Press digest

2019 July 3

S. Korean shipyards in race to win orders for Russia’s ice-breaking LNG carriers

South Korean shipbuilders are in a race to win orders for ice-breaking ships which would transport liquefied natural gas under Russia’s Arctic LNG 2 project, despite business risks caused by Russia’s proposal that construction should be done in its territory.

Russia, a major gas producer, aims to export LNG as much as Qatar. Russia’s second largest natural gas producer, Novatek, plans to start producing LNG at Arctic LNG 2 in Yamal in 2022~2023. The project is expected to require a number of ice-breaking LNG tankers.

According to shipbuilding industry sources, South Korean shipbuilders including Hyundai Heavy Industries (HHI), the world’s largest shipbuilder, and its new subsidiary, are aggressively seeking orders for the Yamal LNG project. Samsung Heavy Industries has teamed up with the Zvezda shipyard in the Russian Far East, to take part in designing icebreakers.

Analysts expressed concerns as Russia mandates the use of Russian-flagged ships to transport oil, natural gas and coal on Arctic sea routes. However, money at stake is too much to miss. Daewoo Shipbuilding & Marine Engineering’s 2014 order for an icebreaking LNG ship was worth $320 million.

“Russia, which lacks technical skills, has requested large-scale design staff as well as technical staff and construction personnel,” a banking official said. “It is almost impossible to meet delivery dates if they are built in Russia, and there is also a high concern of technology leaks.”

In 2019, South Korean shipbuilders anticipate a business recovery on solid demand for LNG carriers. They bagged orders to build 60 LNG carriers in 2018. Qatar, a major gas producer, has expressed its willingness to place multiple orders for the construction of LNG carriers at South Korean shipyards.