Update On The Panama Canal Expansion -- April 13, 2016

Updates

April 14, 2016: this is pretty cool. Yesterday RBN Energy had a great update on the Panama Canal. Today, the EIA tweets on ship-to-ship propane transfers across the canal. Very, very cool.

Original Post 

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Update on the Panama Canal expansion -- RBN Energy (article is archived).

On Monday, September 3, 2007, dignitaries and thousands of Panamanian citizens watched a huge explosion level a hill near Paraiso, a village north of Panama City. That day launched work on a project that would eventually cost more than $6 billion (U.S.) to double the capacity of the Panama Canal and allow for the passage of longer and wider ships. Nearly nine years later on June 26, 2016, the expansion is finally scheduled to be open for business.   The new canal capacity will be a major event in global energy markets, especially for growing volumes of U.S. natural gas, liquified petroleum gas (LPG) and petroleum product exports.   In honor of this historic development, RBN will take you there!   Rusty will be traversing the canal this Thursday, April 14^th and will have the skinny on what is happening in Panama right now, with pictures to show for it. 

In today’s blog we set the stage for our voyage across the Panamanian Isthmus.

The Panama Canal expansion has been a frequent topic in the RBN blogosphere.  We did a primer on the subject a few years back and subsequently have reviewed the impact of the expansion on the full range of hydrocarbon markets. 

In Courtesy of the Red, White and Blue we saw how the shipping distance from the U.S. Gulf Coast to Asia for large LNG tankers will drop from 16,000 to 9,000 miles when the canal expansion opens, cutting freight costs by more than 40%. 

Stayin’ Afloat with the LP Gees examined how the largest LPG vessels carrying propane and butane (very large gas carriers, VLGCS) cannot fit through the Panama Canal today, but will be able to after the expansion goes into service.   

In Rock the Boat Don’t Rock the Boat—Jones Act Vessels Through the Panama Canal? we looked at the possibility of moving US crude from the Gulf Coast to the West Coast either via the Panama Canal or the Transpanama pipeline (TPP). 

And in A Man, A Plan, An Expanded Panama Canal— Cutting Travel Times For LNG And LPG-Laden Ships we examined the benefits that canal expansion offers to LNG and LPG exports.   Today we consider what the upcoming expansion does for the Canal’s capabilities, and what the new capacity will mean for energy markets.

Data points regarding the expanded Panama Canal:

• Panama Canal Expansion Project: Third Set of Locks project, 9-year project; does two things:
• creates a new traffic lane
• first new line since canal built 100 years ago: allows for larger ships
• previous restrictions: no longer than 965 feet; no wider than 106 feet; draft capped at 40 feet (ships up to this size and draft: Panamax vessels
• new restrictions: 1,200 feet in length; 160 feet in width; 50 feet of draft: "New Panamax" or post-Panamax
• ultra large crude carriers (ULCCs) nearly 5x larger than the maximum capacity of the current canal; most other big crude vessels won't fit
• after the expansion: only 10% of LNG carriers won't fit (vs 90% currently)
• the only LNG carriers that will not be able to use the canal because of their width are Q-Flex (164 feet wide) and Q-Max (180 feet wide) -- the larger vessels pioneered by Qatar Gas to move staggering volumes of LNG (up to 157 metric tons for the Q-Flex and almost 200 MT for the Q-Max)
• it's possible, the Q-Flex will eventually be allowed to use the canal
• for LPG (propane and butanes); "very large gas carriers" (VLGCs) are preferred; between 375 MBbl and 550 MBbl; currently only 20% of the 180 global VLGC's can fit through the cana; once the new canal is operational, virtually every VLGC will be able to use the waterway
• expansion will help movement of refined petroleum products
• still a problem: only one port on the Gulf Coast can handle ULCCs, VLCCs, and Suezmax size vessles: LOOP; designed for imports; huge infrastructure costs if flexed to export; these large ships can't transit the new canal
• competition from the Trans-Panama Pipeline (TPP) or Transisthmian Pipeline: ports at either end and handle Suezmax and VLCC ships
• bottom line: expanded Panama Canal is a very big deal for LNG, LPG, and petroleum product exports from the US Gulf Coast; less significant for crude oil exports;