GAO: US Needs 100 LNG Carriers

About 100 LNG carriers and between 4,000 and 5,200 mariners would be needed to transport the five U.S. facilities’ full capacity of LNG once the five are fully operational, according to the U.S. Government Accountability Office (GAO).

The US Department of Energy (DOE) projects that in the next few years the United States is expected to change from a net importer of natural gas to a net exporter, with those exports destined for different regions of the world, especially Asia.

More than 30 companies have received approval from DOE for large-scale exports of U.S. LNG—natural gas cooled for transportation—beginning in 2015 or 2016 via specialized LNG carriers.

Five large-scale U.S. liquefaction facilities are under construction with a projected capacity to export more than 12 percent of U.S. natural gas production in 2020. According to representatives from these five facilities, their liquefaction capacity has already been sold mainly through 20-year contracts and their customers are responsible for transporting the LNG to export markets.

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 U.S. flag.

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 GAO interviewed within a study conducted for the US Congress.

Namely, the Congress is considering introduction of a requirement for U.S. LNG to be exported via U.S.-built-and-flagged carriers with the goal of supporting U.S. shipbuilders and mariners.

However, according to industry representatives, U.S. 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 U.S. LNG in the world market, and may, in turn, reduce demand for U.S. LNG.

“Implementing the proposed requirement may prompt customers to attempt to modify, renegotiate, or terminate their existing contracts for liquefaction. Additionally, limited availability of U.S. carriers in the early years of construction may decrease the amount of LNG that could be exported from the United States for a period of time, leading customers to seek alternate sources.

“Further, a reduction in the level of expected U.S. LNG exports could impact the broader U.S. economy, including potential job and profit losses in the oil and gas sector,” GAO said.

 

 

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Posted on December 9, 2015 with tags , , .

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