AmericasContributionsOperationsTankers

Tankers and the new Panama Canal

Erik Broekhuizen from Poten & Partners wonders whether an expanded Central American waterway bears any significance for the oil and gas trades.

The original Panama Canal, a 48-mile ship canal located in the Republic of Panama, was opened in 1914 and connects the Atlantic and Pacific Oceans. In the first year of operation some 1,000 vessels transited the interoceanic waterway. By 2015, total annual traffic reached 12,330 transits and the canal generated almost $2bn in toll revenues. Originally, the dry and liquid bulk shipping segments generated most of the canal’s revenues, but gradually container vessels became its heaviest users. Due to the growing size of these vessels, the Panama Canal Authority decided to create a new lane of traffic and construct a new set of bigger locks. This will be the third set of locks and the chambers are 180 ft wide, 1,400 ft long and 60 ft deep, which will allow the transit of much larger ships. Work on these expanded locks started in 2007.

On June 26, 2016 the new, expanded locks will open for business. On April 29, the Panama Canal Authority held a draw among its top 15 customers to choose the first commercial vessel transit on June 26. Interested parties were required to indicate the name, type and dimensions of the Neopanamax vessel that they plan to deploy on inauguration day. Only one neopanamax vessel in the southbound direction (from the Atlantic to the Pacific) will be allowed to transit the expanded canal for its inauguration during daylight hours. Regular commercial transits through the expanded canal will commence on June 27.

In terms of container ships, the original locks allow the passage of vessels that can carry up to 5,000 teu, the new expanded locks will allow for post-panamax vessels of up to 14,000 teu to transit. For crude oil and product tankers, the new locks are large enough for the use of a Aframax/LR2 and light-loaded suezmax tankers. Almost all existing LNG and LPG tankers will also be able to use the new locks.

Once the new locks are fully in operation, it will allow for a total of 12 transits per day (it will take 2 hours for a vessel to go through the locks on either side). The expectation is that container vessels will be the most prolific users of the new locks, but it is much less certain how the expanded canal will impact the tanker market. How many crude and product tankers are likely to use the expanded waterway? While there could be the occasional transit of an aframax or suezmax with crude oil, these trades will likely be limited because there is little demand for the movement of crude from the Pacific to the Atlantic, while the reverse route is well served by another piece of infrastructure in Panama: the Trans-Panama Pipeline, which flows from the port of Chiriquí Grande in the Caribbean to the port of Charco Azul on the Pacific coast and has the capacity to handle more than 800,000 barrels of crude oil per day. For product tankers, there is some potential for increased flows (for example, exports from the US Gulf to Asia), but the composition of current trades indicates a strong preference for smaller product tankers. Even though the existing canal can handle panamax sized LR1 product tankers of up tp 75,000 dwt, the vast majority of the petroleum product tankers that transit the canal are smaller medium range (MR) and handysize tankers.

This article first appeared in the latest edition of Maritime CEO magazine, which launched this week. Readers can access the full magazine for free by clicking here.

Splash

Splash is Asia Shipping Media’s flagship title offering timely, informed and global news from the maritime industry 24/7.
Back to top button