Energy security: The Panama Canal

Location: Panama; connects the Pacific Ocean with the Caribbean Sea and Atlantic Ocean

Oil Flows (2004): Panama Canal 0.5 million bbl/d; Trans-Panama pipeline 0.1 million bbl/d
Concerns/Background: The Panama Canal extends approximately 50 miles from Panama City on the Pacific Ocean to Colon on the Caribbean Sea. The largest vessel that can transit the Panama Canal is known as a PANAMAX-size vessel (ships ranging from 50,000 – 80,000 dead weight tons in size). A long-term program is underway to widen the narrow, eight-mile stretch of Gaillard Cut to allow unrestricted two-way traffic of PANAMAX-size vessels.

The United States is the dominant country of origin for all commodities transiting the Panama Canal, and it is also the single largest destination as well. Shipments to and from the east coast of the United States accounted for almost half of all canal traffic, with shipments between the east coast of the United States and Asia comprising the largest single trade route. However, the neighboring countries of Central and South America are proportionately more dependent on the Panama Canal for their trade.

In fiscal year (FY) 2004, petroleum and petroleum products were the second largest commodity (by tonnage) shipped through the Canal after grains, accounting for 12% of total canal shipments. Petrochemicals and coal (including coke from coal) are also shipped through the canal, accounting for 2% and 6%, respectively, of total Canal traffic. About 73% of total oil shipments went south from the Atlantic to the Pacific, with oil products dominating southbound traffic. The United States is not heavily reliant on the Panama Canal for its petroleum imports. In 2004, slightly more than 1% of total U.S. petroleum imports (crude oil plus petroleum products) transited the Canal en route to American ports. On the whole, very little crude oil destined for U.S. shores (55,000 bbl/d or 0.6% in 2004) passes through the canal. As a share of U.S. imports, however, the Canal is more important for petroleum products. In 2004, a little over 4% of all U.S. imported petroleum products came to the United States through the Panama Canal.

The Trans-Panama pipeline (Petroterminal de Panama, S.A.) is located outside the former Canal Zone near the Costa Rican border, and runs from the port of Charco Azul on the Pacific Coast (near Puerto Armuelles, southwest of David) to the port of Chiriqui Grande, Bocas del Toro on the Caribbean. It was opened in October 1982 as an economical alternative to the Panama Canal for transporting Alaskan oil across Panama en route to Gulf Coast ports. More than 2.7 billion barrels of Alaskan crude oil were transported through the 81-mile pipeline at peak rates exceeding 860,000 bbl/d. However, the pipeline was closed in April 1996 after Alaskan oil shipments to the Gulf Coast declined with falling Alaskan oil production and increased oil consumption on the west coast of the United States, especially in California. In addition, the decision to allow Alaskan oil to be exported outside the United States reduced the incentives to ship Alaskan oil to the Gulf Coast. The Trans-Panama pipeline re-opened in November 2003, and began shipping over 100,000 bbl/d of Ecuadorian crude oil to US Gulf ports.

Source: EIA

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