Expanded Panama Canal Allows More Transits of Propane, HGL

Panama CanalImage Courtesy: Panama Canal Authority

The largest change in petroleum flows through the expanded Panama Canal has been the increase of hydrocarbon gas liquids (HGL), especially propane, from the U.S. Gulf Coast to destinations in Asia.

According to the U.S. Energy Information Administration (EIA), most of the petroleum transiting the Panama Canal travels southbound from the Atlantic Ocean to the Pacific Ocean. Flows of HGL are the largest single petroleum commodity transiting the canal, EIA cited data from the Panama Canal Authority.

In 2018, about 387,000 barrels per day (b/d) of HGLs moved southbound through the Panama Canal, compared with 266,000 b/d of distillate and 230,000 b/d of motor gasoline.

The Panama Canal Authority, the operator of the Panama Canal, opened a third set of locks that facilitated transit of larger ships in June 2016. Before 2016, the main constraint for increasing U.S. HGL exports was export infrastructure on the U.S. Gulf Coast.

By 2016, the addition of Gulf Coast export infrastructure alleviated this constraint, and the size limitations of the original Panama Canal locks, and the costs associated with alternative shipping routes became the main constraints for increased exports.

The growth in HGLs transiting the Panama Canal coincided with an increase in exports of HGLs from the U.S. Gulf Coast to destinations mostly in Asia. In 2018, four of the five largest destinations for U.S. Gulf Coast exports of HGLs were in Asia, with Japan being the largest at 280,000 b/d.

“Future petroleum flows through the Panama Canal are likely linked to expanding petrochemical demand for HGL in Asia; economic growth in El Salvador, Ecuador, Peru, and Chile; and continued growth in U.S. petroleum product exports,” EIA concluded.

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