A shortcut that serves 144 trade routes and connects 1,700 ports in 160 countries around the world, the Panama Canal is a primary driver of Panama’s economic growth. Its long-awaited expansion is on target for completion in 2016, doubling the capacity of the canal by creating a new lane of traffic and allowing larger ships to transit the waterway.
At the International Liquid Terminals Association’s 2014 conference, held in June in Houston, Jose Ramon Arango, bulk liquid specialist with the Panama Canal Authority, discussed the expansion project and the impact it will have on the bulk liquid industry.
According to Arango, approximately 330 to 340 million net tons of cargo currently transit through the Panama Canal each year. “With the expansion in 2016, we will be doubling that to 600 million tons,” he said.
Addressing the anticipated changes in global trade routes as a result of the expansion and the impact on worldwide markets, Arango said the canal’s expansion project will have significant impact on the shale revolution and liquefied petroleum gas.
“As you know, China is using LPG as part of its chemical processing,” he said. “So we foresee a huge possibility of increase in traffic that goes from the Gulf Coast to Japan and China.
“LNG is the ‘new kid on the block,’ at least for us,” Arango continued, “because it was not capable of transiting the original canal — not because of length or because of the craft, but because of the beam or the width of these types of carriers. They’re too big to transit through the original canal. But with the expansion, around 84 percent of the total fleet can use the Panama Canal. We see huge potential in that, starting in 2016.”
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Amid other improvements in design and specifications, the expansion deepens and widens the canal in the Pacific entrance, Arango said.
“As you know, we need more water to transit these big ships, so we’re deepening and widening all the cuts so the traffic can move, and we are capable of handling it,” he said. “We’re building a new set of locks on the Atlantic side, and one on the Pacific to, again, provide safe and reliable traffic. We’re dredging and doing everything to make sure these new post-Panamax vessels transit safely and reliably.” The savings to shipping will also be significant, Arango added.
“The route from Asia to the east coast of the U.S. takes 70 days round trip, as opposed to 84 days round trip through the Suez Canal. This is approximately 14 days less, at a savings of approximately 4,600 nautical miles.”
To underscore the social and environmental feasibility of the project, Arango said the expansion complied with environmental impact studies that include mitigation measures such as wildlife rescue, reforestation, and archeological and paleontological rescue.
“We’ve been very careful with the expansion program,” Arango said. “We took everything into consideration — all the impact, including the design of the locks — to continue providing a safe way of working that affects the environment as minimally as possible.” Total capital expenditure for the canal expansion is “around $5.2 billion,” Arango said, adding great consideration is being given to pricing strategies for transit through the Canal.
“We are meeting with the industry, trying to understand the different markets,” Arango said. “Back in 2000, we did a market segmentation to find out how the different markets use the canal … to provide us with the information of how those products are priced, and how those products are put in the place of their destination.”
The pricing structure, which Arango expects to be completed this year, “will be totally and extremely market-oriented due to the talks we’ve had with the industries.”
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