U.S. Natural Gas Export Growth Threatened by Potential Shipbuilding Regulations

Global LNG shipments faced a significant hurdle in 2023, as revealed by data from IndexBox, with the United States shipping out 1,396 cargoes. However, the worldwide LNG vessel fleet encompasses...

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2025 August 30 . 1:27 PM

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LNG Export Growth Potentially Threatened by Proposed Vessel Construction Regulations in the U.S.

U.S. Natural Gas Export Growth Threatened by Potential Shipbuilding Regulations

The U.S. Trade Representative (USTR) has proposed new mandates for LNG exports to be transported on U.S.-flagged and U.S.-built vessels. Here's what you need to know about the potential impact of these mandates on the LNG export sector and the shipbuilding industry.

Impact on LNG Exports

The mandate could hinder the growth of LNG exports. By requiring a small but increasing percentage of LNG to be transported on U.S.-flagged and U.S.-built vessels, the industry faces challenges due to limited domestic shipyard capacity and the high cost of building vessels in the U.S., which is estimated to be two to four times more expensive than in countries like South Korea or China.

This mandate might lead to bottlenecks in LNG exports, allowing foreign markets to capture a larger share of the global LNG market. As U.S. facilities struggle to meet the new requirements, other countries could capitalize on the U.S. inability to supply LNG efficiently.

Impact on Shipbuilding Industry

The U.S. shipbuilding industry lacks the capacity to build LNG carriers quickly enough to meet the new demands. Currently, there is no U.S. shipyard capable of constructing LNG tankers, necessitating significant investment and infrastructure development to comply with the mandate.

The industry faces challenges in acquiring specialized labor and establishing reliable supply chains for shipbuilding materials, which are critical for ramping up production to meet the growing demand for U.S.-built LNG vessels.

The mandate increases regulatory pressure on the industry, as companies must either comply with the costly U.S. shipbuilding requirement or face penalties. This could lead to increased costs and reduced competitiveness against foreign competitors in the shipbuilding sector.

Policy and Economic Implications

The mandate could result in higher costs for U.S. LNG exporters, potentially driving up prices for consumers and affecting the competitiveness of U.S. natural gas in the global market.

Some experts suggest adopting a phased approach or providing flexibility in the implementation of these mandates to mitigate their impact on the LNG export sector and to support the development of the U.S. shipbuilding industry.

Overall, while the mandate aims to boost U.S. shipbuilding and LNG exports, it poses significant challenges for both sectors, requiring careful policy management to balance economic and national security interests.

The global fleet includes only 792 LNG tankers, with just one U.S.-flagged vessel currently in operation (built in France). The last LNG carrier built in the U.S. was completed in 1980. The Center for Liquefied Natural Gas (CLNG) and the American Petroleum Institute (API) have warned that the rules would penalize U.S. LNG exporters without effectively countering China's shipbuilding dominance.

The Trump Administration is pushing to revive U.S. shipbuilding, but without flexibility in defining "U.S.-built" vessels or phased implementation, the policy could stifle LNG exports just as global demand grows.

By the end of the decade, up to six U.S.-built LNG carriers would be needed to comply with the 1% mandate. Industry groups argue that meeting the USTR's requirements would be nearly impossible due to the lack of U.S. shipyard capacity, specialized labor, and supply chains.

The article is titled "Should U.S. Require U.S. Ships for LNG Exports?" and is published in "Archives" and also mentioned in "3pls". The article discusses U.S. policies regarding LNG exports and shipbuilding, as well as Qatar's strategies towards building a sustainable and resilient LNG supply chain. In 2023, the U.S. exported 1,396 LNG cargoes.