WASHINGTON, May 5, 2016 - A limited number of ships designed to transport large quantities of propane over long distances are able to pass through the current Panama Canal. To cut voyage times and costs within the constraints imposed by the existing Panama Canal locks, market participants use ship-to-ship transfer, where the propane cargo of a larger vessel, called a very large gas carrier (VLGC), is transferred to a smaller ship that can pass through the canal. Once through the canal, the smaller ship will either continue on to its destination or transfer the cargo back to a larger ship.

This cargo transfer activity is likely affecting trade data, resulting in import and export data abnormalities affecting U.S. propane exports to Asian countries, says the Energy Information Administration (EIA). Much of EIA's energy export data is based on information from U.S. Customs and Border Patrol, which collects the final destination of an export, if known. Despite this requirement, some of the propane cargoes exported from the U.S. that undergo a ship-to-ship transfer will cite the jurisdiction of the transfer, not the actual final destination.

Asia, the largest regional destination for U.S. propane, imported 220,000 barrels per day (b/d) of the fuel in 2015, or slightly more than one-third of total U.S. propane exports, says EIA. Most of these exports originated from the U.S. Gulf Coast and traveled through the Panama Canal.

The EIA says that U.S. export data show increased propane exports to countries in the Caribbean and Central America where the ship-to-ship transfers are taking place, but these countries do not have sufficient domestic demand or infrastructure to store and distribute such large quantities of propane.

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This discrepancy is also affecting import data in Asian countries, notes EIA. Both China and Japan have begun to report propane imports from Panama, even though Panama does not produce any propane. The EIA says that these propane volumes were likely U.S.-sourced propane that underwent ship-to-ship transfers in Panamanian waters.

The EIA says that the new, larger Panama Canal locks, expected to be completed in the coming months, will allow the majority of VLGCs to transit, which will likely reduce or end the practice of ship-to-ship transfers of U.S. propane destined for Asian markets. That outcome would reduce discrepancies between import and export statistics, says EIA, providing greater clarity on the major markets for increasing U.S. propane exports.


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