Financial performance of shipping firms that increase LNG carriers and the support of eco-innovation

Abstract

The technology to liquefy natural gas for transport to countries worldwide and the increasing use of natural gas as a cleaner fossil fuel for industry and household meant that the supply of liquified natural gas (LNG) worldwide is a profitable trend. Shipping companies can strategically choose to diversify into LNG fleet to grasp this trend. By supplying more LNG shipping capacities, the greater availability of LNG worldwide, as a source of marine fuel and as a source of cleaner energy in replacing coal and oil, is supporting eco-innovation. In this paper, we investigate three economic and financial benefits to a shipping firm that diversified into liquefied natural gas (LNG) shipping, namely firm profitability performance, firm efficiency, and stock return performance. We also investigate if there is an early mover advantage in doing so. Our empirical findings indicate that fleet diversification into LNG carriers resulted in higher profitability and better operational efficiency. For the listed shipping firms, their stock returns increased with diversified exposures to the LNG business. There is some evidence of higher profitability in the early mover advantage. Firms that originated in LNG business also benefited when there was diversification into the non-LNG business.

Policy approaches to mitigate in-use methane emissions from natural gas use as a marine fuel

“…However, in 2018, the Norwegian government removed the carbon tax exemption on LNG as a marine fuel for Norwegian-registered vessels, making the fuel there 25% more expensive than conventional marine diesel fuels [37]. Globally, while making LNG-related investments, shipping companies consider low-risk profitability in the short-term and long-term environmental regulatory targets [11]. Since LNG as a marine fuel meets all the current and upcoming NO x and SO x emissions standards, and CO 2 -intensity-based energy efficiency design index (EEDI) regulations mandated by the IMO, it makes for a solid business proposition [10,11].…”

“…Globally, while making LNG-related investments, shipping companies consider low-risk profitability in the short-term and long-term environmental regulatory targets [11]. Since LNG as a marine fuel meets all the current and upcoming NO x and SO x emissions standards, and CO 2 -intensity-based energy efficiency design index (EEDI) regulations mandated by the IMO, it makes for a solid business proposition [10,11].…”

“…LNG geopolitics sustained by the shale boom, liquefaction technology and LNG infrastructure advancements, and LNG demand, are primarily facilitated by LNGCs [7,12,13]. Shipping companies and shipowners are strategically choosing to diversify into the LNG business to grasp the profitable trend of the shale boom and global LNG trade, which is expected to increase by 21% by 2025 compared to 2019 [11,34]. This diversification is achieved in two ways: by increasing the LNGC fleet (including small-scale LNG bunkering and delivery vessels) and by introducing LNG-fueled ship(s) into the existing fleet [11].…”

“…It has lower CO 2 emissions per unit of energy than HFO, thereby meeting all the IMO emissions regulations [9,10]. The use of LNG as a marine fuel has grown substantially in the shipping industry, by 28%-30% from 2012 to 2018 [3], as its use is linked to a burgeoning and profitable LNG trade, while also supporting compliance with regulatory targets [11]. Factors contributing to this uptake include: a favorable regulatory environment at the IMO level; the US shale gas boom and subsequent shift in natural gas geopolitics; and technological advancements in LNG infrastructure, liquefaction, and dual-fuel gas engine concept [7,10,[12][13][14].…”

2019 World of Shipping Portugal. An International Research Conference on Maritime Affairs editorial “Leading the shipping industry into the future”

“…(Kretschmann 2020) presents a framework in order to design maritime risk models based on safetyrelated data collected onboard ships. (Lim and Lim 2020) analyse the financial performance of shipping companies that support of eco-innovation through the acquisition of LNG carriers. (Vierth and Johansson 2020) perform a comparative analysis of two alternative systems for environmentally differentiated fairway dues in Sweden in order to provide input to develop further environmentally differentiated fairway dues.…”