Profit Consideration

HFO Fuel

MAN B&W Diesel LNG

Mathematical Analysis
Based on the charterers business model for LNG transport illustrated in fig. 2,
it is possible to perform a non-quantitative, purely mathematical analysis,
which as a matter of fact has the inherent advantage of obtaining a strictly
logical and unambiguous result.
(a) LNG is purchased by the charterer at FOB price (or produced at FOB costs)
and sold at a higher CIF price.
(b) PROFIT = Income Expenses
(c) From the charterers point of view we can write
Income = LNGDel CIFLNG
Expenses = LNGLoad FOBLNG + FOE + CRE + PPF
Once we accept the statements (a), (b), and (c) as axioms we obligatorily obtain
(1)

PROFIT = LNGDel CIFLNG LNGLoad FOBLNG + FOE + CRE + PPF

Equation (1) describes the charterers profit problem in its full complexity without any simplification.

Simplification Step 1:

Simplification Step 2:

We can certainly assume that for a given class of LNG

Charter rates will be primarily dictated by the general

carrier tonnage (or ship cargo capacity) we will have the

situation in the LNG charter market at a given point

same amount of passage & port fees for a fixed trans-

of time, the ship size, transport route and type of the

port route.

charter contract (long-term trade, spot trade). The

influence of the ship propulsion system on the charter
rate can be assumed to be negligible.

Then, using equation (1), the difference in charterer profits that are generated by different LNG carrier
propulsion technologies A and B for a given ship size can be written as
PROFIT A PROFIT B > 0
(2)

LNG

A
Del

CIFLNG LNG

B
Del

if

A
B
CIFLNG LNG Load
FOBLNG LNG Load
FOBLNG + FOE A FOE B

CRE A CRE B + PPF A PPF B > 0

The liquid fuel oil expenses (neglection of 1% MDO pilot fuel consumption in the case of 51/60DF
medium-speed diesel engines) are
(3)

FOE = HFOBurnt FOBHFO

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In general, LNG carrier propulsion systems may consume

a part of the loaded LNG, see fig. 2, so we can write
(4)

LNGLoad = LNGDel + LNGBurnt

Using above expressions, the simplified charterers
profit equation (2) then becomes
PROFIT A PROFIT B > 0

if

A
A
A
LNG Del
CIFLNG LNG BDel CIFLNG LNG Del
+ LNG Burnt
FOBLNG LNG BDel + LNG BBurnt FOBLNG
A
B
FOBHFO HFO Burnt
FOBHFO > 0
HFO Burnt

A
LNG Del
LNG BDel

CIFLNG
A
A
LNG Del
LNG BDel LNG Burnt
LNG BBurnt
FOBLNG
FOB
A
B
HFO Burnt
HFO Burnt
FOBHFO > 0
LNG

FOBHFO
CIF
A
B
HFO Burnt
FOB
HFO Burnt
< LNG DelA LNG BDel FOBLNG
LNG
LNG
A
A
+ LNG BDel LNG Del
+ LNG BBurnt LNG Burnt

(5)

FOBHFO
FOBLNG

<

A
LNG Del
LNG BDel

A
B
HFO Burnt
HFO Burnt

A
A
CIFLNG
LNG BDel LNG Del
LNG BBurnt LNG Burnt
+
+
A
B
A
B
HFO Burnt
HFO Burnt
FOBLNG
HFO Burnt
HFO Burnt

For a given class of LNG carrier design (cargo capacity) and transport distance the amount of
consumed fuels and delivered cargos for two different LNG carrier propulsion technologies
A and B (or two different fuel operation modes for a given propulsion system) is fixed and, hence,
we can write

(5')

FOBHFO
FOBLNG

< C1

CIFLNG
FOBLNG

C1 + C2

Charterer Profit Criterion

MAN B&W Diesel LNG

The result shall briefly be described:

C1 and C2 are constants the value of which is determined by purely technical aspects (amount of
consumed and delivered LNG, amount of HFO burnt). The term on the left hand side represents the
fuel price ratio of purchased LNG (FOB price) and HFO. The remaining term on the right hand side
denotes the ratio of LNG selling price (CIF) to LNG purchasing price (FOB).
According to equation (5') the limiting case (i.e. PROFIT A = PROFIT B ) represents a straight line of
the form

Y = c1 X c1 + c2

It must be emphasized that the mathematical approach performed and the resulting equation
(Charterer Profit Criterion) are of a very general form and can be used for profit comparison of all
kind of LNG carrier propulsion systems. The same formula can also be applied to compare the
profitability of two different fuel operation modes (e.g. pure gas operation versus NBOG + HFO add
up operation) for a given propulsion system.
A summary of the mathematical approach described above and of the resulting solution is given
in fig. 3.

Charterer PROFIT = LNGDel CIFLNG LNGLoad FOBLNG + FOE + CRE + PPF

A... LNG carrier with propulsion system A
B... LNG carrier with propulsion system B

Pure Mathematics
PROFIT A > PROFIT B if

FOBHFO
FOBLNG

<

A
LNG Del
LNG BDel

A
B
HFO Burnt
HFO Burnt

Charterer Profit Criterion

System A vs. System B

CIFLNG
FOBLNG

FOBHFO
FOBLNG

A
A
LNG BDel LNG Del
LNG BBurnt LNG Burnt
+
A
B
A
B
HFO Burnt
HFO Burnt
HFO Burnt
HFO Burnt

< C1

CIFLNG
FOBLNG

C1 + C2

For given transport distance

and ship design

Figure 3: Mathematical Solution for Profit Comparison from the Charterers View

Illustration of the Formula

The Charterer Nomogram

To illustrate the mathematical solution, fig. 4 compares the

It can be clearly seen that the answer as to which solution is

charterers annual profitability for two different types of

more profitable depends very much on the prevailing prices

modern propulsion systems that have entered the orderbook

of oil (HFO), the LNG purchasing (FOB) and LNG selling (CIF)

at several yards. In the diagram (charterer nomogram)

price but also on the position of the limiting line. The latter

there are limiting lines for various transport distances. In the

depends from the value of the constants C1 and C2, which

field below the limiting line we have higher annual profitabil-

apart from the transport distance are determined by purely

ity for the HFO burning propulsion concept and in the field

technical aspects of the propulsion system (overall efficiency,

above the limiting line there is higher annual profitability for

type of fuel used), ship design (cargo capacity), and logistics

the gas burning propulsion concept (in this chart calculated

(time loss due to fuel oil bunkering, waiting etc).

with NBOG + FVG operation mode).

With decreasing transport distance, the field of possible oil
and gas price combinations which lead to a higher annual
profitability of the gas burning 51/60DF electric propulsion
concept becomes larger and larger.

Propulsion System Profit Comparison

Transport Distance 10,000 nm

Ship: 200,000 m Class, Service Speed = 20 kn, Twin-Screw

Transport Distance 6,000 nm

Logistics: 10 hours HFO bunkering time per 10,000 nm

Transport Distance 4,000 nm

Fuel Price Ratio HFO / LNG (FOB)

Transport Distance 2,000 nm

Higher profit for GAS propulsion with

the 51/60DF electric concept

2.5

2.0

1.5

1.0

Higher profit for HFO propulsion with

slow-speed engines and NBOG reliquefaction

0.5

0.0
1.0

1.5

2.0

Oil / Gas Price Situation 09-2004

(Prices all based on USD/t, Henry Hub CIF)
Oil / Gas Price Situation 01-2006
(Prices all based on USD/t, Henry Hub CIF)

Figure 4: Charterer Nomogram for Constant Cargo Capacity Ship Design

2.5

3.0

3.5

4.0

Ratio LNG Selling Price (CIF) / LNG Purchasing Price (FOB)

MAN B&W Diesel LNG

Additional valuable information can be gained

from the charterer nomogram:

A negative inclination of the limiting line (C1 < 0), see fig. 5,
represents a case where the gas burning 51/60DF electric
propulsion concept delivers more LNG than the HFO pro-

A horizontal line (C1 = 0), see 2,000 nm line in fig. 4, means

pulsion with slow-speed engines and NBOG reliquefaction

that both solutions deliver the same amount of LNG

in spite of the fact that it has been calculated to be running

A
(LNG Del
= LNG BDel ). In such a case the criterion as to which

on pure gas operation mode (NBOG + FVG) throughout the

propulsion concept is more profitable becomes independent

whole year! The reason for this originates from the aspect

of the LNG selling price (CIF) and is influenced only by the

that the profit comparison in figure 5 is based on ships

operating expenses (fuel price ratio).

having all the same displacement (constant displacement

ship design). On such a basis of comparison the pure gas
burning 51/60DF electric propulsion concept allows an LNG
carrier design with about 3% more cargo capacity. This
advantage is primarily due to the resulting HFO fuel weight
savings, which can partly be replaced by additional LNG
cargo weight, see [2].

Propulsion System Profit Comparison

Transport Distance 10,000 nm

Ship: 134,000 t (200,000 m Class), Service Speed = 20 kn, Twin-Screw

Transport Distance 6,000 nm

Logistics: 10 hours HFO bunkering time per 10,000 nm

Transport Distance 4,000 nm

Fuel Price Ratio HFO / LNG (FOB)

Transport Distance 2,000 nm

Higher profit for GAS propulsion with

the 51/60DF electric concept

2.5

2.0

1.5

Higher profit for HFO propulsion with

slow-speed engines and NBOG reliquefaction

1.0

0.5

0.0
1.0

1.5

2.0

2.5

Oil / Gas Price Situation 09-2004

(Prices all based on USD/t, Henry Hub CIF)

3.0

3.5

4.0

Ratio LNG Selling Price (CIF) / LNG Purchasing Price (FOB)

Oil / Gas Price Situation 01-2006

(Prices all based on USD/t, Henry Hub CIF)

Figure 5: Charterer Nomogram for Constant Displacement Ship Design*

(* 3% higher cargo capacity for ship with 51/60DF electric propulsion)

The decisive advantage of the charterer nomogram is that it

Based on this minimum technical input MAN B&W Diesel

can be calculated by MAN B&W Diesel without any need for

can generate for its customer a project specific charterer

confidential or sensitive customer data like projected oil &

nomogram by means of its 3P analysis tool (3P = Propulsion

gas prices (FOB, CIF)! For determination of the position of

Profit Performance), which was developed inhouse specific-

the limiting line(s) only a minimum of technical customer in-

ally for the economic evaluation of LNG carrier propulsion

put is required:

systems.

>> Cargo capacities of the ship designs for the

With the nomogram the charterer then can decide on his

respective propulsion options

>> Ship service speed and corresponding power

at propeller

>> Transport distance(s)

>> Logistics input (data per round trip): time needed

own which propulsion solution will be the more profitable

option for his business depending on the oil & gas prices
that he assumes or expects for his individual LNG project
in the future.

for loading / unloading of the LNG cargo, extra time

needed for manoeuvring, waiting, etc.

>> Hotel electric load, required electrical power for

LNG cargo loading / unloading.

Additional Note on Charterer Nomogram

(Fig. 4 and 5):
A negative inclination of the limiting line in figures 4
and 5 means
A
C1 < 0 LNG Del
< LNG BDel

A... HFO propulsion with slow-speed engines and NBOG

reliquefaction
B... GAS propulsion (NBOG + FVG) with the 51/60DF
electric concept
and vice versa

Figure 6: Charterer Nomogram, Additional Information

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MAN B&W Diesel LNG

Conclusion

From the mathematical solution for profit comparison of two

Regardless of the customers final choice, MAN B&W Diesel

different propulsion systems (see fig.3) and the resulting

is the only company which can provide all types of modern

charterer nomograms (see fig. 4 and 5) we have to conclude

diesel propulsion solutions for LNG carriers, which are dis-

that there is a tendency towards

cussed in the market today. Upon request MAN B&W Diesel

scientifically calculates with a minimum of project-related in-

GAS burning concept with the 51/60DF

electric system for

formation which propulsion concept suits best its customers

>>
>>
>>
>>

MAN B&W Diesel supports the customer decides.

Short, medium, and long transport distances

individual demands.

High HFO / LNG (FOB) fuel price ratios

Low LNG selling to purchasing price ratios CIF / FOB
Optimised constant displacement ship designs

Sokrates Tolgos

(i. e. more cargo capacity in case of vessel design for

MAN B&W Diesel AG

pure gas operation with the 51/60DF)

Augsburg, Germany
April 2006

HFO burning concept with slow-speed engines

and NBOG reliquefaction for
>>
>>
>>
>>

Long to very long transport distances

Low HFO / LNG (FOB) fuel price ratios
High LNG selling to purchasing price ratios CIF / FOB
Constant cargo capacity ship designs (i. e. ship designs
with the same cargo capacity but in general of different

REFERENCES

displacement)
[1] Tolgos, S.: Mathematical-Analytical Consideration of HFO vs. Gas

It must be emphasized that above results have been obtained

through a very general approach applicable to all LNG carrier
sizes. The only restriction in the mathematical analysis was
that one has to compare similar ship sizes with each other.

Propulsion for LNG Carriers from the Charterers Point of View.

Memorandum, MAN B&W Diesel AG, Augsburg, 20th April 2005.
[2] Tolgos, S. and Bille, O.: Economic Evaluation of LNG Carrier
Propulsion Concepts. Technical Paper, MAN B&W Diesel AG, 2006.

Quantitative calculations at MAN B&W Diesel confirm that

the class of the LNG carrier as such (e. g. 150K, 200K, 250K)
has no influence on the validity of the trends and statements
above. Ship size is no decisive factor for determination of
the most suitable propulsion concept from the profit point of
view in the LNG transport chain.

About the Author

Born in 1966 in Greece, Sokrates Tolgos received his Dipl.-Ing. degree
in Aerospace Engineering from the University of Stuttgart, Germany,
in 1993. Having specialized during his studies in the field of aircraft
propulsion and turbomachinery he started his professional career at
BMW Rolls Royce Aeroengines as an R&D engineer in gasturbine aerodynamics. There he took part in the development of the BR710 and
BR715 aircraft engines. From 1998 he worked with the Sulzer Group in
various positions as a contract manager for industrial turbomachinery
projects and as a marine sales engineer. In 2003 he joined MAN B&W
Diesel, where he has presently been assigned the sales responsibility
of medium-speed marine engines for LNG carrier and cruise vessel
applications worldwide.

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MAN B&W Diesel AG

Stadtbachstr. 1
86224 Augsburg
Germany
Phone +49 821 322-0
Fax +49 821 322-3382
info@de.manbw.com
www.manbw.com

Copyright MAN B&W Diesel AG

Reproduction permitted provided source is given.
Subject to modification in the interest of technical progress.
D2366338EN Printed in Germany KW9-05061

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member of
of the
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