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Shale Gas Going Global
How the New Panama Canal Can Save American LNG Exports

In four years the United States will be the world’s third-largest exporter of liquified natural gas (LNG), behind only Qatar and Australia in an increasingly important energy market. America’s first LNG export facility is now up and running on the Louisiana coast, but most importers of the superchilled hydrocarbon are halfway around the world, in Asia. That’s a long and therefore costly trip for LNG tankers to make, but thanks to the recent expansion of the Panama Canal, American LNG exports to Asia are going to get a good bit cheaper and quicker. The EIA reports:

Transit through the Panama Canal will considerably reduce voyage time for LNG from the U.S Gulf Coast to markets in northern Asia. Four countries in northern Asia—Japan, South Korea, China, and Taiwan—collectively account for almost two-thirds of global LNG imports. A transit from the U.S. Gulf Coast through the Panama Canal to Japan will reduce voyage time to 20 days, compared to 34 days for voyages around the southern tip of Africa or 31 days if transiting through the Suez Canal. Voyage time to South Korea, China, and Taiwan will also be reduced by transiting through the Panama Canal. […]

In addition to shortening transit times, using the Panama Canal will also reduce transportation costs. The Panama Canal Authority has introduced new toll structures for LNG vessels designed to encourage additional LNG traffic through the Canal, especially for round trips…Based on IHS data, the round trip voyage cost for ships traveling from the U.S. Gulf Coast and transiting the Panama Canal to countries in northern Asia is estimated to be $0.30/MMBtu to $0.80/MMBtu lower than transiting through the Suez Canal and $0.20/MMBtu to $0.70/MMBtu lower than traveling around the southern tip of Africa. Transiting the Panama Canal offers reduction in transportation costs to northern Asian countries such as Japan, South Korea, Taiwan, and China and may offer some minimal cost reductions to countries in southeast Asia (Malaysia, Thailand, Indonesia, and Singapore), depending on transit time.

America’s first LNG cargoes were sold to Brazil, in no small part thanks to the shorter trip required. When the U.S. was first plotting its turnaround from building up LNG import facilities towards actually selling its excess shale gas abroad, Asia looked like one of the likeliest markets because of the region’s relatively high prices (historically called the “Asian premium“). But over the past year and a half, Asia’s spot LNG prices have fallen precipitously on flagging demand and the collapse in crude prices (many LNG deals are drawn up as long-term contracts linked to the price of oil). Because of that, it’s harder to justify the expenses involved with liquifying and shale gas and transporting it all the way to Asia.

In this context, any savings America’s LNG exporters can find are going to be exceedingly welcome—the newly enlarged Panama Canal could help U.S. shale gas go global.

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  • ljgude

    I live in Australia and here we run a significant portion of our car fleet on LNG which is legally mandate to sell for a bit more than half the price of gasoline. It has less energy in it but it still reduces running costs. perhaps 25-39% of our filling stations have LNG pumps and in urban areas, at least it is not hard to find it – stations conspicuously display the lower price so you know they carry it. The other thing to understand is that the the bigger your engine the less you experience a loss of efficiency. So a V-8 will seem to not lose power while a gas converted small car will cost nearly as much to run as it does on gasoline. My previous 2.2 litre Camray 4 Cyl was just big enough to benefit for a conversion, while my current 1.3 litre car would not benefit. It may be time for the US to consider gas as an alternative fuel.

    • Andrew Allison

      Roughly 20% of US Public Transit buses are natgas powered. Trucking usage is inhibited by three factors: greatly improved diesel engine efficiency, a 30% price premium for the vehicle and lack of fuel infrastructure.

    • CaliforniaStark

      When driving in Utah, often use an F150 truck which runs on CNG. Utah installed a network of LNG filling stations; they exist even in small towns. The gasoline equivalent price for CNG in Utah is about $1.50 a gallon; it was a major cost savings when gasoline prices were high. Until recently it was all but impossible to drive a CNG vehicle between California and Utah. Now still cannot do so between California and Washington State. A major risk along many routes is that a CNG station at a critical location will not be working.

      Totally agree the benefits of natural gas as an alternative fuel, particularly in light trucks. There is an effort to develop home refueling systems for CNG vehicles; GE is working on it, and there is a company already marketing a home compressor/refueling system (believe it is named “Phill”)

  • Bystander

    I really have nothing to add to these comments but wanted to express my thanks. The comments on many sites consist mostly of vitriol and snark but here I have learned a thing or two.

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