Panama Canal Restrictions Add to U.S. LNG Price Tag
Panama Canal Restrictions Add to U.S. LNG Price Tag | OilPrice.com
Chevron Expands Venezuela Oil Swap Deal as Sanctions Ease
There hasn't been much that…
Despite the unrest in the…
Restrictions on shipping via the Panama Canal due to drought have made the transportation of U.S. LNG to Asia more expensive, widening the gap between Asian and European LNG prices.
Per a Bloomberg report, the price premium for Asian to European gas deliveries for the summer of 2024 has soared twofold since October. The premium for winter 2024 deliveries has also increased because of the drought-related restrictions.
Earlier this month the Panama Canal authorities said they would reduce the number of available slots due to a severe drought, per a Reuters report.
"The recorded precipitation for October has been the lowest on record since 1950 (41% below), and so far, 2023 ranks as the second driest year for the same period," the Panama Canal Authority said, adding this drought had reduced the water level in the reservoir that floats ships through the canal.
The situation is pushing freight costs higher elsewhere as well in a knock-on effect as vessels delayed at the Panama Canal become unavailable for use on other trade routes, according to the Energy Information Administration.
U.S. exports of liquefied natural gas reached a record high during the first half of the year, averaging 11.6 billion cu ft daily, the Energy Information Administration reported last month. This was up 4% on the year and came despite a decline in exports in May and June, the EIA noted.
The top destination for U.S. LNG was the Netherlands—it received the most LNG for five consecutive months this year, through September. Japan came second, followed by France, South Korea, and Italy.
Currently, LNG export facilities in the United States have a combined operating capacity under real-world operating conditions of 11.4 billion cu ft daily. There is another 7.3 billion cu ft daily of capacity under construction, while a further 18.3 billion cu ft daily of possible LNG export capacity has received full regulatory approval from the U.S. Department of Energy and the Federal Energy Regulatory Commission.
ADVERTISEMENT
By Charles Kennedy for Oilprice.com
More Top Reads From Oilprice.com:
Join the discussion| Back to homepage
ADVERTISEMENT
Related Knowledge Center: Liquefied natural gas
Driven by plentiful natural gas produced from shale plays, the United States began exporting liquefied natural gas in 2016 when the Sabine Pass terminal in Louisiana opened and shipped its first cargo. Since then, additional capacity, or trains, have been added to Sabine Pass, and terminals have become operational in Cameron Parish, La.; Hackberry, La.; Cove Point, Md.; and Corpus Christi, Texas. The Energy Information Administration projects that U.S. LNG export capacity will reach 8.9 billion cubic feet per day (Bcf/d) by the end of 2019, making it the third largest in the world, behind Australia and Qatar. The tariff war with China has the potential to impact some final investment decisions for additional terminals in the coming months.