Panama Canal Expansion

Fueled by soaring domestic production of natural gas liquids (NGLs) like propane and butane, U.S. liquefied petroleum gas (LPG) export volumes the past three years have rocketed to the top, surpassing exports by the old Big Three of LPG: United Arab Emirates, Qatar and Algeria. But that rise in LPG exports may be ending, and the share of exports made from Gulf Coast docks may be in for a decline. More propane and butane will be pulled from the Marcellus and Utica to the docks at Marcus Hook, PA, and demand for propane on the Gulf Coast—from new propane dehydrogenation plants and flexible steam crackers—will be climbing. That suggests that less LPG may need to be exported from the Gulf Coast to keep the market in balance. In today’s blog we continue our look at the soon-to-open Panama Canal expansion with an updated examination of U.S. LPG export terminals along the Gulf Coast.

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.

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.