A South Korean court has ordered publicly listed natural gas company Korea Gas Corporation (KOGAS) to pay approximately KRW300 billion (US$200 million) in damages to local shipbuilder Samsung Heavy Industries (SHI).
The amount constitutes compensation for losses incurred by SHI as a result of the incorporation of LNG cargo tanks that were found to have design defects.
The tanks, which were developed by KOGAS, are equipped on the LNG carriers SK Serenity and SK Spica. The two ships were built by SHI and were delivered to South Korea's SK Shipping in the first quarter of 2018.
According to reports, SK Shipping only discovered the defects in the tanks well after the two ships were delivered. The defects, which included gas leaks and cracks, necessitated four return trips for the ships to undergo repairs, resulting in costs of more than KRW100 billion (US$70 million).
Because of the constant repairs, neither ship was able to complete even a single full voyage. They have remained idle over the last six years following the suspension of their operations.
SK Shipping claimed that addressing the cargo tanks' defects led to delays, which in turn resulted in damages including vessel depreciation. The company subsequently filed a case against SHI at the London Maritime Arbitrators Association (LMAA).
The LMAA ordered SHI to pay damages of nearly KRW400 billion (US$30 million) to SK Shipping plus additional settlement fees. SHI has nonetheless reiterated that KOGAS was responsible for the defective design of the cargo tanks.
SHI filed a lawsuit against KOGAS to seek compensation and recover the payments made to SK Shipping. Earlier this month, a court in Seoul ruled that KOGAS was indeed liable for the damages.
The court also said that SHI still bore some responsibility, and the compensation amount to be settled by KOGAS was reduced to KRW299.6 billion (US$200 million).
