American LNG Positioned to Win With IMO 2020
In less than a year, the International Maritime Organization’s (IMO) standards to cap sulfur emissions in marine fuels will go into effect. These “IMO 2020” standards will not only benefit the American oil and shipping industries, but also America’s liquefied natural gas (LNG) sector.
IMO 2020 will reduce the sulfur content in marine fuels from a maximum of 3.5 percent to 0.5 percent. To achieve compliance with these stronger standards, shippers will need to either install emissions-control devices known as “scrubbers” or instead they could switch to a low-sulfur alternative, like LNG. This presents a unique opportunity for the American LNG sector—one of our fastest growing energy industries. LNG is simply natural gas that has been cooled to approximately -260 degrees Fahrenheit, which reduces its volume by 1/600th of its original size and makes it easy to store and export.
The use of LNG as a marine fuel reduces sulfur oxide emissions to nearly zero. Because of this, global demand for LNG is growing as shippers prepare for IMO 2020. America is ready to meet this increased global demand and doing so will strengthen our economy and create hundreds of thousands of jobs.
The United States is advantageously positioned with an abundance of natural gas that allows us to easily meet our energy needs domestically while simultaneously supplying our allies abroad. Specifically, conservative estimates of U.S. natural gas supplies exceed 2,400 trillion cubic feet, enough natural gas to last about 80 years, and America consumed less than 2 percent in 2018. This large surplus positions America to dominate the global LNG market as the world prepares for IMO 2020.
While IMO 2020 is likely a boon for American energy, there has been talk of delaying its implementation. However, with America already producing and exporting large volumes of compliant fuels, this would be an unnecessary and even harmful move. Since 2015, all U.S. ports restrict sulfur emissions to amounts five times more stringent than IMO 2020 standards require. This experience with cleaner fuels places the United States ahead of our foreign competitors, many of whom have yet to prepare for the standards.
From February 2016 to January 2019, the U.S. exported LNG to more than 30 countries, and the Energy Information Administration estimated that American LNG export capacity will more than double by the end of 2019. Substantial industry investments have already been made, and the U.S. Federal Energy Regulatory Commission has approved the construction of new production and export terminals, such as the Golden Pass LNG facility in Texas or Tellurian’s Driftwood facility in Louisiana. Once completed, this facility will be able to export 27.6 million tons of LNG per year to customers worldwide.
IMO 2020 will help bolster our energy economy and create jobs across the entire LNG value chain – ranging from natural gas production, turbine manufacturing, pipefitting, and many other industries across the country. According to a study by the U.S. Department of Energy, LNG exports could add between $50 and $73 billion to the U.S. economy by 2040, while creating between 220,000 and 453,000 jobs. This reaffirms a point illustrated in previous studies: when LNG exports increase, the U.S. economy grows. The study also notes that even as exports grow, the price of LNG is projected to be less than $2 higher in 2040 than it was in 2010.
LNG is one of the safest fuels to transport, which makes it an especially enticing export. Since 1959, logs kept of maritime accidents reveal an industry with an untarnished record at sea. A 2014 report by the Society of International Gas Tanker and Terminal Operators noted that in a period of over 50 years, there were “no onboard fatalities directly attributable to [the LNG cargo]. This is a very impressive, in fact unprecedented, safety record.”
As a clean-burning, cost-efficient and safe fuel, LNG remains a prime choice for shippers post-IMO 2020.
With a natural gas base as strong as America’s, timely implementation of IMO 2020 standards will ensure that the U.S. can maximize its competitive advantage and further enhance our energy economy. Continuing with IMO standards will benefit Americans throughout the country, and we should proceed without delay.
Charlie Riedl is the executive director of The Center for Liquefied Natural Gas (CLNG), which advocates for public policies that advance the use of LNG and its export. As a committee of the Natural Gas Supply Association, CLNG represents the full LNG value chain, including LNG producers, shippers, terminal operators and developers.