An investment appraisal method to compare LNG-fueled and conventional vessels

Jan Eise Fokkema*, Paul Buijs, Iris F. A. Vis

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

15 Citations (Scopus)

Abstract

Ever stricter emission regulations stimulate vessel owners to consider the adoption of alternative marine fuels, such as Liquefied Natural Gas (LNG). In deciding whether to invest in LNG-fueled vessels, initial investment and operating costs are decisive factors that have not yet been fully studied in the literature. In this paper, we present a new investment appraisal method to compare the costs of LNG-fueled vessels with conventional vessels. We analyze the fuel costs and overall exploitation costs by simulating bunker planning decisions under stochastic fuel prices, presence in emission controlled areas, and route lengths. Our analyses reveal that the fuel costs of LNG-fueled vessels are often lower than those of conventional vessels, even under unfavorable LNG prices. Due to the higher initial investment costs in LNG-fueled vessels, these fuel cost reductions do not always translate into lower overall exploitation costs. By conducting numerical experiments, we identified conditions under which the exploitation costs of LNG-fueled vessels are lower than conventional vessels.

Original languageEnglish
Pages (from-to)229-240
Number of pages12
JournalTransportation Research. Part D: Transport and Environment
Volume56
DOIs
Publication statusPublished - Oct-2017

Keywords

  • LNG
  • Investment appraisal
  • Simulation
  • Emission controlled areas
  • Fuel costs
  • LIQUEFIED NATURAL-GAS
  • SHIP

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