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Industry concerns about US protectionist approach to energy exports

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LNG Industry,

The International Chamber of Shipping (ICS), a global trade association for merchant ship operators, has voiced concerns about the potentially protectionist approach that is being taken by the US with respect to future transport of energy exports. This is in response to the US Congress’ recent confirmation of its intention to approve major free trade deals with Asia and Europe.

The US is currently discussing whether it will lift the current ban on crude oil exports.

The Jones Act, dating back over 100 years, has made the US renowned for restricting foreign carrier access to maritime trade between US ports. However, a new, potentially protectionist, approach differs to this since it applies to the carriage of energy exports in international trades.

In December 2014, President Barack Obama signed legislation to implement a programme promoting the use of US flag ships. This legislation is set to prioritise the processing of licenses for US exporters who can highlight their plans to use US deepwater LNG export facilities, as opposed to ships operated by foreign companies.

US energy exports by sea are predicted to expand massively as a consequence of the shale revolution.

The ICS represents ship operators across the globe. The organisation has expressed a commonly held anxiousness that a regime that is currently being developed to promote the carriage of LNG exports on US ships may set an undesirable precedent should the US decide to lift the current ban.

ICS says that a protectionist approach to shipping could seriously undermine the framework of open market access and free trade principles in shipping. Any protectionist approach that is pursued by the US may also be emulated by other energy exporters, such as Russia, Iran and Saudi Arabia.

Costing around US$100 million per vessel, gas carriers are highly sophisticated and most are built in Japan, South Korea and China. In reality, the US has virtually no LNG carriers capable of operating in global export markets and, therefore, it is likely that vessels will be uneconomic to build in the US.

Should a protectionist approach be applied to the carriage of crude oil exports, the global shipping industry fears it could be completely shut out of what is expected to be a major shipping trade worth billions of dollars a year.

ICS says that unless the United States Trade Representative or other supporters of free trade intervene, energy companies might see this as a price worth paying in order to be permitted to export US crude.

The European Commission, representing the EU in trade negotiations, and governments of other countries with large LNG tanker fleets, such as Japan and Norway, are also concerned.

Edited from press release by

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