Does the Panama Canal Need to be Expanded Again?
By Eddie Montes
A dramatic increase in liquefied natural gas (LNG) traffic has some industry experts wondering if the Panama Canal is going to need to be expanded again.
The Panama Canal Authority believes the volume of LNG passing through the Canal could grow by 500 percent by 2020, which would be a significant economic boost for Panama. The $6 billion expansion of the Canal, completed in 2016, can handle the super tankers that carry LNG, but there is concern that it won’t be able to handle the additional traffic.
“As production grows, the risk of bottlenecks in the Canal will inevitably become a harsh reality,” OilPrice.com recently speculated. “It may well be the case that the freshly expanded waterway could need another expansion. The alternative would be costlier for both buyers and sellers in the long term.”
The Canal Authority has been regulating the number of LNG transports, but it has been steadily increasing the number in recent months. Three carriers recently went through the Canal in a single day for the first time.
The Canal is responding to a boom in LNG production in the United States, which is expected to become the biggest exporter of LNG in the world in the next 10 years. Most of the shipments are heading to Asia.
“The Oxford Institute for Energy Studies believes the Panama Canal will become congested with LNG carriers as soon as next year or, under a better-case scenario, by 2021,” OilPrice.com reports. “This will happen even if the [Panama Canal Authority] boosts the allocations for LNG to four daily.”
While any expansion of the Canal may be years off, it’s important to remember that the Canal is a key driver of Panama’s Canal. The success of the Canal generates revenue for infrastructure projects, attracts more companies and encourages more multi-nationals to position employees in Panama.
Panama leads the region in economic growth, in large part due to the Canal. And the continued development of the LNG business is a sign that Panama’s economy is on a stable foundation for years to come.
