LONDON - Six years after the Panama Canal began a $5.25 billion expansion to capture shipments of Asian-made goods to the East Coast of the United States, the flow of liquefied natural gas in the opposite direction promises to be a better bet.
Shipments of the fuel, along with rising commodity and energy cargoes between the U.S., Latin America and Asia, are likely to provide the largest sources of demand growth when the project is complete in June 2015, Administrator Jorge Luis Quijano said in an interview. Shipping containerized goods, which generate most business for the 50-mile link, has yet to return to the same level as 2007, two years before the global economy had its worst recession since World War II.
The shift shows how rising U.S. shale-gas output is reshaping global energy markets. The Panama Canal enlargement is central to the change because the route cuts voyages by more than 8,500 miles to Asia, where fuel demand is growing fastest. The waterway, handling 5 percent of world trade and shipping 333 million metric tons in the year to Sept. 30, is used by as many as 14,000 ships a year, connecting 160 countries and 1,700 ports, according to its website.
"This could be a significant boon to our business," Quijano said in the telephone interview on Jan. 17 from Balboa. "There's been a lot of interest in going through the expanded Panama Canal with LNG cargo from the Atlantic going to Asia."
The original plans for a third set of locks at each entrance of the 99-year-old canal were based on capturing extra traffic from larger container ships to grow routes to the East Coast from Asia, Quijano said. Traffic on the route represents 43 percent of the canal's transport, up from 11 percent in 2000, Monica Martinez, a canal spokeswoman, said in an e-mailed response to questions.
What the canal didn't foresee when it planned the expansion was the rise of shale gas, produced from hydraulic fracturing of rocks, Quijano said. The extraction method boosted U.S. gas output by 30 percent in the past five years and so-called tight-oil production by 20 percent, according to BP's Energy Outlook 2020, released this month. The nation will become a net exporter in 2017, according to Europe's second-biggest oil company. Liquefaction chills the fuel into a liquid for transport by sea.
The U.S. may boost LNG output to 50 million tons annually by the end of the decade, from zero this year, according to Morgan Stanley. That would make the nation the world's third-largest producer, after Australia and Qatar, the bank estimated in a Jan. 28 report.
The U.S., which currently has one LNG export terminal, in Alaska, will probably permit additional overseas sales because the price of natural gas in the country is cheaper than the cost of producing shale gas, Sverre Bjorn Svenning, a shipping analyst at Fearnley Consultants, said in a Jan. 29 phone interview from Oslo. The Oslo-based unit of shipbroker Fearnley worked as consultants to the canal 10 years ago on projected demand for liquefied bulk cargoes. A U.S. Energy Department-sponsored study in December supported LNG exports.
"The Panama Canal is definitely good news for east Asia, and it's where the highest global prices for LNG are," Svenning said. His company is putting together deals to build vessels to ship the fuel that are based on using the canal for long-term charters, he said.