Investing in Marine Scrubber under Uncertainty with Real Option Thinking

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Abstrakt

Scrubber technology is one of the valid alternatives to comply with the tightening sulphur regulation. Due to the high uncertainty associated with the oil price and shipping market, making decision about whether and when to invest in marine scrubber is very difficult. In contrast to the previous works that examine the economic feasibility of scrubber retrofitting through the net present value rule, this paper applies the Real Option Analysis to find the optimal investment strategies. The proposed decision-making framework addresses the uncertainty and the value of deferral option embedded in the scrubber investment. The multiple sources of investment uncertainties are explicitly analyzed and integrated in the modeling by using Rainbow option. The results demonstrate that the value of the scrubber investment has significantly increased for several cases by considering the deferral option. It is thus important for ship owners to consider the available options before proceeding with abandoning or investing strategy. The proposed framework can be widely applied to other ship retrofitting investment evaluations, which include similar investment alternatives and uncertainties.
OriginalsprogEngelsk
Publikationsdato2016
Antal sider16
StatusUdgivet - 2016
BegivenhedThe Annual Conference of the International Association of Maritime Economists. IAME 2016 - Hamborg, Tyskland
Varighed: 23 aug. 201626 aug. 2016
Konferencens nummer: 24
https://www.iame2016.org/

Konference

KonferenceThe Annual Conference of the International Association of Maritime Economists. IAME 2016
Nummer24
LandTyskland
ByHamborg
Periode23/08/201626/08/2016
AndetAnnual conference of the International Association of Maritime Economists (IAME)
Internetadresse

Emneord

  • Real options
  • Scrubber technology
  • Deferral option
  • Rainbow option
  • Flexibility
  • Uncertainty

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