2018 March 13
The rise of US LNG exports has coincided with another major milestone in shipping, the widening of the Panama Canal, which has allowed for a significant increase in LNG shipping transportation. In its latest weekly report, shipbroker Allied Shipbroking noted that “the day was July 25th 2016, a partly cloudy day on the Panama canal, and to most people a rather innocuous day without any real merit, however in shipping it marked the first of a momentous milestone, the day the first LNG vessel transited the new canal locks. The vessel was the Maran Gas Apollonia on charter to Shell, she had loaded her cargo from Sabine Pass LNG Terminal (the only LNG export terminal in the US) to discharge in Yantian, China.
According to Mr. Gerry Lathrop Research Analyst with Allied Shipbroking, “you may be asking yourselves, what is LNG? In shipping we have been hearing the acronym thrown around since at least the 1970s when the first LNG vessels were built, but a lot of people still don’t know exactly what it is. In essence, LNG is natural gas converted to liquid form by cooling it to an astonishing ?162 °C at atmospheric pressure. Natural gas is currently the fastest growing energy commodity according to data published in BP’s Energy outlook 2017, the authors expect the growth to average around 1.6% per annum between now and 2035. By sector, the largest contribution to consumption growth comes from the industrial sector, with combusted and noncombusted use accounting for 45% of growth, followed by power generation. According to BP, LNG imports to China are expected to supply around two thirds of the increase in imports, with pipelines of CNG from Russia making up the remainder”.
Lathrop adds that “since the opening of the Neopanamax locks, LNG vessels have emerged as the fastest growing segment for the waterway. This month the Panama Canal Authority is expecting its 300th LNG vessel to transit the new NeoPanamax locks. Currently of the 7 booking slots offered daily to Neopanamax vessels, the canal authority allows one to be allocated to an LNG vessel each day. This is done so that the pilots at the canal can familiarize themselves and get experience, safely navigating these specialized vessels, as the canal authority expects the number of transits to increase significantly the coming years as the US ramps up its LNG production and exports”.
According to Allied’s analyst, “currently Qatar and Australia are the largest exporters respectively making up almost 50% of total exports in 2016, according to data from IGU’s 2017 report. Most of this LNG was destined for the Asia-Pacific market. In total the Middle East exported 64.6 million tons to the area out of 91 million total tons. Similarly exports from the Asia-Pacific region to other Asian countries totaled 98 million tons out of 99.5 million total tons exported. As of last year, Japan, South Korea, and China were the biggest importers of LNG making up more than 55% of total imports, with China noting the biggest increase in imports from year-on-year, about 6.9 million tons more than the previous year”.
“But how does this tie in with the US and more importantly the Panama Canal? In 2013 the total number of exports of LNG from North America (with the exception of reexports) amounted to 0 tons, in 2014, that number rose to 0.3 million tons exclusively to Asia-Pacific. In 2015 that number stayed flat at 0.3, and then in 2016, that number almost doubled to 0.5m tons to the Asia-Pacific region with another 2.4m total tons going to other destination. According to the Panama Canal Authority, they expect the total number of LNG traffic through the canal to grow by 50% from the previous fiscal year, or from about 163 transits, to about 244. This means that the total expected income from LNG vessels (if all are about 174k cbm) will be in the region of 93 million USD from laden voyages only, according to tariffs provided by the canal authority”, Lathrop concluded.