(Bloomberg) — Mitsui Engineering & Shipbuilding Co., the heavy machinery maker whose merger talks with Kawasaki Heavy Industries Ltd. fell apart earlier this year, has teamed with other shipbuilders in Japan to bid for contracts to build natural gas tankers to service shale-gas projects in the U.S.
The competitiveness of Japanese shipbuilders “has moved close to the Koreans in terms of the currency,” President Takao Tanaka said in an interview in Tokyo last week. “It’s easier for us to compete in the LNG tanker market” compared with the cargo market, he said.
The yen’s 14 percent decline since Prime Minister Shinzo Abe took office in December is reviving the competitiveness of Japanese shipbuilders. The timing is advantageous because Japan, the world’s largest buyer of liquefied natural gas, is in the midst of searching for cheaper energy sources after the Fukushima disaster in March 2011.
More than 700 liquefied natural gas tankers will be needed to satisfy the global market by 2030, almost twice the current fleet of LNG ships in operations, Tanaka said, citing industry data. Mitsui Engineering has the capacity to build as many as three LNG tankers a year, he said, without naming potential partners in Japan.
One possibility is for Mitsui Engineering to team with Kawasaki Heavy to build LNG ships, Tanaka said. Kobe-based Kawasaki Heavy fired its president and scrapped merger talks with Mitsui in June.
Japan’s three other builders of LNG tankers include Mitsubishi Heavy Industries Ltd., closely held Imabari Shipbuilding Co. and Japan Marine United Corp., the venture formed in January by the merger of the shipbuilding units of IHI Corp. and JFE Holdings Inc.
Japanese shipbuilders, including Mitsui Engineering, are in discussions with shipowners for contracts to supply LNG carriers, Tanaka said, adding that each contract would be for more than 10 vessels for delivery after 2017.
Mitsui Engineering, the most reliant of Japan’s major heavy machinery makers on shipbuilding for sales, also plans to forge two separate ventures in Southeast Asia with local partners to produce container cranes and equipment for chemical plants as part of its push to move to destinations where demand is expanding and costs are lower, he said.
The company reported its first annual loss in 11 years in the financial year ended March 31 because of a 24 billion yen ($241 million) impairment charge. It forecasts a profit of 7 billion yen this year.
Mitsui Engineering intends to be “one of the main players” in a project backed by Japan to extract fuel from deposits of methane hydrate, known as “burnable ice,” from under the seabed.
The company is developing a gas hydrate carrier, storage and gasification facility. It also owns Modec Inc., the world’s second-biggest builder of floating production, storage and offloading platforms.
In March, Japan conducted the world’s first tests to extract fuel from methane hydrate deposits. The deposits may be large enough to supply the nation’s natural gas needs for about 100 years, according to Japan Oil, Gas & Metals National Corp.
“No one predicted that U.S shale gas would be realized,” Tanaka said. “Technology will advance when needs are quite high.”
– Masumi Suga, Copyright 2013 Bloomberg.