Consultant expects more than $1 million in Panama Canal LNG fees
Singapore (Platts)--12Sep2012/747 am EDT/1147 GMT
Panama Canal tariffs for LNG carriers will be at least $1 million, Keith
Bainbridge, an LNG consultant said at CWC's LNG conference in Singapore on
Operators at the Panama Canal have said that the most significant change
they expect to see in energy ship traffic through the 50-mile (80.5 km) canal
will be the passage of LNG ships, which currently do not use the canal
because they are too large.
The Panama Canal is currently undergoing a major $5.25-billion project
to expand its capacity, set to be completed in October 2014, which will allow
some of the world's largest ships to pass through. The larger Qatari LNG
Q-Flex and Q-Max class vessels will still be unable to use the widened canal
because of the draft of the ships.
"When it comes to the tariff, I've seen people say it is going to cost
$200,000 to get through the Panama Canal, and that is absolute rubbish,"
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Bainbridge said the reason for the high tariffs for LNG carriers was the
need to recoup the cost of the canal expansion.
"[The Panama Canal authorities] are not going to be incentivized by
giving you a discount," Bainbridge said.
Typically, the toll for a canal fee is what it would cost to send the
ship around the peninsula, with the canal operator giving around a 5%
discount, Bainbridge said.
Furthermore, unlike the Suez canal, the Panama canal traffic needs to be
very regulated due to the system of locks.
"I can't see the LNG business being able to book well in advance,
because it is very much on a spot basis."
At current charter rates, and with an estimated savings of 14 days of
utilization by using the canal, Bainbridge said, "I don't know what the tolls
are and neither do the Panama Canal authorities, but it will be at least $1
million for transit." The prime potential user of the expanded canal would be
the slew of US brownfield Gulf Coast projects in the pipeline to switch and
send LNG to markets in Asia.
Currently, only Houston-based Cheniere Energy, has received approval
from the US Department of Energy to export LNG to Free Trade Agreement and
non-FTA countries and has obtained environmental clearance for the project
from the US Federal Energy Regulatory Commission.
"I think it is at least $4.00/MMBtu freight to move cargoes from the
Gulf of Mexico to Asia," Bainbridge said, adding that he doesn't expect long
term contracts to be signed to ship Gulf of Mexico LNG to Asia.
"[The Panama Canal fees and high freight rate] are why you won't get any
term volumes going from the Gulf of Mexico to Asia...yes, you'll get some
spot volumes, but there is no way LNG based in the Gulf of Mexico is going to
be going 20 years to Asia [on long term contracts]," Bainbridge said.
Other logical routes that involve LNG through the Panama Canal could be
LNG that is processed in Trinidad and Tobago and shipped to Chile, which
imports gas to fuel many of its power plants. Other potential users of the
canal post-2014 are gas-liquefaction plants in Peru that currently ship LNG
to Mexico, but which could add exports through to Europe via the canal.
--Max Gostelow, firstname.lastname@example.org
--Edited by email@example.com