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Panama Canal expansion could reduce time, cost to ship US LNG from Gulf to Asia: report

LONDON, UK—A Reuters report has suggested the United States could benefit from extra Asian demand for shipped gas between now and 2025 with help from a widened Panama Canal and competitive prices.

US natural gas production has surged thanks to the shale revolution, and this means proposed new liquefied natural gas (LNG) projects in Australia, East Africa, Canada and Russia can no longer count on exporting to the United States and will now have to focus more on sales to Asia, said the report.

The distance to ship US LNG from the Gulf of Mexico to Asia is set to be fall to about 9,000 miles from 16,000 after expansion work makes the Panama Canal big enough for LNG tankers.

That will allow US exporters to compete for that same Asian market.

The Gulf of Mexico coast has tailor-made ports, storage and pipes it has used for LNG imports. It is part of the world’s biggest natural gas market and has specialist local labour available, said Reuters.

This gives LNG projects there a set of ‘brownfield’ advantages over ‘greenfield’ rivals off the undeveloped coasts of Mozambique and Tanzania, in the harsh Russian Arctic, and in remoter parts of Australia and Canada.

The United States could therefore meet about a third of the 150 million tonnes per year (mtpa) of extra LNG demand expected between now and 2025 that is not already accounted for by about 100 mtpa of Australian supply currently under construction, according to analysts’ estimates.

Adding to uncertainty for non-US projects is the widening of the Panama Canal and the cost reduction that will bring for U.S. LNG exporters.

Only 21 of the existing global fleet of 370 LNG tankers can currently squeeze through the Panama Canal, and none of them try. Yet more than 80 percent will be able to make the passage once widening is complete, said LNG shipping consultancy Platou.

Delays have beset the widening project but it is currently expected to be completed by the end of 2015 – just in time for the first scheduled exports from Sabine Pass on the border between Texas and Louisiana, said the report.

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1 Comment » for Panama Canal expansion could reduce time, cost to ship US LNG from Gulf to Asia: report
  1. Ron says:

    Safety rules on movement of LNG tankers (e.g. large distance clearance of all other ships) could restrict canal volume for other traffic. Would this make it impractical?

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