A project to convert aging liquefied natural gas (LNG) carriers into floating storage and regasification units (FSRUs) is drawing attention as a new market in the shipbuilding industry. An FSRU is an offshore LNG terminal that stores LNG on a vessel and then converts it back to gas for onshore supply.
According to the shipbuilding industry on the 22nd, HD Hyndai Marine Solution completed the main design of the FSRU conversion project it first won in September last year and is now carrying out follow-up work. HD Hyndai Marine Solution took on the overall ship conversion work needed to turn an LNG carrier into an FSRU.
Within Hanwha Group, Hanwha Power is ramping up its FSRU conversion business. Hanwha Power began the FSRU conversion business in 2023. Hanwha Power is carrying out a project to convert a 145,000 ㎥-class LNG carrier into an FSRU. The work is now in its final stage and is expected to be completed within the year.
The FSRU conversion business is gaining momentum because of the short manufacturing timeline. According to the International Gas Union (IGU), an FSRU has a shorter construction period than an onshore LNG terminal and a smaller initial investment burden.
In particular, the number of LNG-importing countries is increasing in Asia, and many of these countries do not import large volumes, so there is no need to build large-scale terminals. The IGU said that of eight new LNG importers over the next three years, six plan to introduce FSRUs. It also said the number of countries importing LNG via FSRU will expand to 20 by 2030.
Another factor expanding the FSRU conversion market is the recent increase in aging LNG carriers nearing the time for scrapping. LNG carriers are typically scrapped after about 35 to 40 years of operation. For LNG carriers built in the 1990s to early 2000s, about 5 to 10 years remain until scrapping.
LNG carriers built at that time have high fuel consumption by today’s standards, resulting in low energy efficiency. This low efficiency and expense burden are driving demand for FSRU conversions. Han Seunghan, an SK Securities analyst, said, “Converting to an FSRU is more viable as a business than scrapping the vessel, so demand for conversions is increasing.”
In the FSRU conversion market, Korean shipbuilders have not yet accumulated many orders. With strong order backlogs, it is difficult to take on conversion volumes, and compared with overseas offshore infrastructure specialists, they also have fewer FSRU order records, which is cited as another reason. All FSRU conversion contracts ordered this year were won by overseas firms.
However, there is growing consensus that preparations are needed because the market could grow in the mid to long term. Analyst Han Seunghan said, “If demand for FSRU conversions increases, a certain amount of volume could flow to domestic shipyards,” adding, “It is important to build up a track record of orders.”
Source: ChosunBiz