China Shipping Development Co said on Wednesday that it will sign an agreement with China National Petroleum Corp (CNPC) to set up a $5 million joint venture to ship liquefied natural gas (LNG).

China Shipping would account for 90 percent of the venture and CNPC the remainder.

China Shipping said on Tuesday that its average freight rate for domestic coastal bulk cargo contracts for 2009 dropped nearly 40 percent, following plummeting global freight rates.

CNPC, parent of PetroChina, is China's biggest natural gas supplier and has signed several deals to buy LNG from Shell and Qatar to supplement its supplies to the country's coastal areas.

China Shipping Development, listed company of China Shipping Group, mainly engages in vessel transportation.

Analysts said that the joint venture will build its own LNG vessels to reduce PetroChina's transportation costs.