China LNG Shipping and Teekay LNG Partners JV signs US$1.6 billion loan to finance six LNG carriers

Powerful LNG carriers can operate without icebreaker assistance, and will transport LNG to European and Asia-Pacific markets, reducing reliance on coal

Illustration by Sarachandra
Illustration by Sarachandra

A joint venture (JV) between China LNG Shipping and Teekay LNG has signed a US$1.6 billion long-term debt facility to finance six LNG (liquefied natural gas) carriers being built by Daewoo Shipbuilding & Marine Engineering in South Korea.

The first of the vessels is scheduled to deliver in January 2018, with the rest arriving by early 2020. They will service the Yamal LNG project under long-term charter contracts running to 2045, plus option periods.

Yamal LNG shareholders are NOVATEK (50.1%), China National Petroleum Corporation (20%), Total (20%), and the Silk Road Fund (9.9%).

The Yamal LNG project recently commenced production from its first train, and completed its first LNG cargo loading. Located above the Arctic Circle, the gas will be shipped to both European and Asia-Pacific markets, including the Northern Sea route to markets such as South Korea and China. The powerful ships can operate the northern route from Sabetta port on the Yamal peninsula without icebreaker assistance.

On November 29, Yamal LNG was granted Russian government permission to commission the main technological facilities of the LNG plant’s first stage, including the first liquefaction train, 58 gas wells and the respective infrastructure.

The natural gas liquefaction plant is based on the hydrocarbon resources of the South-Tambeyskoye field. The design capacity of the first LNG train is 5.5 million tonnes per annum.

“We not only maintained our strict project deadlines, but we also expect to launch the second and third LNG trains ahead of schedule”, says Evgeniy Kot, general director, Yamal LNG.

In addition to featuring Chinese shareholders, the Yamal project has also relied heavily on debt from China.

In April 2016, Yamal LNG announced the signing of agreements with the Export-Import Bank of China and China Development Bank on two fifteen-year credit line facilities for 9.3 billion euros (approx. US$10.96 billion) and 9.8 billion yuan (approx. US$1.48 billion) respectively.

Teekay LNG Partners is one of the world’s largest independent owners and operators of LNG carriers, providing LNG, LPG (liquefied petroleum gas) and crude oil marine transportation services primarily under long-term, fixed-rate charter contracts through its interests in 50 LNG carriers (including 15 newbuildings), 30 LPG/Multigas carriers (including three newbuildings) and five conventional tankers.

The partnership’s interests in these vessels range from 20%-100%. Teekay also owns a 30% interest in a regasification terminal, which is currently under construction.

China’s involvement in Yamal is an important element of its strategy to reduce reliance on coal-fired power generation. The country is currently suffering from a severe shortage of gas supplies as it makes this transition.

According to an early November presentation from Teekay LNG, at that date China’s imports of LNG had increased by 45% year-on-year. Analysts say there has been a further surge of imports in November and December.

The Asian Infrastructure Investment Bank’s (AIIB) Board of Directors recently approved a US$250 million loan for a project that will reduce China’s coal use by about 650,000 tonnes annually through connecting about 216,750 households in approximately 510 rural villages to the natural gas distribution network. 



The investment in the project is the AIIB’s first corporate loan. The project, undertaken by the Beijing Gas Group Company, will involve the construction of natural gas distribution networks in villages, low-pressure gas pipelines and household connections. Gas consumption meters will also be installed. The project is scheduled for completion in 2021.

Enabling some rural areas to transition off coal will have a marked impact on air quality, including in Beijing.

Upon completion, and after subtracting the emissions of burning natural gas, the Beijing Air Quality Improvement and Coal Replacement Project is expected to reduce annual carbon dioxide emissions by 595,700 tons.

“China’s commitment to reducing its reliance on coal will change lives and improve the environment, and that is why we are investing in a project aligned with their ambitious plan,” comments AIIB president Jin Liqun. “With our unwavering commitment to helping members meet their environmental and development goals, especially their commitments under the Paris Agreement, it is only fitting that our first investment in China will introduce sustainable infrastructure that will reduce greenhouse gas emissions and help vitalize one of the most important economic hubs in Asia.”



 

This issue of Belt & Road Online will be the last for 2017. The newsletter will resume on January 3 after the Christmas break.