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Panama Canal Expansion and U.S. LNG Exports

Mark Green

Mark Green
Posted July 5, 2016

A newly expanded Panama Canal is open for business:

It’s noteworthy, as federal official say, that the enlarged canal can handle the vast majority of the world’s liquefied natural gas (LNG) tankers while significantly shortening travel time and transportation costs for U.S. LNG suppliers to key overseas markets. This is huge for U.S. LNG exports, offering another strong argument for swifter federal approval of pending LNG export projects.

The U.S. Energy Information Administration (EIA) reports that the expanded canal can accommodate 90 percent of the current LNG fleet, with a carrying capacity of up to 3.9 billion cubic feet (Bcf) – compared to just 6 percent of the fleet before with a capacity of less than 1 Bcf. EIA:

The expansion has significant implications for LNG trade, reducing travel time and transportation costs for LNG shipments from the U.S. Gulf Coast to key markets in Asia and providing additional access to previously regionalized LNG markets.

EIA says the expanded canal will reduce transit from Gulf Coast export terminals to Japan to 20 days, compared to the previous 31 to 34 days (moving either through the Suez Canal or around the southern tip of Africa, respectively). It also reduces travel time from the Gulf Coast to potential South American LNG markets. EIA says the canal expansion comes at a time when the U.S. is poised to become a leading player in the global LNG market:

Currently, about 9.2 billion cubic feet per day (Bcf/d) of U.S. natural gas liquefaction capacity is either in operation or under construction in the United States. By 2020, the United States is set to become the world's third-largest LNG producer, after Australia and Qatar. More than 4.0 Bcf/d of U.S. liquefaction capacity has long-term (20 years) contracts with markets in Asia, of which 3.2 Bcf/d is contracted to Japan, South Korea, and Indonesia.


Certainly, looking down the road for U.S. LNG exports, the opening of the canal expansion is timely. Alex Tertzakian, Energy Aspects Ltd. analyst, to Bloomberg:

“The Panama Canal expansion will mean Asia can meet its demand peaks with U.S. gas with lower prices.”

We’ve argued before that opportunities in the global LNG market urge U.S. policymakers to expedite approvals for domestic LNG exports to non-Free Trade Agreement countries. This is a competitive market, one where United States LNG suppliers should be allowed to vigorously engage. The U.S. has abundant supply, and now the expanded Panama Canal offers additional impetus for U.S. exports – and federal export approvals.

As of June 2, more than two dozen facilities awaited final non-FTA authorizations from the Energy Department. These should be moved through the process as soon as possible to so that U.S. suppliers can compete with others around the world. 


Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.