Alex Kimani
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.
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By Alex Kimani – May 12, 2024, 6:00 PM CDT
- Low water levels occasioned by severe drought forced longer wait times for LNG carriers back in March.
- The Panama Canal is currently in talks with U.S. LNG producers on how to meet increased demand for crossings as water levels recover.
- Last year, the U.S. overtook Qatar to become the world’s largest exporter of LNG for the first time ever in the industry’s history.
Back in March, S&P Global reported that a record 24 cargoes carrying nearly 1.6 million metric tons of U.S. LNG had reached Asia via the Cape of Good Hope in the first three months of 2024, with exporters choosing the much longer route and shunning the Panama and Suez canals due to various challenges. S&P reported that only 14 cargoes had reached Asia through the Panama Canal during the timeframe, a sharp drop from 40 cargoes recorded during the corresponding period in 2022 after low water levels occasioned by severe drought forced longer wait times for LNG carriers. The situation remained dire in April, with LNG transits through the canal’s Neopanamax locks amounting to less than 5% of crossings while container ships accounted for more than 60% of the transits.
“We use the canal when it is economical to do so, right now it is not. Right now the market in the Far East is not supporting it, and the waiting time, with us not being a priority customer, is just not worth us using it right now,” Corey Grindal, Chief Operating Officer at Cheniere Energy (NYSE:LNG), previously told a media briefing. Cheniere Energy is the United States’ largest LNG producer and exporter.
Thankfully, the situation is about to change: The Panama Canal is currently in talks with U.S. LNG producers on how to meet increased demand for crossings as water levels recover, Reuters has reported. The canal authorities are working with shippers to secure more passage for LNG customers, with plans to build water reservoirs as a solution to mitigate climate change related shortages.
Last year, Europe accounted for 66 percent of total U.S. LNG exports, followed by Asia at 26 percent and Latin America and the Middle East with a combined eight percent. However, Cheniere is highly optimistic about Asian LNG demand, despite some countries with large gas-reliant economies currently hampered by poor credit ratings.
“They tend to rely more on state-to-state agreements. Obviously that is not something we can participate in. We see Thailand, Philippines as very attractive markets,” Chief Commercial Officer Anatol Feygin told Reuters. Feygin expects China to import 100 million metric tons per year in the future, up from about 64 million metric tons in 2022.
Robust LNG Growth
Last year,