The Panama Canal’s new enlarged locks handled 60 LNG carrier transits in the last quarter of 2017, a 40% jump on the same period a year earlier. The climb in traffic levels aligns with the build-up in exports from the Sabine Pass terminal in Louisiana, currently the LNG sector’s only user of the Canal for laden voyages.
Cheniere Energy’s Sabine Pass terminal exported 13.1M tonnes of LNG in 2017, up from 3.1M tonnes a year earlier. The facility’s third and fourth 4.5 million tonnes per annum (mta) liquefaction trains commenced operations during 2017 while a fifth is under construction and on target for a June 2019 completion.
Some 43% of the Sabine Pass output in 2017 was dispatched to customers in Asia. The Panama Canal did not accommodate all the Asian shipments leaving Sabine Pass as a handful of the loaded LNGCs departing the terminal sailed eastbound and made their passage via the Cape of Good Hope.
However, the waterway also hosted Sabine Pass cargoes destined for the Pacific coast of the Americas, namely the Mejillones and Quintero import terminals in Chile and the Manzanillo facility in Mexico.
The 60 LNGC transits of the Canal in Q4 2017 equates to 4.6 passages per week. The Panama Canal Authority (ACP) currently permits one LNGC through the waterway per day, and the current traffic for this type of gas ship is steadily building towards that threshold.
The question arises as to what extent ACP is prepared to amend its LNGC transit policy as US exports of the cryogenic liquid climb rapidly over the next three years.
Although the ACP recently stated that it expects the volume of LNGC transits it handles to rise another 50% by September 2018, the commissioning of 11 further liquefaction trains currently under construction will boost US LNG export potential by 2020 to 65 mta, or five times the 2017 trade volume. At least three of the new trains, with an aggregate output capability of 12.5 mta, are due onstream this year.
A sizeable proportion of the additional US LNG output in the years ahead is likely to be sold in Asia where customers will appreciate the reduced shipping costs offered by a Panama Canal transit. Will the waterway be up to the challenge of handling what might well turn out to be a fivefold jump in LNGC traffic?