⊗

In the lexicon of climate change jargon, the term ‘stranded assets’ has become increasingly common this past year. Simply defined as something which once had a value or produced an income but which no longer does, assets become ‘stranded’ usually due to an external change from technology, regulation or behaviour. Whilst it has become an increasingly used term particularly with regards to the oil and gas industry, stranded assets have been with us for generations and you have plenty in your home. Whether it be the VHS player, old cameras, the record player or a host of other domestic appliances, the march of technology has seen what many of us thought was ‘cutting edge’ when we spent our hard-earned cash on it become obsolete and gathering dust, never to be used again. “We are now putting a final end to the fossil era,” said Denmark’s climate minister, Dan Jorgensen, earlier this month on announcing that no new oil and gas exploration would be permitted in Danish waters and that fossil fuel extraction would be phased out in the next 30 years. In the same week, oil majors Chevron and Exxon both announced their capital spending budgets for next year will be slashed by up to 26%. That suggests an awful lot of fossil fuels that are likely to be left in the ground and no matter how much oil companies proclaim they are moving ‘beyond petroleum’, there is still a huge amount of capital tied up in fossil fuel assets. Stranded assets have been with us for generations and you have plenty in your home It could be argued that the environmental lobby has found a new weapon in combating investment in non-renewable energy projects. By stressing the risk shareholders and investors are taking by investing in companies whose value could be massively reduced if enough governments manage to unite to make good on the targets they have set for cutting greenhouse emissions, this could be a far quicker way to curb investment and meet targets than waiting for legislation to grind through the corridors of power. It’s less than a decade since we had the massive investment in drillships on the back of high oil prices. This was a time when many traditional owners of tankers and bulk carriers went scurrying off to the shipyards to order hugely expensive offshore vessels whose only thing in common with their traditional businesses was that the asset floated. Much of that ended in tears, with many of those assets ‘stranded’ at shipyards long after their scheduled delivery dates. The talk of stranded assets in recent weeks has mainly centered around oil exploration leases and the sophisticated technology needed to extract oil, such as the aforementioned drillships. Will conventional shipping be hit just as hard? EnTrust Global’s recent $2.1bn fund raising for cleaner newbuildings is further evidence of the increasing awareness that the industry has to change direction, but as Julian Proctor, one of the drivers behind the fundraising, commented there is inadequate financing for the industry to move to a cleaner, more advanced technology. With the newbuilding orderbook at historic low levels across several of the main shipping sectors, our industry may be hard-pressed to meet the new green agenda. For those who have taken the plunge and ordered ships which they believe will be socially and environmentally acceptable, let’s hope they have got it right. For the owners still waiting for clarity on what is the right propulsion systems for the future, let’s hope the low supply of new ships allows them to make enough money from their existing fleets to finance the future before they, too, become stranded.

Don’t get stranded

The unstoppable march to a green venture has taken a new twist in recent weeks. Our special correspondent asks if shipping is about to get stranded

⊗

To continue reading, please login below or subscribe here.

Read Next

Owners advised to cash in

Measuring shipping hubs

April 2024 Review

The on/off risk premium for tankers

Curse of the dry cargo optimist

Owners advised to cash in

Measuring shipping hubs

April 2024 Review

The on/off risk premium for tankers

Curse of the dry cargo optimist

Maritime CEO Forum Singapore

Maritime CEO Forum Monaco

Advertising

Press Releases

Splash

Splash Extra

Splash Special Reports