LONDON- US sanctions on two units of Chinese shipper COSCO hit the liquefied natural gas (LNG) tanker industry on Monday as US-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 percent owned by COSCO Dalian.
“As a result of CLNG’s 50 percent interest, the Yamal LNG Joint Venture also currently qualifies as a ‘Blocked Person’ under OFAC rules,” Teekay said, referring to the US Treasury Department’s Office of Foreign Assets Control (OFAC).
“Teekay Group has not traded and will not trade with Iran and will not act in contravention of any trading sanctions,” Teekay said.
The venture owns Arc7-class LNG tankers capable of navigating through Arctic ice, making them key to transporting LNG from Novatek’s NVTK.MM Yamal LNG plant in northern Russia.
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.
Its Yamal LNG project “has all the necessary capabilities to ensure the delivery of produced LNG to buyers within the agreed by contracts schedules,” Novatek said in a statement.
Teekay said it was working with its partners to resolve the issue.
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 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.
Average rates for Aframax and Suezmax oil tankers have jumped 50 percent to $30,000 a day since sanctions were imposed on Wednesday, said Ryan Hamilton, a Teekay spokesman.
LNG freight rates have jumped by between 7 percent and 11 percent in the past week to about $70,000 a day, shipping analysts said, though rates have been rising gradually in recent weeks as winter demand picks up.
The latest sanctions do not apply to other COSCO subsidiaries or affiliates, the Treasury Department said in a fact sheet distributed on Monday. Companies “do not face sanctions risk for engaging in transactions with COSCO, its non-blocked” subsidiaries or affiliates, the fact sheet said. – Reuters