Panama canal widening to dramatically increase transport of US energy to Asia market

Fuel Fix:

The rapid growth of U.S. oil and gas production is dramatically changing trade patterns in the region, and next year’s expansion of the Panama Canal likely will prompt even more dramatic shifts, according to a new report from the U.S. Energy Information Administration.

The widening of the Panama Canal, scheduled for completion next year, will vastly increase the opportunity for energy producers in the Americas to export their liquefied natural gas to Asia, according to the report.

As it stands, no LNG trade goes through the canal, and the crossing isn’t used for significant volumes of petroleum trade either. Size limitations often makes it too costly to ship those fuels. But Panama’s multibillion-dollar effort to expand the canal to accommodate larger vessels and double its transit capacity is scheduled to be complete in 2015.

The U.S. EIA report says both petroleum and LNG trade through the passage likely will increase.

“While the Americas have accounted for a considerable portion of the global markets in liquid fuels and natural gas and have attracted sizable investments, the region has the potential for further expansion and development,” the EIA wrote in its report.
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Today, the Panama Canal can only accommodate tankers with strict size limits — about 80,000 deadweight tons and a draft of less than 39.5 feet. Ships of that size are known as Panamax vessels.

But once the expansion is complete, the isthmus will be able to accommodate a much larger style of tanker, known as an Aframax, which can carry 120,000 deadweight tons. Once that happens, the canal will accommodate more than 80 percent of the world’s LNG carrier fleet.

That move coincides with the growth of LNG liquefaction projects being developed in the U.S., mostly along the Gulf Coast, that will dramatically increase liquefaction capacity. There are 35 LNG export projects in varying stages of approval, according to the EIA.

At those projects come online, the EIA says, the widening of the canal would help facilitate exports to Asia. The continent is the world’s largest LNG import market, particularly China, Japan and South Korea.
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That should help the balance of trade with Asia, and it will provide  more opportunities for the use of the oil and gas being developed in Texas particularly.  I think it will also facilitate the transport of Texas oil and gas to the West Coast of the US which will offset their current use of Saudi crude.