New Panamax

After the $5 billion-plus expansion of the Panama Canal is dedicated this Sunday, June 26, the first “New Panamax” vessel scheduled to pass through the canal’s new, longer, wider locks will be the Lycaste Peace, a Very Large Gas Carrier (VLGC) that is transporting propane from Enterprise Products Partners’ Houston Ship Channel export terminal to Tokyo Bay in Japan. What remains to be seen, though, is how many other supersized vessels carrying propane, liquefied natural gas (LNG) or other hydrocarbons will follow, and how soon. Today, we mark the formal opening of the newly enlarged Atlantic-Pacific short-cut with a look both at the game-changing potential of the expanded canal and the realities of today’s energy and shipping markets.

The Panama Canal expansion, set for a January 2016 debut, will slash the travel time for larger ships ferrying U.S.-sourced LNG and LPGs from the Gulf Coast (or East Coast) to Japanese and other Asian buyers. And—no surprise here--for ship charterers, time is money, and the ability to make three roundtrips instead of two every three months is a big deal. Being able to use ships with larger, “New Panamax” dimensions is welcome news to Asian utilities awaiting delivery of American LNG, and to Asian petrochemical manufacturers seeking to diversify their LPG sourcing and/or shift from naphtha to LPGs as their preferred feedstock. In today’s blog, we continue our look at what longer, wider and deeper canal locks mean for U.S. hydrocarbon exports.

The long-awaited Panama Canal expansion is expected to be complete and operational in January 2016, more than a year late and just in time to allow much larger liquefied natural gas (LNG) tankers to move product from Sabine Pass through the canal to Asian and Latin American customers. The canal’s ability to handle larger ships with “New Panamax” dimensions also will make transporting growing U.S. liquid petroleum gas (LPG) exports more efficient and less costly. And the canal expansion may make shipments of crude from Gulf Coast ports to West Coast refineries cost-competitive (but that’s not a sure thing). In today’s blog, we discuss the latest on the canal expansion and what it means to U.S. and global energy markets.