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    Home » U.S. sanctions on COSCO hit LNG tankers in Russia’s Arctic

    U.S. sanctions on COSCO hit LNG tankers in Russia’s Arctic

    October 1, 2019
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    U.S. sanctions on COSCO hit LNG tankers in Russia's Arctic
    *LNG vessel.

    London — U.S. sanctions on two units of Chinese shipper COSCO hit the liquefied natural gas (LNG) tanker industry on Monday as U.S.-listed Teekay LNG said its shipping joint venture in Russia had been “blocked” because of its ties to COSCO.

    The United States imposed sanctions on COSCO Shipping Tanker (Dalian) Co and subsidiary COSCO Shipping Tanker (Dalian) Seaman & Ship Management Co for allegedly carrying Iranian crude oil.

    Teekay LNG said on Monday that its 50-50 Yamal LNG Joint Venture had been deemed a “blocked person” under the sanctions because its partner China LNG Shipping (Holding) (CLNG) is 50% owned by COSCO Dalian.

    “As a result of CLNG’s 50% interest, the Yamal LNG Joint Venture also currently qualifies as a ‘Blocked Person’ under OFAC rules,” Teekay said in a statement, referring to the Executive Office of Foreign Assets Control (OFAC) Order.

    “For clarity, the Teekay Group has not traded and will not trade with Iran and will not act in contravention of any trading sanctions,” Teekay said in the statement after postponing its Oct. 2 investor day because of the developments.

    The venture owns Arc7-class LNG tankers capable of navigating through Arctic ice, making them key to transporting LNG from Novatek’s Yamal LNG plant in northern Russia.

    Also Read: India cuts natural gas prices by 12.5% for Oct-March period

    The LNG plant, surrounded by thick ice during the winter, is unique in operating in such harsh conditions. The Arc7 tankers take LNG westward to Europe in winter and eastward to Asia in summer when ice along the Northern Sea Route dissipates sufficiently to allow passage.

    A Novatek spokeswoman declined to comment immediately.

    Teekay said it would hold a conference call at 2000 GMT to discuss the developments.

    SIZEABLE FLEET

    The venture owns the Eduard Toll, Rudolf Samoylovich, Nikolay Yevgenov and Vladimir Voronin tankers, all newly built for Yamal, which began operations in December 2017.

    Georgiy Ushakov, another Teekay Arc7 tanker, is now heading to Yamal after its sea trials around South Korea’s Daewoo Shipbuilding and Marine Engineering (DSME) shipyard. A sixth, Yakov Gakkel, is undergoing tests.

    A further nine Arc7 tankers serving the Yamal plant are managed by Dynagas, Mitsui OSK Lines and Sovcomflot.

    Yamal has been producing and shipping LNG above its expected capacity of 16.5 million tonnes a year (mtpa), shipping 12.8 mtpa so far this year.

    “Everything is going without hindrance,” a source close to Novatek told Reuters when asked about the tankers’ movements.

    The sanctions imposed last Friday on the two COSCO units caused oil freight rates to spike as Asian oil buyers rushed to secure alternative vessels to load crude oil from the Middle East.

    Shipping analysts said LNG freight rates have jumped by between 7% and 11% in the past week to about $70,000 a day, though rates have been rising gradually in recent weeks as winter demand picks up.

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    – Reuters

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