Panama Canal drops LNG transit restrictions

Panama Canal drops LNG transit restrictions

The Panama Canal Authority plans to lift its self-imposed daylight and encounter restrictions on LNG vessels as it gears up for the rising LNG transit need. 

Image courtesy of Panama Canal

The changes will come into effect on October 1, 2018, deputy administrator Manuel E. Benitez said at a conference in Washington.

“Lifting daylight restrictions means LNG vessels will be able to transit the locks at night, as vessels in other segments currently do,” Benitez said.

“Lifting encounter restrictions means LNG vessels will be able to navigate Gatun Lake at the same time, allowing two different LNG vessels to transit the Canal the same day in two different directions,” he added, noting that together, these changes will provide more flexibility and time during the day to transit LNG vessels, and result in an opportunity for LNG shippers to compete for a second booking slot.

Currently, with these restrictions in place, the Panama Canal provides one dedicated reservation slot to LNG carriers per day. This equates to seven dedicated LNG booking slots per week. This is more than the current demand from LNG shippers, who average 5.5 transits per week, a statement by the Panama Canal Authority said.

In addition to the one dedicated slot, the Canal frequently works with customers to transit vessels that arrive without a prior reservation, so long as the day’s vessel mix allows.

The waterway has regularly transited two LNG vessels the same direction in the same day and is capable of transiting up to three vessels the same day in the same direction during periods of uncharacteristically high demand.

“In addition to the one reservation it guarantees each day, the Canal will soon offer LNG shippers, for the first time, the opportunity to compete among our wider vessel segments to book a second daily slot,” Silvia de Marucci, executive manager, economic analysis and market research division said.

The opportunity to compete for this new, second slot has never been available to LNG shippers before. And it will be offered on top of the Canal’s continued efforts to transit LNG vessels that arrive early for their reservations or without one altogether.

Over the past two years, the waterway has welcomed a total of 372 LNG transits. All LNG vessels that arrived with reservations were transited on time, except for one which arrived late. Of the 35 that arrived without a reservation, the Canal transited 30 of these ships the same day, and the remaining five transited with a limited wait. Today, there is currently no wait for LNG vessels to transit the waterway, the statement reads.

The canal’s decision to lift these restrictions comes at an opportune time in the market. According to the canal, LNG transits at the waterway are expected to grow by more than 50 percent by the end of FY 2018 compared to FY 2017.