MarEx Reader Weighs In on the US LNG Mariner Debate

By MarEx 2008-04-02 00:00:00

Dear Mr. Keefe,

Thank you for your interesting and detailed article on US crews availability for LNG tankers on the current issue of the MarEx Newsletter.

However, this point is part of a broader issue which is apparently not debated and which would be worth some analysis. Indeed, giving selective priority to approval of LNG off-shore terminals which would be served partly by ships with some level of US crewing is a marginal, indirect and administrative way to improve the root of the current situation, in a way that is not consistent with the US commitment to free trade undertaken under the WTO and various bilateral trade agreements.

Indeed, the major point which should be dealt with is the absence of US owned LNG tankers, whether foreign or US flagged. Obviously, the best logical driver of US employment on LNG tankers should be the existence of US owned and operated LNG tankers, whether by energy or shipping companies. As far as I know, there is not a single US owned and operated LNG tanker in the current world fleet of 217 ships. As to the about 135 units which are currently on order, it seems that there are only 4 x “Q-Max” units which have been ordered in Korea by a US corporation, i.e. OSG. These ships will be operated in partnership with Qatargas, under the Qatargas II project with ExxonMobil; but with no indication that they will be manned by US crews, especially since they are featured in the “international” fleet of OSG and earmarked to serve Qatargas and ExxonMobil shipping requirements from Qatar to the UK and North Europe. It should also be noted that all LNG tankers are currently exclusively built in Korea, Japan and Western Europe, and it is not clear whether any US commercial shipyard would be ready to build again this type of ships at competitive prices and along the latest technological developments.

As to major US energy companies with significant involvement in LNG, such as ExxonMobil, Chevron, ConocoPhillips, Sempra Energy, etc, contrary to several of their Asian and European competitors, none appears to have decided to invest in its own LNG tankers, apparently preferring to rely entirely either on ships provided by their LNG suppliers, such as Qatargas, Petronas, Sonatrach…etc, or on ships chartered from experienced LNG shipping companies which are essentially either North Asian or Western European.

This state of affairs is partly explained by the US minor involvement in LNG over the past couple of decades, as opposed to the extensive use of this form of energy in north Asia and Western Europe. But it also has specific US root causes, which range from the level and intricacy of potential legal exposure and liability under the US legal system, to the level of taxation or of manning costs in the US, all of which act as deterrents to own and operate ships employed in international trade in the US, including, but not limited to, LNG tankers.

It seems to me that the whole spectrum of this situation, i.e. not only the availability of crews experienced on LNG tankers, should warrant some analysis and recommendations for improvements for the future. This especially at a time the US is slowly improving and building-up its network of LNG receiving terminals, and whereas the Administration and Congress appear to limit their interest in LNG to assumed terminal environmental and safety risks, i.e. with apparently no knowledge nor interest in the economics of LNG overseas trading and shipping, and in the involvement of US companies in these activities.

Best regards,

Louis J. Le Gendre
Management Consultant
International Shipping & Logistics
Chatham, NJ