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Panama Canal seeks LNG resurgence after 65% decline in traffic

The Panama Canal aims to restore vessel traffic bring U.S. liquefied natural gas to Asia as demand in that market rises and a brand-new appointment system allows carriers to secure slots, following a 65% decrease in the transit of its secondmost crucial sector, the Panama Canal Authority informed Reuters.

A U.S. LNG switch to Europe in the aftermath of Russia's. invasion of Ukraine, integrated with long waiting times and. costly charges to transit through Panama due to severe dry spell,. have actually kept many LNG ship of the canal.

Lots of gas exporters continue to take longer routes around. South America even after the waterway's authority raised the. limitations this year. The canal is the quickest route to Asia. for U.S. gas exporters, whose sales to Japan, China, South Korea. and India have grown considerably in the last decade.

In the case of LNG, we lost 65% (of traffic), which is the. traffic that now goes through Cape Horn, compared to what we had. in 2015, 2 years earlier, stated the Canal's administrator,. Ricaurte Vazquez, in an interview in Panama City.

Europe's big hunger for U.S. LNG and hold-ups licensing. brand-new LNG tasks in the United States have actually been the primary motorists. of the switch, he included, although the canal's drought-related. constraints likewise played an essential role, carriers said.

The obstacles of the last dry spell were extremely visible for. everybody, said Anatol Feygin, an executive vice president at. Cheniere Energy, the top U.S. LNG manufacturer.

Due To The Fact That the Panama Canal Authority charges a set fee per. passage, it can be easier for U.S. manufacturers to take. longer paths to Asia depending upon international LNG prices, shipment. terms in contracts and seasonal need.

Often individuals forget that going through the canal ... is. not a complimentary shortcut, Feygin said, describing transit charges. Financially, the option of going around the Cape is not far. from the economics of going through the canal.

But a recovery in Asian LNG need, likely to continue next. year, might require increased shipments through the canal.

We do think that development in LNG need will be driven by. Asia, Feygin included, referring to China, South Asia and. Southeast Asia. And we do believe that U.S. Gulf Coast volumes. will continue to be the single largest exporting node in the. world.

MORE PASSAGES REQUIRED

A new reservation system and lower expenses enabled the canal's. earnings to increase 9.5% to $3.45 billion in the fiscal year that. ended in September, in spite of the dry spell.

But commodities manufacturers think the canal's administration. still has space to set up more transits of LNG and liquefied. petroleum gas (LPG) vessels. The parties have been in touch. considering that in 2015 to think about propositions.

Panama now provides two transit slots each day for LNG ships,. however a long-term reservation system beginning in January will. enable manufacturers to reserve slots as much as a year ahead of time.

The first auction of this type, completed this month, raised. $ 394 million and will represent 40% of all transits through. its largest locks in 2025, administrator Vazquez stated.

Shorter waiting times and the set-aside of a minimal number. of slots for vessels getting to the canal without bookings. will allow Panama to much better manage arrivals. And some other. steps to enhance remain in conversation, including some in. anticipation of dry years, Vazquez added.

It (the canal) still has some constraints that we are. working through, like the truth that LNG carriers do not have. night-time transit capabilities through the new locks, Feygin. said.

The canal, which is monitoring the expansion of international LNG. fleets and the status of brand-new U.S. LNG projects, expects that. bigger LNG vessels, consisting of floating storage units that feed. LNG to onshore centers, will be going through Panama's. largest locks in the next 18 months.

(source: Reuters)