(Yicai) June 3 -- Cosco Shipping Energy Transportation, the energy transportation subsidiary of China Cosco Shipping, plans to invest CNY6.4 billion (USD950 million) for four liquefied natural gas carriers, which it will then lease to Shell Tankers Singapore.

Cosco Shipping Energy's unit Future Ocean LNG Investment yesterday signed a deal with Jiangnan Shipyard Group, ordering four LNG vessels with a capacity of 175,000 cubic meters each, the Shanghai-based parent company announced on the same day. The delivery will be carried out in batches in 2029 and 2030.

Once delivered, the vessels will be leased to Shell Tankers Singapore under a charter model for seven years, generating a total income of about CNY5.4 billion for Cosco Shipping Energy. After the lease expires, the Singapore client has the option to renew it.

Shell Tankers Singapore, established by UK petrochemical giant Shell in Singapore, is engaged in the global ocean transportation of LNG, crude oil, and refined products. Most of its fleet consists of chartered vessels. The latest charter agreement it signed with Cosco Shipping Energy has made it the second-largest client for the Chinese company's LNG vessel leasing business after QatarEnergy.

In recent years, Cosco Shipping Energy has been actively ordering LNG carriers. It had 63 completed vessels and 24 more under construction at the end of last year. All the completed vessels have been leased out under the charter model to domestic and international LNG transportation service providers. The ones under construction have also secured long-term charter contracts.

The global LNG transportation sector operates on a business model where shipowners and operators sign long-term charter contracts for vessels. This model provides shipping companies with stable charter rates and investment returns, offers shippers reliable transportation capacity, and helps carriers avoid the high costs associated with building new ships.

Last year, Cosco Shipping Energy's LNG vessel leasing business generated revenue of CNY3.4 billion, including the rental income from its LNG subsidiary and a share of the rental income from joint venture LNG subsidiaries. It contributed a net profit of CNY895 million (USD130 million), accounting for about 22 percent of the company's total annual net profit.

Editor: Futura Costaglione