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US LNG exporters looking at increased shipments via Panama Canal
PERFORMANCE
EXPORTERS of US LNG are poised to send more gas to Asia, taking advantage of new tran- sit slots at the Panama Canal. The canal has already had a major impact on the LNG trade, after being expanded in 2016 in order to accom- modate larger vessels. Even with tolls, it is the shortest and cheapest route for shipments to Asia from the US Gulf of Mexico – where most of the country’s new LNG export terminals are located – and other points along its coastline.
In June 2018, an increase in the maximum allowable beam for vessels transiting the Neo- panamax locks – from 49 metres to 51.25 metres – made it possible for Q-Flex tankers, the sec- ond-largest class of LNG carrier globally, to tran- sit the canal. These tankers have the capacity to carry 210,000-216,000 cubic metres of gas. The first Q-Flex tanker to pass through the Panama Canal was Qatargas’ Al Safliya, in May 2019.
This came as the number of LNG transits through the canal was already rising. A total of 399 LNG carriers passed through the canal in the year up to September 2019, compared with just 163 two years before, according to the Panama Canal Authority. Some slots for LNG carriers remain unclaimed, but nonetheless the authority anticipates that shipments to Asia will continue to grow.
Indeed, US exports of LNG rose by 60% to about 22mn tonnes in the first eight months of 2019. Despite the collapse of US LNG shipments to China, exports to other Asian countries have been on the rise and account for much of the overall increase. Shipments to Japan increased by 60% over this period, with exports to Singapore, Thailand and South Korea also on the up.
As a result of this growth, the number of slots for LNG carriers at the Panama Canal is set to double to four per day. And this could happen by the end of the year if it is deemed necessary for accommodating the greater demand, the Panama Canal Authority’s top administrator, Ricaurte Vasquez, told Japan’s Nikkei publication last week. The new LNG slots would not affect the passage of other types of vessels, Vasquez said.
Meanwhile, there is renewed optimism that the LNG trade between the US and China could soon resume, following comments from US Sec- retary of Commerce Wilbur Ross.
In a November 5 telephone press confer- ence, Ross said LNG and soybeans were among the goods being discussed as part of an interim trade agreement between the two countries that could reduce tensions in the shorter term and ultimately pave the way to a more robust deal being signed.
China is reported not to have imported a single cargo of US LNG since April, and has subsequently raised its tariff on the fuel to 25%. However, given that the US could eventu- ally become the world’s largest LNG exporter, while China is on course to become its largest importer, the two countries are missing out on an increasingly significant trading opportunity so long as the stand-off continues.
No further breakthrough in negotiations between the US and China has been reported as yet. If a deal is reached, however, a growing num- ber of cargoes destined for China are certain to increase LNG tanker traffic through the Panama Canal further still.™
Qatargas’ Al Safliya became the first Q-Flex tanker to transit the Panama Canal earlier this year.
The number of slots for LNG carriers at the Panama Canal is set to double to four per day.
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