Panama Canal making major bid to win back lost LNG shipping business

The Panama Canal Authority is aiming to lure back lost energy trade with changes to its booking system for LNG tanker canal transits, and with a new natural gas liquids pipeline project offering energy and tanker companies an alternative to move the natural gas commodities across the critical global shipping gateway.

Ricaurte Vásquez, administrator of the Panama Canal Authority, tells CNBC that the canal is moving closer to reinstating a preferred booking slot system for LNG carriers as a way to bring back more of the business. LNG prebooking was removed during drought years and has not returned to date.

“We most likely will reinstate that window of reservations for LNG vessels effective next year,” Vásquez tells CNBC. The Panama Canal has moved to a long-term slot allocation approach, a booking system that allowed for a full year of reservations, but he conceded it “was used very little by LNG this year.”

“We have revamped the product after conversations with customers,” he said, and he added that the Panama Canal Authority plans to announce additional packages for LNG transits that would provide flexibility in changing the tanker type and transit dates.

“I think it’s going to be helpful for them to schedule transits to the Panama Canal,” Vásquez said. “We have some packages that will be very specific, and we have seen shipping companies that go for very specific transits. … We are fine-tuning some of the elements after conversations with the industry, and I think that is going to help,” he added.

Years of severe drought cost the Panama Canal a significant amount of its liquified natural gas trade. Restrictions on vessel weights due to low water levels sent LNG tankers on other shipping routes, and led to a decline in LNG transits through the canal that reached as high as 73%. Even as conditions have improved, LNG shipments have not returned to previous levels, with carriers continuing to choose the longer route around Africa’s Cape of Good Hope.

To free up additional vessel slots for LNG, the canal is also in the process of an ambitious pipeline project, creating what is being called the Interoceanic Energy Corridor. Instead of tankers carrying natural gas liquids, including ethane, butane and propane, through the canal, the NGLs would travel through a 76-kilometer pipeline connecting the Atlantic and Pacific ports. Two maritime terminals would be built to accommodate the tankers. Approximately 2.5 million barrels of energy products per day could be moved through the pipeline.

On Thursday, canal officials met with approximately 30 corporations from Asia, the U.S., and South America interested in the natural gas terminals and pipelines, including Exxon Mobil, Phillips 66 and Shell.

Vásquez also noted “a very good reaction from the Asian market.” Itochu Corporation, Japan Bank for International Cooperation, Mitsubishi, Movement Industries, Nippon Koei, and Sumitomo were all in attendance. Tokyo is the No. 1 buyer for natural gas liquid shipments that pass through the canal.

The process of choosing a concessionaire for the pipeline and energy corridor is underway, with a tender projected for the second quarter of 2026.

Freight volume is declining, China politics coming into play

The canal is critical to the U.S. economy and trade. The U.S. is the largest user of the Panama Canal, with total U.S. commodity export and import containers representing about 73% of Panama Canal traffic, and 40% of all U.S. container traffic traveling through the Panama Canal every year. In all, roughly $270 billion in cargo is handled annually.

The plans to increase the energy shipments come after record-breaking container traffic in early 2025 due to trade war frontloading has given way to a forecast for decrease in transits over the remainder of the year and into 2026.

“We will not have the volumes that are usually at this time of the year, and container cargo as compared to other years because of the front loading, that’s what we are seeing right now,” Vásquez said.

The Panama Canal generates its revenues from fees associated with vessel transits, as well as the volume of containers carried on each vessel.

The maritime industry has been navigating a sea of uncertainty with tariffs, as well as looming Chinese shipbuilding fees being imposed by the U.S. government, which have altered the flow of trade.

Starting on October 14, United States Trade Representative-mandated fees associated with the new regulations on Chinese-built vessels calling on U.S. ports go into effect. Chinese carriers, such as COSCO and OOCL, will pay additional fees for entering the U.S. ports regardless of where they are built. Exceptions will be made for voyages shorter than 2,000 nautical miles and vessels with a smaller than 4,000 twenty-foot equivalent units…