By Robert N. Cowen, Esq., Venable LLP
Over the next few years, the world
fleet of Liquefied Natural Gas tankers
will more than double in size as demand
for LNG soars. A significant portion of
the growth in the LNG trade is expected
to come from shipments of LNG to the
United States. The dramatic growth
already underway in the global LNG
fleet has created a window of opportuni-
ty for the U.S. maritime industry. For the
first time in many years, the employ-
ment of U.S. mariners and U.S. flag ves-
sels has become a real option. Rising
foreign crew costs, more favorable U.S.
tax laws and national security consider-
ations all strongly support the use of
U.S. mariners and U.S. flag vessels in
the importation of LNG into the U.S.
As the world faces the specter of high-
er oil prices and limited incremental oil
supplies, proven reserves of natural gas
are plentiful and growing. The Federal
Energy Regulatory Commission has
characterized the long term supply out-
look for LNG as robust, with many
major development projects underway
throughout the world.
Because these reserves of natural gas
are generally located far from consum-
ing areas, often the only practical way to
transport the gas to market is by sea.
When natural gas is refrigerated to
minus 260 degrees Fahrenheit it
becomes a liquid and its volume is
reduced by a factor of 1/600th. It is then
economical to transport it long distances
by sea on specially built tankers.
World demand for LNG is projected
to triple by the year 2020. In the U.S.
alone, LNG imports are expected to
grow to meet eight percent of the
demand for natural gas over the next
few years, versus 3 percent in 2003.
To meet the projected growth in
demand for LNG, the shipping industry
has ordered a massive number of new
LNG tankers. Today the world fleet
comprises about 200 vessels. Based on
the current world orderbook, over 140
LNG tankers will be delivered over the
next three years, doubling the carrying
capacity of the existing fleet.
The industry is struggling to find qual-
ified mariners to crew these new ves-
sels. It is estimated that at least 5,000
additional deck and engine officers will
be required over the next five years. Yet
there is already a shortage of trained
officers throughout the international
maritime industry. Recruiting and train-
ing skilled crews to operate these highly
sophisticated vessels represents a major
challenge to the LNG industry.
The severe shortage of experienced
LNG officers has driven up foreign crew
wages dramatically and reduced the cost
differential between using U.S. citizen
officers and using foreign nationals. The
employment of U.S. officers has many
other attractions for operators of sophis-
ticated LNG carriers. There already
exists a highly skilled pool of U.S. offi-
cers with recent LNG experience who
can help meet the immediate need to
crew some of the new ships. For the
future, U.S. merchant marine academies
have the capacity to train large numbers
of additional skilled officers. U.S. mar-
itime unions also maintain sophisticated
training facilities with simulation equip-
ment that can provide navigation, cargo
handling and engine room training spe-
cific to LNG vessels.
Expanding beyond the use of U.S.
officers, recent changes in U.S. tax laws
have made it economically feasible to
consider the option of placing new LNG
tankers under U.S. flag with full U.S.
crews. This represents a dramatic depar-
ture from the past when cabotage laws,
or special government programs and
subsidies, have been required to support
the use of U.S. flag vessels.
Under the American Jobs Creation Act
28 Maritime Reporter & Engineering News
Shipbuilding Technology
A modern LNG Carrier. (Photo Courtesy of Wärtsilä)
United States Maritime Industry Can Benefit
Think of us when you are l
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