Run Through the Jungle—Moving LPG and LNG Through the Expanded Panama Canal

After a series of construction setbacks, the Panama Canal expansion is finally expected to come online by mid-2016. The wider, deeper canal locks will enable any LPG ship (up through Very Large Gas Carriers, or VLGCs) on the planet to take the time- and money-saving short-cut, and also will accommodate all but a few of the world’s biggest liquefied natural gas (LNG) vessels. That can only help U.S. liquefied petroleum gas (LPG) and LNG exporters, who for competitive reasons need the low transportation costs to Pacific Basin markets that shipping in super-bulk will provide. Today we discuss how the expansion project may boost exports of hydrocarbons from the U.S. Gulf Coast.

It took Guns N’ Roses 15 years to release its 2008 album, Chinese Democracy, and it wasn’t really worth the wait (or the $13 million cost—it’s still the most expensive album ever produced). In contrast, it took the U.S. only two-thirds as long--10 years--to cut the original Panama Canal through the jungle in 1904-14 (the most expensive U.S. construction project to that point; total cost, $375 million), and it received much better reviews. Now, a long-delayed effort to build a third set of locks along the canal (to allow much larger ships to pass through) is finally nearing completion (for real; see last week’s posting Here She Comes—Full Blast and Top Down); a June 26, 2016, opening is planned. When a Panamanian referendum approved the multibillion-dollar expansion project in October 2006, no one would have guessed that two of the primary products to be moving west through the waterway from the Caribbean to the Pacific would be U.S.-sourced LPG and LNG. In fact, way back then the U.S. was a net LPG importer and was building several LNG import terminals. The Shale Revolution changed everything, though, and now U.S. producers are counting on LPG and LNG exports to keep the domestic market from being flooded with supply surpluses.

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