Teekay became “collateral damage” when the US imposed sanctions against Chinese owner Cosco, a top company executive has said.
“This one surprised us,” Teekay chief executive Kenneth Hvid told Bloomberg on the sidelines of its investor meetings in New York last week.
In late September six specialised LNG carriers built by Teekay and its Chinese partners for Russia’s Arctic-based Yamal LNG project became entangled in the US sanctions slapped on four Cosco companies.
The 172,600-cbm Arc7 ships were jointly owned in a 50-50 partnership with China LNG Shipping (China LNG), itself half-owned by sanctioned entity Cosco Shipping Tanker (Dalian).
By late October Teekay had resolved the issue after an ownership restructuring on “arms-length terms” which resulted in China LNG no longer being classified as a “Blocked Person” under US sanctions.
Hvid said the incident underscored the risk of sanctioning the world’s second largest economy.
If we start sanctioning China, which is what you are doing when you sanction Cosco, then you have real disruption in the world
Kenneth Hvid
“If we start completely sanctioning China, which is really what you are doing when you sanction Cosco, then you have real disruption in the world,” he told Bloomberg.
“Iran is one thing, China is a very different thing.”
Hvid said he spent two weeks in Shanghai trying to resolve the issue, which he eventually achieved after Cosco changed its ownership structure of the LNG venture.
He told Bloomberg that the episode had not deterred Teekay from wanting to continue to work with Cosco.
“We feel very confident that we have the right partner here and hopeful that this doesn’t happen again,” he added.
Hvide said the globalization of gas means that when a supply disruption occurs in one country, other nations can fill the gap.
“The nice thing about owning ships is we don’t have sunk costs in the country.
“If that trade doesn’t work, we will put it on some other trade. It will transport oil or gas to other countries.”
