• 5 minutes 'No - Deal Brexit' vs 'Operation Fear' Globalist Pushback ... Impact to World Economies and Oil
  • 8 minutes China has *Already* Lost the Trade War. Meantime, the U.S. Might Sanction China’s Largest Oil Company
  • 12 minutes Will Uncle Sam Step Up and Cut Production
  • 52 mins OPEC will consider all options. What options do they have ?
  • 10 hours Maybe 8 to 10 "good" years left in oil industry * UAE model for Economic Deversification * Others spent oil billions on funding terrorism, wars, suppressing dissidents, building nukes * Too late now
  • 3 hours Recession Jitters Are Rising. Is There Reason To Worry?
  • 16 hours Russia Accuses U.S. Of Stoking Tensions With Missile Test
  • 7 hours What to tell my students
  • 10 mins With Global Warming Greenland is Prime Real Estate
  • 7 hours CLIMATE PANIC! ELEVENTY!!! "250,000 people die a year due to the climate crisis"
  • 11 hours TRUMP'S FORMER 'CHRISTIAN LIAISON' SAYS DEEPWATER HORIZON DISASTER WAS GOD'S PUNISHMENT FOR OBAMA ISRAEL DIVISION
  • 8 hours NATGAS, LNG, Technology, benefits etc , cleaner global energy fuel
  • 3 hours Trump vs. Xi Trade Battle, Running Commentary from Conservative Tree House
  • 1 day In The Bright Of New Administration Rules: Immigrants as Economic Contributors
  • 12 hours Flaring is at Record Highs in Texas
  • 23 hours Get First Access To The Oilprice App!
Alt Text

Gas Flaring “Running Rampant” In The Permian

Gas flaring in the Permian…

Alt Text

Japan Is Bargain Hunting As LNG Prices Slump

Utilities in Japan, the world’s…

Alt Text

Is Big Oil's Natural Gas Bet Turning Sour?

Big Oil has been piling…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

The Panama Canal Needs To Be Expanded Again

When the Panama Canal was expanded, it drew a lot of enthusiasm, with many seeing U.S. oil and gas exports surging thanks to the wider waterway that cuts the journey to several key markets by between 15 and 30 days, therefore cutting the costs of this journey as well.

Besides the shorter journey times for tankers and LNG carriers, the wider Panama Canal could handle larger vessels such as the Neopanamax class, which is widely used for shipping LNG globally, and Aframax crude tankers. Yet not all is bliss.

Forbes’ oil correspondent Gaurav Sharma wrote in a recent story that although LNG carriers passing through the expanded Panama Canal have increased significantly in numbers, they are still below what the canal can handle on a daily basis: 12 Neopanamaxes. Right now, the average daily transit of this size of vessel is five.

What’s more, not all five carry LNG. In fact, the Panama Canal Authority has reportedly only allocated one slot daily for LNG carriers, which will inevitably lead to congestion as U.S. production—and especially export-bound production—continues to boom.

At the end of last year, tensions flared between the PCA and LNG producers about whose fault it is that not enough LNG tankers are using the freshly expanded channel that saves 11 days from the journey to Asia, which has become a key market for U.S. LNG. According to the producers, the canal has expanded the access of cargo vessels at the expense of LNG tankers. According to the authority, LNG producers can’t comply with timetables. Related: IMF: Expect Oil To Fall Below $60

The Oxford Institute for Energy Studies shares the concern. In a recent paper on the Panama Canal and LNG, the institute said the Panama Canal Authority was working with LNG producers to increase the allocation for LNG carriers by the fall of this year, but the problems remain. This happens after last year the Authority said it would gladly grant LNG producers another daily slot if they “proved worthy.”

So, it seems the LNG industry and the PCA have come to at least a tentative agreement that something must change, so exporters can take fuller advantage of the canal’s expansion. But some believe that a further expansion is necessary.

Right now, despite the official only slot daily for LNG carriers, two are becoming more frequently allocated, allowing for the shipping of 38.3 billion cu m of gas. U.S. energy companies, however, are pumping ever more gas and building more and more liquefaction terminals. The Oxford Institute for Energy Studies believes the Panama Canal will become congested with LNG carriers as soon as next year or, under a better-case scenario, by 2021. This will happen even if the PCA boosts the allocations for LNG to four daily.

For now, the Panama Canal is a great passage for LPG and condensate carriers. But it’s LNG that urgently needs to reach global markets. As production grows, the risk of bottlenecks in the canal will inevitably become a harsh reality. It may well be the case that the freshly expanded waterway could need another expansion. The alternative would be costlier for both buyers and sellers in the long term.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play