China Shipping Development Co. (1138)’s venture will order six liquefied natural gas tankers worth about $1.2 billion by June to tap the nation’s rising demand for cleaner fuel, Chairman Li Shaode said.
“We will expand LNG transportation business to make it become a new profit growth driver as soon as possible,” Li told reporters in Hong Kong today. “The deal means a 20-year shipping contract for us, which will bring us stable earnings”.
The addition of the tankers comes as the world’s largest energy consumer plans to more than double natural gas consumption to cut its dependence on coal and oil. The vessel purchase will be made by a venture owned by China Petrochemical Corp., also known as Sinopec Group, China Shipping and Mitsui O.S.K Lines Ltd. (9104) and each ship will have a capacity to carry 174,000 cubic meters of natural gas, Li said.
The vessels will cost about $205 million each and the shipping company has arranged syndicated loans to finance the deal, Chief Financial Officer Wang Kangtian said.
Hudong Zhonghua Shipbuilding Group Co., the only Chinese shipyard that has built LNG tankers, will make the six vessels, Wang said. China Shipping is also in talks with two Chinese shipyards to order an additional four, which may be announced as early as this year, he said.
China Shipping, the crude and dry-bulk carrier of the nation’s second-largest shipping company, had earlier ordered four LNG carriers from Hudong Zhonghua through its venture with Mitsui.
Sinopec in January last year agreed to pay $1.1 billion to increase its stake in an Australian LNG development led by ConocoPhillips (COP) and Origin Energy Ltd. (ORG).
The purchase plan comes after China Shipping reported a 93 percent drop in 2012 net income to 73.7 million yuan ($11.9 million). Sluggish demand and excess capacity in international and domestic markets resulted in a downturn in freight rates, the company said in a statement in January.
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