Report: U.S. LNG Exports Boost Shipments for Expanded Panama Canal

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Researched by Industrial Info Resources (Sugar Land, Texas)--The opening of the expanded Panama Canal last year has been a boon for growing U.S. liquefied natural gas (LNG) and liquefied petroleum gas (LPG) exports, according to a new report by Morningstar Commodities Research (Chicago, Illinois).

The Panama Canal Authority opened up new locks on June 25, 2016, to allow larger vessels to move through the passage. Prior to the expansion, the canal could accommodate Panamax vessels up to 965 feet long, with a 106-foot-beam and 39.5-foot draft. With the expansion, the canal can now accommodate Neopanamax vessels, up to 1,200 feet long, 180 feet wide and a draft of 50 feet. As a result, the canal can take tankers with up to 600,000-barrel cargoes, as well as more than 90% of the global LNG fleet and all very large gas carriers (VLGCs), according to the report.

The $5.4 billion Panama Canal expansion ushered in a wave of projects by U.S. ports to handle larger vessels. For more information, see June 28, 2016, article - Panama Canal Expansion Sparks Port Projects.

The expansion has had a dramatic impact on LNG and LPG transits, according to the Morningstar report. The canal had 112 LNG carrier transits from October 2016 to May 2017, whereas there weren't any in the same period a year earlier, when most LNG vessels would not fit. Likewise, transits by LPG carriers grew to 406 from 209, during this same period.

But the biggest factor driving LNG traffic on the Panama Canal is the startup of LNG exports by Cheniere Energy Incorporated (NYSE:LNG) (Houston, Texas) from its Sabine Pass terminal in Louisiana, according to the report. LNG exports will increase in coming years as new terminals start operations. According to the International Energy Agency (IEA) (Paris, France) the U.S. will be on course to challenge Australia and Qatar for global leadership among LNG exporters. The U.S. is expected to account for 40% of the world's extra gas production by 2022. For related information, see July 14, 2017, article - IEA: U.S. LNG Exports Go into High Gear.

Meanwhile, the Morningstar report says the increase in LPG shipments through the canal using larger VLGC vessels "purely reflects shippers applying economies of scale to already escalating volumes of U.S. exports. The ability to use larger ships over the past year has coincided with expanding export infrastructure and demand for LPG from Asian countries."

For related information, see March 31, 2017, article - EIA: LPG Production Grows in All U.S. Regions Except West Coast.

U.S. LPG exports will be tempered as new U.S. petrochemical plants consume more propane feedstock, tightening supplies, according to Morningstar. For related information, see July 13, 2017, article - Propylene/Polypropylene Projects Mark Progress in North America.

The canal expansion has had the least impact on crude oil and refined products, according to the Morningstar report, largely because the canal still does not accommodate very large or ultra-large crude tankers that ship between 1 and 2 million barrels at a time.

Industrial Info is tracking $1.2 billion in project activity for the Panama Canal Authority.

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