Q&A: Nautilus Labs on how tech can tackle fuel use and emissions

software dashboard

Now more than ever, ship owners, operators and charterers crave higher fuel efficiency. And yes, there’s an app for that.

One of the higher-profile software platforms is being developed by New York-based Nautilus Labs.

In April 2019, it secured $11 million in Series A funding from M12, Microsoft’s venture fund, and Root Ventures. Together with other investors including Quiet Capital, Trail Mix Ventures and Amplifier, Nautilus Labs has raised a total of $14.5 million.

FreightWaves sat down with Nautilus Labs CEO Matt Heider on Thursday, Feb. 6 to get his views on fuel efficiency, including the issue of vessel speed as it relates to fuel cost — a topic of major interest to investors in U.S.-listed shipping companies.

The following is an edited version of that conversation:

Emission regulations: present and future

FreightWaves: More tech startups are focusing on voyage optimization at the same time the IMO 2020 rule is being implemented, requiring the use of more expensive low-sulfur fuel, and at around the same time the industry is pushing to cut greenhouse gas (GHG) emissions by 50% by 2050. I assume the timing’s not a coincidence?

Heider: “The way I think about it at the highest level is that when you look at the GHG emissions from ocean shipping, it’s roughly the same as the emissions from a country the size of South Korea. For our team, the environmental component is what’s most important. From a ship owner’s or operator’s perspective, saving on fuel and spending less on fuel is where the rubber meets the road. And if you focus on one [fuel savings], the other [emissions reduction] comes along for the ride. There’s a perfect correlation between tons of fuel used and the GHG emissions. So, the way we think about it is: Let’s help the industry operate more efficiently.”

Matt Heider
Nautilus Labs CEO Matt Heider. Photo credit: John Galayda/Marine Money

I’d expect the focus on consumption to become even more intense as the industry debates the transition to different fuel types such as liquefied natural gas (LNG), liquefied petroleum gas (LPG), hydrogen, ammonia and wind power.

“Right now, if you could wave a magic wand and all the ships we have were scrapped and could be replaced with brand-new ones and you had to choose between LNG [as fuel] or LPG or low-sulfur fuel or Flettner rotors [wind propulsion], no one would have the data to make that decision.

“That data doesn’t exist today. Shipping decisions are still largely made on noon data [once-per-24-hours data], so bringing more transparency to fuel consumption is paramount.”

How the system works

Can you explain in general terms how many ships of which type are using your platform, and how you’re getting this real-time data from ships on the water? I see your confirmed clients include Eagle Bulk (NASDAQ: EGLE), Dorian LPG (NYSE: LPG), Teekay Corp. (NYSE: TK) and Eastern Pacific Shipping.

“We have a couple hundred ships committed to the platform today. We have clients in all five of the major segments of global ocean shipping: dry bulk, liquid bulk, gas, ro-ro [vehicle carriers] and container ships.

“Think of our platform as a data platform where we layer on machine learning to provide advanced analytics. We process three different types of information. The first is data we source ourselves — things like weather, oceanographic and map data. The second is data the client provides to us on vessel performance — things like private commercial information, expectations for vessel performance, and maintenance data.

“We combine those with a third set of data, which is sensor data from the ship — high-frequency signals coming from either the engine control room or bridge — signals on heading, speed, fuel flow, engine data, that kind of stuff. There are three different ways we access the sensor data. Sometimes it’s coming to shore already in an OEM [original equipment manufacturer] system like Kongsberg or Honeywell or MAN. Another way is by developing a network of partners who get the data off the ships. The best example to date is the partnership we announced with [satellite company] Inmarsat in December; we’ll be announcing another partnership in the next two weeks. The final way is to basically install a computer in the bridge that connects via a network and sends the data off the ship.”

Enough time has passed for clients to be able to see results from using your platform. What’s their feedback?

“There are documented savings in the 5-10% range. The savings are in a few different buckets. One is what I would call operational efficiency. One example that sounds simple but is more complex to solve than you might think is generator optimization. You might have more than one generator onboard, and it’s not uncommon for those generators to be run in an inefficient manner. Most companies just don’t have the data to optimize that, but if you do, it’s potentially worth a quarter of a million dollars a year in fuel savings. 

“And then there is the concept of voyage optimization — giving the proper instruction around the proper RPM or speed for the vessel to travel given its performance, its expected route, the expected weather and the commercial parameters of the voyage.”

Voyage optimization

But surely when it comes to vessel speed — where slowing down saves on fuel — shipping is very aware of that equation and all of the low-hanging fruit has already been picked?

“Actually, because up until now shipping has been working off noon data, it has been really difficult [to optimize the voyage]. You have to have high-frequency data flowing in real time. When you do, the problem becomes a lot easier to solve.”

With IMO 2020, there’s also the question of: Where do you get your marine fuel? Whether you have an exhaust-gas scrubber and you’re burning 3.5% sulfur fuel or you don’t and you’re burning 0.5% sulfur fuel, the pricing and availability is all over the map, depending on where you refuel, which in turn has a huge effect on fuel costs. Your system is about saving fuel from point A to B, where the customer has already decided to go from A to B, right? 

software screen
Nautilus Labs voyage-optimization dashboard. Photo credit: Nautilus Labs

“It’s an interesting question, which is representative of a lot of the siloed decision-making inside the industry. People think: I’ve already made this commercial decision and here are all the decisions that follow, as opposed to thinking about decision-making in a more holistic way. A big part of what we’re doing and what we evangelize is unifying that decision-making. If there’s a trade opportunity and you need to bunker [refuel], what are the trade-offs? We think it should be a unified set of decisions based on real-time data.”

And I suppose another benefit is that the real-time data is going to continue to pile up, so customers can get better historical context going forward?

“I’d like to just double-click on that point. Baselining for performance is one of the things that companies like Maersk have done really well, and it has helped them be more competitive in a lot of ways. It’s difficult to do — to establish an expectation or baseline for performance and track against it — unless you have a system of truth that has all of that historical information and you can see what your past decisions have been and what the outcomes have been.”

Increased focus on speed

I want to talk more about speed because this is something your platform covers and it’s also a topic being cited by Wall Street analysts, on the theory that post-IMO 2020 fuel hikes will cause the fleet to slow down, which will decrease capacity and improve rates. I’m not convinced, because in a spot voyage deal, the speed is dictated on the fronthaul by the charterer, and if rates are strong, you’re not going to slow down on the backhaul. So, one could argue that slow steaming is something that can make a bad market less bad, but it doesn’t create a good market. What’s your view on speed and how it affects the market?

“From my perspective, it doesn’t really matter what the outcome is in the market as long as people are basing their decisions on a dataset that’s reliable and they’re making a decision that’s optimized for the outcome they’re looking for. There are a lot more decisions in play than ‘which speed do I go?’ That oversimplifies a really complex set of decisions that requires a lot of different data points — decisions that have to be made about a vessel in real time, every day, 24 hours a day, seven days a week.

“Speed issues vary by segment. In some segments, there are really tight ETAs and you don’t have control over the speed variable. In others, you have a lot of control over ETA and can use speed to maximize profitability.

“Also, every vessel is unique. A vessel is like a person. Ships have long lives; they’ve weathered their own storms. They have their own equipment and they’ve had different retrofits. The engines are different from ship to ship. That’s why it’s really hard to actually understand the relative performance of a ship without a good dataset.

“There are other questions, as well: Do you need to bunker? Where is it optimal to bunker? Are you due for a propeller cleaning? If so, is there a port where you have a better service provider? It’s a mix of decisions. It’s not just ‘the market’s hot so I’m going full steam.’ It’s about maximizing profits across multiple voyages and multiple ships — in real time.”

Growth plan for Nautilus Labs

Finally, where do you see Nautilus Labs a year from now? Five years from now?

“Where we go as a company is about where we see the industry going. We want to grow quite a bit over the next year. We opened an office in Singapore at the end of the fourth quarter, and there’s a real possibility we’ll be opening an office in Europe. We want to get more and more clients onto the platform, and we want to start tracking and evangelizing about actual GHG reductions and actual fuel reductions.

“In the five-year time frame, the vision we have for the shipping industry is that it can be the most efficient part of the global supply chain. So, you as the maritime guy at FreightWaves will be reporting on what is actually the greenest part of the global supply chain. There’s no reason why that can’t happen when you think about the potential for the different types of fuel and different types of ships and people getting more advanced in their commercial and operational thinking. We want to support all of that and if we can play a small part in that change, we will have achieved what we wanted to.” More FreightWaves/American Shipper articles by Greg Miller

tech executives
Nautilus Labs CEO Matt Heider (left) and CargoMetrics CEO Scott Borgerson (right) at Marine Money Week in New York. Photo credit: John Galayda/Marine Money