LNG as a marine fuel and risks of stranded assets

Press Release: A new study by UCL Energy Institute released today in the Marine Money conference taking place during the New York Climate Week, reveals that the rapidly growing LNG-capable fleet could reach a total “value at risk” of ~$1trn ($850bn) by 2030.


Policies that incentivise shipping to decarbonise in line with the Paris Agreement, would erode the value of more expensive LNG-capable vessels to be similar to that of lower cost conventional vessels.


The report titled ‘Exploring methods for understanding stranded value: case study on LNG-capable ships’ finds that the write-down of the full $850bn value at risk is not realised if LNG-capable vessels retrofit to run on scalable zero emission fuels (hydrogen and hydrogen-derived fuels such as ammonia). Under these circumstances, the stranded value is estimated at approximately 15-25% of their value ($129-$210bn if the LNG-capable fleet grows strongly this decade).


Marie Fricaudet, lead author and PhD student at UCL Energy Institute said “This report is a first attempt to extend the research on stranded power generation assets and unburnable fossil fuel reserves to the shipping sector. The findings highlight that the risk of stranded assets is also very material in the shipping sector. The longer we leave the LNG transition running and then switch, the more painful it will be and technology lock-in during this crucial decade will create more resistance to change later.”


The study argues that governments should not use public funding to exacerbate the creation of stranded value and identifies methods that investors can use to identify risks posed by climate change on shipping assets.


Download full report here

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