Jones Act denies domestic ocean shipments of propane
by Michael Hansen, Hawaii Shippers Council, September 9, 2019
The Enverus Blog published the article, “Dislocations in the US Propane Market and the Jones Act,” on September 3, 2019, describing how the non-availability of Jones Act-eligible liquefied petroleum gas (LPG) carriers prevents the ocean shipment of domestic propane gas between coastwise points in the United States including Hawaii.
Enverus is a 20-year old Austin, Texas-based provider of oil and gas data originally founded as Drillinginfo.
The situation with LPG carriers parallels that of liquefied natural gas (LNG) carriers in that none of these ships exist in the Jones Act fleet. Therefore, it’s not currently possible to arrange a shipment of domestic LPG or LNG from one coastwise point to another.
LPG and LNG carriers are highly specialized self-propelled oceangoing tank ships designed and built to carry these gaseous cargoes. LPG is typically stored and transported under pressure at 320 pounds per square inch (PSI), which is approximately 22 standard atmospheres, and LNG at minus 260 degrees Fahrenheit. In addition, there are specialist ships that transport liquefied Ethane at approximately minus 220 degrees Fahrenheit. Collectively these kinds of ships are known as “gas carriers.”
Similarly to natural gas, there are several areas of the United States than cannot be supplied with domestic propane and petroleum gas (a mixture of propane and butane) due to the lack of pipelines. This includes New England, Puerto Rico and Hawaii.
The Gas Company LLC d.b.a. Hawaii Gas imports LPG in bulk on foreign LPG carriers from foreign sources including from West Africa to Oahu, Kauai, Maui and Hawaii islands.
An exemption from the Jones Act to permit foreign gas carriers to transport domestic LPG, LNG and liquefied ethane between domestic points in lieu of a Jones Act-eligible ship would improve the energy availability and lower the cost of energy for those areas of the country not serviced by pipeline.
Key excerpts from the Enverus Blog:
The US has become the largest producer and exporter of propane. Despite this growth, some parts of the US are still importing the heating and cooking fuel. This dislocation is caused by the Jones Act, a federal law passed in 1920 requiring goods shipped between US ports to be transported on US-built ships and operated by US crews.
Despite the growth in US exports, some parts of the US are still importing propane. Without any Jones Act-compliant tankers to carry LPG (or LNG for that matter), the only option for Hawaii and Puerto Rico and others is to look abroad. This is also the case for areas without pipeline or rail capacity to deliver the fuel to local markets, such as in New Hampshire. Hawaii and Puerto Rico receive propane cargoes throughout the year to fulfill demand for cooking fuel and other applications, while New Hampshire’s demand is more seasonal, as the fuel has replaced oil for heating purposes.
Hawaii’s propane imports are probably the best example of the dislocations caused by the Jones Act in the propane market. Much of the state’s supply in 2018 originated from Trinidad, but production is on the decline in that country. Since the end of 2018, Hawaii has received propane from Argentina as well as cargoes originated in areas such as Equatorial Guinea that were transferred to tankers offshore of the Dominican Republic . . .
While Hawaii sources propane from offshore West Africa, millions of barrels of US propane are passing by the state every month as they head to Asian markets. The map to the right shows the tracks of tankers loaded with US propane and butane from Enterprise’s Houston and Targa’s Galena Park terminals as they head through the Pacific to destinations in South Korea, Japan, and China.