LNG

The Panama Canal Authority, which is trying to increase transits by liquefied natural gas carriers and other energy vessels and containerships, said it would again increase the number of ships that transit the waterway daily as water levels start to recover on the Canal after a prolonged drought blamed on the “El Niño” weather effects.

The Panama Canal Authority said it was trying to increase US liquefied natural gas transits and had invited energy company executives to Panama for discussions as water levels recovered on the Canal after a prolonged drought blamed on the “El Niño” weather effects.

The ACP, as it is known from its Spanish name Autoridad del Canal de Panamá, said traffic was recovering from a low point at the start of 2024 when booking slots for vessels were cut to 22 ships from all sectors.

During the Atlantic Basin-Pacific Basin transits the ships are lifted from sea level in locks up to the Panama Canal’s Gatun Lake where the water levels had dropped substantially and the levels have risen again.

Bottlenecks

However, during the first quarter most US LNG carriers looking to reach Asia were continuing to choose the longer trans-Atlantic route around South Africa to avoid shipping bottlenecks impacting transits via the Panama Canal, and as security concerns also increased in the Red Sea area to take the Suez Canal out of play.

During March and April up to 30 LNG carriers per month left US LNG plants with Asian cargoes and headed for the longer route to Asia rather than use the Panama Canal.

The latest ACP data showed that only 14 US LNG carriers reached the Asian market via the Panama Canal during the first quarter of 2024 compared with 40 LNG vessels during the same period of 2023.

LNG carrier transits through the Panama Canal's Neopanamax locks had amounted to under 5 percent of the total in the past two months compared with more than 60 percent by other large vessels like containerships.

The ACP said it was now working to modify transit slot allocations and has sent out a survey to all Canal users, including LNG customers, to identify their needs.

Panama invitation

Now that transits have returned to near normal the ACP said it was looking for ways to guarantee crossings for LNG carriers from the US Gulf Coast and other areas and said it had invited LNG companies to come to Panama later in May for talks.

“We will talk and define parameters and will listen to the very big aspirations of the companies,” a statement said.

The ACP has proposed building water reservoirs as medium-term to long-term solution to try and mitigate the drought and low-water conditions being repeated on a regular basis in the Canal system.

The project to widen the Canal at a cost of $5.5 billion was inaugurated eight years ago in June 2016 enabling the largest LNG carrier and containerships to transit the waterway.

While LNG from the US Gulf Coast has mostly pointed at an Atlantic crossing to Europe over the past year, Asia is still a key market for US LNG through the Canal.

Recovery plan

The Canal expansion work included two new lock complexes with a total of 16 gates, eight on the Pacific side and eight on the Atlantic side.

The primary action plan of the ACP is to tap additional rivers to join the Chagres River, the largest river in the Panama Canal's watershed.

The original Canal builders had dammed the Chagres River in two places to create Gatun Lake and the water used for the locks.

The ACP is now seeking to accelerate its plan to divert four additional rivers into the watershed by 2030.

CMA CGM, the French containership group with a growing proportion of vessels powered by liquefied natural gas, has informed its customers that the severe drought and further transit restrictions affecting the Panama Canal have taken a “severe toll” on operations so that consequently CMA CGM prices will have to be increased.

The Panama Canal Authority has further reduced ship transits because of drought blamed on the “El Niño” weather effects to 24 vessels in November and booking slots will be cut to 22 ships in December, hitting LNG, oil and containership traffic on the Atlantic-Pacific Basin crossings and sending bidding for slots up to $2 million or more as waiting times grow to more than a week.

The Panama Canal Authority said that the queue of vessels waiting to transit has dropped by 20 percent to 108 in the first week of September at both entrances to the waterway compared with 135 ships waiting in line last week.

The Panama Canal Authority has issued further restrictions for the maximum authorized draft in locks for the Neopanamax-sized and Panamax-sized vessels, including LNG carriers, as it faces drought conditions that are challenging the modernized Canal’s capacity and draft allowances for larger ships now being constructed.

The Panama Canal Authority said there were fewer ongoing constraints for reserved shipping transits amid continued high demand from LNG carriers and other tankers during the peak Northern Hemisphere winter season, while the Canal was also set to serve as a hub for the shipment and storage of Covid-19 vaccines

The Qatari Q-Flex liquefied natural gas carrier “Al Safliyah”, the largest LNG vessel to transit the expanded Panama Canal, is scheduled to arrive in Europe on June 12 from the US Sabine Plant of Cheniere Energy to complete a triangulation trade that began in South Korea.

The Qatari Q-Flex liquefied natural gas carrier “Al Safliyah”, the largest LNG vessel to transit the expanded Panama Canal, was berthing offshore Cheniere Energy’s US export plants in the Gulf of Mexico to lift a cargo.

The Qatari Q-Flex liquefied natural gas carrier, the “Al Safliyah”, has become the largest LNG vessel to transit the expanded Panama Canal in a test for future tanker movements that could improve the economics of the export plant build-out on the US Gulf Coast.