Two large vessels of SK Shipping, equipped with the South Korean LNG cargo containment system KC-1, have entered the scrapping process without ever having been commercially operated. The project was rushed, resulting in significant resources and time wasted in the domestic shipbuilding and shipping industries and increasing distrust among international shipowners toward South Korean technology.

According to the shipping industry on April 30, SK Shipping’s 174,000 cubic meter LNG carriers, the SK Serenity and SK Spica, recently arrived in Labuan, a federal territory of Sabah, Malaysia, to undergo long-term mooring procedures.

The SK Spica, a 174,000 cubic meter class LNG tanker ship equipped with the South Korean-made LNG cargo containment system KC-1. /Courtesy of Korea Gas Corporation

Labuan is a well-known mooring location for ships. When the shipping economy declines, this offshore area becomes crowded with large vessels sent there by shipowners who cannot find work and wish to manage them at low cost before selling them as used vessels. Many of these sold ships end up in shipbreaking yards in Bangladesh or India, where they are dismantled and sold as scrap metal.

For large vessels, the daily maintenance cost at a mooring site like Jisepo Port in Geoje, South Korea, can cover about a month’s expenses in Labuan. This is possible because the crew can be disembarked, eliminating the need to pay wages or allowances, and the power system can be shut down, using no fuel oil.

The shipping industry predicts that SK Shipping’s LNG carriers equipped with the South Korean cargo containment system will eventually be scrapped due to design flaws that caused insulation issues, leaving no harbors willing to accept these ships. Australia, a major gas exporting country, has stated that it will refuse entry to the SK Serenity and SK Spica until the related issues are resolved. Middle Eastern countries have reportedly not even responded to inquiries about docking.

A cold spot due to insulation abnormalities occurred in the South Korean-made LNG cargo containment system KC-1, first applied to the SK Serenity vessel. /Courtesy of SK Shipping

Samsung Heavy Industries, which built the SK Serenity and SK Spica, compensated SK Shipping with 390 billion won at the beginning of this month for the ships’ depreciation due to defects in their cargo holds. As a result, the shipowner will bear all subsequent costs arising from these vessels. The daily maintenance cost per ship is about $20,000 (about 27.6 million won).

The industry estimates that SK Shipping will be able to sell the ships about three months later after necessary administrative processing. An export license from the Ministry of Trade, Industry, and Energy is required to sell used vessels equipped with the South Korean cargo system, as it is designated as a national core technology.

This article was originally published on April 30, 2024.

An interior view of a cargo hold featuring the Korean LNG cargo technology KC-1. /Courtesy of KC LNG Tech