Central America, the Caribbean Strong Drivers of Panama Canal’s LNG Trade

Central America and the Caribbean are taking an ever-growing role in the Panama Canal’s trade of liquefied natural gas (LNG) amid increasing interest in the environmentally friendly and cost-efficient cargo to meet their energy needs.

Peru and Trinidad and Tobago have emerged as the region’s leading LNG exporters.

In the 2018 fiscal year (FY18), Peru has transited 575,529 tons of LNG to European destinations, and Trinidad and Tobago has exported 1,340,396 tons to Asia, Mexico’s west coast and Chile, according to the data from Panama Canal Authority.

Together, the two exporting nations account for nearly one fifth of all LNG transits at the waterway.

As explained, an LNG vessel departing Trinidad and Tobago for Chile, for example, saves more than six days traveling through the interoceanic route compared to other journeys. Vessels leaving Peru for Spain can save up to eight days each leg.

Central American and Caribbean importers similarly benefit from their newfound ability to receive LNG shipments via the canal.

Since the opening of the Neopanamax locks, Mexico has imported an estimated 3.1 million tons of LNG, while Chile has imported about 1.1 million tons, the authority’s data shows.

In addition to receiving exports from other Latin American nations, both Mexico and Chile are taking in LNG from the United States as it increasingly grows its exports.

“As LNG exporters in both the United States and Trinidad and Tobago vie for importers’ attention in Mexico and Chile, the Panama Canal stands at the ready to receive increased LNG transits,” the canal authority said.

US-Asia LNG trade has kept the lead in the canal’s transited LNG volumes since the opening of the expanded Neopanamx Locks.

According to the Panama Canal Administrator Jorge Quijano, the waterway would transit five times its current volumes of LNG by 2020. U.S. LNG exports through the canal are set to rise to as much as 11 million tonnes this year and to around 20 million tonnes in 2019, Quijano said.

The rise in US exports is being heralded with the inaugural transit of LNG Sakura through the canal loaded with its first LNG shipment from the Dominion Cove Point terminal, the second U.S. LNG export terminal to come online after Sabine Pass began operations in 2016.

The transit marks the beginning of a new LNG commercial route between the United States and Asia.

“As demand continues to grow, trends shift and shippers seek to capitalize on new time and cost savings, so too will the Panama Canal offer the capacity, as needed, to ensure its partners in Central America, the Caribbean and around the world benefit from this burgeoning segment,” the canal authority added.

Namely, over the past two years, the trade winds for LNG have shifted considerably. In FY18, South Korea and China became top importing nations, bringing in 1.7 million tons and 1.6 million tons to their countries, respectively.