Reducing Fuel Use in the Tropical Shrimp
Fishery with Cambered Doors, Sapphire®
Webbing, and Skewed Propellers
1
Prepared by
Michael G. Haby2 & Gary L. Graham2
Narrated by
Nathan P. Kemper3
1.
This work was supported with funds provided by: (a) the U.S. Department of Agriculture to the Texas AgriLife Extension Service, part
of the Texas A&M University System (award number 2005-48605-03347) and (b) the Texas Energy Conservation Office, headquartered
within the State of Texas Comptroller’s Office, to the Sea Grant College Program at Texas A&M University (award number 0000421118).
2.
Texas AgriLife Extension Service / Sea Grant College Program / Texas A&M University
3.
Trade Adjustment Assistance Coordinator, Southern Risk Management Education Center, University of Arkansas
An Overview of The Presentation
■ Introduction
● Why address ways to save fuel when the industry is
experiencing record catch rates?
● A review of historical fuel-saving efforts undertaken by
shrimp fishermen and the Sea Grant College Program.
■ A look at the topics covered in this presentation
● Adaptation & testing of trawl gear new to the shrimp fishery.
● Comments about a preliminary propeller-comparison study.
● Measuring and comparing economic results of new trawl
and propeller gear.
● Next steps for the Southeastern shrimp-trawl fishery...
Catch rates are at record levels so why
address fuel savings? Things change ...
■
Before 2001 ...
● Low-cost inputs were used to
harvest high-dollar shrimp.
● In all but “banner” years catching
enough shrimp generally limited
profitability.
● The formula for success focused
on creating the capacity to catch
more shrimp. This meant investing
in larger more powerful vessels
that could pull larger nets faster,
and stay offshore longer.
Average Percentage Change in Offshore Production Compared to the 45-year Mean
60%
40%
20%
0%
-20%
-40%
-60%
65
67
69
71
73
75
77
79
81
83
Since 2001 ...
● Skyrocketing catch rates, but
high-cost inputs are used to
harvest lower-valued product.
● Profitability requires operators to
reduce avoidable costs.
87
89
91
93
95
97
Ex-vessel price (dollars / lb.)
99
01
03
05
07
09
Diesel Price (cents / gal.)
$5.00
350
Ex-vessel shrimp price
Diesel price
$4.50
■
85
300
$4.00
250
$3.50
200
$3.00
150
$2.50
100
$2.00
50
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Historical Review of Fuel Efficiency
Efforts in the Shrimp-trawl Fishery
■ Post WWII − operators installed military-surplus, diesel engines.
■ In the 50s − industry began using double rigs.
■ In the 60s − cotton webbing was replaced by nylon.
■ In the 70s − offshore trawlers converted to quad rigs.
■ In the 70s & 80s − many vessels added propeller nozzles.
■ In 89 & 90 − nets made from high-tensile-strength, small-diameter
fibers demonstrated fuel savings over nylon-based webbing.
■ In the 90s − some operators switched to more modern propellers.
Trawl Gear Track: Comparing the Efficiency
of Different Trawl Doors and Webbing
A Cambered Door Uses the Same Principle
of Pressure Difference as an Airplane Wing
Air moving over the top of the wing
must travel farther, and must move
faster than air moving under the
wing.
As air moves faster, pressure is reduced. This
causes a low-pressure area across the top of
the wing. Lower pressure across the top of the
wing is less than atmospheric pressure which
creates lift with forward movement.
Direction of travel
Air pressure across the bottom of the
wing equals atmospheric pressure
■ As the door (or plane) travels forward, less water (or air) pressure on the
curved surface allows the door (or plane) to pull outward (or lift).
■ Outward pull is created by a pressure difference; not resistance
generated with a large angle of attack using a four-chain bridle system.
Hydrodynamics Applied to Door Design
Pioneers Who “Found A Better Way”
Clockwise from top right:
Patrick Riley, General Mgr. – Western Seafood
Captain Manuel Calderón – Western Seafood
Captain Louis Stephenson – F/V Master Brandon
In 2008 each of these men received the NMFS
Sustainable Fisheries Leadership Award
Initial Sea Trials (“Proof of Concept”)
■ Work began April 2005 aboard the F/V Isabel Maier
● Baseline:
□ Caterpillar® 3412 (500 hp)
□ Kort nozzle with skewed Rice wheel
□ 4 – 47½ ft. two-seam trawls
□ Spectra® webbing
□ 9' x 40" wooden doors (2.79 m²) [9' x (40" ÷ 12"/ft.) x (1m² ÷ 10.76 ft.²)]
■ Initial findings:
● Experienced difficulty in setting.
● Doors laid in outward position.
● After numerous tows, got gear to bottom & the nets to open.
● Sled (“dummy door”) sank faster than trawl doors.
Initial Trials Showed Proof of Concept, and
Identified Several Required Changes
■ Trial and error for choosing right door size
■ Attaching the door to the towing cable was problematic.
■ Shoe on the bottom of the oval door needed to be modified.
■ Quad rig sled needed to be modified.
Trawl Gear Modifications from Sea Trials (1)
■ Rethinking the required size of cambered trawl doors was the
first modification:
● Cambered doors generated tremendous spreading power.
● Initially evaluated 2.1m2 cambered doors in place of the
2.79m2 flat doors (108" x 40").
● Each door weighed 330 to 616 lb. with weight added.
New Doors are Fifty Percent Smaller
Than Traditional Wooden Ones
■ Trial and error demonstrated the 1.4m2 cambered doors
properly opened 2 – 47½ ft. two-seam nets
■ Compared to the area of the 108" x 40" traditional flat door (2.79
m2), the area of the 1.4m2 cambered door is 50 percent smaller.
Holes in the Brail Connect Trawl
Doors to the Towing Cables
Brail shown with different
attachment points ... These
points control the angle of
attack
Trawl Gear Modifications from Sea Trials (2)
■ Connecting trawl doors to the towing cables
● To create the angle of attack with flat doors, a 4-chain bridle
system is required. The 4-chain bridle establishes both the
angle of attack and the amount of “cut” in the door.
● This 4-chain approach does not work with the vented,
cambered doors.
□ Initially, cambered doors had just one connection point
on the brail. This is the most common connection
method worldwide.
□ Ultimately the new doors were connected with 2-chain
bridles, one at the brail, and the other at the aft, bottom
position of the door.
Two-chain Bridle Connected to
a Vented, Cambered Door
Bridle Configuration for 1.4m2 Door
Inside View
Using Front Hole
Sw ivel
Chain
8 Links
+
2 Shackles
Big Shackle in
Door to Swivel
Front Hole
Chain
Top View
View of Vented, Cambered Door Showing
Two-chain Bridle & Angle of Attack
Trawl Gear Modifications from Sea Trials (3)
■ “Stock” doors with curved shoes resulted in a 19% shrimp loss
because of elevated lead line and tickler chain.
■ Once curved “shoes” were replaced with flat ones, the lead line
and tickler chain attachment points were lowered, & shrimp
loss ended.
“After-market”,
Flat Shoe
“Curved” Shoe
Padeye welded to the
back of the shoe is the
second connection point
Net Attachment Positions for 1.4m2 Door
Outside View
Cork Line
Attachment f or
lazy line
Bottom Line
Tickler Chain
Headrope Attachment
■ Several horizontal holes on the
back of the doors connect the
trawl.
■ Moving headrope & footrope to
an adjacent hole alters the angle
of attack by about 2 ½ degrees.
■ Adjustments on the aft end of
the door work opposite to the
towing points on the brail.
● Connecting the net in the
forward-most point
increases angle of attack.
● Attaching the net further aft
decreases angle of attack.
Trawl Gear Modifications from Sea Trials (4)
■ The traditional sled sank faster than the cambered trawl doors.
■ New sled designs slowed descent to the sea floor:
● Original modification (left) incorporated a buoyancy tank.
● Subsequent modification (right) used lower-cost, flat-bar
stock with a much wider shoe which “skied” to the bottom.
Trawl Sled built from 1"x10" Flat bar and
3/4" x 3" Flat Bar.
0.8"
59.0"
ø 0.8"
ø 0.8"
40.0"
ø 0.8"
ø 0.8"
35.00°
46.0"
16.0"
10.0"
Two Views of the Buoyancy-tank Sled in
a Double-rigged Trawl System
Essential Periodic Maintenance Ensures
Continuous Production Effectiveness
Stress elongates towing holes in
the doors! To keep the gear fishing
correctly, the original diameter
must be maintained.
Friction can compromise shackles
in a single cruise! Extra shackles
should be aboard.
Double-rigged, Energy-conserving Trawl
System Being Retrieved & Loaded
Fuel Flow Meter
■ Meter had to be matched to the
engine brand and horsepower
■ The meter measured fuel
consumption in gallons per
hour, and indicated current
consumption with a dial.
■ Very basic design
■ Worked well in most cases
Engine Performance & Fuel Comparison:
Wooden vs. Vented, Cambered Doors
During fishing operations aboard the F/V Isabel
Maier with a Caterpillar® 3412 (500 hp) …
Wooden
Cambered
Difference
Door size
2.79 m²
1.4 m²
Area reduced
by 50%
RPM @ 3 Kt.
1,525 – 1,550 RPM
1,400 – 1,425 RPM
RPM reduced
by ~ 125 (8%)
Fuel Use
19.5 – 20.0 GPH
14.0 – 14.5 GPH
GPH reduced
by 5.5 (28%)
During fishing operations aboard the F/V Master
Brandon with a Cummins® KTA 19 (500 hp) …
For every 50 RPM reduction in engine speed … fuel use dropped by
1.5 – 2.0 GPH. These values are consistent with the F/V Isabel Maier.
Three-week Cruise Aboard the Isabel Maier
With Traditional & Experimental Gear
■ After all four modifications were completed, a production
cruise was conducted between mid-April and early-May 2006.
■ During this cruise the first-ever performance information was
collected during an actual fishing trip.
● To assess shrimp production differences:
□ both gear types were fished simultaneously,
□ gear position was swapped after 15 good tows to
control for side bias,
□ cambered doors generated a 2.6% shrimp gain, but it
was not a statistically significant difference.
■ No shrimp loss was encountered with the cambered doors.
Cooperative Research by Elite Producers
■ Intensive Technical Assistance
■ Texas Energy Conservation Office
● Tim Adams – Bon Secour
● Delbert Bull, Jr. – Sabine Pass
● David Chauvin – Chauvin
● Charles Burnell – Brownsville
● Juan Gaona – Brownsville
● Manuel Calderón – Freeport
● Bobby Pendarvis – Irvington
● Frank Lasseigne – Brownsville
● Tom Williams – Tarpon Springs
● Louis Stephenson – Hitchcock
■ Areas Tested
● The doors have been fished on all sides of the Gulf
● Muddy, offshore substrate
● Hard Florida bottom
● Offshore and on the beach
Study Protocol for Evaluating New Gear
■ Each cooperator was asked to record fuel use and engine RPM across
steps one, two, and four of a four-step procedure.
● Step 1 – Baseline (current complement of nets and doors).
● Step 2 – Sapphire® nets spread with traditional doors.
● Step 3 – Side-by-side prod. equivalency (traditional vs. cambered).
● Step 4 – Sapphire® nets spread with cambered doors.
■ Approach
● Cooperators pre-selected a speed-over-ground towing rate and
attempted to hold it across steps 1, 2, & 4 of the four-step protocol.
● Each half hour the cooperator recorded:
□ Time of day
□ Actual speed-over-ground
□ Engine RPM
□ Fuel consumption (from the indicating fuel-flow meter)
□ “Current” sea conditions (With, Against, Across, Slack)
● Eight 3½ hr. tows are required for steps 1,2, & 4.
● 15 good tows per side are required for the prod. equivalency step.
Helping Cooperators Address the
“Learning Curve” for Cambered Doors
■ In more profitable times, most operators
could experiment with the new doors &
reach production equivalency.
■ Today, such experimentation is
economically impractical due to:
● an abbreviated production window &
● record prices – on the high side for
fuel and on the low side for outputs.
■ Two elite, consulting fishermen, Captain
Louis Stephenson and Captain Manuel
Calderón, have:
● helped the cadre of cooperators
complete their 4-step protocols &
● sped conversion to this new gear.
South Atlantic Experiences with
Vented, Cambered Doors
■ One smaller boat in South Carolina that exclusively fishes the
beach has been using the cambered doors for several years.
The gear was tested for how well it handled very hard turns,
and the doors maintained their spread.
■ Using traditional gear this vessel burned 10½ – 11 gph. After
switching to the cambered doors, fuel consumption dropped to
9 – 9½ gph; a reduction of 13 to 14 percent.
■ In addition to the fuel savings, less drag with cambered gear
enables this operator to fish against strong winter seas and
currents. Others pulling traditional flat doors must trawl, pick
up, run up-sea, and re-deploy in a following-sea. Much more
fuel and time is used with the traditional gear in the stronger
seas and heavier currents.
What About The Inshore Fleet?
■ Little work has been done inshore.
■ Greg Falkner in Louisiana did some early work that showed
positive results.
A Potential Door for Smaller Nets
■ High Aspect (taller than long)
■ Vented
■ Very Short
■ Used worldwide
■ ... But needs to be evaluated
Replacement Considerations
for Cambered Doors (1)
■ Cambered doors should be roughly ½ as long as what you now
pull, but net size, net style, and webbing material also influence
door size. For example, 2 – 45’ nylon nets require 1.4m2 doors
but that same nets made from Spectra® or Sapphire® can be
spread with 1.1m2 doors.
■ Evaluation by elite fishermen suggest the following rules of
thumb:
● If you are pulling 2 – 40’ to 45’ nets, then use 1.1m2 doors
● If you are pulling 2 – 45’ to 50’ nets, then use 1.4m2 doors
■ Sea trials of doors required to spread 2 – 50’ to 55’ nets are
preliminary and suggest that 1.4m2 doors are marginal at the 2nd
tow point. Sea trials of doors required to spread 2 – 55’ to 60’
nets have not taken place.
Replacement Considerations
for Cambered Doors (2)
■ Remember ... The smaller the angle of attack, the less the
resistance and the greater the fuel economy!
■ Therefore, choose the door size that allows your nets to
spread fully when the doors are pulled from the most
forward hole in the brail. This will ensure the smallest angle
of attack.
■ Cost differences between 1.1m2 – 1.4m2 and 1.4m2 – 1.6m2
doors are about $50 per door, a minor issue. When in
doubt, choose the next larger size.
Sapphire® Fiber, Webbing, and Nets
■ Characteristics of Sapphire® used on our evaluations:
● Small-diameter (2.1mm), high-tensile-strength material.
● Fibers are braided, not twisted.
● No dipping is ever required with Sapphire® webbing.
● High-density polyethylene (HDPE) − recyclable.
● Our work has shown that active vessels get more than 3
years use with braided Sapphire® webbing.
Why Sapphire® Webbing??
■ In 1990, Sea Grant did extensive work with Spectra®. Excellent
results were achieved, and many boats converted to it.
■ The original cost of Spectra® was $28.00/lb. As a component in
personal body armor, military demand pushed the price to over
$60.00/lb. at the time our cambered door project began.
■ Sapphire® webbing cost $8.50/lb. and was chosen because of
its durability and price.
■ Other high-tensile-strength, small-diameter fibers are available
which can reduce drag and generate fuel efficiency, but they
are more costly than Sapphire®.
■ Keep in mind that all of these new fibers weigh less than nylon,
so you get more webbing per pound purchased.
Twine Size Advantages
■ Early Spectra® evaluations used #11 which replaced #18
nylon.
■ This reduced twine area of the entire trawl by about
23.5%.
■ The Sapphire® used in the new study had a diameter of
about 2.1mm − roughly equivalent to #15 nylon.
Saving Additional Fuel with Sapphire®
Nets: Cooperators’ Results
■ Step two of the protocol quantified the proportional fuel
saving attributable to Sapphire® nets spread with traditional
doors.
■ Being braided instead of twisted appears to be an important
contribution to fuel savings.
■ Sapphire® nets saved fuel!
● Captain Tim Adams reported 1 gal./hr. savings.
● Captain Manuel Calderón reported ½ to 1 gal./hr. savings.
● Captain David Chauvin reported 1 gal./hr. savings.
● Captain Louis Stephenson reported 1½ gal./hr. savings.
Performance Summary: Cambered Doors
■ The doors have been in continuous use since 2006, and shrimp
production has not suffered! Some operators still resist.
■ Among our cooperator base, when help was requested,
adjustment or production problems were quickly solved.
■ Doors are not difficult to use, but adjustment logic is different.
■ Doors are effective across all Southeastern shrimp fisheries
(nearshore or offshore, muddy substrate or hard bottom, brown
or white shrimp). Gear can handle sharp turns, etc.
■ Shackles and swivels need frequent replacement. Also, the
diameter of towing points in the brail need to be maintained.
■ At very slow speed-over-ground rates (around 2.2 kt.)
questions arise about effectiveness.
Propeller Track: Comparing Efficiency of
“Nozzled” Kaplan and Skewed Propellers
The Skewed Propeller …
■ Not the newest technology. The Rice Speed Wheel has been
introduced since the skewed propeller was designed.
■ Some owners switched to the skewed propeller, but no
comparative performance data were ever collected from
fishermen for public use.
■ At industry’s suggestion, RPM and fuel consumption was
compared between Kaplan-style and skewed propellers.
● Kaplan-style data were collected in late summer & early fall.
● Skewed data were collected in winter when seas are
stronger/heavier, and currents are faster.
● Therefore, the computed difference of 0.9 GPH savings
(6.1%) with the skewed wheel is probably conservative!
Additional Fuel Savings Documented with
Initial, Comparative Wheel Trials
Gallons per Hour
22
20
Kaplan-style wheel
Skewed wheel
18
16
14
12
10
8
1,250
1,300
1,325
1,350
1,375
1,400
1,425
RPM
1,450
1,475
1,500
1,525
1,550
1,600
Economic Results Track: Current Operating
Conditions Facing U.S. Shrimp Fishermen
■ Significant reduction in operators and thus fishing effort
between 2002 and 2006 has boosted catch rates. But …
● Shrimp fishing is a fuel-intensive enterprise.
● Producers have paid record prices for fuel while receiving
historically-low prices for their shrimp which has
squeezed margins to razor-thin levels.
□ Imports continue relatively unabated and
□ Short-term “shocks” have also affected local prices.
● Since 2001, remaining operators’ main objective has been
“to remain liquid enough to fish another day.”
● “Non-essential” maintenance has been deferred.
Fuel: A Large, Growing Production
Expense for Wild-harvested Shrimp
■ Between 1986 & 1997 the median offshore shrimp trawler used
66,101 gallons of diesel each year (TAMU Standardized
Performance Analysis project).
● In 1997 those 66,101 gallons cost $49,576 ($0.72/gal.)
● In 2006 those 66,101 gallons cost $140,400 ($2.12/gal.)
● In 2008 those 66,101 gallons cost $209,776 ($3.17/gal.)
■ In 2006, roughly 40% of the 2,666 permitted offshore trawlers
remained idle due to high fuel costs & low ex-vessel prices.
■ In 2007, days fished across the Gulf in the 10 to 30 fathom
range had declined by 78% compared with the ’01 to ’03 base.
■ In 2008, roughly 20% of shrimp fishermen gulf-wide did not
generate a trip ticket … they did not fish.
A Summary of Fuel Savings Reported
Through Cooperative Research
■ Results from offshore cooperators indicate the new trawl
gear generates immediate, significant fuel savings.
● S&S Sales (fleet): 375 hp. pulling 4 – 42 ft. nets reduced
fuel use by 28 to 39%.
● Western Seafood (fleet): 500 hp. pulling 4 – 47½ ft. nets
reduced fuel use by 28 to 33%.
● F/V Mariah Jade: 600 hp. pulling 4 – 32 ft. nets reduced
fuel use by 27%.
● F/V Master Brandon: 500 hp. pulling 4 – 50 ft. 2-seam
nets reduced fuel use by 20% inshore & 24% offshore.
Expected Range in Fuel Savings
from Cooperative Research
■ Documented fuel savings ranged
from 10% to 39%. Consider the
“middle half” of that range.
Highest percentage of fuel saved: 39%
75th percentile
28% red.
● The median fuel-savings value
is 24%.
● 25% above and below that midpoint we find a 28% savings
and a 20% savings.
● This “middle 50%” of fuelsavings values (20% – 28%) is
the range in fuel-savings most
offshore operators can expect!
Median
24% red.
Middle Half
25th percentile
20% red.
Lowest percentage of fuel saved: 10%
Actual & Forecasted Nominal Industrial Price
for No. 2 Diesel by All Sellers: 1994 – 2035
Nominal prices (cents per gal.)
700
600
500
Actual annual prices
400
300
200
Forecasted annual prices
100
0
94 96 98
00 02 04 06 08 10
12 14 16 18 20 22
Year (1994 - 2035)
24 26 28 30 32 34
Long-run Outlook for Fuel (2010 – 2035)
■ From 2010 to 2035, forecasts suggest diesel prices will
increase by about 15¢ per gallon each year.
■ About every seven years, the forecasted price will
increase by roughly $1.00 per gallon.
■ This forecast only reflects trend … supply interruptions,
additional regulations further limiting sulfur, etc. can
dramatically influence actual prices.
■ Current diesel prices exceed the 2011 forecast by $1.00
per gallon!
■ Energy price changes will affect the cost of virtually all
activities.
Cost-reducing Effects of Cambered Doors,
HDPE Webbing, and Skewed Propellers
■ Cambered doors & small-diameter HDPE webbing drive
production costs out of the shrimp-trawling enterprise. How?
● Less drag (mostly from the doors) requires fewer RPM to
reach speed-over-ground towing rates so GPH decreases.
● Fewer RPM reduce engine-service hours per hr. operated.
● Reduced fuel use extends time between overhauls.
■ The new trawl doors and HDPE webbing are longer lasting:
● Wooden doors last 12 to 18 months but cambered steel
doors last 7 to 8 years if maintained.
● Nylon nets last 1 to 2 years but Sapphire® nets last 3 to 4+
years. HDPE nets do not require dipping – a huge savings!!
■ A skewed propeller can further reduce fuel consumption.
Measuring Economic Results from
Fuel-efficient Trawl Gear
■ Pro-forma analysis of individual decisions
■ Short-term:
● payback or break-even analysis – limited to assessing a
small slice of asset life & cost-saving benefits. Shows
relationships among unit fuel prices, estimated fuel
savings, & gallons required to recoup investment.
Payback gauges how fast the initial investment is
recovered. It does not measure overall profitability.
■ Long-run:
● capital budgeting – evaluates the adoption of a costreducing investment to produce a given volume of
output. (Remember ... the new trawl gear catches the
same volume of shrimp, but at a lower cost).
Short-term Analysis (graphical)
■ Doors & Sapphire® nets cost $10,600. With fuel @ $3.00/gal. and with a
20% reduction, the investment will be recouped after burning 17,667 gal.;
with a 24% reduction after burning 14,722 gal.; and with a 28% reduction
after burning 12,619 gal.
Gallons required to recoup cost of doors & nets (thousands)
30
25
20
28% Red.
24% Red.
20% Red.
15
10
5
0
$2.00
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
Price (Dollars per Gallon)
$3.40
$3.60
$3.80
$4.00
Short-term Analysis (tabular)
Gallons required to recoup door & net cost given different diesel
prices & different levels of fuel saving within the “middle” 50
percent of reported savings by industry
$ / gal.
20% Reduction
24% Reduction
28% Reduction
$2.00
26,500
22,083
18,929
$2.20
24,091
20,076
17,208
$2.40
22,083
18,403
15,774
$2.60
20,385
16,987
14,560
$2.80
18,929
15,774
13,520
$3.00
17,667
14,722
12,619
$3.20
16,563
13,802
11,830
$3.40
15,588
12,990
11,134
$3.60
14,722
12,269
10,516
$3.80
13,947
11,623
9,962
$4.00
13,250
11,042
9,464
A Summary of Short-term Performance
■ In the short term, reducing fuel consumption rapidly pays
back the cost of the new gear in lower fuel expense. The
quantity of fuel required to do so depends upon:
● unit prices for diesel and
● the amount of expected fuel savings.
■ This work was based on the experiences of offshore
fishermen operating across the Gulf. With smaller, inshore
vessels, the gallons of fuel required to payback the
investment may be greater, and may take longer.
■ Remember … a short-term analysis for equipment that lasts
more than one year provides an incomplete picture. An
analysis to estimate the economic feasibility needs to be
done over the expected life of the equipment being
considered. Only then can we estimate the benefits
generated.
The Three Major Investment Types
■ Maintenance & replacement investments.
● Replacing a main engine is one example.
■ Income-increasing investments.
● Investing in a larger vessel that enables you to fish harder −
stay out longer, cover more bottom with larger gear, etc.
● Investing in on-board, plate-freezing capability to pack and
freeze at sea to support direct marketing.
■ Cost-reducing investments.
● Investing in fuel-saving trawl gear to reduce production
expenses. (Remember … cooperative research showed
catches remain the same, but fewer dollars are required to
generate those catches.)
● Investing in more modern propellers and nozzles.
Analyzing Expected Investment Profitability
■ Investing in equipment today will result in cash flow changes
over the life of that equipment. So …
● What is the Net Present Value (NPV) method of investment
analysis?
● What is the time value of money, and why is it important in
evaluating an investment?
● What information is needed to use the NPV method?
● What are the primary steps in the process?
● Once the calculations are done, how do we use the NPV
number to interpret results and choose from investment
alternatives?
What is The Net Present Value (NPV)
Method of Investment Analysis?
■ Net Present Value is one of only two approaches that addresses
the issue of WHEN cash flow changes occur over the useful life
of an investment.
■ What is the time value of money, and why is it important in
investment analysis?
● Money you have today is worth more than money you will (or
may) receive in the future. Why?
□ Opportunity – money today can be invested and interest
can be earned. “Expected” money cannot be used now.
□ Risk – money in hand is not at risk. Money forecasted to
arrive in the future is less certain.
□ Inflation – money will likely buy more today than at some
time in the future.
Information Needed, Steps Required,
and Interpretation of Results
■ What information is needed to use the NPV method?
● Initial investment
● Cash flows expected from the investment in each period
● Planning horizon (expected useful life of the equipment).
● Expected interest rate, req. rate of return, or cost of capital.
■ What are the primary steps in the process?
● Estimate cash flows across all periods in planning horizon.
● Discount each projected cash flow to its present value.
● Sum all present values to determine NPV of the investment.
■ Once the calculations are done, how do we use the NPV number
to interpret results and choose from investment alternatives?
Analyzing a Cost-reducing Investment in
Fuel-saving Trawl Gear with NPV – How?
■ Compare the present values of projected cash flows generated
by traditionally-used gear and more modern gear over:
● a 7 yr. span (2010 to 2016) – approximate useful life of the
cambered doors
● a 14 yr. span (2010 to 2023) – includes about two replacement
cycles of the cambered doors
■ Key assumptions have been made about:
●
●
●
●
●
Inflation – diesel forecast from DOE & price index
Fuel – quantities used with traditional & cambered gear
Overhauls – frequency driven by cumulative fuel use
Trawl Doors – cost and expected life of wood & cambered
Nets – cost and expected life of nylon & Sapphire®
Forecasted Price for Diesel: 2010 – 2035
■ Besides the forecast of diesel prices, an index was also created
from that time series to inflate expenditures for engine overhauls,
net purchases, and annual net-dipping costs.
Cents per Gallon
Price Index (from Cents per Gallon)
700
3.5
Cents/gal.
600
Index
3.0
500
2.5
400
2.0
300
1.5
200
1.0
100
0.5
0
0.0
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
Figuring & Comparing Net Present Values
■ Use the same procedure for each gear type and planning horizon:
●
●
●
●
Estimate projected cash outlays over the planning horizon
Discount projected cash outlays to their present value
For this comparison, discount rates ranged from 5% to 15%
Sum these annual present values by each discount rate to
arrive at total project NPV across all discount rates considered.
■ NPV comparison by discount rate & gear type
● For each discount rate, subtract the present value of cash
outlays for traditional gear from that of cambered gear.
● If the difference between NPVs is positive, this represents the
amount of cash at each discount rate that can be withdrawn
and used for something else … other efficiency investments,
maintenance, etc.
Estimating Projected Cash Flows
■ Projected cash flows are estimated for each of seven years:
● Top – projected, annual cash outlays with traditional trawl gear
● Bottom – projected, annual cash outlays with cambered gear
Fuel
YY
0
1
2
3
4
5
6
Total
Ann. Use
66,101
66,101
66,101
66,101
66,101
66,101
66,101
Cum. Use
66,101
132,202
198,303
264,404
330,505
396,606
462,707
Fuel
YY
0
1
2
3
4
5
6
Total
Ann. Use
50,237
50,237
50,237
50,237
50,237
50,237
50,237
Cum. Use
50,237
100,474
150,711
200,948
251,185
301,422
351,659
Overhauls
Ann. Cost Cost: Top-end
-$134,713.84
$0.00
-$145,620.50
$0.00
-$158,972.91
$0.00
-$171,994.80
-$10,852.31
-$182,108.26
$0.00
-$192,155.61
$0.00
-$203,855.48
$0.00
-$1,189,421.40
-$10,852.31
Overhauls
Ann. Cost Cost: Top-end
-$102,383.01
0.00
-$110,672.11
0.00
-$120,819.99
0.00
-$130,716.67
0.00
-$138,402.94
-11,490.43
-$146,038.96
0.00
-$154,930.91
0.00
-$903,964.59
-11,490.43
Doors
Nets
Acq. Cost
-$3,500.00
Maint.
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
-$3,500.00
-$3,500.00
-$3,500.00
-$14,000.00
Doors
Acq. Cost
-7,000.00
0.00
0.00
0.00
0.00
0.00
0.00
-7,000.00
Maint.
-234.00
-234.00
-234.00
-234.00
-234.00
-234.00
-234.00
-1,638.00
Acq. Cost
-$5,465.00
-$6,449.13
-$7,387.67
-$8,269.90
-$27,571.70
Dipping
-$2,000.00
-$2,161.92
-$2,360.16
-$2,553.48
-$2,703.63
-$2,852.80
-$3,026.50
-$17,658.49
Nets
Acq. Cost
-6,570.00
0.00
0.00
0.00
-8,881.43
0.00
0.00
-15,451.43
Dipping
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Total, Annual
Future Cash
Outflow
-$145,678.84
-$147,782.42
-$171,282.20
$185,400.59
-$195,699.56
-$195,008.41
-$218,651.88
-$1,259,503.90
Total, Annual
Future Cash
Outflow
-116,187.01
-110,906.11
-121,053.99
-130,950.67
-159,008.80
-146,272.96
-155,164.91
-939,544.45
Summary of Projected Cash
Flows: 2010 – 2016
A Comparison of Projected Cash Flows: 2010 – 2016
Traditional Gear
Cambered Gear
Savings
-$1,189,421
-$903,965
$285,457
Engine Overhauls
-$10,852
-$11,490
-$638
Doors (Acq. & Maint.)
-$14,000
-$8,638
$5,362
Nets
-$27,572
-$15,451
$12,121
Net Dip
-$17,658
$0
$17,658
-$1,259,503
-$939,544
$319,959
Fuel
Total
■ Over 7 years, the accumulated projected cash flows attributed
to the cambered gear were $319,959 (25%) less than projected
cash flows incurred when traditional gear was used.
■ But more importantly, what is the present value of this savings?
Discounting Projected Cash Flows
■ Projected cash flows are estimated for each of seven years:
● Top – Discounted, annual cash outlays with traditional trawl gear
● Bottom – Discounted, annual cash outlays with cambered gear
YY
0
1
2
3
4
5
6
Total
Total, Annual
Future Cash
Outflows
-145,678.84
-147,782.42
-171,282.20
-185,400.59
-195,699.56
-195,008.41
-218,651.88
-1,259,503.90
Present Values of Projected Cash Outflows for Each Period - Traditional Gear
Discount Rates used to Convert Annual Future Cash Outflows
5%
7%
9%
11%
13%
15%
-145,678.84
-145,678.84 -145,678.84 -145,678.84 -145,678.84 -145,678.84
-140,745.17
-138,114.41 -135,580.21 -133,137.32 -130,780.91 -128,506.46
-155,358.00
-149,604.50 -144,164.80 -139,016.47 -134,139.08 -129,513.95
-160,156.00
-151,342.11 -143,163.28 -135,563.32 -128,491.91 -121,903.90
-161,002.51
-149,298.26 -138,638.50 -128,913.36 -120,026.21 -111,891.86
-152,794.19
-139,038.30 -126,742.08 -115,728.00 -105,842.75
-96,953.64
-163,161.40
-145,696.98 -130,374.97 -116,900.22 -105,022.55
-94,529.24
-1,078,896.11 -1,018,773.41 -964,342.68 -914,937.53 -869,982.25 -828,977.89
YY
0
1
2
3
4
5
6
Total
Total, Annual
Future Cash
Outflows
-116,187.01
-110,906.11
-121,053.99
-130,950.67
-159,008.80
-146,272.96
-155,164.91
-939,544.45
Present Values of Projected Cash Outflows for Each Period - Modern Gear
Discount Rates used to Convert Annual Future Cash Outflows
5%
7%
9%
11%
13%
15%
-116,187.01
-116,187.01 -116,187.01 -116,187.01 -116,187.01 -116,187.01
-105,624.87
-103,650.57 -101,748.72
-99,915.41
-98,147.00
-96,440.10
-109,799.54
-105,733.24 -101,888.72
-98,250.13
-94,803.03
-91,534.21
-113,120.11
-106,894.75 -101,117.94
-95,750.00
-90,755.38
-86,102.19
-130,816.93
-121,307.05 -112,645.84 -104,744.02
-97,523.07
-90,913.80
-114,608.69
-104,290.60
-95,067.39
-86,805.88
-79,391.10
-72,723.51
-115,786.44
-103,392.93
-92,519.77
-82,957.50
-74,528.58
-67,082.07
-805,943.60
-761,456.16 -721,175.40 -684,609.96 -651,335.18 -620,982.89
Investment Analysis: 2010 – 2016
■ Summary: NPV of costs saved with the cambered gear were
consistently positive over a broad range of discount rates.
Discounted at 5%, the NPV of costs saved was $272,953.
Discounted at 15%, the NPV of costs saved was $207,995.
Present Value of Cost-savings With Cambered Gear -- 7 years
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
5%
6%
7%
8%
9%
10%
11%
Discount Rate
12%
13%
14%
15%
Summary of Projected Cash
Flows: 2010 – 2023
A Comparison of Projected Cash Flows: 2010 – 2023
Traditional Gear Cambered Gear
Fuel
Savings
-$2,879,756
-$2,188,625
$691,131
Engine Overhauls
-$71,934
-$60,939
$10,995
Doors (Acq. & Maint.)
-$24,500
-$17,276
$7,224
Nets
-$57,026
-$39,056
$17,970
Net Dip
-$42,754
$0
$42,754
-$3,027,292
-$2,305,896
$770,075
Total
■ Over 14 years, the accumulated projected cash flows attributed
to the cambered gear were $770,075 (25%) less than projected
cash flows incurred when traditional gear was used.
■ But more importantly, what is the present value of this savings?
Investment Analysis: 2010 – 2023
■ Summary: The NPV of costs saved with the cambered doors were
consistently positive over a broad range of discount rates.
Discounted at 5%, the NPV of costs saved was $550,454.
Discounted at 15%, the NPV of cost saved was $323,917.
Present Value of Cost-savings With Cambered Gear -- 14 years
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
5%
6%
7%
8%
9%
10%
11%
Discount Rate
12%
13%
14%
15%
What Drives Long-term Performance?
■ Reduced fuel use & expense accounted for most of the cost
savings. Using less fuel drove down engine overhaul costs too.
■ Cash outlays from cambered gear returned a lower net present
value of cash outlays across time and discount rates. Why?
● With a 24% reduction in fuel use, using less of something
that increases in cost over time reduces expenses.
● The longer useful life of cambered doors and Sapphire®
webbing also reduced cash outlays over both time periods.
● Not dipping nets returned the 2nd highest savings after fuel.
■ Reducing expenses while catching the same quantity of shrimp
increases your “bottom line”.
Summary & Conclusions: Economics
■ Cambered doors neither help nor hurt shrimp production.
■ NPV analysis demonstrated that projected cash outlays for fuel,
overhauls, and trawl gear are reduced over time when cambered
doors and Sapphire® webbing replace traditional trawl gear.
Why? … fewer RPM are needed to reach speed-over-ground
towing rates which sharply reduces fuel consumption.
■ Cambered doors and Sapphire® webbing cost more than
traditional gear. However, longer life spans and reduced net
maintenance costs reduced replacement costs over time.
■ Over 7 and 14 year planning horizons, differences in NPV of
projected cash outflows between traditional and cambered gear
generated tremendous, estimated savings for the enterprise.
■
These cost savings can fund previously-deferred maintenance,
other efficiency projects, etc.
Broad-scale Economic Effects
■ In certain ports, conversion to the cambered doors and
Sapphire® webbing has been rapid.
■ Between late 2007 and early 2008, roughly 80% of the
Brownsville/Port Isabel fleet (132 vessels) converted to the
new trawl gear.
■ Between 2008 and 2010, the new trawl gear collectively saved
Brownsville/Port Isabel shrimp fishermen an estimated 7.3
million gallons valued at almost $18 million ... but shrimp
production did not suffer!
Next Steps ... Changing to The New Gear
■ A program funded by the Ocean Conservancy & the Sustainable
Fisheries Partnership can help get this gear aboard your vessel!
● In order to help fishermen transition to this new gear, a costshare approach and training program is available:
□ Half of the gear cost is covered,
□ Funds also cover an experienced fishermen to troubleshoot
start-up problems,
□ Up to $2,500 is available during your “Sea Trials” phase
□ In return ... you must agree to use a more effective BRD
● Financing is also available to cover the remainder of the gear
costs.
● For more information contact Ms. Jaimy Norris at 727/369-6611
or by email at jnorris@oceanconservancy.org
For Specific Questions About ...
■ Doors and webbing, please contact Gary L. Graham
● Phone 979/292-6120
● Email: glgshrimp@embarqmail.com
■ Economic performance, please contact Michael G. Haby
● Phone: 361/265-9203
● Email: m-haby@tamu.edu
■ The gear cost-share or financing program offered jointly
by the Sustainable Fisheries Partnership and the Ocean
Conservancy, please contact Ms. Jaimy Norris
● Phone: 727/369-6611
● Email: jnorris@oceanconservancy.org
Thanks for your interest!