‘Drill, baby, drill’ might be bad for the planet but good for CalMac
When the Glen Sannox finally embarked on its maiden voyage two weeks ago, it marked something of an engineering first for CalMac’s ferry fleet.  The vessel is dual-fuel, able to run on both conventional marine gas oil and cleaner-burning liquefied natural gas (LNG).
The Glen Sannox – and its sister ship, the Glen Rosa which due to be delivered in September – are the first-ever ferries built in the UK which will be capable of running on LNG.
It is also a large part of why they are so late and so over budget.  When the decision was taken over a decade ago, it was seen as a step towards a greener ferry fleet. LNG burns cleaner than marine diesel and produces far less nitrous and sulphur oxides pollutants. It was also, at the time, despite LNG having to be imported and trucked up from the south of England, seen as cost-efficient, as gas was cheap.
After Russia’s invasion of Ukraine war, that cost advantage vapourised. Adding to the woes, Joe Biden froze new LNG export permits in January last year to allow for the environmental and economic effects of the export industry to be studied. But could Donald Trump, with his promise to “Drill, baby, drill” be about give the beleaguered publicly owned ferry operator a bit of a boost, and could that in turn help Scotland’s whisky sector? One of the leader’s first acts following his inauguration was to end his predecessor’s LNG moratorium.  The US is the world’s largest exporter of the product and exports were already expected to double by the end of the decade. With the new Commander-in-Chief also indicating he wants to speed up the licensing process, that could soon increase.

 

Professor Paul de Leeuw, Director of Robert Gordon University’s Energy Transition Institute, said it might take some time for this to have an impact.  “It takes quite a few years to get an energy facility built. So probably this will happen after his presidency is finished.”  However, he said the consequences could provide a quandry for the President.  “Investors have a choice, am I producing it and selling it in a domestic market, or do I sell it internationally at higher prices?  “And this is the dilemma, because, of course, if they’re going to produce more and sell it to the international markets at higher prices, it raises the gas price in the US. “And because the gas in the US is predominantly used for power generation, for industrial purposes, and, of course, for domestic purposes, it will increase the price of power and increase the price to the US consumer, which is not what they want.”
Nevertheless, when President Trump was asked about LNG exports to Europe on Thursday, he guaranteed a supply. “I would make sure that you get it,” he said.  “I think the more that you do, the lower the price is going to go, and what I’d like to see is rapid approvals,” he told an audience at the World Economic Forum in Davos during a virtual appearance.  Intriguingly, shortly after his inauguration, he was asked by reporters how the EU could avoid his plan to impose heavy tariffs on all imports.  He replied: “The one thing they can do quickly is buy our oil and gas.”
During the campaign, President Trump has threatened to slap tariffs of up to 20% on all imports. If he follows through, that could have a devastating impact on the Scotch whisky industry.
When he was last in the White House, he imposed a number of tariffs in retaliation to a long running legal battle between Airbus and Boeing. They included a 25% tariff on single malts, taking the cost of a $40 bottle of single malt to $50.  The Scotch Whisky Association (SWA) estimates the industry lost £600m in sales in the 18 months the tariff was in place.  Is the way to avoid tariffs by buying more US gas? Well, even if it is not, we are going to need more
“With the EU’s roughly 90% gas import dependency, and with UK gas supplies rapidly declining over the coming years, additional LNG volumes from the USA will play a critical role in maintaining European energy security as part of a radical overhaul of its energy infrastructure,” says Prof de Leeuw.
The Glen Sannox may symbolise a new chapter for CalMac and Scotland’s ferry fleet, but its propulsion is tethered to broader geopolitical and economic forces far beyond the Clyde.