Expanded Panama Canal could reroute LNG

2015 completion of work will allow tankers to move more freely, could edge industry toward global pricing structure similar to oil

By Bill White

Researcher/writer for the Office of the Federal Coordinator

Panama had hoped to finish the canal expansion in 2014, the 100th anniversary of the original opening.

That date is getting pushed back due to a dispute this summer with a contractor over the quality of concrete to be used in constructing the new locks.

The existing 50-mile-long canal basically consists of three segments: Two lanes of locks on the Pacific Ocean side, two on the Atlantic side and a waterway in between largely consisting of Gatun Lake, plus a channel cut through the continental divide. The lake lies about 85 feet above sea level, so the locks raise or lower ships, depending on whether they’re entering or exiting the lake.

The maximum size of a ship that can sail the canal now is 106-feet wide and 965-feet long, with a draft of no more than 39 feet. About 13,000 oceangoing ship crossings occur every year.

The expansion project is adding a third lane of locks. The new locks’ chambers will be 180-feet wide, 1,400-feet long and 60-feet deep, dimensions that should accommodate most of the world’s superships. The existing channels are being widened and deepened, too.

The Canal Authority says most of the dredging is done and the new lock design and construction is 31 percent complete.

Panama undertook the project out of two main concerns:

•That the existing canal was maxed out.

•That too many ships were too big for the canal.

Asia manufacturers shipping to U.S. East Coast markets increasingly were dropping their cargos at West Coast ports, with trains toting the merchandise on the remaining trip east.

In a 2006 document touting the canal expansion, the Panama Canal Authority said it held just a 38 percent market share of the Northeast Asia-East Coast trade, even though canal transit is cheaper and more reliable (but it ties up ships longer).

An epic history

The canal’s ribbon-cutting in 1914 culminated decades of dreams that a channel could be carved through the thin Panama isthmus.

Historian David McCullough in his book “The Path Between the Seas” said, “The fifty miles between the oceans were among the hardest ever won by human effort and ingenuity, and no statistics on tonnage or tolls can begin to convey the grandeur of what was accomplished. Primarily the canal is an expression of that old and noble desire to bridge the divide, to bring people together. It is a work of civilization.”

A French-led effort started the muscular work of moving earth for a canal in the 1880s. The French envisioned a canal without locks. Anything above sea level in the canal’s path would be mowed down. Championing the project was Ferdinand de Lesseps, father of the lockless Suez Canal, built in the 1860s.

This first substantial effort in Panama foundered on a massive scale. Mismanagement and corruption pervaded the project. Primitive excavation machinery couldn’t cope with the jungle climate and terrain; landslides poured excavated soil back into the freshly dug channel. Yellow fever and malaria decimated the roster of experienced workers (it was only in the 1880s that scientists started figuring out that mosquitoes transmitted these two diseases and many years later that they developed effective treatments). The French effort went bankrupt after about 10 years.

The United States picked up the project in the early 1900s, behind President Theodore Roosevelt’s bully charge that envisioned a U.S. sea power reigning supreme in both the Atlantic and Pacific. A canal connecting the oceans would help fulfill this destiny.

The U.S. had a smarter plan than the French and learned from the French mistakes. The route was better — abandoning the idea of a sea-level trench in favor of damming a river to create Gatun Lake that ships would sail across for most of the route. Locks would raise and lower ships to appropriate elevations to make the crossing. Rigorous trenching through the mountainous continental divide no longer involved gouging down to sea level. Equipment was better, as were housing and hospitals. To ease epidemics of malaria and yellow fever, workers drained swamps and razed vegetation to destroy mosquito habitat.

Construction started in 1904. Roosevelt himself visited the construction site two years later. In a talk to workers he called the project “one of the great works of the world. It is a greater work than you yourselves at the moment realize.”

In 1914, as construction ended, the first boat motored through the new canal — an old French crane boat called Alexander La Valley returned to the Atlantic side. The start of World War I that summer torpedoed plans to parade an international fleet of warships through the canal for a grand opening — instead the SS Ancon, a canal cement boat, made the first official transit.

Expansion efforts

The U.S. began dredging for wider locks on the Pacific side in 1940. Work on the Atlantic side started the next year. The U.S. secretary of war shelved both efforts in May 1942, five months after the U.S. entered World War II, freeing workers to join the Army and construction equipment to aid the military.

Over the ensuing decades, the canal was improved, with a series of channel widening and deepening projects starting in the 1950s. Lighting added in the 1960s and 1970s allowed nighttime crossings, according to a history provided by the Panama Canal Authority.

Today’s impetus to transform the canal by building wider locks kicked off at noon on Dec. 31, 1999. At that moment, canal ownership shifted from the United States to Panama. And the new owner embraced the canal as a key to the nation’s economic future.

By 2006, the new Panama Canal Authority, which runs the canal, rolled out the detailed expansion plan for a public vote.

Advocates appealed to Panamanians to consider the canal “our petroleum,” which needs investment so that its commercial value can be extracted, producing jobs and reducing poverty. Critics warned of cost overruns, overly rosy projections of new traffic, and corrupt untrustworthy government officials.

Voters endorsed the project in an October 2006 referendum.

The canal widening not only has the potential to change the LNG industry, but East Coast U.S. ports are scrambling to expand to accommodate the superships that could come calling.

In a June 2012 report, the U.S. Army Corps of Engineers noted the canal’s “new locks will be able to pass vessels large enough to carry three times the volume of cargo carried by vessels today.” Without knowing for sure which ports will get traffic, the Corps is trying to figure out where U.S. navigation channels should be deepened and widened, whether bridges are high enough and if dock capacity is sufficient.

On the West Coast, the ports in Seattle, Oakland, Los Angeles and Long Beach all have 50-foot channels deemed deep enough for today’s superships. But on the East Coast, only the Norfolk, Va., channels are that deep, although Baltimore and New York are deepening theirs, the Corps said.

Other ports are planning to spend billions getting ready for the day the expanded Panama Canal opens.

Part 1 of this story appeared in the Dec. 30 issue of Petroleum News.

Editor’s note: This is a reprint from the Office of the Federal Coordinator, Alaska Natural Gas Transportation Projects, online at www.arcticgas.gov/expanded-panama-canal-could-reroute-lng-industry.