Identification and Valuation of Flexibility in Marine Systems Design

Marine systems, typically related to transport services and offshore petroleum projects, are often complex and involve a high degree of uncertainty related to their future operating context. Uncertain factors, such as oil prices and changing environmental regulations, are usually highly influential for the performance of these projects and introduce risks for investors in the capital-intensive maritime industry. This thesis investigates how flexibility can be considered at the design stage for handling uncertainty for marine systems, in contrast to traditional post-design operational methods. Flexibility opens up for both reducing the downside risk and taking advantage of upside possibilities, hence increasing the expected value of a design. Even though real options analysis represents an established approach for analysing flexibility, it may be inappropriate for more complex systems. To better structure options for marine systems design, a differentiation is made between more traditional, operational "on" options, and more complex, technical "in" options. Choosing the right method for analysis is ambiguous, therefore multiple approaches for identifying and valuing relevant flexibilities are discussed in this thesis. Identification methods include interviews and different systems engineering platforms for exploring how designs respond to changing contextual parameters. Valuation approaches include traditional analytical, lattice and Monte Carlo simulation methods for pricing real options, and more novel tradespace evaluation techniques. A generic framework for flexibility analysis is presented, serving as a stepwise approach to quantifying flexibility and as a means of communication between analysts and decision makers, both technical and non-technical. The flexibility analysis framework is illustrated through a case study of a large container ship design. By using screening methods to identify candidate flexibilities such as capacity expansion and fuel-switching, and Monte Carlo simulations for valuation, it was found that flexibility increases the profitability index by 27%, on a 200 million dollar investment. Furthermore, it was demonstrated that screening and simulation methods are appropriate for the use in design of large commercial deep-sea marine transportation systems. From an established real options valuation side, it is obvious that strategic flexibility has value, however, for non-standard applications typically involving complex "in" options, it is more ambiguous how to proceed. Even though system analysts recognise the value of flexibility, there is still a need for further research since flexibility rarely is seen in the maritime industry

Ship Design under Uncertainty

The purpose of this thesis is to develop knowledge to design better ships. More specifically, it concerns the development and application of effective methods and models for handling future contextual uncertainty in the early design stages. Furthermore, it investigates whether changeability in design can improve profitability by reducing risks and enabling upside opportunities. Changeability is the ability of a system to change form, function, or operation, and is a collective term for change-related system properties such as flexibility, adaptability, and agility. The work is motivated by three general characteristics of the maritime industry: high market uncertainty, capital-intensive projects, and long project time horizons. The thesis uses the design of an offshore construction vessel as a primary case. The thesis systematically addresses four research objectives (RO): 1.Develop models that effectively capture relevant aspects of the future uncertain operating context. 2.Define and quantify the level of changeability for a system. 3.Develop an understanding of technical tradeoffs for the realization of changeable ship design solutions. 4.Develop models to evaluate changeability in design – operationalizing the link between uncertainty, design variables, and operational strategies. The thesis supplements four main articles attached, and five supporting papers. The three contributions (C) of the research project are: 1.A framework for describing and quantifying changeable design alternatives, applicable to ship design as well as engineering design in general. 2.An assessment of the applicability of methods and models for handling uncertainty in ship design, primarily from the real options and systems engineering domains. 3.An identification of potentially valuable changeable ship design solutions, specifically being “prepared for retrofits” for two cases: fuel flexibility for transport ships and mission flexibility for non-transport vessels

Sulphur Abatement Globally in Maritime Shipping

In 2016, the International Maritime Organization (IMO) decided on global regulations to reduce sulphur emissions to air from maritime shipping starting 2020. The regulation implies that ships can continue to use residual fuels with a high sulphur content, such as heavy fuel oil (HFO), if they employ scrubbers to desulphurise the exhaust gases. Alternatively, they can use fuels with less than 0.5% sulphur, such as desulphurised HFO, distillates (diesel) or liquefied natural gas (LNG). The options of lighter fuels and desulphurisation entail costs, including higher energy consumption at refineries, and the present study identifies and compares compliance options as a function of ship type and operational patterns. The results indicate distillates as an attractive option for smaller vessels, while scrubbers will be an attractive option for larger vessels. For all vessels, apart from the largest fuel consumers, residual fuels desulphurised to less than 0.5 % sulphur are also a competing abatement option. Moreover, we analyse the interaction between global SOX reductions and CO2 (and fuel consumption), and the results indicate that the higher fuel cost for distillates will motivate shippers to lower speeds, which will offset the increased CO2 emissions at the refineries. Scrubbers, in contrast, will raise speeds and CO2 emissions.acceptedVersio

Sulphur Abatement Globally in Maritime Shipping

In 2016, the International Maritime Organization (IMO) decided on global regulations to reduce sulphur emissions to air from maritime shipping starting 2020. The regulation implies that ships can continue to use residual fuels with a high sulphur content, such as heavy fuel oil (HFO), if they employ scrubbers to desulphurise the exhaust gases. Alternatively, they can use fuels with less than 0.5% sulphur, such as desulphurised HFO, distillates (diesel) or liquefied natural gas (LNG). The options of lighter fuels and desulphurisation entail costs, including higher energy consumption at refineries, and the present study identifies and compares compliance options as a function of ship type and operational patterns. The results indicate distillates as an attractive option for smaller vessels, while scrubbers will be an attractive option for larger vessels. For all vessels, apart from the largest fuel consumers, residual fuels desulphurised to less than 0.5% sulphur are also a competing abatement option. Moreover, we analyse the interaction between global SOX reductions and CO2 (and fuel consumption), and the results indicate that the higher fuel cost for distillates will motivate shippers to lower speeds, which will offset the increased CO2 emissions at the refineries. Scrubbers, in contrast, will raise speeds and CO2 emissions

Handling commercial, operational and technical uncertainty in early stage offshore ship design

In this paper, we assess state-of-the-art methods for handling aspects of technical, commercial and operational uncertainty in the early stages of offshore ship design. Uncertainty affects the lifecycle performance of a ship in a complex manner, which is difficult to assess in the early design process. We approach this problem by decomposing uncertainty into technical, commercial and operational aspects, and investigate how it can be identified, modelled and handled. Methods discussed include design structure matrix, tradespace exploration and evaluation methods, real options theory, stochastic optimization, and system dynamics. Strategies for handling uncertainty discussed include margins, and specific system lifecycle properties “-ilities”. We argue that a decomposition of uncertainty facilitates the use of current methods and approaches for decision-making in early stage ship design

Investigating tradeoffs between performance, cost and flexibility for reconfigurable offshore ships

This paper investigates tradeoffs between technical performance, cost and flexibility level for reconfigurable offshore ships. An offshore ship can be configured with various types of equipment; thus, its base structure constitutes a platform from which several end ship design configurations can be derived. A ship with equipment retrofit flexibility will typically have excess stability, deadweight and deck area to ensure physical compatibility. However, there are complex system interactions that need consideration, such as the effects of flexibility on cost and technical performance. To tackle this problem, we capture technical performance using a multi-attribute utility function, based on a ship's capability, capacity and operability, and utilize a tradespace representation of the system to quantify flexibility using the filtered outdegree metric. Findings indicate that increased platform flexibility does increase capacity, but comes at a complex compromise with operability as resistance is increased, and roll periods become unfavorable due to high accelerations. Furthermore, the analysis confirms the applicability of multi-attribute utility, tradespace exploration and filtered outdegree for understanding the implications of flexible offshore ships

Investigating feasibility of flexible ship concepts using tradespace network formulations

In this paper, we investigate the technical feasibility of flexible offshore ship design concepts with respect to retrofits. Flexibility is intended to improve performance, but there are often complex system interactions that are difficult to assess at the early design stage related to stability, resistance, hydrodynamic behavior and payload capacity. These aspects need to be understood and assessed at the conceptual stages. In this paper, we develop a tradespace network model and define transition rules to describe feasible retrofits. A multi-criteria utility function is used to assess the tradeoff between performance and cost. We demonstrate our approach using a case from offshore vessel design, where we investigate the feasibility and impact of retrofits. The low-fidelity quantitative analysis indicates that the beam is the least flexible design parameter. This knowledge can be important when defining a flexible marine platform “prepared” for future retrofits

Versatility vs. retrofittability tradeoff in design of non-transport vessels

In this paper, we study the relationship between economic performance and flexibility for non-transport vessels. More specifically, we investigate the difference between two means of achieving flexibility: retrofittability and versatility, i.e., the ability of a vessel to satisfy diverse needs with or without change of physical form, respectively. A model is presented to study this relationship, where we first generate design alternatives with relevant, flexible properties before we subsequently evaluate the design alternatives based on their expected discounted economic lifecycle performance. The evaluation model is based on a two-level decomposition of the planning horizon to handle temporal complexity, using scenario planning and Epoch-Era analysis (EEA) for long-term strategic considerations, and Monte Carlo simulation and optimization for medium-term tactical ship deployment. The proposed model is applied to an offshore construction ship design case. Findings indicate that retrofittability can increase economic performance significantly for non-transport vessels operating in an uncertain heterogeneous context. Keyword: Ship design; Retrofittability; Versatility; Flexibility; Uncertaint

Combining design and strategy in offshore shipping

This paper presents the design-strategy planning (DSP) procedure as a framework that integrates life cycle strategies of a ship into the early stages of the design process. We argue that understanding strategic, tactical, and operational aspects is essential when it comes to design of complex systems under uncertainty. Unfortunately, these are often neglected in ship design today. Using a Markov Decision Process Methodology, we demonstrate the insight gained from the concurrent exploration of system configurations and strategies, to better understand what to do when in the operational phase of the lifecycle. A case study is presented, where different tactical strategies of an offshore vessel are characterized. The results indicate that there are significant advantages in explicitly addressing ship owner strategy through DSP, when designing offshore support vessels that may be reconfigured in their lifetime

Ill-Structured Commercial Ship Design Problems: The Responsive System Comparison Method on an Offshore Vessel Case

In this paper, we address difficulties in ill-structured ship design problems. We focus on issues related to evaluation of commercial system performance, involving perceptions of value, risk, and time, to better understand trade-offs at the early design stages. Further, this paper presents a two-stakeholder offshore ship design problem. The Responsive Systems Comparison (RSC) method is applied to the case to untangle complexity, and to address how one can structure the problem of handling future contextual uncertainty to ensure value robustness. Focus is on alignment of business strategies of the two stakeholders with design decisions through exploration and evaluation of the design space. Uncertainties potentially jeopardizing the value propositions are explicitly considered using epoch-era analysis. The case study demonstrates the usefulness of the RSC method for structuring ill-structured design problems