A proposed requirement for U.S. construction, registration and crewing could create jobs, but would also make exporting liquid natural gas from the United States more expensive, according to a recent study from the Government Accountability Office.
A proposal to require exports of liquefied natural gas to be carried on U.S. built, flagged, and crewed ships “could expand employment for U.S. mariners and shipbuilders if it does not reduce the expected demand for U.S. LNG,” according to a study released by the Government Accountability Office earlier this month.
Advocates for requiring LNG exports to be carried on U.S. ships such as House Rep. John Garamendi, D-Calif., have also proposed that crude oil exports be carried on U.S. built, flagged, and crewed ships.
Congress is currently negotiating a possible lift on a ban of U.S. crude oil exports as part of a deal to fund the government for the next year, but it is not clear if any sort of consideration is being given to a requirement to carry crude exports on U.S. flag ships.
“This report confirms what we already knew,” Garamendi said in a statement on the GAO report. “First, a U.S. LNG export trade is imminent and this trade could provide a substantial new opportunity for growth in the U.S. flag Merchant Marine. Second, requiring U.S. LNG exports to be shipped on American tankers, manned by U.S. officers and mariners, will be more expensive, especially at the outset, because of the shipyard infrastructure and technology investments necessary to be able to build these ships in the first place.
“But these are investments we need to make anyway to ensure future shipbuilding capacity and military readiness, and for our long-term economic and national security. Requiring that LNG be transported on American ships won’t just create and safeguard US jobs: it will force us to address our infrastructure deficiencies, rather than simply outsourcing the work to foreign countries that have the capacity we currently lack,” he said.
“If we are serious about maintaining our maritime industrial capability and military readiness, we should not be deterred by the potential obstacles identified in this report but seize the broader opportunity laid out before us,” Garamendi added.
The report said, “According to representatives of U.S. mariner groups, between 4,000 and 5,200 mariners would be needed to operate the estimated 100 LNG carriers needed to transport the full amount of LNG from five once they are fully operational.”
But the GAO noted constructing such a fleet would be no easy task.
“Based on the current capacity of U.S. shipyards we spoke with, building 100 carriers would likely take over 30 years, with employment in U.S. shipyards increasing somewhat or becoming more stable, according to shipyard representatives,” the agency said.
“Department of Defense officials also indicated that any policy or requirement that increases and stabilizes jobs in the U.S. maritime industry could support military readiness.”
Industry representatives told the GAO that U.S. built, flagged and crewed carriers “would cost about two to three times as much as similar carriers built in Korean shipyards and would be more expensive to operate.”
“These costs would increase the cost of transporting LNG from the United States, decrease the competitiveness of U.S. LNG in the world market, and may, in turn, reduce demand for U.S. LNG,” said GAO.
“The extent of these effects depends on customers’ circumstances and business decisions,” it added. “For example, several stakeholders told us implementing the proposed requirement may prompt customers to attempt to modify, renegotiate, or terminate their existing contracts for liquefaction.”
GAO: U.S. LNG exports will require 100 ships
