The analysis of an oscillating wing located beneath the ship’s hull is investigated as an unsteady thruster, augmenting the overall propulsion of the ship and offering dynamic stabilization. The unsteady thruster undergoes a combined oscillatory motion in the presence of waves. For the system in horizontal arrangement the vertical heaving motion is induced by the motion of the ship in waves, essentially ship heave and pitch, while the rotational pitching motion of the flapping propulsor about its pivot axis is set by an active control mechanism. Our method is based on coupling the seakeeping operators associated with the longitudinal and transverse ship motions with the hydrodynamic forces and moments produced by the flapping lifting surfaces, using simplified unsteady lifting line theory. First numerical results presented in Belibassakis & Politis [1],[2] indicate that high levels of efficiency are obtained in sea conditions of moderate and higher severity, under optimal control settings. For the detailed investigation of the effects of the free surface in the present paper a potential-based panel method has been developed for the hydrodynamic analysis of 2D hydrofoil operating beneath the free surface, undergoing heaving and pitching oscillations while moving with constant forward speed. The instantaneous angle of attack is influenced by the foil oscillatory motion and by the incident waves. At a first stage of development we consider moderate submergence and relatively low speeds permitting us to approximately neglect effects due to breaking waves and cavitation. Numerical results are presented concerning the numerical performance of the developed BEM. Also results concerning the thrust coefficient and the efficiency of the system over a range of motion parameters, including reduced frequency, Strouhal number, feathering parameter and compared against other methods. Our analysis indicates that significant efficiency can be obtained under optimal operating conditions. Thus, the present method can serve as a useful tool for assessment and the preliminary design and control of such systems extracting energy from sea waves for marine propulsion.