Project Details and Impact
The Panama Canal Authority (ACP) plans to start the construction of a 77-kilometer gas pipeline in 2027, according to the canal’s administrator, Ricaurte Vásquez. Formal discussions with interested companies are set to begin this week.
This pipeline will facilitate the transportation of propane, butane, and ethane from the U.S. East Coast to Asia, specifically China, Japan, and South Korea. The ACP anticipates that this trade will double in the next decade.
Project Scope and Cost
The gas will arrive in ships at the Panamanian Caribbean and, after crossing the isthmus through the pipeline, will be re-embarked in the Pacific heading to Asia.
Vásquez stated that construction might commence “possibly in 2027 if the timelines are met reasonably.” The estimated cost for the pipeline ranges from $2 billion to $8 billion, depending on whether all three gases are transported.
Current Trade Dynamics
The Panama Canal, primarily used by the U.S. and China, facilitates around 5% of global maritime trade.
Prior to 2023, over 90% of propane, butane, and ethane shipped from the U.S. to Asia passed through the Panama Canal. However, this percentage has been declining due to various factors.
To reverse this trend, the ACP believes constructing the pipeline is essential. It will enable the transportation of 2 million barrels of fuel daily, with the ACP expecting nearly 53 million tons of fuel, mainly propane, to transit through the canal by 2040.
Future Prospects
Vásquez anticipates an increase in the transportation of this energy material over the coming years, driven by India’s industrialization and the U.S.’s export capacity.
“That amount [of fuel] is going to double in the next 10 years,” he said. “If Panama does not build the gas pipeline, an alternative route for its transportation might emerge.”
Key Questions and Answers
- What is the project about? The Panama Canal Authority plans to build a 77-kilometer gas pipeline to transport propane, butane, and ethane from the U.S. East Coast to Asia.
- When will construction begin? Construction is expected to start possibly in 2027, contingent on meeting reasonable timelines.
- What is the estimated cost? The pipeline’s cost is projected to range between $2 billion and $8 billion, depending on the gases transported.
- Why is this project necessary? The decline in the percentage of propane, butane, and ethane transported through the Panama Canal necessitates this infrastructure to maintain and increase trade volumes.
- What impact will this have on global trade? The project aims to facilitate nearly 53 million tons of fuel, mainly propane, passing through the Panama Canal by 2040, supporting global trade dynamics.
