Assessing flexible offshore construction vessel designs combining real options and epoch-era analysis
Journal article, Peer reviewed
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OriginalversjonShip Technology Research. 2017, 64 (2), 76-86. 10.1080/09377255.2017.1334311
Recent events in offshore oil and gas markets show the need for elaborate treatments of uncertainty throughout the design process and lifecycle management of maritime engineering systems. Offshore construction vessels are subject to uncertainty stemming from both economic factors modelled as stochastic processes, and from discrete factors like regulations and contract requirements. We present a simulation framework for valuation of flexible offshore construction vessels incorporating real options analysis and epoch-era analysis. Based on compliance with a set of contracts and the potential revenue to be earned from these contracts, the model maximizes expected net present value for each contract period. Benchmarking a flexible design of an offshore construction vessel against an inflexible design, we estimate the value of flexibility and find strategies for managing the design through the lifecycle. The results show that significant gains in the value of the vessel result when design changes are taken into account.