Panama Canal May be a Game-Changer Says FMC Commissioner

MarineLink.com
Thursday, November 21, 2013
William P. Doyle: Photo credit FMC

FMC Commissioner William P. Doyle, addressed the Executive Committee of the National Lieutenant Governors Association (NGLA) in Little Rock, Arkansas: Topic – "Is Your State Ready for a Historic Transformation of Transportation, Energy, & Agriculture?"  The text of the Commissioner's seminal speech follows:

Panel Context:

The Panama Canal may remake world trade patterns. To be finished in 2015, the $5-billion expansion of the Panama Canal will create a third lane accommodating mega-ships nearly three times larger than previously passable and this may significantly reduce shipping time to Asia. The expansion impacts state ports, rail lines, trucking and cargo movement from the south and east to the west. The U.S., once an importer of natural gas, could see new shale gas development, LNG projects, and the faster shipping lanes open new Asian markets.

Opening
I am going to comment on whether the Panama Canal Expansion will be a game changer. Next, I will discuss what the Administration has done and plans to do for nationwide ports, how Liquefied Natural Gas and Natural Gas Liquids exports may benefit, and other transportation and economic impacts.

First, the expansion of the Panama Canal may be a game changer. Ports in the United States are preparing for increased cargo volumes from larger ships that will transit the Canal. If utilized to its fullest potential, the Canal would allow the United States the opportunity to compete in the global energy market with products manufactured and produced in America.

Obama Administration’s Regulatory Focus in the U.S. for the Panama Canal

The Panama Canal expansion fits in well with the Obama Administration’s focus on manufacturing, exports, and job creation.

The expansion will enable a doubling in the tonnage of trade that can pass through the Canal. In terms of ship size, the canal’s expansion will allow a 160% increase in the size of ships able to transit the Panama Canal.

The Obama Administration, members of Congress and state and local officials support the tremendous economic, business, job-supporting, energy and transportation related opportunities the expanded canal will bring to the United States.

To meet the Canal’s expansion, ports in the U.S. are deepening their shipping channels and harbors, increasing dock facilities, and installing new cranes to accommodate larger ships and much greater cargo volumes. And the modernization of U.S. ports is not just happening on the East and Gulf Coast — West Coast ports are also updating their infrastructure to accommodate larger vessels.

In September, the Secretary of Transportation, Anthony Foxx, announced its grants from the Transportation Investment Generating Economic Recovery (TIGER) 2013 discretionary program. This program distributed approximately $474 million for transportation projects in 37 states. Of that amount, nearly 45% of the funding will be utilized for port and rail improvements.

Last year the Administration announced that it would expedite the federal permitting processes for the Port of Jacksonville, the Port of Miami, the Port of Savannah, the Port of New York and New Jersey, and the Port of Charleston.

On March 29, 2013, in the Port of Miami, Florida, President Obama outlined a program of transportation bonds and other measures to encourage infrastructure improvements on roads, bridges, and ports.

On May 17, 2013, President Obama signed a Presidential Memorandum to modernize the federal infrastructure permitting process, cutting timelines in half for major infrastructure projects while creating incentives for better outcomes for communities and the environment.

And this week, Vice President Joe Biden is leading a U.S. delegation in Panama to view construction progress on the widening of the Canal.

Liquefied Natural Gas
I’d like to address exporting liquefied natural gas (LNG). When the Panama Canal expansion project began in 2007, U.S. and state regulators were swamped with applications for LNG import terminals. At that time, America was positioning itself to become a major importer of LNG. In fact, in 2007, the U.S. imported nearly 771 billion cubic feet (Bcf) of LNG. This made the United States the fourth largest importer of natural gas.
That all changed in 2008, when it became clear that the independent natural gas producers in the U.S. could produce high quantities of natural gas extracted from shale basins in states like Louisiana, Texas, Pennsylvania, Ohio and West Virginia.

As a result, LNG imports have collapsed. The peak import month for LNG was in April of 2007 when we imported 98.7 Bcf. This year the imports on a monthly basis have been in the range of the 5 – 6 Bcf/month, with April’s historic low of 5.2 Bcf.

With so much natural gas being produced in the U.S., energy companies began applying for export licenses for LNG terminals. Last week the Department of Energy conditionally approved its 5th application to supply LNG to non-FTA countries.

How does domestically produced natural gas compete in the export market?

Once the expanded Panama Canal opens, the distance to ship U.S. natural gas from the Gulf Coast of the United States to Asia will decrease by 9,000 miles. Only 21 of the existing global fleet of 370 LNG tankers can currently fit through the Panama Canal. None are currently using the Canal.
However, more than 80 % of the tankers will be able to make the passage through the Canal once the widening is complete. The U.S. will be competing with Australia, Russia, East Africa and the Middle East as a natural gas supplier for Asia.

Japan is the largest importer of LNG. It has significantly increased its demand since the Tohoku earthquake and tsunami of 2011 hindered its nuclear power operations.
Japanese officials are interested in learning more about the tolls and cost structure associated with LNG tankers transiting the Canal.

It is important that the toll structure and economics work for all parties-- Panama wants LNG business which it never really planned on when it began the expansion project – natural gas produced in the U.S. must compete on the world market with LNG from Russia, Australia and the Middle East - and increasing demand makes Asia the primary market for natural gas.

Natural Gas Liquids
There is another major economic, manufacturing, export and jobs producing renaissance currently going in the U.S.—and it can only get better with the opening of the expanded Panama Canal.
Due in large part to shale natural gas production, U.S. exports of natural gas liquids (NGLs) are at an all-time high. NGLs include ethane, butane, propane, isobutene and pentane. The end use products of NGLs include plastic bags, detergent, home heating, small stoves, refrigeration, synthetic rubber, aerosol and gasoline.

Deliveries of NGLs or fuels to foreign buyers averaged 555,000 barrels a day in July. According to U.S. government data, that is the largest monthly delivery of NGLs since 1981 (Bloomberg).
According to U.S. Customs data, China’s imports of NGLs increased between 20 and 25 percent this August as compared to the same month last year (Ibid).

A recent projection indicates that U.S. exports of NGLs would jump to 20 million metric tons by 2020 from the current 5 million tons, making the United States the world’s largest exporter -- ahead of both Qatar and Saudi Arabia (Ibid).

New NGL terminals like the Mariner East Pipeline project by Sunoco Logistics Partners in Marcus Hook, Pennsylvania are being considered due to increased production in Appalachia. Mariner East would deliver propane and ethane from the Marcellus shale formation to the Marcus Hook, PA terminal for export.
When you hear President Obama talk about supertankers, and other Administration officials talk about dredging the channels and harbors, and Governors talk about their port related infrastructure improvements—they are talking in part about preparing for Very Large Gas Carriers otherwise known as VLGCs that will be exporting U.S. manufactured NGLs.

Right now the VLGCs leaving the East and Gulf Coast of the U.S. for Asia markets must travel around Cape Horn at the bottom-tip of South America or head East through the Suez Canal.

As it stands now less than 20 percent of VLGC world fleet can fit through the Panama Canal—and only about 4 percent use it. Once completed the Canal would be able to accommodate the entire VLGC fleet.
What is unfolding in the maritime and energy related sector is truly amazing. Six years ago you’d have been laughed at if you proposed that the U.S. could become a major competitor on the LNG export market. The Panama Canal’s expansion model never accounted for increased business related to VLGCs and LNG tankers.

The development of U.S. natural gas resources, together with the Panama Canal Expansion, is good news for the U.S. energy and transportation landscape. With increased exports, our balance of trade will improve helping to strengthen our energy security while spurring economic development and job creation around the country.

The Commissioner has appended a list of the sources drawn on in his speech at: www.fmc.gov/assets/1/Page/SoucesUsedLtGovSpeech.pdf

Maritime Reporter September 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Nordic American Offshore Declares Dividend

Nordic American Offshore Ltd. today announced that its board of directors has declared a dividend of $0.45 per common share for the third quarter 2014. This is the same as for the second quarter 2014.

Bollore Africa Logistics Sees Profit Plunge in H1

First half 2014 profit at shipping company Bollore Africa Logistics plunged to 5.89 billion CFA francs ($11.48 million) from 9.45 billion CFA francs in the same period last year,

Ocean Rig, Petrobras Agree to $1.1b Drill Ships Lease

Cyprus-based Ocean Rig UDW Inc said on Monday that it signed a $1.1 billion three-year contract with Brazil's state-run oil company, Petroleo Brasileiro SA, to

Finance

Nordic American Offshore Declares Dividend

Nordic American Offshore Ltd. today announced that its board of directors has declared a dividend of $0.45 per common share for the third quarter 2014. This is the same as for the second quarter 2014.

Bollore Africa Logistics Sees Profit Plunge in H1

First half 2014 profit at shipping company Bollore Africa Logistics plunged to 5.89 billion CFA francs ($11.48 million) from 9.45 billion CFA francs in the same period last year,

Maduro Says Venezuela's 2015 Budget to Put Oil at $60

Venezuela's 2015 budget will be based on a target oil price of $60 dollars per barrel, President Nicolas Maduro said on Friday night, but he repeated expectations that prices will recover.

LNG

New Standard for LNG Cargo Containment Systems

Wilhelmsen Technical Solutions (WTS) said it has successfully completing the gas trial for the first LNG carrier built to a Boil Off Rate (BOR) of 0.08% per day.

LNG America, Buffalo Marine to Design LNG Bunker Fuel Network

LNG America announced it has entered an agreement with Buffalo Marine Service, Inc. (Buffalo Marine) to cooperate on the design of an LNG bunker fuel network for the U.

World’s 1st LNG Hybrid Barge Christened "Hummel"

The world’s first LNG hybrid barge of Becker Marine Systems was christened with the name "Hummel" on October 18, 2014, at Grasbrook Quay in HafenCity Hamburg.

News

Nordic American Offshore Declares Dividend

Nordic American Offshore Ltd. today announced that its board of directors has declared a dividend of $0.45 per common share for the third quarter 2014. This is the same as for the second quarter 2014.

Missouri River Basin is Booming

The U.S. Army Corps of Engineers Missouri River Basin Water Management Division is maintaining above normal releases at the four lower dams on the Missouri River.

Bollore Africa Logistics Sees Profit Plunge in H1

First half 2014 profit at shipping company Bollore Africa Logistics plunged to 5.89 billion CFA francs ($11.48 million) from 9.45 billion CFA francs in the same period last year,

People in the News

Frontline appoints Macleod as new CEO

Crude oil tanker firm Frontline, part of shipping tycoon John Fredriksen's business empire, appointed Robert Hvide Macleod as chief executive to replace Jens Martin Jensen, the firm said on Monday.

Saudi Oil Pipeline Set Alight

A "limited fire" broke out on a subsidiary oil pipeline in eastern Saudi Arabia on Saturday after assailants fired shots at a security patrol, the state news agency SPA said.

Maduro Says Venezuela's 2015 Budget to Put Oil at $60

Venezuela's 2015 budget will be based on a target oil price of $60 dollars per barrel, President Nicolas Maduro said on Friday night, but he repeated expectations that prices will recover.

Government Update

India to Develop Iran's Chabahar Port

India will float a company to develop Iran's Chabahar Port, a government statement said on Saturday, as New Delhi aims to take advantage of a thaw in Tehran's relations with world powers.

Shadrin is D.G. of Gazprom Investholding

On October 13 the Gazprom leadership acceded to Alisher Usmanov's request for releasing him from his position as Director General of Gazprom Investholding. At the meeting Alexey Miller,

ITIC Measures against Ebola

The International Transport Intermediaries Club (ITIC) has issued the following general advice related to the outbreak of Ebola. Vessels that have recently

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Navigation Offshore Oil Pipelines Ship Repair Ship Simulators Shipbuilding / Vessel Construction Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.3763 sec (3 req/sec)