Ships with Korean-made LNG containment face key supply chain disruptions
The industry analysts estimate repairing the ship will take at least 18 months
A vessel owned by an SM Group subsidiary, equipped with the KC-1, a South Korean-made liquefied natural gas (LNG) cargo containment system, was damaged in an accident. However, the restoration process faces obstacles due to disruptions in the equipment supply chain. The KC-1 was developed ambitiously by the South Korean government, Korea Gas Corporation (Kogas), and the domestic shipbuilding industry. The ongoing accidents of vessels applied with the KC-1 persist following the case of two large LNG carriers owned by SK Shipping, which incurred high costs but remained unused due to design flaws after construction, The CHOSUN Daily reported.
According to the shipping industry, on Feb. 25, an LNG carrier, SM JEJU LNG1, belonging to Korea Line LNG, affiliated with SM Korealine, collided with a cargo vessel in the early morning hours of Feb. 17 close to Yeoseo Island Wando-gun, South Jeollanam-do in South Korea. SM JEJU LNG1, the first KC-1-equipped vessel to be put into commercial service, is a 7,500-CBM LNGC. Since 2019, the Kogas-chartered tanker has transported LNG between Tongyeong, Gyeongsangnam-do, and Aewol-ro, Jeju Island.
SM JEJU LNG1′s right containment system was damaged in the accident, resulting in seawater entering the damaged system, which required extensive repairs. SM Korealine has contacted Samsung Heavy Industries (SHI) for the ship’s repair, yet estimating the time and cost proves challenging. This difficulty arises from the supply chain collapse for crucial equipment required for the KC-1 containment system.
Norwegian company TMC Compressors (TMC), the sole membrane supplier for the KC-1 containment system, ceased membrane production after SM JEJU LNG2. They also disposed of key assets necessary for mass production, such as molds. The company believed it would be difficult to secure additional contracts due to the controversy over design flaws in SK Shipping’s large LNG carriers, and there were no orders after that.
SHI has recently secured many LNG carriers and is facing a shipbuilding capacity shortage, making it difficult to find space to repair the wrecked vessels. The industry analysts estimate repairing the ship will take at least 18 months.
Cost is another significant concern. If customized production is necessary for discontinued materials required for SM JEJU LNG1′s repair, expenses could escalate sharply. Furthermore, if repair expenses become excessively high while SM Korealine is responsible for covering the replacement ship usage fee, there is a chance that the shipowner may decide to scrape SM JEJU LNG1 and sell it for scrap metal.
South Korean-designed LNG cargo containment system
The LNG cargo containment system for ships represents a sophisticated technology, as it must endure the force of tens of thousands of tons of ultra-cold liquid cargo moving with the ocean’s waves and impacting the tank. GTT, the French company holding the patent for the LNG containment system, receives approximately 10 billion won (about $7,264,274) in royalties per ship from companies utilizing the technology. Korea Gas Corporation collaborated with domestic shipbuilders from 2004 to 2014 to develop the LNG containment system (KC-1) and localize the technology. However, it has not been utilized for commercial operations due to confirmed functional abnormalities.