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Sea Change
China Wants In On LNG Ship-Building

China wants to build as much as 20 percent of the world’s growing fleet of liquified natural gas (LNG) tankers over the next six years. International trade of LNG is booming, and there’s a real need for more ships. Beijing hopes to take roughly $10 billion in orders for these vessels by 2020, as the New York Times reports:

As many as 50 tankers, or more than 20 percent of the 225 liquefied natural gas vessels expected to be added worldwide by the end of 2020, are expected to be built in China to deliver gas to its ports, according to estimates from the American Bureau of Shipping, a ship safety society.

China’s reliance on vessels built at home for gas deliveries — which China needs to serve new import terminals — would give it greater control over its supply chain and a bigger share of the high-value end of shipbuilding.

China wants not only to invigorate its shipbuilding industry, which lags behind Japan and especially South Korea, but also to consolidate its control over its energy supply chains. China has to look abroad, to nearly every corner of the globe, to find supplies to help meet its growing energy needs. The farther afield it goes, and the more links in these chains lie outside China’s control, the more likely it is that disruptions will occur.

This is what we mean when we talk about energy security, and Beijing knows there is room for improvement here. That’s why it has been squirreling away oil into strategic reserves at a record pace recently; it’s why China is so desperately trying to catch up to the United States in the development of shale oil and gas; it’s (part of the reason) why China is moving oil rigs out into the South China Sea. And it helps explain why China wants to build the ships that will schlep liquified natural gas from all over the world back to its import terminals.

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  • lukelea

    Several years back the story was that China’s shipbuilding industry had seriously overbuilt. I guess that referred to freighters and conventional tankers. So here’s a way to keep that sector of their economy humming. The flaw in China’s economy is that it has no rational mechanism for the allocation of capital. The banking sector is owned by the state. No markets, no price system. In a word, waste. Terrible waste of the life savings of the Chinese people. I don’t see any way around that conclusion.

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