OREANDA-NEWS. July 26, 2011. China, already the world's biggest shipbuilder, has moved into the top ranks of the business by winning its first overseas order for liquefied natural gas (LNG) carriers.

Shanghai's Hudong-Zhonghua Shipbuilding, a subsidiary of China State Shipbuilding Corp, signed formal orders last week for four LNG carriers worth in total more than USD 1 billion from joint ventures of Japan's Mitsui OSK Lines (MOL) and China Shipping Development. The ships, each of which will carry 172,000 cubic meters of LNG, will transport gas from Australia and Papua New Guinea to China, according to Hong Kong-listed China Shipping Development.

"LNG carriers represent the highest shipbuilding technology in the world, since they must be equipped with tanks that can withstand extremely low temperatures," said Wang Liqun, professor at the department of Polymer Science and Engineering of Zhejiang University. "The success of Hudong-Zhonghua receiving its first overseas order provides international recognition of China's improving technology in the area and also lays the foundation for the country to have a greater presence in the global and domestic market."

China in 2010 passed South Korea to become the top shipbuilder in terms of number of vessels produced. The first export order for LNG carriers is a milestone recognition of China's progress in terms of quality design and production. Until now, only South Korea, Japan, European countries - France, Italy, Finland, Norway, Spain and Sweden - and the United States have been capable of building such ships.

Hudong-Zhonghua started researching LNG carrier design and manufacturing technology in 1997. In 2003, the yard received its first order to build LNG carriers from China Ocean Shipping (Cosco) and China Merchants Group for importing gas from Australia's North West Shelf to Dapeng Bay, China's first LNG receiving terminal, near Shenzhen, in southern Guangdong province. Dapeng Sun was the first to be delivered, in early April, 2008.

The yard has built and delivered five 147,000-cubic-meter LNG carriers to date and has a sixth vessel of similar size under construction for delivery in 2012.

China Shipping Development agreed to fund 30% of the cost of the latest order, with the balance coming from MOL, according to the statement. The formal signing of the contracts follows the agreement on project development in Beijing in January. At the time, MOL chairman Akimitsu Ashida said, "The agreement marked a first for MOL to secure LNG ships in China and we believe that with concerted efforts by all the parties concerned, the objective of this project will be accomplished in a professional manner."

The partners spent the past six months agreeing on the final design, cost and financing before Friday's final contract signing.

The four LNG carriers are expected to be delivered between 2015 and 2016. Two of the ships will be operated by MOL and East China LNG Shipping Investment, a joint venture between China Shipping Development and China Petroleum & Chemical Corp (Sinopec). The other two will be operated by MOL and North China LNG Shipping Investment, a joint venture of China Shipping Development and China National Petroleum Corp (PetroChina).

LNG carriers, dubbed the "maritime superfreezer", are regarded as one of the most sophisticated vessel types for a shipyard to produce as they need to store LNG at a temperature below minus 162 degrees Celsius, giving the gas only one-six-hundredth of its original volume. High quality of workmanship is essential - "if a stream of LNG leaks from a pressurized tank or pipe, it will feed a huge fire," said Zhejiang University's Wang.

As of March 2011, 355 LNG carriers were in operation around the world, according to Shipbuilding History, an online shipping database; 19 carriers at that time were on order or under construction - one at Hudong-Zhonghua, three in Japan and the remaining 15 in Korea.

The five carriers built by Hudong-Zhonghua and now in service are dual classed by the American Bureau of Shipping (ABS), which develops and verifies standards for the design, construction and operational maintenance of marine-related facilities, and the China Classification Society (CCS). ABS is the only class society with LNG carriers being built to its standards in China, Korea and Japan. It is also the only society to have classed LNG carriers with all of the different containment systems that are at present on offer.

"To assist the Shanghai yard, ABS assigned a team of surveyors to the project with many years of experience in LNG construction and in particular with the GTT NO96 membrane containment system," ABS said on its website in April 2008, when China delivered its first LNG carrier.

Founded in 1956, CCS, one of the 10 full members of the International Association of Classification Societies (IACS), is the only specialized Chinese organization to provide classification services.

Wang said the latest order would boost the international reputation of LNG carriers made in China. He expected the country's LNG carrier-building capacity to increase along with demand for LNG, particularly in China, where use of the relatively environmentally friendly fuel will rise as the country tries to almost halve carbon dioxide emissions relative to gross domestic product over the next decade.

China's LNG imports increased 66% in 2009 to 5.53 million tonnes. Based on current import growth, China will need more than 65 LNG carriers by 2015 to transport the fuel, China Shipbuilding Economic Research Center said. The government has approved construction of LNG terminals in Guangdong, southeast Fujian province, Shanghai and eastern Zhejiang province and is planning others.

China overtook South Korea to become the world's foremost shipbuilder in 2010, constructing vessels with a total deadweight capacity of 65.6 million tonnes, up 54.6% on a year earlier and accounting for 43% of total world construction by deadweight capacity.