Disruptions in transit via the Panama and Suez Canals affected the equivalent of just over 10% of global LNG trade but did not prevent shipping between the Atlantic and Pacific Basins, according to the Oxford Institute for Energy Studies (OIES) on Tuesday.
A study from OIES showed that 8% of global LNG exports in 2023 were delivered via the Suez Canal and 2.5% via the Panama Canal.
The institute said that, due to droughts and restrictions on vessel transport through the Panama Canal, the volume of LNG shipments declined by two-thirds between August 2023 and January 2024. It also forecasted that shipments could fall to zero in February, owing to Houthi attacks on vessels in the Red Sea, which meant that no LNG cargoes traversed the Red Sea since Jan. 12, 2024.
OIES said that after accounting for diversions, the re-routing of cargo via longer routes, and the consequent curtailment of LNG shipping capacity, global LNG supply could fall by 5.4 million tons year-on-year.
It noted that disruptions could primarily affect LNG deliveries to Europe from Qatar, and deliveries to Asia from the US, Russia, Algeria and Egypt.
‘Cargoes are being re-routed via the Cape of Good Hope (South Africa) or diverted to other markets. The longer routes imply greater shipping costs and a smaller volume of LNG that can be delivered by each vessel over a given period of time,’ it said.
As a result, these increased operational costs represent an ‘inter-basin LNG shipping premium’ that will be borne by the exporters.
According to OIES, these additional costs will only be recouped through higher sales prices if disruptions cause a rise in LNG import prices in Europe and Asia.
Due to an unprecedented drought that has lowered the water level, the Panama Canal put restrictions in place for the transit of ships in 2023.
