The Panama Canal Authority may add additional reserved LNG transit slots in the future to address the increase in US exports via the shortest route from the Gulf Coast to the key East Asia import market, the agency said Dec. 4.
Delays of up to more than a week for LNG tankers passing through without a reservation began in late October and have continued recently. Last month, the Canal facilitated 53 LNG transits, up from 35 in October and 48 in November 2019, according to agency data. For overall vessel traffic, the Canal is currently facilitating an average of around 36 transits per day.
The delays have been blamed on a combination of factors, including fog, higher-than-average arrivals and additional safety procedures to prevent further spread of the coronavirus. Looking ahead, with US LNG export activity surging, and more capacity expected to come online through 2024, the Canal Authority wants to look at long-term options.
“There is potential in the next few years to increase the number of LNG vessel transits,” the Canal Authority said in a statement to S&P Global Platts in response to questions. “We look forward to revisiting the issue in the middle of next year, to see if any variation can be allowed, always maintaining the safety of the LNG ship, other vessels in the traffic mix, and our personnel and Canal infrastructure.”
The Canal Authority currently maintains two booking slots for LNG tankers per day. On some days, it has been able to accommodate four vessels on a given day, depending on the transit mix and operational conditions. Under current restrictions for the type of vessel, it could routinely accommodate up to two LNG tankers in the northbound direction and one in the southbound direction on a daily basis.
The US LNG netback from the Platts JKM rose to $2.80/MMBtu recently, a two-year high and a roughly $2/MMBtu premium over the comparable Dutch TTF netback.
The higher spot prices have incentivized a strong pickup in US LNG exports to Asia, which has been bolstered by a ramp in new export capacity. However, long wait times for unreserved vessels at the Panama Canal have also forced many US LNG cargoes to sail eastward, avoiding the Canal altogether and adding a considerable cost to the overall voyage.
The delays caused by the increased demand for slots pushed the average transit time per vessel to roughly 3.6 days, a 66% increase over last year and exceeding record wait times observed last fall. At least seven vessels took more than 200 hours to transit the Canal, with two vessels taking over 10 days to make the trip, S&P Global Platts Analytics data show.
US LNG exporters have taken notice.
“We have had to wait a few extra days to get a slot,” Cheniere Energy CEO Jack Fusco said in an interview with Platts on Dec. 4.
Fusco said the situation overall hasn’t impacted Cheniere much.
“We are hopeful that we can work closely with them and get the right slots so people feel comfortable that they are not going to sit there for an enormous amount of time,” he said.
Source: Hellenic Shipping News Worldwide