Seoul to back construction of LNG-fuelled ships in 2018

The Korean government wants to reduce the cost of building LNG-fuelled vessels. Credit: Getty Images
The Korean government wants to reduce the cost of building LNG-fuelled vessels. Credit: Getty Images

The South Korean government will support the orders of LNG-powered newbuildings in 2018 as part of a wider move to develop LNG bunkering and to revive the troubled shipbuilding industry, the Ministry of Oceans and Fisheries (MOF) has announced.

MOF on 12 December said that given the high investment costs involved in building LNG-fuelled vessels, the government, cargo owners, shipowners, and state-backed LNG importer Korea Gas Corporation, have to work together.

Officials from MOF and the Ministry of Trade, Industry, and Energy (MOTIE) will sign a collaboration agreement with other industry stakeholders on 13 December, during the fourth annual meeting of the LNG Promotion Industry.

These other stakeholders comprise H-Line Shipping, POSCO Terminal Co Ltd, KOGAS, and Korea South-East Power.

The parties will thereafter conduct a feasibility study of the design and construction of an LNG-fuelled 80,000 dwt bulk carrier. If all goes well, H-Line Shipping would commission a bulk carrier newbuilding of this design in 2018.

The government and other relevant agencies will prepare measures to alleviate the costs of LNG-fuelled bulkers, which cost 20% more to build due to the need to install LNG tanks.

South Korea and various Asian countries are keen to launch LNG bunkering ahead of the International Maritime Organization’s implementation of a global sulphur cap of 0.5% in marine fuels in 2020.

Due to the significant investment costs needed to facilitate LNG bunkering, from the infrastructure to the end-user, governments have had to provide subsidies.

In September the MOF and MOTIE, together with steel mill POSCO, KOGAS, Korean Register of Shipping, Korea Development Bank, Korea LNG Bunkering Industry Association, and Korea Research Institute of Ships & Ocean Engineering, signed a similar agreement to explore the design and construction of a 180,000 dwt LNG-fuelled bulk carrier.

Currently there is just one LNG-fuelled vessel operating in South Korea: Econuri, a cleaning vessel plying Incheon port.

A 50,000 dwt LNG-fuelled bulk carrier, Ilshin Green Iris, is now under construction at Hyundai Mipo Dockyard. Upon delivery, Ilshin Shipping will charter the vessel for a long period to POSCO. This is the first LNG-fuelled merchant ship to be built with Seoul’s support.

MOF’s head of ocean policy, Cho Seung-hwan, said, “This agreement will be an important opportunity to promote the introduction of the LNG carrier in Korea, together with the pilot project for the introduction of the 180,000 dwt LNG-fuelled bulk carrier. We will actively co-operate with industry such as cargo owners and shipping companies that have signed the agreement to introduce LNG-powered vessels.”