As the government signaled it will pursue domestic production of the liquefied natural gas (LNG) cargo containment system (KC-2) technology, expectations are rising in the shipbuilding industry. To transport LNG, it must be cooled to minus 163 Celsius, and the cargo containment system refers to the storage tank that holds it. The containment system is cited as a core element of the LNG carrier business, but because domestic production had not been achieved, Korean shipbuilders have paid hefty technology licensing fees to overseas firms.
According to the shipbuilding industry on the 29th, the Ministry of Trade, Industry and Resources said on the 22nd that it launched a public-private joint working group to review plans to localize LNG cargo containment systems, including new orders for national-flag vessels. The three shipbuilders had each developed cargo containment technologies, but had not properly commercialized them. In response, the government decided to support verification of the technologies developed by the shipbuilders and their expense and risks.
Samsung Heavy Industries independently developed a cargo containment technology and in Oct. first installed it on a 7,500㎥-class LNG carrier, successfully sailing from Tongyeong, South Gyeongsang, to Jeju. HD Hyundai Heavy Industries also applied its in-house cargo containment technology, KC-2B, to a mid-sized LNG bunkering vessel and completed a demonstration.
The problem was that this technology had not been applied to large vessels. Because there was no track record (order history) of large LNG carriers equipped with Korean shipbuilders' cargo containment technologies, shipowners were reluctant to place orders.
In the past, to localize cargo containment technology in Korea, Korea Gas Corporation (KOGAS) participated as the ordering party, SK Shipping as the operator, and Samsung Heavy Industries as the builder in a joint development of a large LNG carrier. This vessel, which adopted domestically developed cargo containment technology, completed development in 2015, but a "cold spot (icing caused by LNG carrier defects)" occurred immediately after departure. Even after investing 100 billion won and undergoing multiple repairs, the problem was not resolved, and the three parties have been engaged in legal disputes since 2019.
Another reason localization was difficult to push forward properly is the potential deterioration of relations with France's GTT, which monopolizes cargo containment technology for the global LNG carrier market. If disputes arise during the localization process, it becomes difficult to obtain cargo containment technology from GTT, and in that case, orders for LNG carriers are also more likely to be blocked.
All three domestic shipbuilders also use GTT's cargo containment technology. Last year, the three shipbuilders paid 995.4 billion won to GTT in cargo containment royalties for 52 LNG carriers. That is about 19.1 billion won per vessel.
GTT demands that Korean shipbuilders report all trial-and-error and technical elements from operations in return for providing cargo containment technology. It also opposes international waters operations by LNG carriers equipped with domestically developed cargo containment technology.
Rhe Shin Hyung, a professor in the Department of Naval Architecture and Ocean Engineering at Seoul National University, said, "There was a time when the government pursued localization based on the KC-2 technology and it did not progress well," adding, "From ordering large national-flag vessels to apply the technology, to preparing for potential disputes with GTT after localization, strong government support is needed."