Exhibition & Conference

8-10 September 2020

Singapore EXPO, Singapore

Strategic Programme

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Doug Brown

LNG Shipping Specialist

Poten & Partners


14:25 - 14:50

Wednesday, 18 September 2019

S2.5 Is the Panama Canal a Bottleneck?

  1. Objective/Scope

The opening of enlarged locks of the Panama Canal in June 2016 was seen as facilitating LNG trade between US Gulf and the Far East, offering unrestricted opportunity for LNG exports.  One main flaw with this perception is that the Canal carries far more diverse traffic than just LNG. We will describe, document and explain how the growth of shipping overall through the Panama Canal is on trend to increasingly constrain LNG traffic. We will also suggest a potential avenue to mitigate the problem.

  1. Methods, Procedures, Process

We will undertake statistical and technical analysis of Panama Canal traffic, regulations and ship requirements.  We will extrapolate the trends and issues identified by this analysis, using future projections of LNG trade and other ship trade using Poten proprietary models and publicly available data and forecasts.  We will use process analysis and expert judgment to review and identify inefficiencies in the logistics of canal passage and assess at a high level their potential to be addressed.

 

  1. Results

The Panama Canal expansion increased the ship beam restriction from 32.3m to 51m beam, wide enough for all LNG carriers except QMax vessels.  The expanded dimensions were great news for LNG carriers, but also for containerships, LPG vessels, bulk carriers, oil tankers and cruise ships, which also were restricted by the old lock dimensions. LNG carriers currently account for about 10% of the Panama Canal traffic. As further projects come on line, the industry will look for a larger share of transits.  The only problem is that other shipping sectors will also be looking to increase their Canal usage, particularly with increases in LNG exports. Oil, LPGs and ethane from the US shale revolution will also be looking for access through the Canal to the Far East.

  1. Observations

When the enlarged Canal locks were originally conceived, the US was a gas and oil importer and only occasional Trinidad and Peru LNG cargoes were expected to transit the Canal.  The idea that the US could be a major LNG exporter was not considered and the Canal is finding itself a victim of its own success.

There is a strict transit limitation of 12 NeoPanamax ships (of all types) per day through the Canal. The way that LNG carrier transits through the Canal are scheduled exacerbates this restriction. Alternative ways of scheduling could partially alleviate the growing problem.

  1. Conclusions

This paper will argue that the Canal is on track to becoming a bottleneck for LNG trade.  Panama Canal authorities should evaluate alternative ways of scheduling of LNG carrier transits through it.