Expanded Panama Canal Will not Affect Crude Oil Traffic

  • Business & Finance

Although the Expanded Panama Canal will allow the transit of larger ships, most of the petroleum-related traffic through the canal will be petroleum products rather than crude oil as Very Large Crude Carriers (VLCC) and Ultra Large Crude Carriers (ULCC) will still be too large to transit the Panama Canal fully laden.

According to the US Energy Information Administration, the maximum vessel dimensions in the old lock system, known as Panamax vessels, limited tankers to those of approximately 300,000 to 500,000 barrels of capacity of petroleum products like gasoline and diesel fuel.

The newer lock systems allow for the transit of larger Neopanamax vessels, with estimated petroleum product capacities of 400,000 to 600,000 barrels.

In 2015, most of the petroleum-related traffic on the canal moved southbound, from the Atlantic to the Pacific.

Diesel fuel and gasoline made up the largest share of southbound traffic, totaling 9.5 million long tons and 9.1 million long tons, respectively.

Largely because of ship size restrictions, crude oil traffic was significantly smaller, and fairly equal in direction, with 3 million long tons going southbound and 2.6 million long tons going northbound, from the Pacific to the Atlantic.

Previously, the size limitations of the canal created logistical bottlenecks for U.S. propane exports to reach markets in Asia, forcing shippers to perform ship-to-ship transfers. The new, larger Panama Canal locks will allow most Very Large Gas Carriers (VLGC) to transit, likely reducing or even ending the practice of ship-to-ship transfers.

The Panama Canal Authority, the body that operates the Panama Canal, will inaugurate the third set of locks on June 26, which will allow four transits per day, supplementing the 25 daily transits using the older lock system.

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