Panama Canal Authority announces proposed LNG tolls

The Panama Canal Authority has released the proposed LNG tolls to take effect following its expansion which will allow LNG tankers through the passage and for the first time directly between the US Gulf and Asia.

The expanded canal locks are expected to be operational by the first quarter of 2016.

The canal authority has created a tiered rate system, based on the cubic metre capacity of the vessel, both on a ballast and laden basis. This differs from tariffs set at the competing Suez Canal, which is based on net tonnage and varies between Moss and membrane-type vessels.

Fees are tiered to cover the first 60,000cbm of LNG aboard the vessel, with two subsequent tiers of 30,000cbm in volume, and a final tier to cover the remainder.

For one example, it will cost $380,480 for a 173,000cbm fully laden vessel to transit the canal for one way. If the same size carrier were ballast, it would cost $334,830.

A discount would apply if the laden vessel goes through the canal once and then returns to make its ballast trip through the canal within 60 days, so a round-trip estimate through the canal twice would equal $680,480, after applying an additional ballast of $300,000.

According to an estimate by the consultancy Wood Mackenzie, this would mean a shipping cost of about $1.75/MMBtu from the US Gulf to Japan through the Panama Canal. This assumed a dual fuel diesel electric propulsion vessel of about 174,000cbm traveling at 19 knots an hour and with a charter rate of $70,000/day. This compared with Wood Mackenzie’s estimated shipping cost of just above $2.50/MMBtu from the US to Japan around the Cape of Good Hope.

The final toll rate is expected to be finished in the next three months. Comment from the LNG industry is still being received by the Panama Canal Authority on the proposal.

However, some questioned whether other costs would be added to the proposed rate, such as the cost of tugboats and reservation fees. The canal authority has previously mentioned a reservation system that would allow for the auctioning of scheduled slots, but this system also has not been finalised.

Contractor settlement dispute

A review board has sided with a consortium of contractors working on the Panama Canal expansion in a $234m claim that the canal authority now owes and has lengthened the contract period.

The Dispute Adjudication Board sided with the consortium Grupo Unidos por el Canal (GUPC), which primarily claims a poor quality of basalt, or type of concrete, was used in the project causing ongoing delays which were the fault of the canal authority. The consortium is comprised of Italian contractor Sacyr, Belgian firm Jan De Nul and Panama contractor Constructora Urban.

The board determined that the Panama Canal Authority would pay a $234m settlement to the consortium and extend the contract period for six months.

The claims first emerged in February 2011, when the consortium notified the canal authority that the properties of the basalt to be used in the project were not of the same quality as in the bidding documents that were submitted. Procuring for new basalt, as well as approving the mixture, added to further delays, according to a 1 January statement by GUPC.

Also at the Panama Canal, a recent worker strike was resolved on 3 January, after reports of about 1,000 workers began striking over labour conditions on 23 December.

As of 16 December 2014, the expansion was deemed 83% complete. The last four of 16 new steel rolling gates arrived in November, with all gates expected to be installed by mid-2015, according to the Panama Canal Authority. Ruth Liao