Competitive position of the expanded Panama Canal in the shipment of liquefied natural gas

Abstract

The appearance of new gas extraction technologies has led to surplus production in the United States (Gulf of Mexico). At the same time, energy consumption in Asia has increased significantly and Japan has introduced important changes to its post-Fukushima energy policies. Taken together, these factors have resulted in an imbalance in production and consumption between the Atlantic and Pacific Maritime Areas. Over the same period of time, the Panama Canal expansion opened, permitting transit by liquefied natural gas vessels for the first time. These developments are reflected in the current order book for liquefied natural gas carriers, which is composed entirely of ships in the new Neopanamax category. The canal transit fees and new propulsion systems for these ships—dual fuel diesel electric and electronically controlled gas injection—significantly impact the price of cargo at the destination. This study conducts a sensitivity analysis of the variables for transportation costs in order to determine the expanded Canal’s competitive position. In addition, the study uses a Monte Carlo simulation to obtain the most representative values for total cost based on factors such as the type of propulsion and fuel as well as the distance traveled. The analysis clearly demonstrates the competitiveness of exporting liquefied natural gas via the Panama Canal from terminals in the Gulf of Mexico and the Caribbean to consumers in Asia, as well as the competitiveness of the canal itself versus alternative routes. With respect to propulsion systems, the study demonstrates the greater competitive advantage of electronically controlled gas injection propulsion.