Chinese shipping firms, Greece’s Dynagas in talks to build Arctic LNG vessels

China Merchants Energy Shipping, Sinotrans Shipping and Greek shipping firm Dynagas are in talks to form a joint venture to build five vessels to ship liquefied natural gas (LNG) from the Arctic, the firms said.

China Merchants said in a stock exchange statement on Tuesday that its board had approved a proposal allowing subsidiary China LNG Shipping to take a 25.5 per cent stake in the joint venture, which will pay US$1.59 billion for the ships.

Sinotrans, a unit of state-owned Sinotrans & CSC on Monday said it would take a 25.5 per cent share of the joint venture without revealing who its partners were. Dynagas, a private Athens-based LNG shipping firm, will take a 49 per cent stake, China Merchants’ statement said.

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Calls to Dynagas’ offices in Athens were not answered outside regular business hours. China LNG is a joint venture between China Merchants and China Ocean Shipping (Group) Company.

The ships will be principally tasked to transport gas from the US$27 billion Yamal LNG project, a joint venture being built by Russia’s Novatek, France’s Total and China National Petroleum Corp. Chinese banks are expected to lend US$12 billion to the project.

A growing number of firms have been eyeing shorter shipping routes through the Arctic as the ice melts rapidly amid rising temperatures, though the recent slump in oil prices has deterred investment.

The joint venture represents Sinotrans’ first foray into LNG shipping, which Barclays analysts said would help shift its earnings profile from spot to long-term contracts. China LNG and Teekay LNG Partners signed a deal last year to build six carriers.

The deal also marks the second significant partnership between China Merchants and Sinotrans after they set up a US$1.1 billion crude oil tanker joint venture last year as part of a desire to help China seek better control over its oil imports.