OSG Orders Korean-Built Tankers for U.S.-Flag Trade
On Tuesday, Overseas Shipholding Group announced that it has ordered two new U.S.-flag product tankers from South Korean shipbuilder Hyundai Mipo. Since they will be built at a foreign yard, they will not be Jones Act-qualified, but they will be eligible for U.S.-flag registration, which opens up eligibility for carriage of federal cargoes and American defense sealift programs.
The 50,000 dwt vessels will be built to comply with Tier III ECA NOx emissions standards, and will have scrubbers, which will allow them to bunker with low-cost HFO while maintaining compliance with the IMO's 2020 sulfur content rules. OSG expects that the two new ships will participate in trades that are served by existing company-operated vessels. The two tankers currently enrolled in the U.S. Maritime Security Program (Overseas Santorini and Overseas Mykonos) are owned and operated by OSG subsidiaries; separately, OSG owns a fleet of 21 Jones Act-qualified Handysize product tankers and ATBs.
“OSG is committed to maintaining a leading presence in the US-flag petroleum transportation sector,” said Sam Norton, OSG’s president and CEO. “Our initiative to pursue construction of modern, efficient and environmentally responsible vessels sends a strong signal to our customers, our stockholders and our employees that we are confident in achieving our commitment and that we have the resources and unique skill sets to enable us to do so."
The Jones Act requires that vessels operating between U.S. points must be built, crewed, owned and flagged in the United States. However, the U.S.-flag registry allows foreign-built, non-Jones Act ships, and registration can open up eligibility for federal cargo preference programs and enrollment in the U.S.-flag Maritime Security Program (MSP). According to the Maritime Administration, the MSP helps America to sustain a deep-sea merchant fleet and the civilian mariners to crew it while keeping costs low for the taxpayer. In return for a $5 million-per-vessel annual subsidy, MSP participants are required to make their ships and terminals available to the Defense Department during times of war or national emergency - the "most prudent, economical and necessary solution" to meet the DoD's sealift requirements, according to MARAD.