News & Media

24 October, 2019

LNG Market News - Japan

(Source: Japan Maritime Daily 02/Oct/2019)

Tokyo Gas President Takashi Uchida Changes Expectations for LNG

"I think the expectation for LNG (liquefied natural gas) remains unchanged"
Tokyo Gas will celebrate the 50 year anniversary of its introduction of LNG in November. Looking ahead to the next 50 years, he answered a question about the difference between the roles of past and future LNG.
"But the content of what is expected will change." he said, pointing to environmental friendliness, economic efficiency and stable supply.
"Environmental performance changes from air pollution to climate change" he said, adding, "It is also necessary to complement the unstable supply of renewable energy.".

(Source: Japan Maritime Daily 03/Oct/2019)

Kawasaki Heavy Industries aims at LNG carriers and large-scale business negotiations. Construction is planned at Sakaide Plant and DACKS

Kawasaki Heavy Industries plans to meet the demand for large scale new construction of LNG (liquefied natural gas) vessels with its Sakaide shipyard (Sakaide City, Kagawa Prefecture), which specializes in constructing gas vessels, and with a joint shipyard in China "DACKS (Dalian City, Dalian COSCO KHI Ship Engineering and Liaoning Province)". The move is aimed at strengthening the company's cost competitiveness and dealing with the construction of large lots. Kawasaki had a plan to build LNG carrier Series No. 1 at the Sakaide Works and subsequent ships in China after No. 2. The move comes at a time when LNG carrier is in talks on large-scale projects, including a project to build up to 100 ships in the Middle East and Qatar.
"Medium Total 2019" Yoshinori Mochida Managing Executive Officer President Ship & Offshore Structure Company said at a meeting in Tokyo on Feb. 2.

In the marine business, the company is strengthening the integrated operation of 2 Chinese joint shipyards of NACKS (Nantong City, Jiangsu Province, Nantong COSCO KHI Ship Engineering) and DACKS and domestic shipyards in line with the structural reform.
As part of the project, the company will start studying the feasibility of providing DACKS with LNG carrier 's construction technology at its Sakaide plant. With DACKS as (Mochida clan) "independent LNG carrier construction yard that manufactures its own tanks", the company aims to secure orders for gas vessels.

The Qatari expansion and Mozambique LNG projects are in the process of being selected as LNG carrier LNG yards after bidding. Although Kawasaki Heavy has not disclosed how it will deal with the situation, it is possible that the company is using the "Sakaide Plant + DACKS" scheme announced this time, as many domestic shipyards are withholding bids.
The Sakaide Plant has strengthened its function as a mother yard for gas ships. The company will provide LPG (liquefied petroleum gas) shipbuilding technology to NACKS, which will take over projects in China. Due to the shift of gas ship construction to China, "grab market share from South Korea and seek 30 ~ 40% global share in LNG carrier and 20 ~ 30% in LPG carrier" the official said.

The company set sales targets for fiscal 2021 at 90 billion yen, up 14% from fiscal 2018, at 3 billion yen, up 3 times for operating profit, and at 230 billion yen, up 28% for the entire group, including NACKS and DACKS.
"Japanese lamps" [Explanation] "to make it more cost competitive and make it easier to build larger lots." he said. Mochida said the company aims to build two shipyards in LNG carrier, one in Sakaide and the other in China's "DACKS" a joint venture with COSCO.
First, cost competitiveness.

The value of newly built ships in LNG carrier has recovered from last year's low of about $180 million and is on an upward trend, with recent contracts centered around $190 million. However, in negotiations for a newly-built LNG carrier Qatari and Mozambican projects, the South Korean shipyard will likely "offering a price that is unbelievable to be profitable" (Shipbuilding industry in Japan).
The Sakaide plant has the world's most advanced technology in the construction of gas ships. However, Kawashige concluded that the plant "Can't compete with Korean shipyards in terms of cost" and (Mochida clan) amid intensifying competition. In addition to the Sakaide plant, DACKS, which is as cost competitive as the Korean shipyard, decided to build LNG carrier.

"Labor costs are on the rise in China, but still far from Korea." Mochida said, expressing confidence in the combination of DACKS's cost competitiveness and the Sakaide plant's technology.
Another aim is to accommodate large lots. Shipyards that can build only small LNG carrier lots are "there are cases in which a bidder is not even qualified to bid" the official said.
Kawasaki Heavy will build the two plants in Sakaide and DACKS, according to the sources. "Ability to accommodate large lot inquiries and reduce overall building costs".
In March, DACKS opened its second dock, 550 meters long and 68 meters wide. The company plans to double its production capacity in fiscal 2022 from the fiscal 2017 level. As a result, DACKS, which was established in 7, will have the same construction capacity as NACKS, which was established in 1995.

In 13, Kawasaki Heavy presented a plan to meet growing demand for shale gas in LNG carrier with the Sakaide Plant and NACKS.
However, the "yard to build LNG carrier with the Sakaide Plant" indicated in the new plan was not NACKS, which has a high building capacity, but DACKS, which is currently under construction.
One of the reasons for this is that "Tighter environmental regulations in the Yangtze River basin, where NACKS is located, have made it difficult to build a large LNG carrier". Some factories in the area may be forced to relocate because of the Chinese government's greening plan, and NACKS may restrict the use of the pier in the future.
"DACKS was originally more suitable for building large ships" the official said. Traffic to and from the open ocean is restricted at NACKS due to restrictions on the flow of water through the mouth of the Yangtze River. On the other hand, DACKS, which is located on the coast of Bo Hai Bay, has no such restriction.

The Mochida clan said that if the influence of the ban on the use of the quay did not increase, it would "may be built at NACKS" for small and medium-sized LNG carrier firms.
Kawasaki Heavy is shifting the focus of its merchant ship business to two joint shipyards in China in line with the restructuring of its entire marine business. Under such circumstances, is it possible that LNG carrier will build all of the cars with DACKS, which is superior in cost competitiveness?

"The No. 1 vessel in the series will be built at the Sakaide plant, which has a long history and track record of building LNG carrier. In general, Vessel No. 1 is prone to unforeseen troubles, but even if a problem does occur, the Sakaide Plant, which has extensive construction know-how, will solve the problem and construct Vessel No. 2 and subsequent vessels in China. This is the best system at the moment."
As a mother factory, the Sakaide plant will further refine its shipbuilding and production management techniques, he said. He added:. (YĆ«suke Matsushita) "In my opinion, the Japanese shipyard, the world's largest LNG importer, should not turn off the lights of LNG carrier. But since companies are doing construction as a business, if there is no profit, there is no guarantee that they can continue."