China catching up on South Korea for Russia's ice breaker Arctic LNG carrier orders.
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South Korea and China are competing for ice-breaking LNG carrier building contracts in Russia. Although South Korea is superior in shipbuilding technology, China is trying to catch up based on private-public cooperation and its investment in Russia’s LNG development project.
In Russia’s Arctic LNG 2 project,
China National Petroleum Corp. (
CNPC) and
China National Offshore Oil Corp. (
CNOOC) made a 10 percent investment in July last year. As a result,
Hudong-Zhonghua Shipbuilding has emerged as a promising candidate for the ice-breaking LNG carrier construction project. According to industry sources, the shipbuilder with rather limited technology could conclude a slot reservation agreement with Qatar Petroleum and win contracts for 16 LNG carriers in April this year because China proposed to purchase LNG from Qatar.
In Russia’s previous Yamal project for Arctic LNG development, China won export contracts for four LNG carriers and equipment by making an equity investment. In that project, Chinese shipping operators posted combined sales of US$8.5 billion and China’s material and equipment exports added up to US$7.6 billion. On the other hand, South Korea’s performance in that project was limited to the export of 15 ice-breaking LNG carriers.
These days, Chinese shipbuilders and shipping companies are expanding their cooperation with Japanese shipping operators that have invested in Arctic LNG 2. For example, Japan’s
MOL and China’s
CSET strengthened their LNG and ethanol transport partnership in August last year. In addition, Japan’s
MODEC and China’s
Dalian Consortium won an FPSO contract related to Australia’s Barossa gas field by beating
Samsung Heavy Industries.
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Now why Yamal so important? To give you a background, this peninsula in Russia is a major source of natural gas. However, its harsh location makes it difficult to transport LNG from it, and this requires a specialized ice breaking LNG carrier. CNPC does have a share in the project. It is smart for Russia to include Chinese shipbuilders in the project of making ice breaking LNG carriers because the potential threat of US sanction against Japanese and Korean shipbuilders from building ice breaking LNG carriers for Russia can cripple this vital project, know how much the US clamped down on the Nordstream pipeline. Its better to have a Chinese insurance card on hand. China itself is a major shipping customer for Yamal LNG.