Bloomberg has run an interesting article on the expansion of locks at the Panama Canal, which was completed in late June 2016. This expansion has allowed the US shale industry to reach Asian markets through a more direct route, thus enabling US LNG producers to use larger tankers and reducing transport times to Asia by 11 days and shipping costs by one-third.
Below are some key extracts from this article:
Nine years of construction work at a cost of more than $5 billion have equipped the canal with a third set of locks and deeper navigation channels, crucial improvements that doubled the isthmus’s capacity for ferrying goods between the Atlantic and Pacific oceans. Within a week of opening, officials said they had more than 170 reservations for transits this year, mostly for so-called New Panamax cargo carriers that couldn’t fit through the old canal.
For natural gas suppliers, the expansion comes at a pivotal moment. It coincides with a big increase in U.S. shale production and the construction of several Gulf Coast export terminals designed to help American gas muscle its way onto the world market. The canal’s deeper channels can accommodate the kind of football-field-size tankers that transport liquefied natural gas (LNG), shaving 11 days and one-third the cost of the typical round trip to Asia. In July the U.S. Department of Energy predicted 550 tankers could be crossing each year by 2021…
By 2020, U.S. export capacity is expected to expand to 9.2 billion cubic feet a day, a fifteenfold increase, with the country becoming the world’s third-biggest LNG producer, behind Australia and Qatar, the U.S. Energy Information Administration says.
This development is clearly bad news for Australian LNG exporters. After sinking hundreds of billions of dollars into building export terminals to export gas into Asia, the LNG price has collapsed. And now the industry is facing significant increased competition from US producers seeking to dump cheap gas onto the Asian market.
