Appeals Court Orders Korea Gas to Pay Two Awards Over KC-1 LNG Tank Defects
Key Facts
On appeal, the Seoul High Court on November 11, 2026, ordered Korea Gas Corporation to compensate SK Shipping for losses linked to defects in the tanks of two liquefied natural gas carriers built using the KC-1 design. Newsis reported that, if the ruling becomes final, the company must pay about 2,200 billion won to SK Shipping and about 480 billion won to Samsung Heavy Industries. The court thereby ruled on the company’s liability for defects that it said prevented the carriers from operating under the transportation contract. The liability covered the “cold spot” defect, as well as moisture defects and cracks in the tank panels. The court also rejected Korea Gas’s appeal in its counterclaim seeking compensation from SK Shipping.
The court awarded SK Shipping about 220.391 billion won, compared with about 115.4 billion won in the first-instance ruling issued in October 2023. Newsis said the court added costs incurred by the company during the appeal period to the first-instance amount. These costs included vessel financing and fixed expenses. The court also calculated the costs of operating substitute vessels and investigating the defects. The amount awarded to SK Shipping thus increased as the dispute continued and those expenses accumulated.
In the related case involving Samsung Heavy Industries, the appeals ruling reduced the award to about 48 billion won, from about 72.6 billion won in the first-instance ruling. The court, in turn, ordered the company to repay an advance payment of about 24.9 billion won to Korea Gas. The ruling thus combined compensation due to the shipbuilder with an amount it must return to the gas company. Samsung Heavy Industries built the two carriers at the center of the dispute. The appeals ruling in the counterclaim between Korea Gas and SK Shipping upheld the rejection of the gas company’s compensation claim.
The two carriers, SK Serenity and SK Spica, are the first vessels to use KC-1 tank technology developed by Korea Gas, according to Newsis. The domestic technology was designed for use in liquefied natural gas carriers, while Samsung Heavy Industries built the vessels. The report said the “cold spot” defect was discovered after they were built. The term refers to cold transferring to the ship’s hull, potentially exposing the metal to damage. The report put the temperature of liquefied natural gas at 162 degrees Celsius below zero.
The project dates back to an agreement to import shale gas from the Sabine Pass project in the U.S. state of Louisiana. Under the agreement, Korea Gas plans to import 500,000 tons annually from 2017 to 2037. The company selected SK Shipping to transport the gas and Samsung Heavy Industries to build the vessels. The two carriers became the first application of KC-1 technology under the arrangement. The dispute thus links the development of domestic tanks, vessel operations under transportation contracts, and the construction and operating costs addressed in the appeals ruling.