Source: Lloyd’s List
January 18th 2017
The Panama Canal’s impact on liquefied natural gas shipping is definitely being felt, with LNG transits from the US to Asia via the waterway rising to an average of 14 per month from five last July.
The boost has occurred over the last three months, the Panama Canal Authority’s liquid bulk specialist José Arango told Lloyd’s List.
The increase in traffic was driven by winter cargo purchases, the outage of Australia’s Gorgon plant, and the opening of arbitrage opportunities for US cargoes.
“The Far East became more attractive and competitive for cargoes out of the US Gulf,” said Mr Arango.
He expects 22 LNG carrier transits in January and 15 in February. Since the widened canal reopened last July, allowing large-size LNG carriers through for the first time, some 66 LNG carrier transits have taken place.
The growing US to Asia trade enhances LNG shipping’s spot market. “LNG is an industry that is evolving quite fast in terms of spot,” said Mr Arango. “We expect to continue to be an important link in this new dynamic.”
As an example of the new dynamic, Knutsen’s 2016-built, 176,300 cu m LNG carrier Rioja Knutsen is carrying its maiden load of shale gas from Sabine Pass terminal in the US Gulf, according to Lloyd’s List Intelligence analyst Mark Renton.
The vessel is scheduled to arrive at the Panama Canal on Wednesday January 18, according to Lloyd’s List Intelligence vessel tracking data.
The canal, through its tolls, benefits financially from the new business. LNG carriers are charged per cubic meter, which works out at roughly $600,000 per round trip from the US to Asia. A quick calculation shows this would bring in around $40m for the total LNG transits done so far.
However, the new business has brought challenges. Only up to six slots can be allocated per day, while the workers get to grips with the new business and more accustomed to the new traffic. The aim is to increase this to 12 slots, but by an unspecified date in the future.
“For us this is a totally new market,” said Mr Arango. “We are in a learning curve. We need to improve ourselves and our times so we can keep providing the level of service our clients are accustomed to. There’s always room for improvement. We are never static, we are always finding new ways, the challenge is to continue innovating and providing a service.”
Prior to the opening of the widened canal last July, there was worried talk that owners of LNG carriers would have to invest in modifications to their vessels to ensure smooth and safe transits. Mr Arango said this had not been an issue so far. “Most clients are very happy.”
Concerns had also been raised about potential sudden changes to tolls.
Mr Arango has allayed those fears. The current toll structure for LNG carriers, he said, was devised following meetings with bodies such as Intertanko and Intercargo. Feedback and a public hearing ensured transparency. “We do not change toll structures out of the blue,” he said. Maintaining the toll “brings certainty to all our clients”.
On Friday, Donald Trump becomes the 45th US President. His support of the fossil fuel industry is well-known and many people expect a boost to US gas and oil production. Jack Gerard, president of the American Petroleum Institute, has already called on the new head of the US Department of Energy, Rick Perry, to make increasing exports of US natural gas a top priority.
If higher US exports of gas materialize, there are clearly positive implications for the Panama Canal. “I would not like to speculate on that,” said Mr Arango. But he did say that the canal would help in any move to boost trade. “The Panama Canal will be more than ready to continue to be an enabler for those types of cargoes, to provide safe and reliable traffic and opportunities to open new markets.”