relatively few shipbuilders are capable of building them—only 12 yards in five countries have engaged in the construction of these tankers since 1980. They are also a very high-value-added product, typically costing $250 million, or three times the cost of a crude oil carrier of similar tonnage. Japanese companies are very prominent in this market (see Table B-1); however, managers at Newport News believe that their firm’s experience in building technologically advanced warships makes it well suited to the construction of LNG tankers as well.

The high cost and complexity of LNG tankers is a result of the advanced containment systems necessary to transport liquified natural gas. The system must control the temperature of the cargo as well as the amount of natural gas that is allowed to “boil off” during transport. This gas is collected and used to power the ship. The four systems currently used in LNG tanker construction are the Technigaz Mark III system, the Gaz Transport system, the Kvaerner-Moss Spherical system, and the SPB system developed by Ishikawajima-Harima Heavy Industries (IHI). The Kvaerner-Moss Spherical system is the most widely used, equipping approximately half the world’s LNG tanker fleet. As Newport News prepared to reenter the LNG tanker market, however, it was primarily interested in IHI’s SPB system because of operational advantages and because its prismatic shape simplifies design and production, allowing ships to be produced at a lower cost.

The liquified natural gas market itself is concentrated primarily among a few Asian and European countries. Japan is by far the largest importer, followed by France, Spain, Korea, Taiwan, and the United Kingdom. The United States also purchases significant amounts of LNG, but trade is considered less profitable because of domestic availability. The primary advantage of LNG for countries such as Japan is that it is a relatively clean fuel and is often used in power generation. The demand for LNG is closely correlated with the price of oil. In recent years the low price of crude oil has been a major factor in depressed demand for LNG and associated

TABLE B-1 Nations Formerly and Currently Building Liquified Natural Gas Tankers

 

Yards Building LNG Tankersa

Ships Constructedb

Year of Last Delivery

France

5

31

1994

Japan

5

28

1994

Republic of Korea

2

4

1994

United States

2

13

1980

Sweden

1

3

1984

Denmark

1

7

1977

Italy

1

2

1970

Belgium

1

1

1978

Germany

1

1

1977

Spain

1

1

1970

United Kingdom

1

1

1964

aIncludes yards that have built LNG ships in the past but no longer do so.

bIncludes ships under construction or ships for which a contract has been awarded.

SOURCE: Newport News Shipbuilding and Drydock Company.



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