
A new Trump administration regulation requires LNG exporters to start shipping on U.S.-built ships by 2028. No ships currently qualify and would take up to five years to build. (Source: Shutterstock.com)
Energy industry representatives have asked the Trump administration to rethink a new rule that requires some LNG exports to be sent via U.S.-made tankers.
The rule would go into effect in 2028. There are currently no operational U.S.-made LNG tankers.
The rule, consisting of two sections, was published by the office of the U.S. Trade Representative on April 17. The first section deals with charging fees for goods shipped on Chinese-made ships when they port in the U.S.
The second section says that in three years there would be restrictions placed on U.S. LNG shipments. By 2028, U.S.-flagged and operated ships would need to ship 1% of LNG exports.
In 2029, the percentage of exports will remain at 1%, but in addition to being U.S.-flagged and operated, the tankers would be required to also be domestically built. The percentage is set to climb up to 15% by 2047.
“The Trump administration’s actions will begin to reverse Chinese dominance, address threats to the U.S. supply chain and send a demand signal for U.S.-built ships,” said USTR Ambassador Jamieson Greer in the statement announcing the rule change.
Since then, energy representatives have been increasing calls to change the policy before it goes into effect since no ships currently meet the requirements.
LNG carriers are some of the most complicated vessels to build, and the construction time for new vessels can vary between 20 months and five years, according to AXSMarine, a charter and freight consulting company.
“There are no such vessels in existence today, and building them would take decades, making compliance impossible for the industry,” Charlie Riedl, executive director of the Center for LNG, said in April press release.
API sent a letter to Energy Secretary Chris Wright on April 23, which was later obtained by Reuters. The letter said the policy would harm the LNG industry because it would not be able to keep up with its international competitors.
The policy “risks counteracting the significant progress the Trump administration has made towards reducing uncertainty and unleashing U.S. LNG,” API CEO Mike Sommers wrote, according to Reuters. The U.S. energy sector and exporters would have to deal with the decisions made by a U.S. LNG carrier construction industry not yet in existence.
Exporters have “little control over their ability to comply with USTR’s new requirements but ultimately face the consequences of not doing so,” Sommers said.
According AXSMarine, there are 792 LNG carriers in operation around the globe, the majority of them built in South Korea or Japan. China, which plans to become a major player in the sector, has built 58.
The U.S. has built a total of five LNG carriers, but they were constructed in the 1970s and none are currently in commission.
The U.S. has one LNG tanker in service. By law, the American Energy can only deliver LNG to Puerto Rico. The ship was built in France more than 30 years ago. It was selected to be re-flagged as a U.S. vessel because it qualified for a loophole in the Jones Act, which requires commercial ships passing between U.S. ports to be U.S. owned, crewed and flagged.
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