Panama Canal and LNG: Congestion Ahead?

With the ongoing expansion of US LNG exports from projects under construction and a long list of new US projects (yet to receive FID) potentially onstream in the early 2020s – the US could approach and perhaps exceed LNG output levels from Qatar and Australia.  With no destination restrictions on US LNG cargoes, they are free to flow to importing markets which offer the best ‘netback’ whether on a spot, short term or medium term contractual basis.

Clearly for Asia-bound US LNG cargoes, transiting the Panama Canal reduces voyage time and hence charter and fuel costs. The recent expansion of the Canal capacity has not been without problems and the prospect of the Panama Canal becoming a ‘bottleneck’ for LNG supply from Atlantic basin to Asian markets is therefore a very real possibility.

This Energy Insight addresses the following questions:

  • What is the current capacity for LNG transit through the Panama Canal and what is the reasonable expectation of increased capacity in the next 5 years?
  • What are the additional costs incurred for LNG carriers from the US to Asian markets if they have to seek alternative routes?
  • If there is a future bottleneck to LNG tradeflows via the Panama Canal, when is this likely to occur and what might be the consequences in terms of pricing?

By: Howard Rogers

Latest Tweets from @OxfordEnergy

  • A new OIES study on European gas demand: The UK was the only one of the large gas consumers not to use more gas in…

    April 26th

  • BP & Reliance last week sanctioned phase 2 of India KG D6, with all three phases to bring 10 bcm/y of new productio…

    April 25th

  • Jim Henderson on Germany-Russia gas ties: While lower prices may reflect strong diplomatic links, they also show th…

    April 25th

Sign up for our Newsletter

Register your email address here and we will send you notification of new publications, comment, articles etc. automatically.