Friday, December 11, 2015

DOE: 100 New US LNG Ships Needed

By Mark Edward Nero

The United States is expected to change from a net importer of natural gas to a net exporter in the next five years, and transport of the full output capacity of under construction US liquefaction facilities will require about 100 or more American-built liquefied natural gas carriers, according to the US Government Accountability Office.

“Based on the current capacity of US shipyards we spoke with, building 100 carriers would likely take more than 30 years, with employment in US shipyards increasing somewhat or becoming more stable,” the GAO stated in its report, which was released Dec. 3.

Five large-scale US liquefaction facilities necessary for conversion of natural gas to LNG are under construction with a projected capacity to export more than 12 percent of US natural gas production in 2020.

The proposed requirement to transport exports of LNG via US-built and US-flagged carriers could expand employment for US mariners and shipbuilders if it doesn’t reduce the expected demand for US LNG.

According to representatives of US mariner groups, between 4,000 and 5,200 mariners would be needed to operate the estimated 100 LNG carriers needed to transport the five US facilities’ full capacity of LNG once the five are fully operational.

However, the GAO said it was told by several stakeholders that implementing the proposed requirement could prompt customers to attempt to modify, renegotiate, or terminate their existing contracts for liquefaction.

Maritime industry representatives told the government that US carriers would cost about two to three times as much as similar carriers built in Korean shipyards and would be more expensive to operate.

Based on GAO analysis, these costs would increase the cost of transporting LNG from the United States, decrease the competitiveness of US LNG in the world market, and may, in turn, reduce demand for US LNG.

Additionally, limited availability of US carriers in the early years of construction could decrease the amount of LNG that could be exported from the United States for a period of time, leading customers to seek alternate sources.

Currently operating LNG carriers are nearly all foreign built and operated. LNG carriers have not been built in the United States since before 1980, and no LNG carriers are currently registered under the US flag.

The full GAO report, titled “Implications of Using US Liquefied-Natural-Gas Carriers for Exports,” can be read or downloaded at the Accountability Office website: