Earlier this summer, the 102-year-old shipping route – the Panama Canal, expanded to add a third lane to accommodate larger ships – including the big tankers that transport liquefied natural gas (LNG).
As a result of this estimated $5.25 billion upgrade, LNG exports from the U.S. are now poised to increase by sea.
- Is this expansion a big deal? Yes!
According to the Wall Street Journal (WSJ), the expansion of the Panama Canal is “poised to capitalize on the surge in U.S. natural-gas output and the interest in new export markets including Japan, South Korea, India and China.” According to predictions by Oscar Bazán, the Panama Canal’s executive vice president for planning and business development, featured in “The Panama Canal Expands” article in the WSJ, LNG exports are expected to increase – “By 2020, Mr. Bazán said he expects liquid natural gas to be one of the main products transported through the canal.”
In fact, Bloomberg Markets explained in “A New Trade Route for Natural Gas Opens in Panama,” that “[w]hen the Panama Canal’s expanded locks slide open in late June, perhaps no one was happier than executives in the U.S. shale industry. With the goal of making the U.S. a global powerhouse for natural gas exports, these frackers have their sights on Asia. Now they have a more direct route that could significantly benefit their bottom line.”
The article goes on to report that “[f]or gas companies reeling from the recent collapse in prices, which in March reached the lowest level since 1998, the drop in time and shipping costs will provide a much-needed lift.”
- How will this expansion increase LNG exports? By making it quicker, cheaper and much easier to get LNG to other markets.
The Bloomberg Markets article details HOW the expansion can boost LNG exports as follows:
“The canal’s deeper channels can accommodate the kind of football-field-size tankers that transport liquefied natural gas (LNG), shaving 11 days and one-third the cost of the typical round trip to Asia.”
The route through the Panama Canal also provides a competitive option for gas companies shipping from the U.S. Gulf to Asia when compared to going through the Suez Canal or around Africa’s Cape of Good Hope.
- When will LNG exports increase? The timing is difficult to pinpoint, but…
Only a week after the locks opened, the Panama Canal Authority reportedly announced its first booking for an LNG carrier. In fact, the U.S. Department of Energy has predicted 550 tankers could be crossing each year by 2021.
We look forward to seeing the economic impacts of this potential increase in LNG exports by sea. The “ripple effect on the economy” of the canal’s expansion predicted by Forbes’ article, “Panama Canal Expansion: A Potential Supply-Chain Game-Changer” will be welcome.