Challenges to the containment establishment provokes competition in the large LNG carrier sector, an issue that has not troubled the smaller sectors, notes Small LNG Shipping principal, Eduardo Perez Orue
“Nobody ever got fired for buying IBM” is an unattributed, very popular saying in some business circles, and it has been kicking around for a long time.
The idea here is simple and powerful: IBM had such a solid reputation that it used to be a safe bet for buying hardware, a good buying decision that would allow you to, at least, retain your job because the probability of anyone blaming any problem or mistake on the IBM hardware was so remote.
Translating this idea to LNG shipping, we can probably jokingly (or not) say “Nobody ever got fired for buying GTT membrane tanks”. The company has a strong presence in the LNG shipping containment systems market and is a reliable solution that guarantees smooth sailing for new tonnage.
This comes at a cost: the cost of depending on the technology of one single company and the economic cost of using such technology. That is the reason why several South Korean shipyards have been looking into developing alternatives for quite some time now: KC-1, developed by KOGAS with South Korean shipyards, Solidus by Daewoo Shipbuilding & Marine Engineering and KCS by Samsung Heavy Industries.
All of them have struggled to make a dent in GTT’s lucrative market share. In fact, Kogas reportedly lost US$150M with the KC-1 LNG tanks, and now has evolved them into the KC-2 system.
There have been other companies looking at this market, like LNT Marine with its LNT A-BOX that “uses independent self-supporting prismatic IMO type A tanks”. In fact, it managed to get a ship equipped with its containment system: 45,000-m3 LNG Jia Xing, originally Saga Dawn, trading in Asia from 2020.
Interestingly enough, the small-scale LNG shipping market is totally different. There, in ships below the 40,000 m3 of storage capacity, the dominant containment system is the one using Type C tanks. Type C tanks are insulated cylindrical shaped tanks that can be fully or partially pressurised and that are relatively cheap and easy to build all around the world. There is no royalty associated with them and they can be built using the new bilobe or trilobe designs to increase their storage capacity using similar space in the hull of the ship.
These tanks also have a huge advantage versus membrane systems: small LNG carriers using Type C tanks can easily carry other compatible products like ethylene, butadiene, LPG and other petrochemicals, providing a long-term flexibility to shipowners that does not exist with other systems. All this works well in small LNG carriers but it is not easily translated to other tonnage because the shape of the tanks makes it difficult to fit in bigger ships.
From the outside, GTT looks like a solid company with a solid product that is not easy to replicate and that has managed to provide a reasonably reliable solution to shipowners. As I playfully mentioned in the title, choosing its containment system has high chances of success for anyone taking the decision, but that decision comes at a cost. Therefore, challengers have a huge incentive to enter this lucrative market and some have the technology and will to do so in a very competitive manner.
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