Powering newly constructed vessels to comply with ECA regulations under fuel market prices uncertainty: Diesel or dual fuel engine?

Over the last decade, marine engine engineering has evolved considerably, to the point where engine technology can be considered mature and reliable using LNG as fuel without affecting safety at sea. This paper analyses the choice between diesel or dual engines jointly and considers the alternatives of installing or not installing a sulphur scrubber when building a new vessel. The dual engine is more flexible because it can consume liquefied natural gas (LNG) as other marine fuels but the initial investment is more expensive. On the other hand, the use of scrubbers enables the use of marine fuels with high sulphur content in Emission Control Areas (ECAs), these marine fuels are usually cheaper also we consider Selective Catalytic Reduction technology (SCR) in all cases to minimize NOx. The paper calibrates a stochastic model for LNG and determines four marine fuel correlated prices. The work also considers a possible regulatory change from a non ECA to an ECA in the future. When we aggregate the installation costs to the present value of the expected combustible cost under uncertainty we can select the cheapest alternative. We obtain a minimum of expected present value of investment and fuels cost of 25.62 million US$ with a Dual engine with scrubber configuration. Our work shows that, in the cases considered, the use of a dual engine is the best alternative minimizing the total of investment and fuel costs. Finally, we analyse the distribution of fuel cost and its associated risks.