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Push to develop a US-owned fleet for LNG exports

Push to develop a US-owned fleet for LNG exports
The Crimean crisis has generated support for additional US exports of LNG to supplant Russian gas supplies to Europe and has also roused collateral efforts to require the use of US vessels.

The movement to require LNG export ships to be built, flagged and crewed in the US has yet to attract widespread support, but is being watched warily by shipping and energy interests, particularly if it attracts bipartisan backing.  Republicans, which control the lower House, are pushing for more energy exports in general and additional LNG exports in particular, and are studying the buy-American initiative for shipping.    

One Congressman, John Garamendi, a California Democrat, has proposed legislation that would in effect extend the Jones Act cabotage requirements from the domestic or coastal arena into the international sector.  He would phase in the requirement, in recognition that a US fleet would have to be constructed from scratch. 

Further, the Maritime Administration (Marad) has its eye on LNG exports as a way to revive the US merchant marine.  Paul Jaenichen, the acting maritime administrator, has spoken in favor of setting aside some energy related cargoes for US carriage.

Marad has promised to develop a national maritime strategy by next year, and the main elements under consideration are the construction and operation of coastal container ships (the marine highway) and energy vessels.  Ironically, the Jones Act coastal trade is already enjoying a renaissance due to fracking, as new oil supplies have increased movements of both crude oil and refined products into new outlets and onto new routes. 

Ships built and manned in the US would cost considerably more to purchase and operate than foreign-flag vessels, but   proponents are arguing that the premium required would be a small part of the cost advantage that US gas would enjoy in the fracking age. Estimates vary but one is that a US vessel would cost 25% more.

Marad has some unpleasant history with LNG vessels, but in the opposite direction and in a different era. The agency provided funds under its Title XI lending program in the 1970’s to support plans of several natural gas companies to import LNG, mainly from Algeria, to supplement waning domestic gas supplies. But, a repricing of the foreign gas undermined the economics of the plans, and made the ships redundant.  Marad sustained substantial losses in the process of finding new owners for the vessels.

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