THE owner of shipbuilder Swan Hunter said last night that work might be brought back to its mothballed Teesside yard after striking a lucrative deal with Dutch company NV Ecodock.

The contract will see Ecodock UK Ltd set up a shipbreaking operation at Swan's Tyneside yard, creating about 250 jobs.

Owner Jaap Kroese said Ecodock is also looking at other yards to dismantle ships at, including Swan's Teesside yard at Port Clarence, which was mothballed in May when work dried up, with the loss of 200 jobs.

"Ecodock is looking at other sites, including Teesside. What they are doing is assessing the situation and it could be that work is done at Teesside as well," he said.

Swan's expects to get its licence to run a shipbreaking operation in the next six weeks and work is expected to start at its Wallsend yard early next year.

The firm expects to dismantle about 12 ships a year and also hopes to gain access to the neighbouring land at A&P Tyne where it can work on larger ships.

Ecodock is already in talks with the Royal Navy over recycling old warships and has also been talking to companies such as P&O and Maersk.

Mr Kroese said it would be the first shipbreaking business in the world that was environmentally friendly.

"Most shipbreaking is done on the beaches of Sri Lanka and India and oil, asbestos and metals get into the water," he said.

"This will be the first time shipbreaking is done in an environmentally friendly way and no oil or asbestos will get into the water - it will be taken away safely in containers."

Swans employs about 800 workers, but has been laying off staff month-on-month as work nears completion on two Royal Fleet Auxiliary vessels.

Mr Kroese said he will continue looking for other contracts to keep as many people at the yard as possible.

"I have not given up on getting other work, perhaps off-shore work or more ship conversions. There needs to be some more activity on the river," he said.

The yard is bidding for a contract with Swiss firm Allseas to build a pipe-laying vessel and hopes to secure work on the Ministry of Defence aircraft carrier programme in 2008.

The new partnership between Ecodock and Swans met with officials from One NorthEast, Newcastle City Council and offshore cluster group NEMOC yesterday to discuss the fine details of the shipbreaking project.

A spokesperson from One NorthEast said they would be meeting with Swan's again next week.