Proceedings Of The Marine

FALL 2015

Proceedings magazine is a communication tool for the Coast Guard's Marine Safety & Security Council. Each quarterly magazine focuses on a specific theme of interest to the marine industry.

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46 Proceedings Fall 2015 coastwise domestic demand materialize. Absent either, the current market doesn't necessarily support the demand for U.S. tonnage. In the interim, speculation has centered on whether would- be U.S. liquefed natural gas shippers would consider diver- sifying their portfolios to include atypical cargoes such as liquefed petroleum gas (LPG). Currently the global market for LPG is 30 percent larger than the market for LNG, and the U.S. is exporting more than 500,000 barrels of LPG a day. 11 U.S.-sourced liquefed petroleum gas is largely the result of the domestic natural gas conditioning process and is a byproduct of oil refning. However, the export share is largely infuenced by an international market not necessar- ily subject to U.S. cabotage laws. In 2013, the Coast Guard experienced a 26 percent increase in foreign LPG vessel cer- tifcate of compliance exams. This increase was 15 percent greater than the previous busiest year on record. Current industry forecasts indicate that the 2013 LPG certifcate of compliance exam workload could double or triple in 2015 and beyond. 12 Domestic Challenges Recognizing the diversity in the U.S. natural gas market, American LNG export presents similar challenges in the domestic trade. This is especially germane as Hawaii and U.S. island territories, such as Puerto Rico, look to lower energy costs and diversify fuel supply, transitioning petro- leum energy consumption and primary power generation sources to natural gas. Natural gas appeals as a clean- burning source of energy, which is less carbon-intensive than either coal or oil, to fuel residential, commercial, insti- tutional, industrial, and transportation sectors. Similarly, Alaska is in a position to enter the domestic liquefed natural gas trade to export to the continental U.S. and Hawaii. This also presents challenges when it comes to the lack of avail- able vessels qualifed for coastwise LNG trade. In larger markets, plans include signifcant infrastructure enhancements, including a foating liquefed natural gas import terminal off the coast of Puerto Rico. Generally, the Puerto Rico Electric Power Authority purchases most of its natural gas from Trinidad and Tobago, transported via foreign-fagged vessels. 13 The idea of low-cost U.S.-sourced natural gas presents an inviting prospect, albeit complicated by the absence of qualifed vessels. U.S. shipping statutes do provide some fexibility under a specifc trade provision for LNG movement to Puerto Rico from the U.S. mainland. 14 Despite legislative authorization, U.S.-fagged vessels have not been employed in the Puerto Rico LNG trades because domestically sourced liquefed natural gas is not yet avail- able for delivery into Puerto Rico due to the regulatory and construction timelines associated with export liquefaction projects. Bulk liquefed natural gas shipments are not practical in all markets, especially where quantities surpass the capac- ity and absorption rates of some island economies. In this regard, small-scale LNG imports by way of standardized cryogenic shipping containers may provide an alternative to the costly investment associated with regasifcation and distribution infrastructure. Further, advances in LNG con- tainment systems may present added possibilities for small- scale bulk liquefed natural gas imports via articulated tug and barge (ATB) combinations. Envisioned for limited trade in coastal and island markets, advantages include lower construction and operational costs when compared with conventional LNG carriers. This arrangement also conforms to the "drop and swap" method, whereby a laden barge may serve as a storage unit while the tug returns an empty barge for loading. Additionally, the ATB concept could leverage Jones Act shipyards to construct new vessels with LNG containment technologies for quali- fed coastwise trade. Liquefed petroleum gas, on the other hand, is transported regularly on specialized tank barges throughout the U.S. western river system. Unlike LNG, LPG does not require complex liquefaction or regasifcation facilities and can be transported as a liquid in purpose-built pressurized con- tainment or in smaller quantities in International Standards Organization (ISO) containers. On a larger scale, there are currently no U.S.-fagged LPG carriers available for service within the Jones Act trade. However, the new construction dilemma associated with bulk LNG containment technolo- gies may not be as prevalent considering LPG's transporta- tion properties. On the contrary, there is currently no prohibition to a for- eign-constructed liquefed gas carrier receiving a U.S. reg- istry endorsement, if otherwise qualifed under U.S. law, while operating in noncoastwise trade. Absent a precondi- tion for U.S. construction, employing modern gas carriers (albeit foreign-constructed) under U.S. registry could be an option in the interim. Nonetheless, a sustainable pool of spe- cially trained and qualifed U.S. mariners will be necessary to crew the gas carrier feet. Developing and maintaining this contingent may present certain challenges in the early stages of feet development, though access to foreign-fagged gas carriers has provided training and experience opportu- nities for American mariners.

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