The South Korean government will subsidize and promote liquefied natural gas (LNG) as the fuel source for both merchant and naval vessels in hopes to kill three birds with one stone - make a new demand for troubled shipbuilders, save fuel cost for shippers, and meet stringent emission rules.

The outline to promote LNG-fueled vessel industry was reported in an economy-related cabinet meeting on Tuesday. It is a follow-up on the government outline to restructure and strengthen shipping and shipbuilding industries that have been struggling with global-wide common woes of overcapacity and prolonged slowdown in global economy.

The three shipbuilding majors all have come under creditors’ relief program while one of the country’s container ship lines Hanjin Shipping went under court receivership.

The Seoul government a few weeks earlier pledged to inject 6.5 billion won ($5.7 billion) to rebuild local shipping and shipbuilding sector crucial to its exports-reliant economy.

Since few in the local private sector can presently afford LNG-powered vessels, the government will make orders and promote the use of ships running on natural gas by exempting port service fees and offering tax incentives in owning and registering the vessels.

The government had pledged 2.8 trillion won in subsidy for new vessels and will use existing 1 trillion won in a fund earmarked to invest in environment-conscious vessels as well as the fund on modernizing ferries to create demand for LNG-powered ships.

Ships running on natural gas are deemed to be 10 percent to 20 percent costlier to build than typical oil-fueled vessels.

The government will fund research and development projects to develop cost-efficient and advanced technologies to build LNG-powered vessels and localize necessary parts.

It will build an LNG bunkering to store the fuel at the Busan port by 2025 by pulling in 600 billion won investment from the private sector. Construction could start from 2018.

Global demand for LNG-fueled ships will likely go up to meet the needs of climate control as LNG reduces carbon emissions by at least 20 percent.

The government hopes to have LNG-fueled ships make up 10 percent of vessels rolled out from Korean shipyards by 2025 and bring home 70 percent of global orders for the ships running on natural gas. It aims to set up LNG bunkering infrastructure at five ports.

By Seo Dong-cheol

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]