Cheniere’s Serena Xiaotian Su
Earlier this month at LNG2019 in Shanghai, Serena Xiaotian Su, manager on the commercial structuring team at Cheniere, gave a presentation to industry leaders on the future of liquified natural gas (LNG) transits at the Panama Canal. We spoke with Serena to hear about her talk and her perspective on the Canal’s relationship with Cheniere.
You presented a paper about LNG at the Panama Canal during LNG2019 in Shanghai this month – Why did you pick this topic?
Given growing Asian demand for LNG from the Atlantic Basin, the Expanded Panama Canal is set to play an increasingly important role in global LNG trade. We believe through its operational experience and frequent communication with the Panama Canal, Cheniere is uniquely positioned to provide valuation insight into the dynamics of LNG transit through the Canal.
What are the paper’s key findings regarding the Expanded Canal’s impact on LNG trade?
The opening of the Expanded Canal was only one month after Cheniere’s first liquefaction facility at Sabine Pass in Louisiana reached substantial completion. By November 2018, the Neopanamax Locks had already accommodated more than 500 LNG vessel transits. One of our key findings is that the Panama Canal’s planning and operation capabilities have adjusted quickly to recent changes in expectations for LNG trade flows.
Can you speak to Cheniere’s relationship with the Panama Canal?
Cheniere is one of the largest users of the Panama Canal for LNG transits. Cheniere and the Canal have met multiple times over the last three years in order to better understand each other’s part of the business, including the expected growth in the global LNG trade. We have developed an excellent working relationship with the Canal and have always found the Canal very responsive to our questions and requests for transits. Hopefully the Canal finds the industry perspective we can provide from our side useful in their planning.
Can you provide an example on how working closely with the Canal has resulted in improvements for LNG transits?
By working closely with the Panama Canal since the opening of the Neopanamax Locks, we believe we have helped the Canal better align the Panama Canal booking system with industry requirements, improving the availability of marketed slots (the booking system) and the utilization of LNG slots and LNG transits. That has resulted in multiple LNG transits per day, including four in one day. We will continue to engage with the Panama Canal to hopefully help further align the LNG industry requirements.
What is your perspective on the Canal’s ability to provide capacity for the growing LNG segment?
Our estimates suggest that the Canal will be able to accommodate the expected increase in LNG traffic through the period we modelled, which is up to 2030.
Containerships, LPG ships and LNG ships currently account for approximately 90% of total Neopanamax transits. We expect that these segments will continue to dominate the total transits going forward. Our analysis suggests total transits from these three segments will reach 10.3 transits per day by 2030, leaving 1.7 daily slots or 51 slots per month available. These remaining slots leave room to manage short periods of peak LNG demand or higher than expected growth in other sectors. Considering complementary seasonality profiles and different dominant trade directions of containerships and LNG vessels, we believe the Canal will be able to provide capacity of the growing LNG segment.
What is your outlook on the future of LNG at the Panama Canal?
In our base case analysis, we estimate LNG transits through the Panama Canal to be at 3.0 per day on average by 2030. Since successfully transiting three LNG vessels on Oct 1st 2018, the Canal was able to transit four LNG vessels on three occasions. With increasing operational experience over time, we expect the Panama Canal to be able to accommodate the expected increase in LNG transits in the coming decade.
Overview of the Panama Canal's 2017 Fiscal Year