The Panama Canal expansion completed in June 2016 was expected to allow much larger LNG tankers to move product from Sabine Pass LNG and other Gulf Coast export terminals through the canal to Asian and Latin American customers. But water levels at Gatun Lake, which provides the fresh water needed to operate the canal’s locks, have been well below normal in recent years, limiting opportunities to use the canal and complicating plans to ramp up LNG flows through it. In today’s RBN blog, we look at the challenges of moving LNG through the Panama Canal, how access to the waterway has been affected by drought and climate conditions over the past decade, and the impact on the LNG market.
Representatives from U.S. LNG export projects met with the Panama Canal Authority (ACP) a few weeks ago to lobby for an increase in the number of transit slots available to them. LNG carriers (LNGCs) with a capacity above about 30,000 cubic meters can only transit the canal using the Neopanamax locks, which were opened in June 2016 after about nine years of construction. The Panamanian government decided in 2007 to expand the canal, at which time LNG exports from the Lower 48 were not even a blip on the radar screens of U.S. developers. The Shale Revolution was in its infancy, with gas production from shale plays accounting for less than 2,000 Bcf in 2007. That grew to more than 30,000 Bcf per year currently.
The Shale Revolution turned the LNG industry on its head. By 2023, the U.S. had become the world’s largest exporter of LNG, much of it directed toward Asia. In the first wave of U.S. LNG export projects, Asian buyers accounted for 36-37 million tons per annum (MMtpa; 4.8-4.9 Bcf/d) of LNG export capacity, from a total of 65-70 MMtpa (8.6-9.3 Bcf/d). More recently, Chinese buyers accounted for 24 MMtpa (3.2 Bcf/d) of U.S.-sourced LNG, almost all derived from projects coming online since 2022. U.S. project developers have set up marketing offices in China in hopes of signing long-term sales and purchase agreements (SPAs) needed to obtain project financing.
A Q-Flex LNG Carrier, QatarEnergy’s Al Safliya, Moving Through the Panama Canal.
Source: gcaptain.com
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