Industry shifts to cleaner, more efficient carriers

Joerg Beiler, vice-president of Det Norske Veritas, oversees the Chinese markert. [Provided to China Daily]

China's shipbuilding industry is changing course as liquefied natural gas ships are set to be the next gold mine amid rising concerns over the marine environment and government initiatives.

Shipbuilders have new challenges under China's 12th Five-Year Plan (2011-2015) that requires shipbuilders to accelerate upgrading the technical content of bulk carriers, oil tankers and container ships. The new direction for the industry focuses on developing ships that use LNG and liquefied petroleum gas as fuel.

The benefits of natural gas over oil-based fuels are well-known; LNG is cheaper and cuts down on carbon emissions, which harm the environment.

Jiangsu-based Tsujiu Heavy Industries Co Ltd signed a deal in October to build two LNG ships for Nor Lines, a Norwegian shipping and logistic company. The deal, worth about $90 million (67.8 million euros), marks the first overseas order of LNG ships to be built by a Chinese company. Two multipurpose cargo vessels are expected to be delivered in October 2013 and will be used in Norway's coastal region.

Norway's Det Norske Veritas, one of the world's largest risk management companies, will provide technical support, quality control and classification for the ships. In 2000, DNV developed its first classification rules for gas-fueled ships and participated in the construction of the world's first LNG ferry.

Joerg Beiler, vice-president and area chair for greater China of DNV, says China is an appealing market for selling the company's services.

"Most LNG ships are being designed and used in Norway, where we come from. We are trying to transfer our knowledge and experience through training courses, workshops and daily involvement in technical support at our cooperating shipyards in China," Beiler says.

DNV established a technical advisory service center in Shanghai in November to offer services to its cooperating shipyards to build energy-efficient ships and offshore engineering products.

LNG ships are a good alternative to oil- and coal-fueled ships amid rising environmental concerns, in particular, in the inland waterways and coastal areas in China, says Wang Jinlian, secretary-general of the China Association of the National Shipbuilding Industry.

Chinese shipbuilders are also preparing for shipping emission curbs. The United Nation's international maritime organization announced last year that it will force all ships weighing more than 400 tons and built after 2013 to reduce their emissions output by 10 percent. That number will rise to 20 percent between 2020 and 2024.

"European and North American short sea shipping is facing environmental regulations, which will make LNG ships the preferred choice both from environment and economic aspects," Beiler says. "Chinese shipyards definitely have the opportunity to sell LNG ships to those markets."

This could be a big chance for many Chinese shipyards to escape from a declining global ship market by developing LNG ships because foreign shipping companies are more interested in ships that help them save money now, in particular saving fuel, which is costly in the shipbuilding business.

"With China's already existing LNG infrastructure, it would be feasible to set up an economically viable distribution system that suits the developing demand for the nation's shipping industry," Beiler says.

Zhao Ying, a professor at the Institute of Industrial Economics of the Chinese Academy of Social Sciences in Beijing, says China should strengthen LNG tank construction at import terminals for further distribution and adopt small LNG carriers for short sailing distances.

"From the long term view, LNG ships will be widely used in China for multipurposes," Zhao says. "Even though higher investment cost is a challenge for the LNG option, this is more than offset by fuel-saving costs over the lifecycle of a ship."

Elisabeth Harstad, managing director of DNV's research and innovation unit, says there could be other options besides LNG.

"It is likely that we will see the application of more environmental friendly fuels like LNG and to a lesser degree bio fuels," she says. "Nuclear might also come into play beyond 2020 but will initially struggle to get public acceptance."

Today, the fleet of LNG-fueled ships has grown to 22 in the world, covering ferries, offshore supplies and coast guard vessels. A total of 18 ships are in the process of being built, of which three ships are due for conversion from conventional fuel to LNG, according to the data provided by DNV.